As filed with the Securities and Exchange Commission on August 22, 1995
Registration No. 33- _____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------
SPECIALTY RETAILERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5311 04-3034294
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
10201 MAIN STREET
HOUSTON, TEXAS 77025
TELEPHONE: (713) 667-5601
(ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-----------------------------
MR. CARL TOOKER
10201 MAIN STREET
HOUSTON, TEXAS 77025
TELEPHONE: (713) 667-5601
(NAME, ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
COPY TO:
LANCE C. BALK
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022-4675
TELEPHONE: (212) 446-4800
-----------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT TO MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER UNIT (1) OFFERING PRICE (1) REGISTRATION FEE
- -------------------------------------------------- ------------- ------------------ ------------------ ----------------
<S> <C> <C>
11% SENIOR SUBORDINATED NOTES
DUE 2003, SERIES D .................................. $18,250,000 100% $18,250,000 $6,293.10
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF PART I OF FORM S-4
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
----------------------- ---------------------------------
<S> <C> <C>
1. FOREPART OF REGISTRATION STATEMENT AND OUTSIDE
FRONT COVER PAGE OF PROSPECTUS.......................... OUTSIDE FRONT COVER PAGE
2. INSIDE FRONT AND OUTSIDE BACK COVER PAGES OF
PROSPECTUS.............................................. INSIDE FRONT COVER PAGE; OUTSIDE BACK COVER
PAGE
3. RISK FACTORS, RATIO OF EARNINGS TO FIXED CHARGES
AND OTHER INFORMATION.................................. PROSPECTUS SUMMARY; THE COMPANY; RISK
FACTORS; SELECTED HISTORICAL AND PRO FORMA
FINANCIAL DATA
4. TERMS OF THE TRANSACTION................................ OUTSIDE FRONT COVER PAGE; PROSPECTUS SUMMARY;
THE EXCHANGE OFFER; DESCRIPTION OF NEW
SECURITIES; CERTAIN FEDERAL INCOME TAX
CONSEQUENCES
5. PRO FORMA FINANCIAL INFORMATION......................... SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
6. MATERIAL CONTRACTS WITH THE COMPANY BEING
ACQUIRED................................................ INAPPLICABLE
7. ADDITIONAL INFORMATION REQUIRED......................... INAPPLICABLE
8. INTERESTS OF NAMED EXPERTS AND COUNSEL.................. LEGAL MATTERS; EXPERTS
9. DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES.......... INAPPLICABLE
10. INFORMATION WITH RESPECT TO S-3 REGISTRANTS............. INAPPLICABLE
11. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE....... INAPPLICABLE
12. INFORMATION WITH RESPECT TO S-3 OR S-2 REGISTRANTS...... INAPPLICABLE
13. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE....... INAPPLICABLE
14. INFORMATION WITH RESPECT TO REGISTRANTS OTHER THAN
S-3 OR S-2 REGISTRANTS.................................. OUTSIDE FRONT COVER PAGE; PROSPECTUS SUMMARY;
RISK FACTORS; USE OF PROCEEDS; CAPITALIZATION;
SELECTED HISTORICAL AND PRO FORMA FINANCIAL
DATA; MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS;
BUSINESS; MANAGEMENT; PRINCIPAL STOCKHOLDERS;
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
i
15. INFORMATION WITH RESPECT TO S-3 COMPANIES............... INAPPLICABLE
16. INFORMATION WITH RESPECT TO S-3 OR S-2 COMPANIES........ INAPPLICABLE
17. INFORMATION WITH RESPECT TO COMPANIES OTHER THAN
S-3 OR S-2 COMPANIES.................................... INAPPLICABLE
18. INFORMATION IF PROXIES, CONSENTS OR AUTHORIZATIONS
ARE TO BE SOLICITED..................................... INAPPLICABLE
OUTSIDE FRONT COVER PAGE OF PROSPECTUS;
SUMMARY; PRINCIPLE STOCKHOLDERS; CERTAIN
19. INFORMATION IF PROXIES, CONSENTS OR AUTHORIZATIONS RELATIONSHIPS AND RELATED TRANSACTIONS; THE
ARE NOT TO BE SOLICITED OR IN AN EXCHANGE OFFER......... EXCHANGE OFFER
</TABLE>
ii
<PAGE>
******************************************************************************
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy nor *
* shall there be any sale of these securities in any State in which such *
* offer, solicitation or sale would be unlawful prior to registration or *
* qualification under the securities laws of any such State. *
******************************************************************************
SUBJECT TO COMPLETION, DATED AUGUST 22, 1995
PROSPECTUS
SPECIALTY RETAILERS, INC.
OFFER TO EXCHANGE ITS
11% SERIES D SENIOR SUBORDINATED NOTES DUE 2003
FOR ANY AND ALL OF ITS OUTSTANDING
11% SERIES C SENIOR SUBORDINATED NOTES DUE 2003
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _______,
1995, UNLESS EXTENDED.
Specialty Retailers, Inc., a Delaware corporation (" SRI" or the
"Company"), hereby offers (the "Exchange Offer"), upon the terms and subject to
the conditions set forth in this Prospectus (the "Prospectus") and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange
$1,000 principal amount of its 11% Series D Senior Subordinated Notes due 2003
(the "New Securities"), which will have been registered under the Securities Act
of 1933, as amended (the "Securities Act") pursuant to a Registration Statement
(as defined herein) of which this Prospectus is a part, for each $1,000
principal amount of its outstanding 11% Series C Senior Subordinated Notes due
2003 (the "Old Securities"). The form and terms of the New Securities are the
same as the form and terms of the Old Securities (which they replace) except
that the New Securities will have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer. The New Securities
will evidence the same debt as the Old Securities (which they replace) and will
be issued under and be entitled to the benefits of the indenture governing the
Old Securities dated July 27, 1995 (the "Indenture"). See "The Exchange Offer"
and "Description of New Securities."
The Company will accept for exchange any and all Old Securities
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
_____, 1995, unless extended by the Company in its sole discretion (the
"Expiration Date"). Tenders of Old Securities may be withdrawn at any time prior
to 5:00 p.m. on the Expiration Date. The Exchange Offer is subject to certain
customary conditions. The Old Securities were sold by the Company on July 27,
1995 to the Initial Purchaser (as defined herein) in transactions not registered
under the Securities Act in reliance upon the exemption provided in Section 4(2)
of the Securities Act. The Initial Purchaser subsequently placed the Old
Securities with qualified institutional buyers in reliance upon Rule 144A under
the Securities Act. Accordingly, the Old Securities may not be reoffered, resold
or otherwise transferred in the United States unless so registered or unless an
applicable exemption from the registration requirements of the Securities Act is
available. The New Securities are being offered hereunder in order to satisfy
the obligations of the Company under the Registration Rights Agreement (as
defined herein). See "The Exchange Offer."
Based on no-action letters issued by the staff of the Securities
and Exchange Commission (the "Commission") to third parties, the Company
believes the New Securities issued pursuant to the Exchange Offer may be offered
for resale, resold and otherwise transferred by any holder thereof (other than
any such holder that is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Securities are acquired in the ordinary course of such holder's business and
such holder has no arrangement or understanding with any person to participate
in the distribution of such New Securities. See "The Exchange Offer - Purpose
and Effect of the Exchange Offer" and "-Resale of the New Securities." Each
broker-dealer that receives New Securities for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a Prospectus in connection
with any resale of such New Securities. The Letter of Transmittal states that by
so acknowledging and by delivering a Prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of New Securities
received in exchange for Old Securities where such Old Securities were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
Holders of Old Securities not tendered and accepted in the
Exchange Offer will continue to hold such Old Securities and will be entitled to
all the rights and preferences and will be subject to the limitations applicable
thereto under the Indenture and with respect to transfer under the Securities
Act. The Company will pay all the expenses incurred by it incident to the
Exchange Offer. See "The Exchange Offer."
There has not previously been any public market for the Old
Securities or the New Securities. The Company does not intend to list the New
Securities on any securities exchange or to seek approval for quotation through
any automated quotation system. There can be no assurance that an active market
for the New Securities will develop. See "Risk Factors - Lack of a Public
Market." Moreover, to the extent that Old Securities are tendered and accepted
in the Exchange Offer, the trading market for untendered and tendered but
unaccepted Old Securities could be adversely affected.
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DESCRIPTION OF
CERTAIN RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD SECURITIES IN THE
EXCHANGE OFFER.
-----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS ________, 1995.
<PAGE>
The New Securities will be available initially only in book-entry
form. The Company expects that the New Securities issued pursuant to this
Exchange Offer will be issued in the form of Global Securities (as defined
herein), which will be deposited with, or on behalf of, The Depository Trust
Company (the "Depositary") and registered in its name or in the name of Cede &
Co., its nominee. Beneficial interests in the Global Securities representing the
New Securities will be shown on, and transfers there to qualified institutional
buyers will be effected through, records maintained by the Depositary and its
participants. After the initial issuance of the Global Securities, New
Securities in certificated form will be issued in exchange for the Global
Securities on the terms set forth in the Indenture. See "Description of New
Securities - Book-Entry, Delivery and Form."
-----------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE NEW SECURITIES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE NEW SECURITIES
TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HERETO.
Until _____, 1995, (90 days after commencement of the Exchange
Offer), all dealers effecting transactions in the New Securities, whether or not
participating in the Exchange Offer, may be required to deliver a Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
Available Information................... 2 Beneficial Ownership ........................... 42
Prospectus Summary...................... 4 Certain Relationships and Related Transactions.. 44
The Company............................. 15 Description of Certain Indebtedness............. 45
Risk Factors............................ 16 Description of New Securities................... 47
Use of Proceeds......................... 18 The Exchange Offer.............................. 65
Capitalization.......................... 19 Certain Federal Income Tax
Selected Historical and Pro Forma Consequences.................................. 72
Financial Data........................ 20 Plan of Distribution............................ 73
Management's Discussion and Analysis
of Financial Condition and Results
of Operations......................... 23 Legal Matters................................... 74
Business of the Company................. 24 Experts......................................... 74
Management.............................. 34 Index to Consolidated Financial Statements..... F-1
</TABLE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration
Statement on Form S-4 under the Securities Act, for the registration of the New
Securities offered hereby (the "Registration Statement"). This Prospectus, which
constitutes a part of the Registration Statement, contains a description of all
material matters related to the Exchange Offer but does not contain all of the
information set forth in the Registration Statement, certain items of which are
contained in exhibits and schedules to the Registration Statement as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and the New Securities offered hereby, reference is made
to the Registration Statement, including the exhibits thereto, and financial
statements and notes filed as a part thereof. Statements made in this Prospectus
concerning the contents of any document referred to herein are not necessarily
complete. With respect to each such document filed with the Commission as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference.
2
The Company is subject to the information requirements of the
Securities and Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. Such reports
and other information filed by the Company can be inspected and copied at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the regional offices of the Commission located at 7
World Trade Center, New York, New York 10048 and 500 West Madison Street, 14th
Floor, Chicago, Illinois 60661. Copies of such materials may be obtained from
the Public Reference Section of the Commission, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at its public reference facilities in
New York, New York and Chicago, Illinois at prescribed rates.
In the event that the Company ceases to be subject to the
information requirements of the Exchange Act, the Company has agreed that, so
long as the Old Securities or the New Securities remain outstanding, it will
file with the Commission and distribute to the holders of the Old Securities or
the New Securities, as applicable, copies of the financial information that
would have been contained in such annual reports and quarterly reports,
including management's discussion and analysis of financial condition and
results of operations, that the Company would have been required to file with
the Commission pursuant to the Exchange Act. Such financial information shall
include annual reports containing consolidated financial statements and notes
thereto, together with an opinion thereon expressed by an independent public
accounting firm, as well as quarterly reports containing unaudited consolidated
condensed financial statements for the first three quarters of each fiscal year.
The Company will also make such reports available to prospective purchasers of
the New Securities or the Old Securities, as applicable, securities analysts and
broker-dealers upon their request. In addition, the Company has agreed that for
so long as any of the Old Securities remain outstanding it will make available
to any prospective purchaser of the Old Securities or beneficial owner of the
Old Securities in connection with any sale thereof the information required by
Rule 144A(d)(4) under the Securities Act, until such time as the Company has
either exchanged the Old Securities for the New Securities or until such time as
the holders thereof have disposed of such Old Securities pursuant to an
effective registration statement filed by the Company.
3
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. THE COMPANY'S
FISCAL YEAR ENDS ON THE SATURDAY NEAREST TO JANUARY 31 IN THE FOLLOWING CALENDAR
YEAR. REFERENCES TO YEARS MEAN THE COMPANY'S FISCAL YEAR. FOR EXAMPLE,
REFERENCES TO "1994" MEAN THE FISCAL YEAR ENDED JANUARY 28, 1995.
THE COMPANY
Specialty Retailers, Inc. ("SRI" or the "Company") operates
family apparel stores primarily under the names "Bealls", "Palais Royal" ,
"Stage" and "Fashion Bar" offering branded fashion apparel and accessories for
women, men and children. During 1993, at the direction of the shareholders of
SRI, SRI became a wholly-owned subsidiary of Apparel Retailers, Inc. ("ARI").
ARI has no operations of its own and its primary asset is the common stock of
SRI.
The Company currently operates 248 stores in thirteen states
primarily throughout the central United States. The Company's stores are
typically between eighteen and thirty thousand square feet in size which is
smaller than typical department stores yet larger than most specialty stores.
The store format allows the Company to operate in either small towns and
communities with as few as fifteen thousand people or large metropolitan and
suburban areas. The Company's store format is large enough to offer apparel and
accessories for all members of the family yet small enough to allow for
strategic location in rural markets or in numerous, convenient locations in
metropolitan and suburban areas.
The Company believes that its store format, merchandising
strategy and management systems have enabled it to develop a strong franchise in
all of its trading areas. The Company believes that its ability to operate
stores profitably in markets with as few as fifteen thousand people is an
important competitive advantage over department stores, which are generally
unable to operate profitably in small communities. In addition, the Company's
stores have an advantage over locally operated retailers due to the Company's
ability to offer a broader and better assortment of continuously replenished,
branded merchandise at everyday fair prices. In larger communities, the
Company's retailing concept differentiates it from both department and specialty
stores. As compared to department stores, the Company offers multiple convenient
locations and better customer service. As compared to specialty stores, the
Company's stores offer more leading brand names and a greater assortment of
merchandise. All of the Company's stores have several distinctive features such
as store size, layout and location, merchandise strategy and personalized
customer service, which are designed to provide a convenient shopping experience
and to build strong customer loyalty.
RETAIL CONCEPT
The Company has successfully implemented its retail concept with
an emphasis on management systems and technology, centralized decision making
and tight control of operating expenses. The Company believes that its
distinctive retail concept and strong operating systems have positioned the
Company for future growth with only incremental increases in overhead expenses.
The following features distinguish the Company from other apparel retailers:
ABILITY TO OPERATE PROFITABLY IN SMALLER MARKETS. The Company's
store format and locations are designed to offer a convenient and efficient
shopping experience for customers. The stores are typically between eighteen
thousand and thirty thousand square feet in size, which is smaller than typical
department stores yet larger than most specialty stores. The Company's store
format is large enough to offer branded apparel and accessories for all members
of the family and small enough to allow for profitable strategic location either
in rural markets where the Company faces lower levels of competition, or in
numerous, convenient locations in metropolitan/suburban areas. The Company's
smaller market stores generally experience higher profit margins due to lower
levels of competition.
EFFECTIVE MERCHANDISING STRATEGY. The Company's merchandising
strategy focuses on the traditionally higher margin merchandise categories of
women's, men's and children's apparel and accessories offered at an everyday
fair price. Sales associates are encouraged to adopt a "can do" attitude in
order to "exceed a customer's expectations". The Company offers a selected
assortment of branded first-quality, moderately priced merchandise which is
divided into distinct departments including, misses, men's, boy's, shoes,
intimate apparel, juniors, children's, accessories, cosmetics and gifts.
Merchandise mix may vary significantly from store to store to accommodate
differing demographic factors. The Company offers leading national brand names
such as Liz Claiborne, Haggar, Guess, Hanes, Nike and Reebok and other
moderately priced, high quality brands. The Company's buyers are constantly
4
evaluating new vendors and the market for unique merchandise. Each buyer is
responsible for specific merchandise categories in order to enhance his or her
knowledge of the related vendors and the merchandise generally available. The
Company may augment its merchandise persentation with private label product
based on opportunities to maximize mix. This focused buying approach, combined
with the Company's in-depth understanding of each of its individual markets and
its highly automated merchandise allocation system, enables the Company to keep
each of its stores stocked with a broad, frequently replenished assortment of
high quality merchandise that has been finely tuned to meet the fashion needs of
its customers. The Company's management believes that the combination of the
size and experience base of its buyer group, its strong merchandising systems
and its participation in the Associated Merchandising Corporation ("AMC") buying
cooperative allows the Company to compete effectively with department and
specialty stores.
EMPHASIS ON CUSTOMER SERVICE. Providing excellent customer
service through stores staffed with highly trained and motivated sales
associates is a primary corporate objective. The Company has implemented its
"Team One" operating format in many of its smaller stores which focuses
employees on selling and customer service during peak hours while handling
non-customer oriented tasks such as shipping/receiving and security tagging
during off-peak hours. The Company monitors the quality of its customer service
and actively solicits feedback by conducting over 1,700 telephone surveys with
customers each month. The Company believes that its strong customer service is a
significant competitive advantage over department stores which generally offer
lower levels of customer service. The Company's private label credit card
program includes over 1.5 million active accounts and comprised approximately
55% of net sales during the first six months of 1995. The Company communicates
with its private label credit cardholders through targeted mailings.
STRONG OPERATING SYSTEMS AND TECHNOLOGY. The Company supports its
retail concept with highly automated, integrated systems in such areas as
merchandising, sales promotion, credit, personnel management, store design,
accounting and distribution. The Company believes that its automated systems
provide it with a significant competitive advantage over competitors that lack
similar capabilities. For example, the Company has developed and has begun to
utilize an automated store personnel scheduling system which analyzes historical
hourly sales trends to schedule sales personnel accordingly. This system
optimizes labor costs while producing a higher level of customer service. The
Company believes that these systems increase sales per square foot, reduce
markdowns and overhead and create important efficiencies and cost savings in the
most labor intensive areas of the business. The Company's merchandising systems
assist merchandise planners in allocating inventory to each store based on its
specific attributes and recent sales trends. Additional systems allow the
Company to efficiently transfer slow moving merchandise to stores selling such
items more rapidly, identify merchandise requiring mark downs and maintain
in-stock positions in basic items such as hosiery and jeans. These systems have
enabled the Company to better manage its inventory while reducing costs.
GROWTH STRATEGY
The following are the primary elements of the Company's growth
strategy:
CONTINUED MARGIN IMPROVEMENTS THROUGH AUTOMATED MERCHANDISE
ALLOCATION. The Company believes it can increase sales and profitability through
automated inventory planning, allocation and transfer systems. During the past
four years, the Company has devoted significant computer programming resources
to the design and development of its automated, algorithm-based merchandise
allocation and transfer systems. These systems allow specific merchandise to be
allocated and, if necessary, transferred to stores where it is being more
rapidly sold. By continuing to maximize in-stock positions by merchandise
classification, the Company believes that the use of this proprietary system
should continue to increase sales and reduce markdowns, thereby improving
margins.
NEW STORE OPENINGS IN SMALLER MARKETS. The Company has identified
locations in both its existing and new markets which are potential sites for new
stores. Such sites are primarily located in smaller communities, where the
Company experiences its highest margins and where the Company believes it has a
competitive advantage over local retailers and where it is also difficult for
larger department stores to profitably operate. In addition, expansion into
existing markets may be accomplished at a lower cost, as the Company can utilize
its existing systems such as merchandising, credit, distribution and store
personnel scheduling in these markets, thereby minimizing the incremental cost
of opening new stores.
MAKING SELECTED STRATEGIC ACQUISITIONS. The Company believes that
it can continue to benefit from selected strategic acquisitions by (i)
consolidating overhead functions, (ii) introducing its superior management
systems and (iii) applying its merchandising, sales and customer service methods
to acquired retail concerns. The Company believes that such acquisitions will
5
allow it to improve overall profitability by amortizing its fixed cost structure
over a larger revenue base and by improving sales per square foot and
profitability of acquired small town stores. The Company believes that retail
chains operating in small towns offer attractive acquisition opportunities, as
such markets typically have only limited competition from locally owned
retailers and little or no competition from regional department stores. During
1994, this strategy resulted in the acquisition of forty-five store leases from
the Beall-Ladymon Corporation ("Beall-Ladymon"), located primarily in Louisiana,
Arkansas and Mississippi. See Note 1 to the Consolidated Financial Statements.
6
THE OLD SECURITIES OFFERING
Series C Notes...................... The Old Securities were sold by the
Company on July 27, 1995 (the "Offering")
to Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial
Purchaser"), pursuant to a Purchase
Agreement dated July 20, 1995 (the
"Purchase Agreement"). The Initial
Purchaser subsequently resold the Old
Securities to qualified institutional
buyers pursuant to Rule 144A under the
Securities Act.
Registration Rights
Agreement........................... Pursuant to the Purchase Agreement, the
Company and the Initial Purchaser entered
into a Registration Right Agreement dated
July 27, 1995 (the "Registration Rights
Agreement"), which grants the holders of
the Old Securities certain exchange and
registration rights. The Exchange Offer
is intended to satisfy such exchange
rights which terminate upon the
consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered.................. $18,250,000 in aggregate principal amount
of 11% Series D Senior Subordinated Notes
due 2003.
The Exchange
Offer............................... $1,000 principal amount of the New
Securities in exchange for each $1,000
principal amount of Old Securities. As of
the date hereof, $18,250,000 in aggregate
principal amount of Old Securities are
outstanding. The Company will issue the
New Securities to holders on or promptly
after the Expiration Date.
Based on an interpretation by the staff
of the Commission set forth in no-action
letters issued to third parties, the
Company believes that the New Securities
issued pursuant to the Exchange Offer in
exchange for Old Securities may be
offered for resale, resold and otherwise
transferred by any holder thereof (other
than any such holder which is an
"affiliate" of the Company within the
meaning of Rule 405 under the Securities
Act) without compliance with the
registration and prospectus delivery
provisions of the Securities Act,
provided that such New Securities are
acquired in the ordinary course of such
holder's business and that such holder
does not intend to participate and has no
arrangement or understanding with any
person to participate in the distribution
of such New Securities.
Each broker-dealer that receives New
Securities for its own account pursuant
to the Exchange Offer must acknowledge
that it will deliver a Prospectus in
connection with any resale of such New
Securities. The Letter of Transmittal
states that by so acknowledging and by
delivering a Prospectus, a broker-dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it
may be amended or supplemented from time
to time, may be used by a broker-dealer
in connection with resales of New
Securities received in exchange for Old
Securities where such Old Securities were
acquired by such broker-dealer as a
result of market-making activities or
other trading activities. The Company has
agreed that, for a period of 90 days
after the Expiration Date, it will make
this Prospectus available to any
broker-dealer for use in connection with
any such resale. See "Plan of
Distribution."
7
Any holder who tenders in the Exchange
Offer with the intention to participate,
or for the purpose of participating, in a
distribution of the New Securities could
not rely on the position of the staff of
the Commission enunciated in EXXON
CAPITAL HOLDINGS CORPORATION (available
April 13, 1989) or similar no-action
letters and, in the absence of any
exemption therefrom, must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction.
Failure to comply with such requirements
in such instance may result in such
holder incurring liability under the
Securities Act for which the holder is
not indemnified by the Company.
Expiration Date..................... 5:00 p.m., New York City time, on
_________ , 1995 unless the Exchange
Offer is extended, in which case the term
"Expiration Date" means the latest date
and time to which the Exchange Offer is
extended.
Accrued Interest
on the New
Securities and Old
Securities.......................... Each New Security will bear interest from
its issuance date. Holders of Old
Securities that are accepted for exchange
will receive, in cash, accrued interest
thereon to, but not including, the
issuance date of the New Securities. Such
interest will be paid with the first
interest payment on the New Securities.
Interest on the Old Securities accepted
for exchange will cease to accrue upon
issuance of the New Securities.
Conditions to the
Exchange Offer...................... The Exchange Offer is subject to certain
customary conditions, which may be waived
by the Company. See "The Exchange
Offer--Conditions."
Procedures for
Tendering Old
Securities.......................... Each holder of Old Securities wishing to
accept the Exchange Offer must complete,
sign and date the accompanying Letter of
Transmittal, or a facsimile thereof, in
accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of
Transmittal, or such facsimile, together
with the Old Securities and any other
required documentation to the Exchange
Agent (as defined herein) at the address
set forth herein. By executing the Letter
of Transmittal, each holder will
represent to the Company that, among
other things, the New Securities acquired
pursuant to the Exchange Offer are being
obtained in the ordinary course of
business of the person receiving such New
Securities, whether or not such person is
the holder, that neither the holder nor
any such person has any arrangement or
understanding with any person to
participate in the distribution of such
New Securities and that neither the
holder nor any such other person is an
"affiliate," as defined under Rule 405 of
the Securities Act. See "The Exchange
Offer--Purpose and Effect of the Exchange
Offer" and "--Procedures for Tendering."
Untendered Old
Securities......................... Following the consummation of the
Exchange Offer, holders of Old Securities
eligible to participate but who do not
tender their Old Securities will not have
any further registration rights and such
Old Securities will continue to be
subject to certain restrictions on
transfer. Accordingly, the liquidity of
the market for such Old Securities could
be adversely affected.
8
Consequences of
Failure to
Exchange............................ The Old Securities that are not exchanged
pursuant to the Exchange Offer will
remain restricted securities.
Accordingly, such Old Securities may be
resold only (i) to the Company, (ii)
pursuant to Rule 144A under the
Securities Act or pursuant to some other
exemption under the Securities Act, (iii)
outside the United States to a foreign
person pursuant to the requirements of
Rule 904 under the Securities Act or (iv)
pursuant to an effective registration
statement under the Securities Act. See
"The Exchange Offer-Consequences of
Failure to Exchange."
Shelf Registration
Statement........................... If any holder of the Old Securities
(other than any such holder which is an
"affiliate" of the Company within the
meaning of Rule 405 under the Securities
Act) is not eligible under applicable
securities laws to participate in the
Exchange Offer and such holder has
satisfied certain conditions relating to
the provision of information to the
Company for use therein, the Company has
agreed to register the Old Securities on
a shelf registration statement (the
"Shelf Registration Statement") and use
its best efforts to cause it to be
declared effective by the Commission as
promptly as practical on or after the
consummation of the Exchange Offer. The
Company has agreed to maintain the
effectiveness of the Shelf Registration
Statement for, under certain
circumstances, a maximum of three years,
to cover resales of the Old Securities
held by any such holders.
Special Procedures
for Beneficial
Owners.............................. Any beneficial owner whose Old Securities
are registered in the name of a broker-
dealer, commercial bank, trust company or
other nominee and who wishes to tender
should contact such registered holder
promptly and instruct such registered
holder to tender on such beneficial
owner's behalf. If such beneficial owner
wishes to tender on such owner's own
behalf, such owner must, prior to
completing and executing the Letter of
Transmittal and delivering its Old
Securities, either make appropriate
arrangements to register ownership of the
Old Securities in such owner's name or
obtain a properly completed bond power
from the registered holder. The transfer
of registered ownership may take
considerable time.
Guaranteed
Delivery
Procedures.......................... Holders of Old Securities who wish to
tender their Old Securities and whose Old
Securities are not immediately available
or who cannot deliver their Old
Securities, the Letter of Transmittal or
any other documents required by the
Letter of Transmittal to the Exchange
Agent (or comply with the procedures for
book-entry transfer) prior to the
Expiration Date must tender their Old
Securities according to the guaranteed
delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights................... Tenders may be withdrawn at any time
prior to 5:00 p.m., New York City time,
on the Expiration Date.
Acceptance of Old
Securities and
Delivery
of New Securities................... The Company will accept for exchange any
and all Old Securities which are properly
tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the
Expiration Date. The New Securities
issued pursuant to the Exchange Offer
will be delivered promptly following the
Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
9
Federal Income
Tax Consequences.................... The exchange pursuant to the Exchange
Offer should not be a taxable event for
Federal Income Tax purposes. See
"Certain Federal Income Tax
Consequences."
Use of Proceeds..................... There will be no cash proceeds to the
Company from the exchange pursuant to the
Exchange Offer.
Exchange Agent...................... The First National Bank of Boston.
SUMMARY OF TERMS OF NEW SECURITIES
The form and terms of the New Securities are the same as the form
and terms of the Old Securities (which they replace) except that (i) the New
Securities have been registered under the Securities Act and, therefore, will
not bear legends restricting the transfer thereof, and (ii) the holders of New
Securities will not be entitled to certain rights under the Registration Rights
Agreement, which rights will terminate when the Exchange Offer is consummated.
The New Securities will evidence the same debt as the Old Securities and will be
entitled to the benefits of the Indenture. See "Description of New Securities."
The Old Securities and the New Securities are referred to herein collectively as
the "Securities."
NEW SECURITIES:
Maturity Date................. August 15, 2003.
Interest Rate................. The New Securities bear interest at the
rate of 11% per annum payable semi-
annually on February 15 and August 15,
commencing February 15, 1996.
Ranking....................... The New Securities will be general
unsecured obligations of the Company,
will rank junior to all existing and
future Senior Debt (as defined herein),
pari passu with the existing $100.0
million in aggregate principal amount of
11% senior subordinated notes due 2003
(the "11% Notes") and senior to all
existing and future subordinated
Indebtedness of the Company, including
the 7% FB Holdings Subordinated Notes (as
defined herein), the 9% Bealls Holdings
Subordinated Debentures (as defined
herein) and the 7% Bealls Holdings Junior
Subordinated Debentures (as defined
herein). The existing 11% Notes, however,
are guaranteed on a senior subordinated
basis by the Company's wholly-owned
subsidiary, Palais Royal, Inc. ("Palais
Royal").
Optional Redemption........... The New Securities may not be redeemed by
the Company at any time prior to August
15, 1998. Thereafter, the New Securities
may be redeemed at the option of the
Company at a premium declining ratably to
par in 2002. In the event of an IPO at
any time prior to August 15, 1996, the
New Securities will be callable at 110%
of par; provided that at least
$11,929,000 in aggregate principal amount
of Securities remain outstanding
following the redemption.
Mandatory Redemption.......... The Company will be required to redeem
40% in aggregate principal amount of the
Securities on September 15, 2002 to the
extent not already repurchased.
10
Covenants..................... The Indenture contains restrictions
relating to, among other things, the
repurchase of stock and subordinated debt
and the making of certain other payments,
the incurrence of additional
Indebtedness, the creation of certain
Liens, certain Asset Sales and
transactions with subsidiaries and other
Affiliates (each of such terms as defined
herein). See "Description of New
Securities."
11
<PAGE>
The following table presents summary historical consolidated financial
data derived from the Company's financial statements and summary pro forma
financial information derived from unaudited pro forma financial data. The
summary pro forma financial data for the year ended January 28, 1995 and the
three months ended April 29, 1995 give effect to the issuance of the Old
Securities. The summary pro forma financial data does not purport to represent
what the Company's results of operations actually would have been if the
issuance of the Old Securities had occurred as of the beginning of or will be
for any future periods. The information in the table should be read in
conjunction with "Selected Historical and Pro Forma Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company, included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
--------------------------------------------------------------- --------------------------------
PRO PRO
FORMA FORMA
FEB. 2, FEB. 1, JAN. 30, JAN. 29, JAN. 28, JAN. 28, APRIL 30, APRIL 29, APRIL 29,
1991 1992 1993(1) 1994 1995 1995(10) 1994 1995 1995(10)
-------- -------- -------- -------- -------- -------- -------- --------- --------
(dollars in thousands, except store data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:(2)
Net sales ................... $426,158 $447,142 $504,401 $557,422 $581,463 $581,463 $128,073 $ 142,353 $142,353
Gross profit ................ 126,707 135,569 154,265 172,579 182,804 182,804 39,856 46,283 46,283
Selling, general and
administrative
expenses(3) ............... 109,441 116,658 129,313 135,209 140,359 140,359 30,045 34,127 34,127
Service charge
income (4) ................ 20,197 22,840 29,670 20,003 8,515 8,515 2,133 2,683 2,683
Operating income ............ 37,463 41,751 54,622 57,373 50,960 50,960 11,944 14,839 14,839
Net interest expense ........ 35,874 33,407 31,771 30,925 28,089 30,303 7,132 7,351 7,903
Extraordinary item (5) ...... -- -- -- 16,208 308 308 326 -- --
Net income .................. 1,274 3,961 12,235 910 14,224 12,851 2,755 4,569 4,227
Ratio of earnings
to fixed charges(6) ....... -- 1.16x 1.47x 1.63x 1.57x 1.49x 1.49x 1.71x 1.62x
MARGIN DATA:
Gross profit margin ......... 29.7% 30.3% 30.6% 31.0% 31.4% 31.4% 31.1% 32.5% 32.5%
Operating income
margin .................... 8.8% 9.3% 10.8% 10.3% 8.8% 8.8% 9.3% 10.4% 10.4%
STORE DATA:
Comparable store sales
growth (7) ................ 0.4% 3.0% 2.2% 5.9% 3.1% -- 5.4% (0.7)% --
Net sales per square
foot ...................... $ 135 $ 142 $ 137 $ 145 $ 149 -- -- -- --
Number of stores open
at end of period (8) ...... 152 159 229 231 206 -- 231 240 --
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital ............. $182,907 $200,050 $214,430 $156,414 $147,595 -- $150,692 $ 140,814 $156,678
Total assets ................ 356,248 365,381 403,824 341,621 362,521 -- 332,814 359,820 376,378
Long-term debt(9) ........... 288,207 298,266 296,587 262,235 253,027 -- 252,303 253,084 269,542
</TABLE>
12
NOTES TO SUMMARY HISTORICAL AND
PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
(1) The selected financial data for 1992 include the operations of Fashion Bar
from May 30, 1992, the effective date of its acquisition.
(2) The statement of operations data include reclassifications from amounts
reported in previous years. Non- interest credit expenses of $14,894,
$17,429 and $18,930 have been reclassified to selling, general and
administrative expenses for 1990, 1991 and 1992, respectively. These
reclassifications had no impact on operating income or net income for the
years presented.
(3) Selling, general and administrative expense for 1994 includes costs of
$5,232 associated with the Store Closure Plan (as defined herein). See Note
2 to the Consolidated Financial Statements.
(4) Service charge income decreased during 1993 and 1994 due to the sale of
accounts receivable to a trust pursuant to the Accounts Receivable Program
(as defined herein). See Note 4 to the Consolidated Financial Statements.
(5) The extraordinary item represents the loss on the early extinguishment of
certain debt of the Company.
(6) Earnings used in computing the ratio of earnings to fixed charges consist
of income before income taxes and minority interest, plus fixed charges
charged to income. Fixed charges consist of interest on indebtedness,
amortization of debt issue costs and one-third of rental expense, which
management believes to be a reasonable estimate of the interest factor of
rental payments. Earnings were insufficient to cover fixed charges in 1990
by $183.
(7) Comparable stores sales ("Comparable Store Sales") growth includes sales of
stores that have been open for the full previous period and the full period
for which the calculation is made. Comparable Store Sales growth for 1990,
1991, 1992 and 1993 excludes Fashion Bar stores acquired in June 1992.
(8) Stores open at February 1, 1992, January 30, 1993 and January 29, 1994
included four, five and ten stores, respectively, which were previously
excluded under the Bealls store closure program. Such stores are only
included in the Company's results of operations subsequent to their removal
from the Bealls store closure program. See Note 7 to the Consolidated
Financial Statements. Stores open at January 28, 1995 exclude 29 Fashion
Bar stores closed during 1994 pursuant to the Store Closure Plan (as
defined herein).
(9) Long-term debt at January 29, 1994 and January 28, 1995 includes the impact
of the refinancing of certain debt of the Company. See Note 3 to the
Consolidated Financial Statements.
13
(10) Pro forma statement of operations data for 1994 and the three months ended
April 29, 1995 reflect the following adjustments related to the issuance of
the Old Securities:
THREE MONTHS
YEAR ENDED ENDED
JAN. 28, 1995 APRIL 29, 1995
------------- --------------
Increase in interest expense ...... $2,214 $552
Decrease in net income ............ 1,373 342
Pro forma balance sheet data at April 29, 1995 reflect the following
adjustments related to the issuance of the Old Securities:
Net proceeds to the Company ................. $15,964
Additional debt issue costs ................. 594
Accrual of certain costs related to the
offering of the Securities ................ 100
Additional debt ............................. 16,458
The above pro forma data does not include any adjustment related to the
acquisition of Beall-Ladymon on October 31, 1994. See Note 1 to the
Consolidated Financial Statements.
14
THE COMPANY
The Company operates family apparel stores primarily under the names
"Bealls", "Palais Royal", "Stage" and "Fashion Bar" offering branded fashion
apparel and accessories for women, men and children. During 1993, the Company
became the wholly-owned subsidiary of ARI. ARI has no operations of its own and
its primary asset is the common stock of the Company. The Company currently
operates 248 stores in thirteen states primarily throughout the central United
States.
The principal executive offices of the Company are located at 10201 Main
Street, Houston, Texas 77025, and their telephone number is (713) 667-5601.
15
RISK FACTORS
Holders of the Old Securities should consider carefully the information set
forth below, as well as the other information set forth in this Prospectus,
before accepting the Exchange Offer.
LEVERAGE AND DEBT SERVICE
As of April 29, 1995, on a pro forma basis after giving effect to the
issuance of the Old Securities, the Company's total long-term indebtedness would
have been $269.5 million (including the New Securities).
Any material adverse developments affecting the business of the Company
could significantly limit its ability to withstand competitive pressures or
adverse economic conditions, take advantage of significant business
opportunities that may arise, or meet its financial obligations as they become
due. The Company's ability to make principal and interest payments on the New
Securities and to make payments to ARI to pay interest on ARI's debt obligations
(the "ARI Debentures") and to repay the ARI Debentures at maturity will depend
on the Company's future operating performance, which is itself dependent on a
number of factors many of which are beyond its control. No cash interest
payments are required on the ARI Debentures until 1999. Although there can be no
assurance that the current level of the Company's operating results will
continue or improve, the Company believes that, based upon current operations
and anticipated growth, it will be able to meet its obligations as they come due
and make sufficient distributions to ARI to enable ARI to meet its obligations
as they come due through cash flow from operations and proceeds from the
accounts receivable securitization program (the "Accounts Receivable Program").
SUBORDINATION OF SECURITIES
The New Securities will be general unsecured obligations of the Company,
will rank junior to all existing and future Senior Debt (as defined herein),
pari passu with the existing 11% Notes and senior to all existing and future
subordinated Indebtedness of the Company, including the 7% FB Holdings
Subordinated Notes (as defined herein), the 9% Bealls Holdings Subordinated
Debentrues (as defined herein) and the 7% Bealls Holdings Junior Subordinated
Debentures (as defined herein). The existing 11% Notes, however, are guaranteed
on a senior subordinated basis by Palais Royal.
GENERAL ECONOMIC CONDITIONS AND SEASONALITY
Substantially all of the Company's operations are located in the central
United States. As a result, the Company's operations are affected by local
economic conditions which are beyond the Company's control. Any decline in the
economic conditions in this region could have an adverse effect on the Company.
For example, continued weak economic conditions in Mexico, which have resulted
in the devaluation of the peso, adversely affected sales of six Bealls stores
located near the Texas-Mexico border during the first quarter of 1995.
Comparable store sales, adjusting for this impact, would have increased 1.7%
versus a 0.7% decrease as reported. Although this may be a temporary aberration,
its continued duration and resulting impact on these and possibly other stores'
sales can not be predicted at this time.
The Company's business is seasonal and its sales and profits traditionally
have been lower during the first three quarters of the year (February through
October) and higher during the fourth quarter of the year (November through
January). Any substantial decrease in sales for the fourth quarter of the year
could have a material adverse effect on the Company's profitability.
COMPETITION
The retail apparel industry is highly competitive and the Company faces
substantial competition, particularly in the Houston market, from national and
regional department and specialty stores. Some of the Company's competitors are
considerably larger than the Company and have substantially greater financial
and other resources. The Company believes its store format, merchandising
strategy and customer service, combined with an emphasis
16
on operating systems and technology, enable it to effectively compete with
department stores and specialty stores located in the Company's markets. The
Company believes that its knowledge of local markets, developed over seventy
years of service, has enabled it to establish a strong franchise in most of its
markets.
LACK OF PUBLIC MARKET
The Old Securities are currently owned by a relatively small number of
beneficial owners. Prior to the Exchange Offer, there has not been any public
market for the Old Securities. The Old Securities have not been registered under
the Securities Act and will be subject to restrictions on transferability to the
extent that they are not exchanged for New Securities by holders who are
entitled to participate in this Exchange Offer. The holders of Old Securities
(other than any such holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) who are not eligible to
participate in the Exchange Offer are entitled to certain registration rights,
and the Company is required to file a Shelf Registration Statement with respect
to such Old Securities. The New Securities will constitute new issues of
securities with no established trading market. The Company does not intend to
list the New Securities on any national securities exchange or to seek the
admission thereof to trading in the National Association of Securities Dealers
Automated Quotation System. The Initial Purchaser has advised the Company that
it currently intends to make a market in the New Securities, but it is not
obligated to do so and may discontinue such market making at any time. In
addition, such market making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act and may be limited during the Exchange
Offer and the pendency of the Shelf Registration Statement. See "Description of
New Securities--Registration Rights; Liquidated Damages." Accordingly, no
assurance can be given that an active public or other market will develop for
the New Securities or as to the liquidity of the trading market for the New
Securities. If a trading market does not develop or is not maintained, holders
of the New Securities may experience difficulty in reselling the New Securities
or may be unable to sell them at all. If a market for the New Securities
develops, any such market may be discontinued at any time.
If a public trading market develops for the New Securities, future trading
prices of such securities will depend on many factors, including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the New Securities may trade at a discount from the
principal amount.
EXCHANGE OFFER PROCEDURES
Issuance of the New Securities in exchange for the Old Securities pursuant
to the Exchange Offer will be made only after a timely receipt by the Company of
such Old Securities, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of the Old
Securities desiring to tender such Old Securities in exchange for New Securities
should allow sufficient time to ensure timely delivery. The Company is under no
duty to give notification of defects or irregularities with respect to the
tenders of Old Securities for exchange. Old Securities that are not tendered or
are tendered but not accepted will, following the consummation of the Exchange
Offer, continue to be subject to the existing restrictions upon transfer thereof
and, upon consummation of the Exchange Offer, certain registration rights under
the Registration Rights Agreement will terminate. In addition, any holder of Old
Securities who tenders in the Exchange Offer for the purpose of participating in
a distribution of the New Securities may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Securities for its own
account in exchange for Old Securities, where such Old Securities were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a Prospectus in connection
with any resale of such New Securities. See "Plan of Distribution." To the
extent that Old Securities are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Securities could
be adversely affected. See "The Exchange Offer."
17
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights Agreement.
The Company will not receive any cash proceeds from the issuance of the New
Securities offered hereby. In consideration for issuing the New Securities
contemplated in this Prospectus, the Company will receive in exchange Old
Securities in like principal amount, the form and terms of which are the same as
the form and terms of the New Securities (which they replace), except as
otherwise described herein. The Old Securities surrendered in exchange for New
Securities will be retired and canceled and cannot be reissued. Accordingly,
issuance of the New Securities will not result in any increase or decrease in
the indebtedness of the Company. As such, no effect has been given to the
Exchange Offer in the pro forma financial data or capitalization tables.
The net proceeds from the sale of Old Securities in the Offering were
$15,964,187 in the aggregate after deduction of discounts and commissions.
Substantially all of such net proceeds will be used for new store openings and
other general corporate purposes.
18
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of April 29, 1995 and as adjusted to give effect to the issuance of
the Old Securities. This presentation should be read in conjunction with the
Consolidated Financial Statements of the Company and the related notes thereto
and other information appearing elsewhere in this Prospectus.
HISTORICAL PRO FORMA
APRIL 29, APRIL 29,
1995 1995
-------- --------
(in thousands)
Short-term debt and current maturities of long-term debt $ 276 $ 276
======== ========
Long-term debt:
Senior Notes ........................................ $130,000 $130,000
11% Notes ........................................... 100,000 100,000
Revolving credit agreement with a bank .............. -- --
Old Securities, net of discount of $1,792 ........... -- 16,458
9% Bealls Holding Subordinated Debentures,
net of discount of $4,148 ........................ 10,835 10,835
7% FB Holdings Subordinated Notes, net of
discount of $286 ................................. 3,949 3,949
7% Bealls Holding Junior Subordinated Debentures,
net of discount of $8,191 ........................ 6,122 6,122
Other long-term debt ................................ 2,178 2,178
-------- --------
Total long-term debt ................................... 253,084 269,542
-------- --------
Stockholder's equity ................................... 9,395 9,395
-------- --------
Total capitalization ................................... $262,479 $278,937
======== ========
19
SELECTED HISTORICAL AND
PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT STORE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
------------------------------------------------------------------ ----------------------------------
PRO PRO
FORMA FORMA
FEB. 2, FEB. 1, JAN. 30, JAN. 29, JAN. 28, JAN. 28, APRIL 30, APRIL 29, APRIL 29,
1991 1992 1993(1) 1994 1995 1995(10) 1994 1995 1995(10)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:(2)
Net sales ................ $ 426,158 $ 447,142 $ 504,401 $ 557,422 $ 581,463 $ 581,463 $ 128,073 $ 142,353 $ 142,353
Cost of sales and related
buying, occupancy and
distribution expenses ... (299,451) (311,573) (350,136) (384,843) (398,659) (398,659) (88,217) (96,070) (96,070)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Gross profit ............. 126,707 135,569 154,265 172,579 182,804 182,804 39,856 46,283 46,283
Selling, general and
administrative,
expenses(3) ............. (109,441) (116,658) (129,313) (135,209) (140,359) (140,359) (30,045) (34,127) (34,127)
Service charge
income(4) ............... 20,197 22,840 29,670 20,003 8,515 8,515 2,133 2,683 2,683
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Operating income ......... 37,463 41,751 54,622 57,373 50,960 50,960 11,944 14,839 14,839
Net interest expense ..... (35,874) (33,407) (31,771) (30,925) (28,089) (30,303) (7,132) (7,351) (7,903)
Other non-operating
income (expense) ........ 426 359 (2,276) -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Income before income tax,
minority interest and
extraordinary item ...... 2,015 8,703 20,575 26,448 22,871 20,657 4,812 7,488 6,936
Income tax expense ....... -- (3,993) (8,340) (9,330) (8,339) (7,498) (1,731) (2,919) (2,709)
Minority interest
expense ................. (741) (749) -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Income before
extraordinary item ...... 1,274 3,961 12,235 17,118 14,532 13,159 3,081 4,569 4,227
Extraordinary item -
Early extinguishment
of debt (5) ............. -- -- -- (16,208) (308) (308) (326) -- --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net income ............... $ 1,274 $ 3,961 $ 12,235 $ 910 $ 14,224 $ 12,851 $ 2,755 $ 4,569 $ 4,227
========= ========= ========= ========= ========= ========= ========= ========= =========
Ratio of earnings to fixed
charges (6) ............. -- 1.16x 1.47x 1.63x 1.57x 1.49x 1.49x 1.71x 1.62x
MARGIN AND OTHER DATA:
Gross profit margin ...... 29.7% 30.3% 30.6% 31.0% 31.4% 31.4% 31.1% 32.5% 32.5%
Operating income margin .. 8.8% 9.3% 10.8% 10.3% 8.8% 8.8% 9.3% 10.4% 10.4%
STORE DATA:
Comparable store sales
growth (7) .............. 0.4% 3.0% 2.2% 5.9% 3.1% -- 5.4% (0.7)% --
Net sales per square foot $ 135 $ 142 $ 137 $ 145 $ 149 -- -- -- --
Number of stores open at
end of period (8) ....... 152 159 229 231 206 -- 231 240 --
BALANCE SHEET DATA (AT END
OF PERIOD):
Working capital .......... $ 182,907 $ 200,050 $ 214,430 $ 156,414 $ 147,595 -- $ 150,692 $ 140,814 $ 156,678
Total assets ............. 356,248 365,381 403,824 341,621 362,521 -- 332,814 359,820 376,378
Long-term debt(9) ........ 288,207 298,266 296,587 262,235 253,027 -- 252,303 253,084 269,542
Redeemable preferred
stock ................... 12,407 15,200 17,500 -- -- -- -- -- --
Stockholder's equity
(deficit) ............... (20,744) (19,500) (9,605) (9,263) 4,826 -- (6,508) 9,395 9,395
</TABLE>
20
NOTES TO SELECTED HISTORICAL AND
PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
(1) The selected financial data for 1992 include the operations of Fashion Bar
from May 30, 1992, the effective date of its acquisition.
(2) The statement of operations data include reclassification from amounts
reported in previous years. Non-interest credit expenses of $14,894,
$17,429 and $18,930 have been reclassified to selling, general and
administrative expenses for 1990, 1991 and 1992, respectively. These
reclassifications had no impact on operating income or net income for the
years presented.
(3) Selling, general and administrative expense for 1994 includes costs of
$5,232 associated with the Store Closure Plan (as defined herein). See Note
2 to the Consolidated Financial Statements.
(4) Service charge income decreased during 1993 and 1994 due to the sale of
accounts receivable to a trust pursuant to the Accounts Receivable Program.
See Note 4 to the Consolidated Financial Statements.
(5) The extraordinary item represents the loss on the early extinguishment of
certain debt of the Company.
(6) Earnings used in computing the ratio of earnings to fixed charges consist
of income before income taxes and minority interest, plus fixed charges
charged to income. Fixed charges consist of interest on indebtedness,
amortization of debt issue costs and one-third of rental expense, which
management believes to be a reasonable estimate of the interest factor of
rental payments. Earnings were insufficient to cover fixed charges in 1990
by $183.
(7) Comparable Stores Sales growth includes sales of stores that have been open
for the full previous period and the full period for which the calculation
is made. Comparable Store Sales growth for 1990, 1991, 1992 and 1993
excludes Fashion Bar stores acquired in June 1992.
(8) Stores open at February 1, 1992, January 30, 1993 and January 29, 1994
included four, five and ten stores, respectively, which were previously
excluded under the Bealls store closure program. Such stores are only
included in the Company's results of operations subsequent to their removal
from the Bealls store closure program. See Note 7 to the Consolidated
Financial Statements. Stores open at January 28, 1995 exclude 29 Fashion
Bar stores closed during 1994 pursuant to the Store Closure Plan (as
defined herein).
(9) Long-term debt at January 29, 1994 and January 28, 1995 includes the impact
of the refinancing of certain debt of the Company. See Note 3 to the
Consolidated Financial Statements.
21
(10) Pro forma statement of operations data for 1994 and the three months ended
April 29, 1995 reflect the following adjustments related to the issuance of
the Old Securities:
THREE MONTHS
YEAR ENDED ENDED
JAN. 28, 1995 APRIL 29, 1995
------------- --------------
Increase in interest expense........ $2,214 $552
Decrease in net income.............. 1,373 342
Pro forma balance sheet data at April 29, 1995 reflects the following
adjustments related to the issuance of the Old Securities:
Net proceeds to the Company .................. $15,964
Additional debt issue costs .................. 594
Accrual of certain costs related to the
offering of the Securities ................. 100
Additional debt .............................. 16,458
The above pro forma data does not include any adjustment related to the
acquisition of Beall-Ladymon on October 31, 1994. See Note 1 to the
Consolidated Financial Statements.
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company operates family apparel stores primarily under the names
"Bealls", "Palais Royal", "Stage" and "Fashion Bar" offering branded fashion
apparel and accessories for women, men and children. During 1993, The Company
became the wholly-owned subsidiary of ARI. ARI has no operations of its own and
its primary asset is the common stock of SRI.
The Company currently operates 248 stores in thirteen states primarily
throughout the central United States. The Company's stores are typically between
eighteen and thirty thousand square feet in size which is smaller than typical
department stores yet larger than most specialty stores. The store format allows
the Company to operate in either small towns and communities with as few as
fifteen thousand people or large metropolitan and suburban areas. The Company's
store format is large enough to offer apparel and accessories for all members of
the family and small enough to allow for strategic location in rural markets or
in numerous, convenient locations in metropolitan and suburban areas.
During 1993, management formalized its growth strategy for expanding the
Company's business. The strategy provides for (i) the opening and profitable
operation of new stores in small market areas where the Company can become a
dominant retailer in the local community by providing quality and value priced
merchandise for the whole family and (ii) the acquisition of selected apparel
retail concerns in markets compatible with the Company's growth strategy. During
1994, this growth strategy resulted in the opening of ten new stores in Texas,
Oklahoma and Missouri and the acquisition of forty-five store leases from
Beall-Ladymon located primarily in Louisiana, Arkansas and Mississippi. The
former Beall-Ladymon stores reopened in the first quarter of 1995 under the name
of Stage, the banner the Company has registered nationally and intends to
promote in all new markets where its traditional names are unrecognized. These
new stores are similar in size, appearance and merchandise content to the
Company's other stores. Management continues to actively search for other
potential locations that meet its site selection criteria including market size,
economic demographics, customer profile and competitive environment and, as a
result, expects to open sixteen additional new stores during the remainder of
1995. Many of these stores will be opened as Stage stores in new markets
including Missouri, Illinois, Kansas and Iowa.
In order to finance the new planned store openings and possible future
acquisitions, the Company initiated an overall refinancing plan during 1993
which included the implementation of the Accounts Receivable Program and the
issuance of new long-term debt instruments which replaced certain existing debt
and preferred stock (the "Refinancing"). See Note 3 to the Consolidated
Financial Statements and "Liquidity and Capital Resources" below.
The Company approved a store closure plan (the "Store Closure Plan") during
the fourth quarter of 1994, pursuant to which it would close forty Fashion Bar
stores, primarily located in major regional malls within the Denver area. To
date, the Company has closed all but one of such stores. Management determined
that the return on the investment needed to upgrade these stores and the
promotional efforts required to make these stores more competitive were neither
justified nor compatible with the Company's overall merchandising philosophies.
Upon completion of the Store Closure Plan during 1995, twelve Fashion Bar stores
will remain open. Management anticipates that two of the twelve remaining stores
will close once lease termination agreements are reached with the respective
landlords or upon the expiration of their leases between August 1996 and January
1998. These two stores are not included in the Store Closure Plan as management
is unsure of the cost and timing of the store closures. Management is optimistic
that merchandising and pricing strategies consistent with its other stores can
be successfully applied to the ten Fashion Bar stores which will remain open.
Management plans to gradually remodel the majority of these stores in order to
update their look and provide its customers with a fashionable, pleasant
shopping environment. Nine of the remaining ten Fashion Bar stores will be
converted to Stage stores during 1995. The downtown Denver location will
continue to be a Fashion Bar store. See Note 2 to the Consolidated Financial
Statements.
23
During the first quarter of 1995, continued weak economic conditions in
Mexico, which have resulted in the devaluation of the peso, adversely affected
sales of six Bealls stores located near the Texas-Mexico border. Comparable
store sales, adjusting for this impact, would have increased 1.7% versus a 0.7%
decrease as reported. Although this may be a temporary aberration, its continued
duration and resulting impact on these and possibly other stores' sales can not
be predicted at this time.
RESULTS OF OPERATIONS
FIRST QUARTER 1994 COMPARED TO FIRST QUARTER 1995. Sales for the first
quarter of 1994 and 1995 were $128.1 million and $142.4 million, respectively,
representing an increase of 11.2%. The increase was due to a 16.6% increase in
sales generated from stores opened during 1994 and 1995, partially offset by a
4.7% decrease in sales as a result of the closure of stores in the Store Closure
Plan combined with a 0.7% decrease in comparable store sales. The decrease in
comparable store sales was primarily due to the weak economic conditions in
Mexico. Excluding the six Bealls stores located near the Texas-Mexico border,
comparable store sales would have increased 1.7%.
Gross profit as a percent of sales for the first quarter of 1994 and 1995
was 31.1% and 32.5%, respectively. This increase was due to favorable profit
margins associated with sales at the Company's newly opened stores combined with
the application of fixed costs related to buying, occupancy and distribution
expenses to a greater volume of sales.
Selling, general and administrative expenses as a percent of sales for the
first quarter of 1994 and 1995 were 23.5% and 24.0%, respectively. This increase
resulted from an increase in costs associated with the Accounts Receivable
Program partially offset by the reversal of a $0.8 million reserve as a result
of a favorable court ruling in a litigation matter.
Service charge income for the first quarter of 1994 and 1995 was $2.1
million and $2.7 million, respectively, an increase of $0.6 million. Service
charge income increased due to increased accounts receivable balances resulting
from higher sales volume and the purchase of accounts receivable from
Beall-Ladymon. This increase was partially offset by an increase in accounts
receivable sold to the trust under the Company's Accounts Receivable Program.
Interest income decreased from $0.4 million for the first quarter of 1994
to $0.2 million for the first quarter 1995 due to the Company's lower cash
balances. The decrease in the Company's cash balances is primarily attributable
to inventory purchases and capital expenditures associated with new store
openings.
Interest expense for the first quarter of 1994 and 1995 was $7.5 million.
Interest savings which resulted from the retirement of $10.0 million of the
Senior Notes (as defined herein) during the first quarter of 1994 was offset by
increased interest rates on certain debt combined with increased borrowings and
associated fees under the Credit Agreement (as defined herein).
The extraordinary charge of $0.3 million in the first quarter of 1994 was
comprised of acquisition premiums and the write-off of debt issue costs
associated with the retirement of $10.0 million of Senior Notes (as defined
herein), net of applicable income taxes.
As a result of the foregoing, the Company's net income increased from $2.8
million for first quarter of 1994 to $4.6 million for first quarter of 1995.
1993 COMPARED TO 1994. Sales for 1993 and 1994 were $557.4 million and
$581.5 million, respectively, representing an increase of $24.1 million or 4.3%.
Comparable store sales were $525.2 and $541.7 million for 1993 and 1994,
respectively, representing an increase of $16.5 million or 3.1%. The overall
increase in sales was a result of an increase in Comparable Store Sales combined
with a net increase in sales from store openings and closings during 1994. The
increase in Comparable Store Sales was a result of (i) the greater visual impact
derived from the Company's continued remodeling program, (ii) automated
scheduling which enables the Company to properly match sales associates to peak
traffic hours, (iii) the favorable reaction to the relocation of four store
locations, (iv) more professional and dramatic presentations in print and
television advertising, (v) increased sales in the Company's private label
apparel,
24
(vi) the acceptance of third party charge cards in Palais Royal stores beginning
in early 1994 and (vii) a higher level of consumer confidence due to slightly
improved general economic conditions.
Gross profit as a percentage of sales was 31.0% and 31.4% of sales for 1993
and 1994, respectively. The increase in the gross profit percentage was
primarily due to increased sales in the Company's private label apparel which
generally has higher margins than brand name apparel.
Selling, general and administrative expenses were $135.2 million and $135.1
million for 1993 and 1994, respectively. Selling, general and administrative
expenses as a percentage of sales were 24.3% and 23.2% for 1993 and 1994,
respectively. The decrease as a percentage of sales is due primarily to the sale
of accounts receivable to a trust pursuant to the Accounts Receivable Program
which began during August 1993 and the Company's ability to effectively manage
variable selling, general and administrative expenses.
Service charge income decreased from $20.0 million for 1993 to $8.5 million
for 1994 due primarily to the sale of receivables pursuant to the Accounts
Receivable Program. See Note 4 to the Consolidated Financial Statements.
Operating income as a percentage of sales declined from 10.3% for 1993 to
8.8% for 1994 due primarily to costs associated with the Store Closure Plan in
1994 of $5.2 million combined with the implementation of the Accounts Receivable
Program in 1993 which resulted in an initial gain of $2.7 million. See Note 2 to
the Consolidated Financial Statements.
Net interest expense decreased $2.8 million from $30.9 million for 1993 to
$28.1 million for 1994. The decrease in net interest expense is due to the
purchase and retirement of $20.0 million of the Company's Senior Notes (as
defined herein), $10.0 million of which were purchased during the latter portion
of 1993.
As a result of the foregoing, the Company's net income increased from $0.9
million for 1993 (which includes an extraordinary charge related to the
Refinancing of $16.2 million) to $14.2 million for 1994.
1992 COMPARED TO 1993. Sales for 1993 were $557.4 million compared to sales
of $504.4 million for 1992, an increase of $53.0 million or 10.5%. This increase
was due to (i) an increase in Comparable Store Sales of $26.6 million or 5.3%,
(ii) the acquisition of Fashion Bar effective May 30, 1992 which added $39.4
million of sales in 1992 compared to $55.2 million in 1993, an increase of $15.8
million or 3.1%, (iii) the addition of sales from five Bealls stores which were
removed from the store closure program during 1993 of $5.5 million or 1.1% and
(iv) an increase in sales from stores opened during 1993 net of sales from
stores closed during the year, of $5.1 million or 1.0%. The Company achieved
these sales increases despite continued sales weaknesses in the Colorado
markets. Increased advertising efforts which included (i) a higher visibility in
television, (ii) over eighteen million units of 101 different catalogs, flyers,
letters, brochures and postcards sent to targeted customers, primarily the
Company's private label credit card holders and (iii) the purchase of
advertising space and spots in 174 newspapers and on 252 radio and television
stations had a positive impact on the Company's Comparable Store Sales in 1993.
Gross profit as a percentage of sales increased from 30.6% in 1992 to 31.0%
in 1993 due to the 10.5% growth in sales discussed above coupled with continued
efficiencies gained from the consolidation of the Fashion Bar buying operations
into the Company and the consolidation of the former Fashion Bar and Palais
Royal distribution centers into the Jacksonville distribution center.
Selling, general and administrative expenses increased from $129.3 million
for 1992 to $135.2 million for 1993. This increase is primarily due to the
increased sales during 1993. Selling, general and administrative expenses as a
percentage of sales were 25.6% and 24.3% for 1992 and 1993, respectively. This
decrease is due to the gain on sale of receivables discussed below, coupled with
continued benefits derived from the consolidation of the Company's operations.
25
Service charge income decreased from $29.7 million for 1992 to $20.0
million for 1993 due to the sale of receivables to a trust which resulted in a
gain of $3.3 million. This gain has been reflected as a reduction in selling,
general, and administrative expenses. See Note 4 to the Consolidated Financial
Statements.
Operating income as a percentage of sales declined slightly from 10.8% for
1992 to 10.3% for 1993 due primarily to the implementation of the Accounts
Receivable Program. See Note 4 to the Consolidated Financial Statements.
Net interest expense decreased $0.9 million from $31.8 million for 1992 to
$30.9 million for 1993. The decrease in net interest expense is due to more
favorable interest rates resulting from the Refinancing.
In connection with the Refinancing, the Company recorded an extraordinary
charge of $16.2 million, net of applicable income taxes of $8.8 million,
representing (i) the write-off of the debt issue costs associated with the
replaced debt and the existing accounts receivable facility, (ii) the write-off
of an interest rate cap agreement associated with the existing accounts
receivable facility, (iii) the write-off of unamortized debt discounts
associated with the senior subordinated notes and subordinated debentures, (iv)
the repurchase premiums associated with the subordinated debentures and the
14 5/8% senior subordinated notes repurchased through a tender offer and (v) the
costs of defeasing the remaining 14 5/8% senior subordinated notes. See Note 3
to the Consolidated Financial Statements.
As a result of the foregoing, the Company's net income decreased from $12.2
million to $0.9 million for 1992 and 1993, respectively.
SEASONALITY AND INFLATION
The Company's business is seasonal and sales and profits traditionally have
been lower during the first three quarters of the year (February through
October) and higher during the fourth quarter of the year (November through
January). Working capital requirements fluctuate during the year and generally
reach their highest levels during the third and fourth quarters.
The following table shows certain unaudited financial information for the
Company by quarter (in thousands):
<TABLE>
<CAPTION>
1994 1995
-------------------------------------------------------------- --------
Q1 Q2 Q3 Q4 Q1
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales ................................. $128,073 $132,060 $134,939 $186,391 $142,353
Gross profit .............................. 39,856 39,163 41,110 62,675 46,283
Operating income .......................... 11,944 10,574 10,030 18,412 14,839
Quarter's operating income as a
percent of annual .................... 23% 21% 20% 36% --
Income before extraordinary item .......... $ 3,081 $ 2,286 $ 1,963 $ 7,202 $ 4,569
Net income ................................ 2,755 2,286 2,001 7,182 4,569
</TABLE>
The Company does not believe that inflation had a material effect on its
results of operations during the past two years. However, there can be no
assurance that the Company's business will not be affected by inflation in the
future.
LIQUIDITY AND CAPITAL RESOURCES
At April 29, 1995, the Company's consolidated long-term debt included
$130.0 million in aggregate principal amount of 10% senior notes due 2000, (the
"Senior Notes"), $100.0 million of 11% Notes, $2.1 million of indebtedness under
industrial development revenue bonds and certain other debt of its subsidiaries.
See Note 8 to the Consolidated Financial Statements.
26
Working capital decreased $6.8 million during the first quarter of 1995
primarily due to capital expenditures. Significant changes within working
capital components included cash, accounts receivable and merchandise
inventories. The Company's cash balances decreased from $27.8 million at January
28, 1995 to $8.7 million at April 29, 1995. This decrease was due primarily to
capital expenditures related to the new store openings and seasonal purchases of
inventory. Accounts receivable decreased $21.8 million during the first quarter
of 1995 as a result of collections generated from seasonal fourth quarter 1994
sales combined with an increase in accounts receivable sold to the trust.
Merchandise inventories increased $27.6 million during the first quarter of 1995
as a result of seasonal purchases of merchandise and merchandise purchased for
newly opened stores.
During 1993, the Company implemented the Accounts Receivable Program which
provides a source of funds from the sale of accounts receivable to a master
trust (the "Trust"). Pursuant to the Accounts Receivable Program, the Company
sells all of the accounts receivable generated by the holders of the Company's
private label credit card accounts to its wholly-owned subsidiary SRI
Receivables Purchase Co., Inc. ("SRPC"), on a daily basis. SRPC is a separate
limited-purpose subsidiary that is operated in a fashion intended to ensure that
its assets and liabilities are distinct from those of the Company and its other
affiliates as SRPC's creditors have a claim on its assets prior to becoming
available to any creditor of the Company. SRPC sells, on a daily basis, the
accounts receivable purchased from the Company to the Trust in exchange for cash
or a certificate representing an undivided interest in the Trust. At its
inception, the Trust issued $140.0 million of term certificates and a $40.0
million revolving certificate representing undivided interest in the Trust. On
August 15, 1995, the Trust issued an additional $25.0 million of term
certificates representing an undivided interest in the Trust. The Trust did not
receive any cash immediately from the issuance of the revolving certificate.
Instead, the holder of the revolving certificate agreed to purchase interests in
the Trust equal to the amount of accounts receivable in the Trust above the
level required to support the term certificates and the transferor's retained
interest (currently $200.1 million), up to a maximum of $40.0 million. If
receivable balances in the Trust fall below the level required to support the
term certificates and revolving certificates, certain principal collections may
be retained in the Trust until such time as the receivable balances exceed the
certificates then outstanding and the required transferor's interest. The
Company owns and undivided interest in the accounts receivable in the trust not
represented by the term or revolving certificates and will continue to service
all of the accounts receivable in the Trust. The Trust may issue additional
series of certificates from time to time. Terms of any future series will be
determined at the time of issuance. The outstanding balance of the revolving
certificate was $10.3 million at April 29, 1995.
Total accounts receivable sold to the Trust during 1993 and 1994 were
$285.1 million and $278.6 million, respectively. In addition, the Company
transferred $10.0 million of accounts receivable purchased from Beall-Ladymon to
the Trust on February 1, 1995. The cash flows generated from the accounts
receivable in the Trust are dedicated to (i) the purchase of new accounts
receivable generated by the Company, (ii) payment of a return on the
certificates and (iii) the payment of a servicing fee to SRI. Any remaining cash
flows are remitted to the Company. The term certificates entitle the holders to
receive a return, based upon the London Interbank Offered Rate ("LIBOR"), plus a
specified margin paid on a quarterly basis. Principal payments commence on
December 31, 1999 but can be accelerated upon occurrence of certain events. The
revolving certificates entitle the holders to receive a return based upon a
floating LIBOR rate, plus a specified margin, or prime rate, at the option of
the Company paid on a monthly basis. The Company is protected against increases
above 10% under an agreement entered into with a bank. The Company is exposed to
loss in the event of non-performance by the bank. However, the Company does not
anticipate non-performance by the bank. At April 29, 1995, the average rate of
return on the term certificates was 7.3%. The purchase commitment for the
Revolving certificate has been extended until December 1999, subject to renewal
at the option of the parties. The revolving certificate holders are entitled to
repayment in the event the accounts receivable decrease below that required to
support such certificates.
The Company entered into a Credit Agreement and a Seasonal Credit Agreement
(as defined herein) with a bank on January 28, 1994 and March 31, 1995,
respectively. Funds available under the Credit Agreement total $25.0 million of
which $15.0 million may be used to collateralize letters of credit. As of April
29, 1995, $11.8 million of the total commitment was used to collateralize
letters of credit resulting in available funds of $13.2 million. Funds available
under the Seasonal Credit Agreement total $10.0 million from August 15 to
January 15 of each fiscal year. Both agreements are available through February
3, 1998.
27
The Company's primary capital requirements are for working capital,
including interest payments and capital expenditures. Management expects
interest payments and capital expenditures during the last three quarters of
1995 to be approximately $15.6 million and $12.5 million, respectively. During
1994, capital improvements were made to 37 stores, 23 of which were extensively
remodeled and 14 of which received betterments consisting of new carpeting,
brighter, more economical lighting and other cosmetic improvements. Management
expects to extensively remodel 15 stores during 1995.
Management believes that funds provided by operations, together with funds
available under the Credit Agreement, the Seasonal Credit Agreement, the
Accounts Receivable Program and the proceeds from the issuance of the Old
Securities will be adequate to meet the Company's anticipated requirements for
working capital, interest payments and planned capital expenditures. Estimates
as to working capital needs and other expenditures may be materially affected if
the foregoing sources are not available or do not otherwise provide sufficient
funds to meet the Company's obligations.
28
BUSINESS OF THE COMPANY
GENERAL
The Company operates family apparel stores primarily under the names
"Bealls", "Palais Royal", "Stage" and "Fashion Bar" offering branded fashion
apparel and accessories for women, men and children. During 1993, The Company
became the wholly-owned subsidiary of ARI. ARI has no operations of its own and
its primary asset is the common stock of SRI.
The Company currently operates 248 stores in thirteen states primarily
throughout the central United States. The Company's stores are typically between
eighteen and thirty thousand square feet in size which is smaller than typical
department stores yet larger than most specialty stores. The store format allows
the Company to operate in either small towns and communities with as few as
fifteen thousand people or large metropolitan and suburban areas. The Company's
store format is large enough to offer apparel and accessories for all members of
the family and small enough to allow for strategic location in rural markets or
in numerous, convenient locations in metropolitan and suburban areas.
The Company believes that its store format, merchandising strategy and
management systems have enabled it to develop a strong franchise in all of its
trading areas. Many Company stores are located in small towns and communities
with as few as fifteen thousand to thirty thousand people. The Company believes
that its ability to operate stores profitably in markets with as few as fifteen
thousand people is an important competitive advantage over department stores,
which are generally unable to operate profitably in small communities. In
addition, the Company's stores have an advantage over locally operated retailers
due to the Company's ability to offer a broader and better assortment of
continuously replenished, branded merchandise at everyday fair prices. In larger
communities, the Company's retailing concept differentiates it from both
department and specialty stores. As compared to department stores, the Company
offers multiple convenient locations and better customer service. As compared to
specialty stores, the Company's stores offer more leading brand names and a
greater assortment of merchandise. All of the Company's stores have several
distinctive features such as store size, layout and location, merchandise
strategy and personalized customer service, which are designed to provide a
convenient shopping experience and to build strong customer loyalty.
RETAIL CONCEPT
The Company has successfully implemented its retail concept through an
emphasis on management systems and technology, centralized decision making and
tight control of operating expenses. The Company believes that its distinctive
retail concept and strong operating systems have positioned the Company for
future growth with limited increases in overhead expenses. The following
features distinguish the Company from other apparel retailers:
ABILITY TO OPERATE PROFITABLY IN SMALLER MARKETS. The Company's store
format and locations are designed to offer a convenient and efficient shopping
experience for customers. The stores are typically between eighteen thousand and
thirty thousand square feet in size, which is smaller than typical department
stores yet larger than most specialty stores. The Company's store format is
large enough to offer apparel and accessories for all members of the family and
small enough to allow for profitable strategic location either in rural markets
where the Company faces lower levels of competition, or in numerous, convenient
locations in metropolitan/suburban areas. The Company's smaller market stores
generally experience higher profit margins due to lower levels of competition.
EFFECTIVE MERCHANDISING STRATEGY. The Company's merchandising strategy
focuses on the traditionally higher margin merchandise categories of women's,
men's and children's apparel and accessories, offered at an everyday fair price.
Sales associates are encouraged to adopt a "can do" attitude in order to "exceed
a customer's expectations". The Company offers a selected assortment of
first-quality, moderately priced merchandise which is divided into distinct
departments including, misses, men's, boy's, shoes, intimate apparel, juniors,
children's, accessories, cosmetics and gifts. Merchandise mix may vary
significantly from store to store to accommodate differing demographic factors.
The Company offers leading national brand names such as Liz Claiborne, Haggar,
Guess, Hanes, Nike and Reebok and other moderately priced, high quality brands.
The Company's buyers are constantly evaluating new vendors and the market for
unique merchandise. The Company may augment its merchandise presentation with
private label product based on
29
opporltunities to maximize mix. Each buyer is responsible for specific
merchandise categories to enhance his or her knowledge of the related vendors
and the merchandise generally available. This focused buying approach, combined
with the Company's in-depth understanding of each of its individual markets and
its highly automated merchandise allocation system, enables the Company to keep
each of its stores stocked with a broad, frequently replenished assortment of
high quality merchandise that has been finely tuned to meet the fashion needs of
its customers. The Company management believes that the combination of the size
and experience base of its buyer group, its strong merchandising systems and its
participation in the AMC buying cooperative allows the Company to compete
effectively with department and specialty stores.
EMPHASIS ON CUSTOMER SERVICE. Providing excellent customer service through
stores staffed with highly trained and motivated sales associates is a primary
corporate objective. The Company has implemented its "Team One" operating format
in many of its smaller stores which focuses employees on selling and customer
service during peak hours while handling non-customer oriented tasks such as
shipping/receiving and security tagging during off-peak hours. The Company
monitors the quality of its customer service and actively solicits feedback by
conducting over 1,700 telephone surveys with customers each month. The Company
believes that its strong customer service is a significant competitive advantage
over department stores which generally offer lower levels of customer service.
The Company's private label credit card program includes over 1.5 million active
accounts and comprised approximately 55% of net sales during the first six
months of 1995. The Company communicates with its private label credit
cardholders through targeted mailings.
STRONG OPERATING SYSTEMS AND TECHNOLOGY. The Company supports its retail
concept with highly automated, integrated systems in such areas as
merchandising, sales promotion, credit, personnel management, store design,
accounting and distribution. The Company believes that its automated systems
provide it with a significant competitive advantage over competitors that lack
similar capabilities. For example, the Company has developed and is utilizing an
automated store personnel scheduling system which analyzes historical hourly
sales trends to schedule sales personnel accordingly. This system optimizes
labor costs while producing a higher level of customer service. The Company
believes that these systems increase sales per square foot, reduce markdowns and
overhead and create important efficiencies and cost savings in the most labor
intensive areas of the business. The Company's merchandising systems assist
merchandise planners in allocating inventory to each store based on its specific
attributes and recent sales trends. Additional systems allow the Company to
efficiently transfer slow moving merchandise to stores selling such items more
rapidly, identify merchandise requiring mark downs and maintain in-stock
positions in basic items such as hosiery and jeans. These systems have enabled
the Company to better manage its inventory while reducing costs.
GROWTH STRATEGY
The following are the primary elements of the Company's growth strategy:
CONTINUED MARGIN IMPROVEMENTS THROUGH AUTOMATED MERCHANDISE ALLOCATION. The
Company believes it can increase sales and profitability through automated
inventory planning, allocation and transfer systems. During the past four years,
the Company has devoted significant computer programming resources to the design
and development of its automated, algorithm-based merchandise allocation and
transfer systems. These systems allow specific merchandise to be allocated and,
if necessary, transferred to stores where it is being more rapidly sold. By
continuing to maximize instock positions by merchandise classification, the
Company believes that the use of this proprietary system should continue to
increase sales and reduce markdowns, thereby improving margins.
NEW STORE OPENINGS IN SMALLER MARKETS. The Company has identified locations
in both its existing and new markets which are potential sites for new stores.
Such sites are primarily located in smaller communities, where the Company
experiences its highest margins and where the Company believes it has a
competitive advantage over local retailers and where it is also difficult for
larger department stores to profitably operate. In addition, expansion into
existing markets may be accomplished at a lower cost, as the Company can utilize
its existing systems such as merchandising, credit, distribution and store
personnel scheduling in these markets, thereby minimizing the incremental cost
of opening new stores.
30
MAKING SELECTED STRATEGIC ACQUISITIONS. The Company believes that it can
continue to benefit from selected strategic acquisitions by (i) consolidating
overhead functions, (ii) introducing its superior management systems and (iii)
applying its merchandising, sales and customer service methods to acquired
retailers. The Company believes that such acquisitions will allow it to improve
overall profitability by amortizing its fixed cost structure over a larger
revenue base and by improving sales per square foot and profitability of
acquired small town stores. The Company believes that retail chains operating in
small towns offer attractive acquisition opportunities, as such markets
typically have only limited competition from locally owned retailers and little
or no competition from regional department stores. During 1994, this strategy
resulted in the acquisition of forty-five store leases from Beall-Ladymon,
located primarily in Louisiana, Arkansas and Mississippi. Management continues
to actively search for other potential locations that meet its site selection
criteria including market size, economic demographics, customer profile and
competitive environment and, as a result, expects to open sixteen additional new
stores during the remainder of 1995. Many of these stores will be opened as
Stage stores in new markets including Missouri, Illinois, Kansas and Iowa.
STORE CLOSURES
The Company approved the Store Closure Plan during the fourth quarter of
1994, pursuant to which it would close forty Fashion Bar stores, primarily
located in major regional malls within the Denver area. To date, the Company has
closed all but one of such stores. Management determined that the return on the
investment needed to upgrade these stores and the promotional efforts required
to make these stores more competitive were neither justified nor compatible with
the Company's overall merchandising philosophies. Upon completion of the Store
Closure Plan during 1995, twelve Fashion Bar stores will remain open. Management
anticipates that two of the twelve remaining stores will close once lease
termination agreements are reached with the respective landlords or upon the
expiration of their leases between August 1996 and January 1998. These two
stores are not included in the Store Closure Plan as management is unsure of the
cost and timing of the store closures. Management is optimistic that
merchandising and pricing strategies consistent with its other stores can be
successfully applied to the ten Fashion Bar stores which will remain open.
Management plans to gradually remodel the majority of these stores in order to
update their look and provide its customers with a fashionable, pleasant
shopping environment. Nine of the remaining ten Fashion Bar stores will be
converted to Stage stores during 1995. The downtown Denver location will
continue to be a Fashion Bar store. See Note 2 to the Consolidated Financial
Statements.
COMPANY OPERATIONS
The Company's merchandising strategy focuses on the traditionally higher
margin categories of women's, men's and children's apparel and accessories
offered at an everyday fair price. Sales associates are encouraged to adopt a
"can do" attitude in order to "exceed a customer's expectations." The Company
offers a selected assortment of first-quality, moderately priced merchandise
which is divided into distinct departments including, misses, men's, boy's,
shoes, intimate apparel, juniors, children's accessories, cosmetics and gifts.
Merchandise mix may vary significantly from store to store to accommodate
differing demographic factors.
The Company purchases merchandise from a vendor base of over two thousand
suppliers. The Company's leading vendors for 1994 were Levi Strauss, Liz
Claiborne, Haggar, Guess, Hanes, Nike and Reebok. No one supplier accounted for
more than 9% of the Company's 1994 purchases. The Company, through its
membership in AMC, a cooperative buying service, purchases imported merchandise
for its private label program. The membership provides the Company with group
purchasing opportunities.
31
Set forth below is the percentage of sales by major merchandise departments
for 1993 and 1994.
Department 1993 1994
---------- ---- ----
Mens/Young Men ....................................... 21% 20%
Juniors .............................................. 15 15
Misses Sportswear .................................... 14 15
Accessories & Gifts .................................. 9 10
Children ............................................. 9 9
Shoes ................................................ 8 8
Intimate ............................................. 6 6
Special Sizes ........................................ 5 5
Misses Dresses ....................................... 4 4
Cosmetics ............................................ 4 4
Boys ................................................. 3 3
Furs & Coats ......................................... 2 1
--- ---
100% 100%
=== ===
The Company's integrated merchandising systems are designed to provide its
buyers with necessary information and analytical support and include, among
others, (i) an automated merchandise financial planning and allocation system
which recognizes the attributes and current merchandise needs by classification
for each store, (ii) a staple stock replenishment system to ensure the Company
is in stock on basic items such as hosiery, foundation garments, dress shirts
and jeans and (iii) markdown exception analysis and merchandise transfer
exception reporting. The Company also maintains an assortment planning system to
closely tailor the merchandise assortment in each store based on local
demographics and historical trends and to automatically allocate merchandise
accordingly. The Company's information systems monitor slow and fast moving
merchandise to enable the Company to transfer slower moving merchandise from one
store to another store where such merchandise may be selling more rapidly.
The Company maintains a four hundred fifty thousand square foot
distribution center with the capacity to support approximately one billion
dollars in aggregate annual sales volume. The automated and centralized
distribution center enables the Company to distribute most merchandise within
forty-eight hours of receipt.
CREDIT SERVICES
The Company offers its own private label credit card program which enhances
the Company's relationship with core customers by tailoring credit availability
to individual customers and facilitating frequent communication of promotional
offerings. The private label credit card program includes over 1.5 million
active accounts and comprised approximately 55% of sales during the first six
months of 1995. The Company's independent dedicated communications system links
its corporate headquarters with each store enabling immediate point-of-sale
credit approval for the use of private label credit cards.
COMPETITION
The retail apparel industry is highly competitive and the Company faces
substantial competition, particularly in the Houston market, from national and
regional department and specialty stores. Some of the Company's competitors are
considerably larger than the Company and have substantially greater financial
and other resources. The Company believes its store format, merchandising
strategy and customer service, combined with an emphasis on operating systems
and technology, enable it to effectively compete with department stores and
specialty stores located in the Company's
32
markets. The Company believes that its knowledge of local markets, developed
over seventy years of service, has enabled it to establish a strong franchise in
most of its markets.
EMPLOYEES
During 1994, the Company employed an average of (i) 273 salaried and 176
hourly employees in its Houston corporate headquarters, (ii) 26 salaried and 429
hourly employees in its Jacksonville, Texas distribution center and credit
facility and (iii) 663 salaried and 7,083 hourly employees (including 4,775
part-time workers) at store locations. The Company traditionally hires temporary
store employees and increases the hours of part-time store employees during peak
seasonal selling periods. There are no collective bargaining agreements in
effect with respect to any of the Company's employees and the Company believes
that it has excellent relationships with its employees.
PROPERTIES
The Company's corporate headquarters is located in a one hundred thirty
thousand square foot building in Houston, Texas. The Company leases the building
and most of the land at its Houston, Texas facility. See "Certain Relationships
and Related Transactions - Transactions with Management." The Company owns its
four hundred fifty thousand square foot distribution center and its credit
department facility, both located in Jacksonville, Texas. The Jacksonville
distribution center collateralizes the Company's $25.0 million revolving credit
facility entered into during January 1994.
At April 29, 1995, the Company operated 248 stores located in Texas (157
stores), Louisiana (25 stores), Colorado (13 stores), Oklahoma (12 stores),
Arkansas (12 stores), New Mexico (8 stores), Mississippi (6 stores), Illinois (4
stores), Alabama (3 stores), Missouri (3 stores), Kansas (2 stores), Iowa (2
stores) and Wyoming (1 store). Stores range in size from nine thousand to fifty
thousand square feet with the majority between twenty thousand and thirty
thousand square feet. The majority of the Palais Royal stores are located in
metropolitan Houston in both strip shopping centers and enclosed malls. Bealls
stores are located in strip shopping centers in small rural markets primarily in
Texas. The Fashion Bar stores are principally located in Colorado, the majority
of which are operated in enclosed malls. All store locations are leased except
for three Bealls stores and two Fashion Bar stores which are owned. All leases
provide for a base rent amount plus contingent rentals, generally based upon a
percentage of gross sales.
LEGAL PROCEEDINGS
From time to time the company and its subsidiaries are involved in various
litigation matters arising in the ordinary course of the Company's business.
None of the matters in which the Company or its subsidiaries are currently
involved, either individually or in the aggregate, is material to the Company or
its subsidiaries.
33
MANAGEMENT
The following sets forth certain information with respect to the directors
and executive officers of the Company. Pursuant to an equity stock purchase
agreement (the "Equity Purchase Agreement"), the Company, Bain Capital, Inc.
("Bain"), certain affiliates of Bain, Citicorp Venture Capital Ltd.
("Citicorp"), Acadia Partners, L.P. ("Acadia") and certain other stockholders
have agreed that until certain designated events occur, such parties will vote
for Bain's nominees to the Board of Directors, and that so long as Acadia and
its affiliates hold at least 5% of the outstanding Common Stock, such parties
will vote for one Acadia nominee to the Board of Directors. Certain affiliates
of Bain, an affiliate of Citicorp, Acadia and certain of Acadia's affiliates are
stockholders. The current Bain nominees serving on the Board of Directors are
Joshua Bekenstein and Adam Kirsch. The current Acadia nominee serving on the
Board of Directors is Peter Mulvihill.
NAME AGE POSITION
---- --- --------
Bernard Fuchs (1) .... 68 Chairman
Carl Tooker .......... 47 Director, President and Chief Executive Officer
Mark Shulman ......... 46 Executive Vice President/Chief Merchandising Officer
James Marcum ......... 36 Executive Vice President/Chief Financial Officer
Stephen Lovell ....... 40 Executive Vice President/Director of Stores
Vivian Baker ......... 53 Senior Vice President/General Merchandising Manager
Jerry Ivie ........... 62 Senior Vice President, Secretary and Treasurer
Myrna Phillips ....... 56 Senior Vice President/Marketing Director
Joshua Bekenstein (1) 37 Vice Chairman
Adam Kirsch(2) ....... 33 Director, Vice President and Assistant Secretary
Peter Mulvihill(2) ... 36 Director
Lasker Meyer ......... 69 Director
- ------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Mr. Fuchs has been involved in retailing since 1944. He began his career
with Grayson shops of California and subsequently served as Executive Vice
President and Chief Operating Officer of S. Klein in New York from 1960 through
1967. He came to Palais Royal as Executive Vice President and Chief Operating
Officer in 1967 and became President and Chief Executive Officer in 1979. Mr.
Fuchs was Chairman and Chief Executive Officer of the Company from December 1988
until July 1994 when Mr. Tooker was appointed Chief Executive Officer. Mr. Fuchs
continues to serve as Chairman.
Mr. Tooker joined the Company as a Director, President and Chief Operating
Officer on July 1, 1993 and, effective July 1, 1994, Mr. Tooker was appointed
Chief Executive Officer. Mr. Tooker has 24 years of experience in the retail
industry, 18 of which were spent in various management positions at the May
Company where he most recently served as Chairman and Chief Operating Officer of
Filene's of Boston from 1988 to 1990. In 1990, Mr. Tooker joined Rich's, a
division of Federated Department Stores, Inc., as President and Chief Operating
Officer, and in 1991 Mr. Tooker was promoted to Rich's Chief Executive Officer.
34
Mr. Shulman joined the Company in January 1994 as Executive Vice President
and Chief Merchandising Officer with 24 years of retailing experience. Prior to
joining the Company, Mr. Shulman held varying positions with Bloomingdales,
Rikes and I. Magnin, all of which are divisions of Federated Department Stores,
Inc. Since 1985, Mr. Shulman has served as President of Ann Taylor (Allied
Stores), Henri Bendel (The Limited), Bon Jour and most recently, Leslie Fay.
Mr. Marcum joined the Company in June 1995 as Executive Vice President and
Chief Financial Officer. Prior to joining the Company, Mr. Marcum served as
Treasurer of the Melville Corporation from 1986 to 1989, Vice President and
Controller of Marshalls, Inc., a division of the Melville Corporation, from
1989-1990 and most recently as Senior Vice President and Chief Financial Officer
of Marshalls, Inc.
Mr. Lovell joined the Company in June 1995 as Executive Vice President and
Director of Stores. Prior to joining the Company, Mr. Lovell spent 15 years
with Hit or Miss, a division of TJX Companies. Mr. Lovell's first position
with Hit or Miss was Store Manager. He served as a District Manager, Regional
Manager, Territorial Vice President and since January 1987, Senior Vice
President and Director of Stores.
Ms. Baker has served as the Company's Senior Vice President and General
Merchandising Manager since December 1988 and was with Bealls since 1983 where
she served as General Merchandising Manager. Ms. Baker was with Dillards for
three years and Woodward and Lothrop for 15 years prior to joining Bealls.
Mr. Ivie has served as Senior Vice President, Secretary and Treasurer
since December 1988 and was with Palais Royal since 1976. Mr. Ivie previously
spent 15 years in the finance department of Burdine's, a division of Federated
Department Stores.
Ms. Phillips joined the Company in October 1990 following three years of
consulting work in retail communications. Previously, Ms. Phillips was Senior
Vice President of Marketing at Foley's where she worked for 13 years after
spending 14 years in the advertising departments at Gimbel's and Abraham &
Straus.
Mr. Bekenstein has been an officer and director since December 1988 and was
elected Vice Chairman and Chief Financial Officer in May 1992. Mr. Bekenstein
resigned as Chief Financial Officer upon the appointment of Mr. Marcum. Mr.
Bekenstein has been a General Partner of Bain since its inception in 1987 and a
Managing Director of Bain Capital, Inc. since May, 1993. Mr. Bekenstein also
currently serves as a director of The Holson Burnes Group, Inc.
Mr. Kirsch has been a Managing Director of Bain since May, 1993 and a
General Partner of Bain since 1990 and was a Associate and Principal of Bain
from 1987 to 1990. Mr. Kirsch also currently serves as a director of
Brookstone, Inc., Duane Reade and Dade International Inc.
Mr. Mulvihill has been a director since December 1988. Mr. Mulvihill has
served as a Managing Director to Oak Hill Partners, Inc. (the management
company for Acadia) since January 1993. From June 1987 through June 1991, Mr.
Mulvihill was a Senior Vice President of Rosecliff, Inc., (the former management
company for Acadia) and as a consultant to Acadia from June 1991 through
December 1992.
Mr. Meyer served as Vice-Chairman and Chief Merchandising Officer from
May 1989 until he retired in December 1993. Mr. Meyer has been a director since
1988 and continues to serve as a director. Mr. Meyer was in Foley's from 1959
until 1987, when he retired from his position as Chairman and Chief Executive
Officer. From 1987 until May 1989, Mr. Meyer was an officer and director of
Spoetzel Brewery, Inc.
35
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following summarizes the principal components of compensation of the
Company's Chief Executive Officer and the four highest compensated executive
officers.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
----------
COMPENSATION AWARDS
--------------------------- ----------
SECURITIES
UNDERLYING ALL OTHER
FISCAL SALARY BONUS OPTIONS/ COMP.
NAME AND PRINCIPAL POSITION YEAR ($) ($) SARs(#) ($)(1)
--------------------------- ------ ------- ------ --------- --------
<S> <C> <C> <C> <C> <C>
1994 450,000 65,265 -- 36,885 (2)
Bernard Fuchs, 1993 450,000 59,200 197,000 1,260
Chairman 1992 150,000 489,000 -- 1,260
Carl Tooker, 1994 468,750 56,128 50,000 67,774 (3)
President and 1993 247,916 75,000 200,000 132,116 (4)
Chief Executive Officer 1992 -- -- -- --
Mark Schulman, 1994 276,614 37,820 -- 394,144 (5)
Executive Vice President and 1993 -- -- -- --
Chief Merchandising Officer 1992 -- -- -- --
Vivian Baker,
Senior Vice President and 1994 205,625 -- -- 3,020
General Merchandising 1993 195,000 3,750 1,175 3,020
Manager 1992 185,000 10,000 -- 3,020
Jerry Ivie, 1994 175,008 20,000 -- 702
Senior Vice President, 1993 173,731 5,000 1,762 702
Secretary and Treasurer 1992 171,600 -- -- 450
</TABLE>
(1) Unless otherwise indicated, amounts shown represent premiums paid on behalf
of the officers for life insurance coverage.
(2) Amount shown reflects a distribution related to options vested of $35,625
and premiums for life insurance coverage of $1,260 paid to Mr. Fuchs during
1994.
36
(3) Amount shown reflects a distribution related to options vested of $38,000,
premiums for life insurance coverage of $174 and housing and auto
allowances of $29,600 paid to Mr. Tooker during 1994.
(4) Amount shown reflects moving expenses of $114,861 and housing and auto
allowances of $17,255 paid to Mr. Tooker during 1993.
(5) Amount shown reflects moving expenses of $385,184, premiums for life
insurance coverage of $160 and housing and auto allowances of $8,800 paid
to Mr. Shulman during 1994.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following discloses options granted during 1994 for the names
executives in the compensation table above.
<TABLE>
<CAPTION>
Potential Realizable Value at Assumed
Annual Rates of Stock Price Appreciation
Individual Grants For Option Term
----------------------------------------------------------------- ---------------------------------------
Number of % of Total
Securities Options/
Underlying SAR's Excercise
Options/ Granted to or Base 0% Annual 5% Annual 10% Annual
SAR's Employees in Price Growth Growth Growth Rate
Name Granted(#) (1) Fiscal Year (%) ($) Expiration Date Rate ($) Rate ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Carl Tooker 50,000 51.5% $2.15 07/01/04 -- $67,500 $172,500
</TABLE>
(1) All of such options were granted under the Company's stock option plan.
The options granted under such plan are subject to vesting and repurchase
provisions upon termination of employment.
37
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
THE FOLLOWING SUMMARIZES EXERCISES OF STOCK OPTIONS (GRANTED IN PRIOR
YEARS) BY THE HIGHEST PAID EXECUTIVE OFFICERS IN THE PAST YEAR, AS WELL AS THE
NUMBER AND VALUE OF ALL UNEXERCISED OPTIONS HELD BY THE NAMED OFFICERS AT THE
END OF 1994.
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options/SARs at Options/SARs at
FY-End(#) FY-End ($)(1)
Shares ------------- -------------
Acquired on Value Exercisable/ Exercisable/
Name Excercise(#) Realized($) Unexercisable Unexercisable
- ------------- ------------- ----------- ------------- -------------
Bernard Fuchs -- -- 49,250 / 147,750 $76,875 / $230,625
Carl Tooker -- -- 40,000 / 210,000 82,000 / 328,000
Mark Shulman -- -- -- / 100,000 -- / --
Vivian Baker -- -- -- / 1,175 -- / --
Jerry Ivie -- -- -- / 1,762 -- / --
(1) Value is based upon the stock price as of January 28, 1995 ($2.15) minus
the exercise price. Market value is determined in good faith by the
Board of Directors and is based upon the historical and projected
financial performance of the Company.
COMPENSATION OF DIRECTORS
During 1994, Dr. Berry and Mr. Meyer received cash compensation of $8,750
and $54,167, respectively, for services rendered as directors. No other
directors received compensation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Mr. Fuchs and Mr.
Bekenstein, who served in such capacities during the last fiscal year. Each
member of the Compensation Committee abstains from voting on matters relating
directly to such member's compensation as an executive officer. Mr. Bekenstein
is a Managing Director of Bain, an affiliate of a principal stockholder. See
"Certain Relationships and Related Transactions" for a description of certain
transactions between Mr. Fuchs and the Company and Bain and the Company.
38
MANAGEMENT AGREEMENTS
The Company, Bain and certain of its affiliates, Citicorp and Bernard Fuchs
entered into a management agreement (the "Fuchs Management Agreement"), dated as
a May 26, 1989 and amended effective February 1, 1993, pursuant to which (i) the
Company employed Mr. Fuchs as an executive officer and (ii) Mr. Fuchs purchased
from Bain and certain of its affiliates, and an affiliate of Citicorp, in the
aggregate, 293,750 shares of the Company's common stock for $0.09 per share and
250 shares of the Company's senior preferred stock for $1,000 per share
(subsequently redeemed in connection with a refinancing of the Company in 1993).
The Fuchs Management Agreement provides that transfers of common stock by Mr.
Fuchs are subject to certain rights to first offer and refusal of the Company
and the other parties of the Fuchs Management Agreement.
Pursuant to the Fuchs Management Agreement, Mr. Fuchs served as Chairman of
the Board and Chief Executive Officer until July 1, 1994 when Mr. Tooker was
appointed Chief Executive Officer. Mr. Fuchs will continue to serve as Chairman.
The Fuchs Management Agreement, as amended, provides for a base salary plus an
annual incentive bonus based on an increase in the Company's pretax income
(excluding any increase or decrease in pretax income attributable to any
financial restructuring) as compared to the fiscal year in which the bonus is
being paid. The incentive bonus is applicable to fiscal years 1993 through 1998.
Mr. Fuchs may also be awarded discretionary bonuses by the Company's
Compensation Committee elected by the Board of Directors. The Fuchs Management
Agreement generally restricts Mr. Fuchs from competing with the Company or its
subsidiaries for a period of 24 months after his termination, except for
termination without cause. Mr. Fuchs' base salary for the next four fiscal years
shall be $450,000, $300,000, $200,000 and $100,000, respectively.
In connection with the February 1993 amendment to the Fuchs Management
Agreement, the Company also entered into a stock option agreement with Mr. Fuchs
providing the grant of options to acquire up to 150,000 shares of the Company's
common stock at a original purchase price of $5.00 per share. Such options are
subject to vesting and repurchase restrictions. In connection with the formation
of ARI, such options were converted into options to acquire shares of ARI common
stock (the "Common Stock") at a price of $0.10 per share and the right to
receive payments equaling $0.95 per option share ratably over the vesting
schedule.
On July 1, 1993, the Company and Carl Tooker entered into an employment
agreement (the "Tooker Management Agreement") providing for Mr. Tooker's
employment as Director, President and Chief Operating Officer. As discussed
above, Mr. Tooker was appointed Chief Executive Officer effective July 1, 1994.
The Tooker Management Agreement provides for an initial base salary of $425,000
plus and annual incentive bonus based on an increase in the Company' pretax
income (excluding any increase or decrease in pretax income attributable to any
financial restructuring) as compared to the fiscal year in which the Company
recorded its highest pretax income prior to the fiscal year for which the bonus
is being paid. The Tooker Management Agreement also provided for an initial
grant of options to purchase 200,000 shares of the Company's common stock at
$5.00 per share, subsequently converted into options to acquire shares of Common
Stock as described above for Mr. Fuchs. Pursuant to Mr. Tooker's appointment to
CEO, he was awarded additional options to purchase 50,000 shares of Common Stock
with an exercise price of $2.15 per share and his annual salary was adjusted to
$500,000. Such options and the related Common Stock are subject to vesting and
repurchase restrictions.
On January 31, 1994, the Company and Mark Shulman entered into an
employment agreement (the "Shulman Employment Agreement") providing for Mr.
Shulman's employment as Executive Vice President and Chief Merchandising
Officer. The Shulman Employment Agreement provides for an initial base salary of
$275,000 plus an annual incentive bonus based on an increase in the Company's
pretax income (excluding any increase or decrease in pretax income attributable
to any financial restructuring) as compared to the fiscal year in which the
Company recorded its highest pretax income prior to the fiscal year for which
the bonus is being paid. The Shulman Employment Agreement also provided for an
initial grant of options to purchase 100,000 shares of Common Stock with an
exercise price of $2.15 per share. Such options and the related Common Stock are
subject to vesting and repurchase requirements.
On June 1, 1995, the Company and James Marcum entered into an employment
agreement (the "Marcum Employment Agreement") providing for Mr. Marcum's
employment as Executive Vice President and Chief Financial
39
Officer. The Marcum Employment Agreement provides for an initial base salary of
$275,000 plus an annual incentive bonus based on the Company's actual versus
planned pretax income. The Marcum Employment Agreement also provided for an
initial grant of options to purchase 100,000 shares of Common Stock with an
exercise price of $2.88 per share. Such options and the related Common Stock are
subject to vesting and repurchase requirements.
On June 1, 1995, the Company and Steven Lovell entered into an employment
agreement (the "Lovell Employment Agreement") providing for Mr. Lovell's
employment as Executive Vice President and Director of Stores. The Lovell
Employment Agreement provides for an initial base salary of $275,000 plus an
annual incentive bonus based on the Company's actual versus planned pretax
income. The Lovell Employment Agreement also provided for an initial grant of
options to purchase 75,000 shares of Common Stock with an exercise price of
$2.88 per share. Such options and the related Common Stock are subject to
vesting and repurchase requirements.
The Company, Bain and certain of its affiliates and Citicorp also entered
into management agreements with Vivian Baker and Jerry Ivie as well as certain
other officers, pursuant to which such officers purchased from either Bain and
certain of its affiliates, and affiliates of Citicorp or the Company, shares of
Common Stock and senior preferred stock of ARI (subsequently redeemed in
connection with the Refinancing). The shares of Common Stock acquired pursuant
to such management agreements ("Executive Stock") are subject to certain vesting
provisions in addition to restrictions on transfer and repurchase options. The
management agreements give the Company, or if the Company does not exercise its
repurchase right, Bain and certain of its affiliates, Citicorp and Acadia, the
right to repurchase all or a portion of such Executive Stock upon termination of
the officer's employment. If the officer's termination of employment is for any
reason other than cause or voluntary (as defined in the management agreement),
the officer has the option to require the Company to repurchase the Executive
Stock. The repurchase price upon termination is the lower of the fair market
value or the original cost of the officer for unvested Executive Stock and the
fair market value for vested Executive Stock. Executive Stock vests 40% two
years from the date of issue and in 20% annual increments thereafter.
If the Board of Directors and the holders of a majority of the Common Stock
then outstanding approve the sale of the Company to an independent third party
(whether by merger, consolidation, sale of all or substantially all of the
outstanding capital stock), the holders of Executive Stock are required to
consent and raise no objections against such transaction. Additionally, holders
of Executive Stock are required to agree to sell all of their Executive Stock
and rights to acquire Common Stock issued pursuant to the stock Option Plan (as
defined herein) if the transaction is structured as a sale of stock. The Company
has the right to redeem the Executive Stock held by any holder who fails to
comply with these provisions.
COMPANY RETIREMENT PLAN
The Specialty Retailers, Inc. Retirement Plan (the "Company Retirement
Plan") is a qualified defined benefit plan. Benefits under the Company
Retirement Plan are administered through a trust arrangement providing benefits
in the form of monthly payments or a single lump sum payment. The Company
Retirement Plan covers substantially all employees who have completed one year
of service with 1,000 hours of service. The Company Retirement Plan is
administered by the retirement plan committee (the "Committee"), and its three
to five members are appointed by the Company. All determinations of the
Committee are made in accordance with the provision of the Company Retirement
Plan in a uniform and nondiscriminatory manner.
Generally, a participant is eligible for a benefit on his/her normal
retirement date, which is the later of age 65 or the fifth anniversary of the
date of hire. A participant may elect an early retirement benefit if he/she is
at least 55 years old, has 10 Years of Service (as defined below) and retires
from active employment with the Company. Early retirement benefits are reduced
according to a formula established in the Company Retirement Plan based upon
each full month that the participant's age is less than 65 on the date the
payments commence. If a participant who is vested terminates employment, he/she
is entitled to deferred benefit payable at his/her normal retirement date or an
earlier date, if requested, but not before age 55.
The amount of a participant's retirement benefit is based on each Year of
Credited Service (as defined below) and on his/her earnings for that year. The
individual yearly benefits are then totaled to determine the annual benefit at
40
age 65. A participant's accrued benefits in the superseded plan are determined
in accordance with the terms of those plans except as modified by the terms of
the Company Retirement Plan. The annual amount of the participant's normal
retirement benefit is derived, subject to certain limitations, by adding (i) 1%
of earning up to $30,600 plus 1 1/2% of the excess of such earnings over $30,600
for each Year of Credited Service earned on or after July, 1989 through December
31, 1991 (ii) 1% of earnings upon to 31,800 plus 1 1/2% of the excess of such
earnings over $31,800 for each Year of Credited Service earned after December
31, 1991 (iii) 1% of earnings up to $42,500 plus 1 1/2% of the excess of such
earnings over $42,500 for each year of credited service earned after December
31, 1994 and (iv) accrued benefits determined in accordance with the terms of
the Company Retirement Plan under any superseded plan. The normal retirement
benefit formula produces an annual benefit which is paid to the participant in
equal monthly installments. The standard form of payment for a single
participant is a monthly benefit payable for the participant's life only. The
standard form of payment for a married participant is a 50% joint and survivor
benefit, which provides a reduced monthly benefit to the participant during
his/her lifetime, and 50% of that benefit to the participant's spouse for
his/her lifetime in the event of the participants' death. Other forms of the
payment are also provided including lump sum payouts, but they require
participant election. In addition, the Committee may elect to pay the benefit
equivalent of a benefit payable at normal retirement date in the form of a lump
sum payment, if the lump sum payment does not exceed $3,500.
Any participant who is credited with 1,000 or more hours of service in a
calendar year receives a "Year of Service", while any participant who is
credited with 1,284 or more of service in a calendar year receives a "Year of
Credited Service". Years of Service determine a participant's eligibility for
benefits under the Company Retirement Plan, and the percentage vested in those
benefits. After five Years of Service, a participant is 100% vested.
Participants in any superseded plan earn Years of Service and Years of Credited
Service pursuant to sightly different criteria for plan years beginning prior to
January 1, 1990.
The Company Retirement Plan is funded entirely by Company contribution
which are held by a trustee for the exclusive benefit of the participants. The
company voluntarily agreed to contribute the amounts necessary to provide the
assets required to meet the future benefits payable to Company Retirement Plan
participants. Under the Company Retirement Plan, contributions are not
specifically allocated to individual participants. Although the Company intends
to continue the Company Retirement Plan indefinitely, it can terminate the plan
at any time, upon which all participants will become 100% vested in any benefit
accrued to the extend funds are available in trust. In this event, assets will
be allocated to benefit categories in the order specified in the Company
Retirement Plan.
As of January 28, 1995, the estimated annual benefits payable upon
retirement at normal retirement age subject to certain adjustments permitted by
applicable federal law, for individuals named in the cash compensation table
above would be as follows: Mr. Fuchs-$0; Mr. Tooker-$0; Mr. Shulman-$0; Ms.
Baker-$19,225; and Mr. Ivie-$40,250. No amounts were paid or distributed during
1994 pursuant to the Company Retirement Plan to any of the individuals named or
included in the group in the cash compensation table above.
41
BENEFICIAL OWNERSHIP
ARI's authorized equity consist of the Common Stock and the Class B common
stock (the "Class B Common Stock"). Except as otherwise described herein, all
shares of the Common Stock and the Class B Common Stock are identical and
entitle the holders thereof to the same rights and privileges (except as
described below). Holders of the Class B Common Stock may elect at any time to
convert any or all of such shares into the Common Stock, on a share-for-share
basis, to the extent the holder thereof is not prohibited from owning additional
voting securities by virtue of regulatory restrictions. The holders of the
Common Stock are entitled to one vote per share on all matters to the voted upon
by the stockholders. Except as required by law, holders of the Class B Common
Stock do not have the right to vote on any matters to be voted upon the
stockholders. As of April 17, 1995, 1,468,750 shares of the Class B Common Stock
were outstanding, 1,320,198 of which is owned by Court Square Capital Limited
(see note (3) to ownership table below). Except as described in note (3) below,
the percentage of shares of the Common Stock is calculated assuming no Class B
Common Stock is converted.
The table below sets forth certain information regarding ownership of the
Common Stock as of April 17, 1995 assuming exercise of options exercisable
within sixty days of such date by (i) each person or entity who owns of record
or beneficially 5% or more of the Common Stock, (ii) each director and named
executive officer and (iii) all executive officers and directors as a group.
Each of such stockholders is assumed to have sole voting and investment power as
to the shares shown. Known exceptions are noted.
NUMBER OF PERCENTAGE OF
SHARES OF SHARES OF
NAME COMMON STOCK COMMON STOCK (7)
Joshua Bekenstein (5)....................... 5,358,143 46.2%
Adam Kirsch (5)............................. 5,340,645 46.1%
Bain and the Tyler Entities (1)............. 5,291,911 45.7%
Acadia Partners, L.P. (2)................... 3,515,466 30.3%
Bernard Fuchs (4)........................... 1,073,000 9.3%
Court Square Capital, Limited (3)........... 390,667 3.4%
Carl Tooker (4)............................. 49,800 --
Vivian Baker................................ 34,310 --
Jerry Ivie.................................. 32,665 --
Mark Shulman................................ 20,000 --
Lasker Meyer................................ 11,750 --
Peter Mulvihill (6)......................... -- --
All executive officer and directors as a
group (10 Persons) (4).................... 6,647,672 57.4%
(1) The Tyler Entities include Tyler Capital Fund, L.P., Tyler Massachusetts,
L.P. and Tyler International, L.P.-II. Such entities are managed by Bain.
Bain is a California limited partnership with seven individuals serving as
general partners, including Joshua Bekenstein, Vice Chairman and a director
of the Company, and Adam Kirsch, a director of the Company. The address of
Bain and the Tyler Entities is Bain Capital Inc., Two Copley Place, Boston,
Massachusetts 02116.
(2) Amounts shown represent shares held by the nominee of Acadia and shares held
by FWHY-Coinvestment I Partners, L.P. ("FCP") and Oak Hill Partners, Inc.,
("Oak Hill"), both affiliates of Acadia. The address of Acadia and FCP is
201 Main Street, Fort Worth, Texas 76102. The address of Oak Hill is 65
East 55th Street, New York, New York 10022.
(3) Court Square Capital Limited, a Delaware corporation, is a direct
wholly-owned subsidiary of Citicorp Banking Corporation, a Delaware
corporation, which is a direct wholly-owned subsidiary of Citicorp, a
Delaware corporation. Amount and percentage shown do not include 1,320,198
shares of the Class B Common Stock, owned by Court Square Capital Limited.
Each share of Class B Common Stock is convertible, subject to substantial
restrictions, into one share
42
of Common Stock. Assuming full conversion of all shares of Class B Common
Stock, Court Square Capital would own 13.3% of the then outstanding Common
Stock. The address of Court Square Capital Limited is 399 Park Avenue, 6th
Floor, New York, New York 10043.
(4) Amounts shown include shares of Common Stock that such persons or group
could acquire upon the exercise of options exercisable within sixty days.
Options for 486,212 shares of Common Stock were held by all executive
officers and directors as a group (10 persons) of which 62,350 are
exercisable within sixty days. Amount shown for Mr. Fuchs includes (i)
470,000 shares held by the Fuchs Family Limited Partnership for which Mr.
Fuchs may be deemed to possess beneficial ownership and (ii) 2,350 options
which are exercisable.
(5) Amounts shown include shares beneficially owned by Bain and the Tyler
Entities. Mr. Bekenstein and Mr. Kirsch may be deemed to share voting
and dispositive power as to all shares owned by Bain and the Tyler
Entities.
(6) Mr. Mulvihill is a director and a managing director of the investment
advisor to Acadia. In addition, Mr. Mulvihill holds indirectly a limited
interest in Acadia and holds directly a limited interest in Oak Hill.
However, he does not hold or share voting or dispositive power as to shares
beneficially owned by Acadia or Oak Hill.
(7) No percentage of class is shown for holdings less than 1%.
43
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT
The Company's corporate headquarters in Houston, Texas and the land and
buildings in which six Palais Royal stores are located are leased from PR
Investments, Ltd ("PR Investments"), a partnership in which Mr. Fuchs, his wife
and certain former owners of Palais Royal are general partners. The lease
relating to the corporate headquarters is for a term of 50 years expiring in
2032 and includes an established minimum annual rent adjusted periodically for
changes in the Consumer Price Index ("CPI"). Three of the Palais Royal store
leases with PR Investments are for terms of 20 years expiring in the years 1999,
1999 and 2000, respectively. The remaining three Palais Royal store leases with
PR Investments are for 25-year terms expiring in the years 2005, 2010 and 2010,
respectively. All of the Palais Royal store leases with PR Investments provide
the option to extend the term of the lease for two consecutive five-year terms.
One of the Palais Royal leases with PR Investments provides for the option to
extend the term of the lease for an additional 20 years. In addition to an
established minimum annual rent adjusted for changes in the CPI, the above
described store leases include additional rent calculated at 4% of gross sales
exceeding established levels per store. During 1994, the Company paid PR
Investments an aggregate of $2.0 million under all leases described above. The
Company believes that the terms of the leases with PR Investments are comparable
to leases with unaffiliated third parties covering similar properties.
During 1993, the Company entered into an employment agreement with its new
President and Chief Executive Officer. As part of this agreement, the Company
agreed to purchase his former residence for $1.2 million and loaned $0.3 million
to him. The loan is due October 2, 1996 and bears a market rate of interest.
As of April 17, 1995, executive officers and directors as a group (10
persons) owned 1,293,451 shares of Common Stock and 486,212 options to purchase
Common Stock (excluding shares beneficially owned by Bain and the Tyler
Entities).
TRANSACTIONS WITH BAIN
Pursuant to a professional service agreement, Bain received fees for
professional services rendered and expense reimbursements in the amount of $0.6
million in 1994. The agreement provides for Bain to render financial,
acquisition and management services and receive its usual and customary fees,
based upon actual services rendered. The agreement is terminable at any time at
the discretion of the board of directors of the Company.
44
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following discussion sets forth information concerning the material
terms of the Company's indebtedness outstanding after giving effect to issuance
of the New Securities.
The Senior Notes were originally issued in an aggregate principal amount of
$150.0 million and bear interest at 10% payable semi-annually on February 15 and
August 15. The Company is required to make a mandatory sinking fund payment on
August 15, 1999 equal to twenty five percent of the original principal amount.
The Company has purchased $20.0 million of the Senior Notes which satisfied a
portion of the August 15, 1999 sinking fund requirement. The Senior Notes are
general unsecured obligations and rank senior to all subordinated debt of the
Company including the 11% Notes.
The 11% Notes were originally issued in an aggregate principal amount of
$100.0 million and bear interest at 11% payable semi-annually on February 15 and
August 15. The Company is required to make a mandatory sinking fund payment on
August 15, 2002 equal to forty percent of the original principal amount. The 11%
Notes are subordinated to the obligations under the Senior Notes.
The Company currently has outstanding $14,983,000 principal amount of 9%
Bealls Holding Subordinated Debentures due 2002 (the "9% Bealls Holding
Subordinated Debentures") and $14,313,000 principal amount of 7% Bealls Holding
Junior Subordinated Debentures due 2003 (the "7% Bealls Holding Junior
Subordinated Debentures") which were issued to the former holders of Bealls
common stock in connection with the Company's acquisition of Bealls.
The 9% Bealls Holding Subordinated Debentures originally earned interest at
the per annum rate of 9%. However, the per annum interest rate for the 9% Bealls
Holding Subordinated Debentures increased to 10% on January 1, 1994, 11% on
January 1, 1995 and increases to 12% on January 1, 1996. The 9% Bealls Holding
Subordinated Debentures are prepayable at the Company's option in whole or in
part at their face amount, plus accrued but unpaid interest. The Company is
required to redeem the 9% Bealls Holding Subordinated Debentures beginning not
later than the December 31, 1997 in not more than six equal annual installments.
The 7% Bealls Holding Junior Subordinated Debentures earn interest at the per
annum rate of 7%. The Company is entitled to prepay the 7% Bealls Holding Junior
Subordinated Debentures in whole or in part at any time prior to, and is
required to redeem the 7% Bealls Holding Junior Subordinated Debentures in whole
not later than December 31, 2003 at a price of 100% of the principal amount
thereof plus accrued but unpaid interest.
In connection with FB Holdings' acquisition of Fashion Bar in June, 1993,
FB Holdings issued to the former holders of the capital stock of Fashion Bar 7%
FB Holdings Subordinated Notes due 2000 (the "7% FB Holdings Subordinated
Notes") in the aggregate principal amount of $3,550,000. The Company currently
has outstanding $4,234,000 principal amount of the 7% FB Holdings Subordinated
Notes. Fifty percent of the outstanding principal amount of the 7% FB Holdings
Subordinated Notes is due on June 30, 1999, with the entire principal amount and
accrued and unpaid interest due on June 30, 2000. The Company is required to
prepay certain principal amounts of the 7% FB Holdings Subordinated Notes if
certain financial targets are achieved. The 7% FB Holdings Subordinated Notes
are prepayable at any time at the Company's option in whole or in part. The 7%
FB Holdings Subordinated Notes earn interest at the per annum rate of 7%. Prior
to June 1995, the Company could, at its option, pay interest in the form of
additional 7% FB Holdings Subordinated Notes in a principal amount equal to the
amount equal to the amount otherwise payable in cash.
The 9% Bealls Holding Subordinated Debentures, the 7% Bealls Holding Junior
Subordinated Debentures and the 7% FB Holdings Subordinated Notes are direct
obligations of the Company.
The Company has a revolving credit agreement with The First National Bank
of Boston (the "Bank") (the "Credit Agreement") under which it may draw up to
$25.0 million. Of this amount, $15.0 million may be used to support letters of
credit. As of April 29, 1995, $11.8 million of the total commitment was used to
collateralize letters of credit resulting in available funds of $13.2 million.
Effective March 31, 1995, the Company entered into a separate agreement with the
Bank under which it may borrow an additional $10.0 million for seasonal working
capital needs (the "Seasonal Credit
45
Agreement" and together with the Credit Agreement, the "Revolving Credit
Agreement"). Funds are available under the Seasonal Credit Agreement from August
15 through January 15 of each calendar year. The Revolving Credit Agreement is
available through February 3, 1998 and provides for a commitment fee of 1/2 of
1% of the average daily unused portion of the commitment amount paid on a
quarterly basis. Interest is charged on outstanding loans at a base rate plus a
specified margin. The base rate is higher of the Bank's prime rate or 1/2 of 1%
above the Federal Funds Effective Rate (as defined in the Revolving Credit
Agreement). The specified margin range is 1.25% to 2.75% based on calculated
debt service ratios as defined in the Revolving Credit Agreement. The Revolving
Credit Agreement contains covenants which, among other things, restricts the (i)
incurrance of additional debt, (ii) purchase of certain investments, (iii)
payment of dividends, (iv) formation of certain business combinations, (v)
disposition of certain assets, (vi) acquisition of subordinated debt, (vii) use
of proceeds received under the agreement and (viii) transactions with related
parties. The Revolving Credit Agreement also requires that SRI maintain a debt
service ratio above a predetermined level. The Revolving Credit Agreement is
secured by the Company's distribution center located in Jacksonville, Texas,
including equipment located therein, and a pledge of SRPC stock. The net book
value of the distribution center was approximately $11.0 million at January 28,
1995.
46
DESCRIPTION OF NEW SECURITIES
THE NEW SECURITIES. The New Securities are to be issued as a separate
series of notes pursuant to the same Indenture under which the Old Securities
have been issued, between the Company and The First National Bank of Boston, as
trustee (the "Trustee"). The terms of the New Securities include those stated in
the Indenture. Capitalized terms not defined in the text shall have the meaning
set forth in "Certain Definitions."
PRINCIPAL, MATURITY AND INTEREST
The New Securities are limited in aggregate principal amount to $18,250,000
million and will mature on August 15, 2003. Interest on the New Securities will
accrue at the rates per annum set forth on the cover page of this Prospectus and
will be payable semi-annually on February 15 and August 15 of each year,
commencing on February 15, 1996, to Holders of record on the immediately
preceding February 1 and August 1. Interest on the New Securities will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the date of original issuance. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. The New Securities
will be payable both as to principal and interest at the office or agency of the
Company maintained for such purpose within the City and State of New York or, at
the option of the Company, payment of interest may be made by check mailed to
the holders of the New Securities at their respective addresses set forth in the
register of holders of New Securities. Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose. The New Securities will be issued in
registered form, without coupons, and in denominations of $1,000 and integral
multiples thereof.
SUBORDINATION
The New Securities will be general unsecured obligations of the Company,
will rank junior to all existing and future Senior Debt, pari passu with the
existing 11% Notes and senior to all existing and future subordinated
Indebtedness of the Company, including the 7% FB Holdings Subordinated Notes,
the 9% Bealls Holdings Subordinated Debentures and the 7% Bealls Holdings Junior
Subordinated Debentures. The existing 11% Notes, however, are guaranteed on a
senior subordinated basis by Palais Royal.
The Company may not make any payment or distribution to the Trustee or any
Holder upon or in respect of Obligations with respect to the Securities and may
not acquire from the Trustee or any Holder any Securities for cash, securities
or other property (other than securities that are subordinated to at least the
same extent as the Securities to (a) Senior Debt and (b) any securities issued
in exchange for Senior Debt), until all principal and other Obligations with
respect to the Senior Debt have been paid in full, if: (i) a default in the
payment of any principal, premium, if any, interest or other Obligations with
respect to Designated Senior Debt occurs and is continuing beyond any applicable
period of grace (whether upon maturity, as a result of acceleration or
otherwise); or (ii) a default occurs and is continuing that then permits holders
of the Designated Senior Debt as to which such default relates to accelerate its
maturity, and the Trustee receives a written notice of a default (a "Payment
Blockage Notice") from the Holders, or from the Representative of the Holders,
of any such Designated Senior Debt. If the Trustee receives any such notice, a
subsequent notice received within 360 days thereafter shall not be effective. 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 for a period of at least 180 days.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property in an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, Holders of Senior Debt of the Company, will be entitled
to receive payment in full of all Obligations due in respect of such Senior Debt
(including interest after commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before the Holders of the New
Securities will be entitled to receive any payment, until all Obligations with
respect to Senior Debt of the Company are paid in full, any distribution to
which the holders of the New Securities would be entitled shall be made to the
holders of Senior Debt (except that Holders of the New Securities may receive
securities that are subordinated at least to the same extent as the New
Securities are to the Senior Debt).
47
REDEMPTION
OPTIONAL REDEMPTION. The Company shall not have the option to redeem the
Securities prior to August 15, 1998. Thereafter, the Company shall have the
option to redeem the Securities, in whole or in part, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on August 15 of the years indicated below:
YEAR PERCENTAGE
1998............................ 105.500%
1999............................ 104.125%
2000............................ 102.750%
2001............................ 101.375%
2002 and thereafter............. 100.000%
Notwithstanding the preceding paragraph, at any time prior to August 15,
1996, the Company may redeem the Securities with the net proceeds of an initial
public offering of common stock of ARI, to the extent that such net proceeds
thereof are contributed to the Company as common equity, at a redemption price
equal to 110% of the principal amount thereof, plus accrued and unpaid interest
thereon to the applicable redemption date; PROVIDED that at least $11,929,000 in
aggregate principal amount of Securities remain outstanding immediately after
the occurrence of such redemption and that such redemption occurs within 30 days
of the date of the closing of such initial public offering.
MANDATORY REDEMPTION. The Securities are subject to redemption on September
15, 2002 through the operation of the mandatory sinking fund. The Company will
make a mandatory sinking fund payment sufficient to retire by redemption on such
mandatory redemption date Securities equal to 40% of the aggregate principal
amount of the Securities authenticated and delivered under the Indenture
(regardless of the principal amount of Securities then outstanding) at a
redemption price equal to 100% of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon to the redemption date.
The sinking fund payment shall be made by depositing immediately
available funds sufficient therefor with the Paying Agent (as defined in
Section 2.03 of the Indenture) one Business Day prior to September 15, 2002.
Selection of the Securities to be redeemed shall be made by the Trustee.
SELECTION AND NOTICE
If less than all of the Securities are to be redeemed at any time,
selection of the securities for redemption will be made by the Trustee in
compliance with the requirement of the principal national securities exchange,
if any, on which such securities are listed, or, if such securities are not so
listed, on a PRO RATA basis, by lot or by such method as the Trustee shall deem
fair and appropriate; PROVIDED that no Security of $1,000 or less shall be
redeemed in part. Notices of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at its registered address. If any Security is to be
redeemed in part only, the notice of redemption that relates to such security
shall state the portion of the principal amount thereof will be issued in the
name of the Holder thereof upon cancellation of the original security. On and
after the redemption date, interest ceases to accrue on the securities or
portions of them called for redemption.
CERTAIN COVENANTS
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The
Indenture provides that 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 (a) pay dividends or make any other distributions to the Company
or any of its Subsidiaries on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits or pay any
Indebtedness owed to the Company or any of its Subsidiaries, (b)
48
make loans or advances to the Company or any of its Subsidiaries or (c) transfer
any of its properties or assets to the Company or any of its Subsidiaries, in
each case, except for such encumbrances or restrictions existing under or by
reasons of (i) Existing Indebtedness as in effect on the date hereof, (ii)
Indebtedness permitted to be incurred pursuant to clause (a) of the second
paragraph of Section 4.09 of the Indenture, (iii) the Indenture, (iv) applicable
law, (v) 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 anticipation 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, (vi) by reason of non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices, (vii) with
respect to clause (c) above, purchase money obligations for property acquired in
the ordinary course of business or (viii) permitted Refinancing Indebtedness (as
defined below), PROVIDED that the restrictions contained in the agreements
governing such Refinancing Indebtedness are no more restrictive than those
contained in the agreements governing the Indebtedness being refinanced.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Indenture
provides that 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 with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt), and 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 may
incur Indebtedness if (i) 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 would have been at least (a) 2.25 to 1, if such date is
prior to August 15, 1995 and (b) 2.50 to 1 thereafter, in each case determined
on a pro forma basis (including a pro forma application of the net proceeds
therefrom) as if the additional Indebtedness had been incurred at the beginning
of such four-quarter period and (ii) such Indebtedness is pari passu with or
subordinated in right of payment to the Securities and has a Weighted Average
Life to Maturity that is greater than the remaining Weighted Average Life to
Maturity of the Securities.
The foregoing limitations will not apply to (a) the incurrence by the
Company or any of its Subsidiaries of revolving credit Indebtedness and letters
of credit, and any extension, refinancing, renewal, replacement or refunding
thereof, in an aggregate principal amount at any one time outstanding not to
exceed $25 million, less the amount of Net Proceeds of Asset Sales that have
been applied to permanently reduce borrowings and commitments under any such
facility, PROVIDED that the proceeds of such Indebtedness are not used for
acquisitions or other expenditures not in the ordinary course of business, (b)
the incurrence by the Company or any of its Subsidiaries of the Existing
Indebtedness, (c) the incurrence by the Company and its Subsidiaries of
Indebtedness represented by the Securities and the Senior Securities, (d) the
incurrence by the Company or any of its Subsidiaries of Indebtedness issued in
exchange for, or the proceeds of which are used to extend, refinance, renew,
replace, refund or defease, Indebtedness incurred pursuant to the immediately
preceding paragraph or pursuant to clause (b), (c) or (g) of this paragraph
("Refinancing Indebtedness"); PROVIDED, HOWEVER, that (1) the principal amount
of such Refinancing Indebtedness shall not exceed the principal amount of
Indebtedness so extended, refinanced, renewed, replaced, substituted, refunded
or defeased, (2) the Refinancing Indebtedness shall have a Weighted Average Life
to Maturity equal to or greater than either (x) the remaining Weighted Average
Life to Maturity of the Indebtedness being extended, refinanced, renewed,
replaced, refunded or defeased or (y) the remaining Weighted Average Life to
Maturity of the Securities and (3) if applicable, the Refinancing Indebtedness
shall be subordinated in right of payment to the Securities on terms at least as
favorable to the Holders of Securities as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
refunded or defeased (a "Permitted Refinancing"), (e) intercompany Indebtedness
between or among the Company and any of its Wholly Owned Subsidiaries that are
Subsidiary Guarantors, (f) the incurrence by the Company of Hedging Obligations
to protect the Company against interest rate risk with respect to variable rate
Indebtedness permitted to be incurred by the Indenture, (g) additional
Indebtedness in an aggregate principal amount not to exceed $10 million at any
one time outstanding, (h) Capital Lease Obligations in an aggregate principal
amount not to exceed $2 million at any one time outstanding, (i) purchase money
Indebtedness in an aggregate principal amount not to exceed $2 million at any
one time outstanding, (j) the incurrence of Indebtedness pursuant to the
Registration Rights Agreement as in effect on the date of the Indenture and (k)
the incurrence by the Company and its Subsidiaries of Hedging Obligations with
respect to long-term Indebtedness of an Accounts Receivable Subsidiary.
49
ASSET SALES. The Indenture provides that the Company shall not, and shall
not permit any of its Subsidiaries to:
(i) sell, lease, convey or otherwise dispose of any assets
(including by way of a sale-and-leaseback) other than (A) in
the ordinary course of business, (B) contributions,
dispositions or other transfers of accounts receivable to an
Accounts Receivable Subsidiary that is wholly owned,
directly or indirectly, by the Company in exchange for
Equity Interests in such Accounts Receivable Subsidiary or
sales of accounts receivable to an Accounts Receivable
Subsidiary for cash and promissory Securities, in each case
for consideration having a value at least equal to 95% of
the book value thereof as determined in accordance with GAAP
and (C) sales of assets securing Indebtedness permitted to
be incurred pursuant to clause (a) of the second paragraph
of Section 4.09 of the Indenture if the Lien on such assets
is permitted by clause (a) of the definition of Permitted
Liens and the net proceeds from the sale of such assets are
applied to permanently reduce commitments and borrowings
under such Indebtedness, or
(ii) issue or sell equity securities of any of its Subsidiaries,
in each case, whether in a single transaction or a series of related
transactions, (a) that have a fair market value in excess of $3 million or (b)
for net proceeds in excess of $3 million (each of the foregoing, an "Asset
Sale"), unless (x) 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 of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets sold or otherwise
disposed of and (y) at least 80% of the consideration received therefor by the
Company or such Subsidiary is in the form of cash; PROVIDED, HOWEVER, that, for
purposes of this clause (y), the amount of (A) any liabilities (as shown on the
Company's or such Subsidiary's most recent balance sheet or in the Securities
thereto), of the Company or any Subsidiary (other than liabilities that are by
their terms subordinated to the Securities) that are assumed by the transferee
of any such assets and (B) any Securities 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 180 days after any Asset Sale, the Company (or such Subsidiary) may
(a) irrevocably commit to apply the Net Proceeds from such Asset Sale to an
Investment in another business, capital expenditures or other long-term assets,
in each case, in accordance with Section 4.16 of the Indenture, (b) permanently
reduce long-term Senior Debt (including by way of an Asset Sale Offer of Senior
Securities), (c) permanently reduce borrowings and commitments under
Indebtedness permitted to be incurred pursuant to clause (a) of the second
paragraph of Section 4.09 of the Indenture, PROVIDED that any Net Proceeds that
are committed to be used pursuant to this sentence are so used within 360 days
after such Asset Sale or (d) offer to redeem and redeem 11% Notes in accordance
with the 11% Notes Indenture. Pending the final application of any such Net
Proceeds, the Company (or such Subsidiary) may temporarily reduce Senior Debt or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from such Asset Sale that are not finally applied or
invested as provided in the first sentence of this paragraph or that remain
following consummation of the offer to redeem contemplated by the 11% Notes
Indenture will be deemed to constitute "Excess Proceeds." Within five days of
each date on which the aggregate amount of Excess Proceeds exceeds $5 million,
the Company shall commence an Asset Sale Offer pursuant to purchase the maximum
principal amount of Securities 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, 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 amount of Securities 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.
Upon completion of such offer to purchase, the amount of Excess Proceeds will be
deemed to be reset at zero.
LIENS. The Indenture provides that the Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly create, incur, assume
or suffer to exist any Lien 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, unless the Securities are equally and ratably
secured thereby.
50
LINE OF BUSINESS. The Indenture provides that the Company shall not, and
shall not permit any of its Subsidiaries to, engage in any business other than
those businesses in which the Company and its Subsidiaries are engaged on the
date hereof and other businesses directly related thereto (it being understood
that the Company and its Subsidiaries may engage in retailing activities).
TRANSACTIONS WITH AFFILIATES. The Indenture provides that the Company shall
not, and shall not permit any of its Subsidiaries to, sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into any contract, agreement, understanding,
loan, advance or Guarantee with, or for the benefit of, any Affiliate (including
any Accounts Receivable Subsidiary) (each of the foregoing, an "Affiliate
Transaction"), unless (a) 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 (b) the Company delivers to the Trustee (i) with
respect to any Affiliate Transaction involving aggregate consideration in excess
of $1 million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (a)
above and such Affiliate Transaction is approved by a majority of the Board of
Directors and (ii) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $2 million (other than a contribution, disposition or
other transfer of accounts receivable to an Accounts Receivable Subsidiary in
accordance with Section 4.10 of the Indenture), an opinion as to the fairness to
the Company or such Subsidiary from a financial point of view issued by an
investment banking firm of national standing; PROVIDED, HOWEVER, that (i) any
employment agreement entered into by the Company or any of its Subsidiaries in
the ordinary course of business of the Company or such Subsidiary, (ii)
transactions between or among the Company and/or its Wholly Owned Subsidiaries,
(iii) transactions permitted under Section 4.07 of the 11% Securities Indenture
and (iv) payments to Bain for services rendered in an aggregate amount not to
exceed $1 million in any fiscal year, plus reasonable out-of-pocket expenses,
shall not be deemed Affiliate Transactions.
SENIOR SUBORDINATED DEBT. The Indenture provides that the Company shall not
incur, create, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness that is subordinated or
junior in right of payment to any Senior Debt of the Company and senior in any
respect in right of payment to the Securities.
MERGER, CONSOLIDATION, OR SALE OF ASSETS. The Indenture provides that 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 or Person unless (i) the
Company is the surviving corporation 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 Person formed by or
surviving any such consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the Company
pursuant to a supplemental indenture, in a form reasonably satisfactory to the
Trustee, under the Securities and the Indenture, (iii) immediately after such
transaction, no Default or Event of Default exists and (iv) the Company or any
Person formed by or surviving any such consolidation or merger, 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 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 clause (a) of the first paragraph of Section
4.09 of the Indenture.
Notwithstanding anything else contained in the Indenture to the contrary,
the Company is entitled to merge with a Wholly Owned Subsidiary of the Company,
PROVIDED that if the Company is not the surviving entity of such transaction,
the surviving entity shall comply with clause (ii) of the immediately preceding
paragraph.
ACCOUNTS RECEIVABLE SUBSIDIARIES. The Company (a) shall not permit any
Accounts Receivable Subsidiary to sell any accounts receivable purchased from
the Company or any of its Subsidiaries or participation interests therein to any
other Person except on an arms-length basis and solely for consideration in the
form of cash, Cash Equivalents or
51
Indebtedness of or other interests in a Master Trust, PROVIDED that such
Accounts Receivable Subsidiary may not sell such Indebtedness or other interests
to any other Person except on an arms-length basis and solely for consideration
in the form of cash or Cash Equivalents, (b) shall not permit any Accounts
Receivable Subsidiary to incur Indebtedness in an amount in excess of the book
value of such Accounts Receivable Subsidiary's total assets, as determined in
accordance with GAAP, and (c) shall not, and shall not permit any of its
Subsidiaries to, sell accounts receivable to an Accounts Receivable Subsidiary
if (i) such Accounts Receivable Subsidiary, pursuant to or within the meaning of
Bankruptcy Law, (A) commences a voluntary case, (B) consents to the entry of an
order for relief against it in an involuntary case, (C) consents to the
appointment of a Custodian of it or for all or substantially all of its property
or (D) makes a general assignment for the benefit of its creditors or (ii) a
court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (A) is for relief against such Accounts Receivable Subsidiary, (B)
appoints a Custodian of such Accounts Receivable Subsidiary or for all or
substantially all of the property of such Accounts Receivable Subsidiary or (C)
orders the liquidation of such Accounts Receivable Subsidiary.
REPORTS. (a) Whether or not required by the rules and regulations of the
Commission, so long as any Securities are outstanding, the Company shall furnish
to all Holders all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants. Whether or not required by the rules and
regulations of the Commission, the Company shall file a copy of all such
information with the Commission for public availability and shall promptly make
such information available to all investors who request it in writing.
EVENTS OF DEFAULTS AND REMEDIES
Events of Default include: (i) default for 30 days in the payment when due
of interest on the Securities; (ii) default in the payment when due of principal
of or premium, if any, on the Securities 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 4.09, 4.10 or
5.01 of the Indenture, which failure remains uncured for 30 days; (iv) failure
by the Company for 60 days after notice to the Company by the Trustee or the
Holders of at least 25% in aggregate principal amount of the Securities then
outstanding to comply with certain other agreements in the Indenture or the
Securities; (v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness 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 the Indenture, which default (a) is caused by a Payment Default or (b) has
resulted 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 $5
million or more; (vi) 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 Material Subsidiaries and such judgment or judgments
remain undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, PROVIDED that the aggregate of all such
undischarged judgments exceeds $5 million; (vii) certain events of bankruptcy or
insolvency with respect to the Company pursuant to Section 6.01 of the
Indenture. If any Event of Default occurs and is continuing, the Trustee or the
Holders of least 25% in principal amount of the then outstanding Securities may
declare all the Securities to be due and payable immediately; PROVIDED, that so
long as any Indebtedness permitted to be incurred pursuant to clause (a) of the
second paragraph of Section 4.09 of the Indenture shall be outstanding, such
acceleration shall not be effective until the earlier of (i) an acceleration
under any such Indebtedness or (ii) five business days after receipt by the
Company of written notice of such acceleration of the Securities.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Company, any
Significant Subsidiary or any group of Material Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary, all outstanding Securities
will become due and payable without further action or notice. In the case of any
Event of Default occurring by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding
payment of the premium that the Company would have had to pay if the Company
then had elected to redeem the Securities pursuant to the optional redemption
provisions of the Indenture, an equivalent premium shall also become and
52
immediately due and payable to the extent permitted by law. If an Event of
Default occurs prior to August 15, 1998 by reason of any wilful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition on redemption of the Securities prior to such date,
then the premium specified in Section 6.02 of the Indenture shall also become
immediately due and payable to the extent permitted by law. Holders may not
enforce the Indenture or the Securities except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Securities may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of the Securities 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 Securities then outstanding by notice to the Trustee may
on behalf of the Holders of all of the Securities 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 the principal of, premium, if any,
or interest on, the Securities; PROVIDED, HOWEVER, that the Holders of a
majority in aggregate principal amount of the then outstanding Securities may
rescind an acceleration and its consequences, including any related payment
default that resulted from such acceleration. 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.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Securities.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Securities ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Securities, except for (i) the rights of Holders of such Securities to receive
payments in respect of the principal of, premium, if any, and interest on such
Securities when such payment are due, (ii) the Company's obligations with
respect to such Securities concerning issuing temporary Securities, registration
of Securities, mutilated, destroyed, lost or stolen Securities and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trust, duties and immunities of the
applicable Trustee, and the Company's obligations in connection therewith and
(iv) the Legal Defeasance provisions of the Indenture. In addition, the Company
may, at its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligation shall not constitute a Default or Event of Default with respect to
the Securities. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute and Event
of Default with respect to the Securities.
In order to exercise either Legal Defeasance of Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Securities, cash in U.S. dollars, non-callable Government
Securities, or 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, premium, if any, and interest on the Securities on the
stated date for payment thereof or on the applicable redemption date, as the
case may be, of such principal or installment of principal, or premium, if any,
or interest on such Securities; (ii) in the case of Legal Defeasance, 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 the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of such
Securities 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
53
Defeasance had not occurred; (iii) in the case of the Covenant Defeasance, the
Company shall have delivered to the applicable Trustee an opinion of counsel in
the United States reasonably acceptable to such Trustee confirming that the
Holders of such Securities 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;
(iv) 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 with respect to
the Indenture resulting from the incurrence of Indebtedness, all or a portion of
which will be used to defease the Securities concurrently with such incurrence)
or insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance of Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the Indenture or any other
material agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries is bound; (vi) the
Company shall have delivered to the Trustee an Officer's Certificate stating
that the deposit was not made by the Company with the intent of preferring the
Holders of such Securities over other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company or other; and (vii) the Company shall have delivered to the
applicable Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the then outstanding Securities, and any existing default
or compliance with any provision of the Indenture or the Securities may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Securities. Without the consent of any Holder of a Security,
the Indenture or the Securities may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Securities in
addition to or in place of certificated Securities, to provide for the
assumption of the Company's obligations to Holders of the Securities in case of
a merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Securities or that does not adversely
affect the legal rights under the Indenture of any such Holder, or to comply
with the requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act. In addition,
pursuant to Section 9.07 of the Indenture, certain amendments, supplements and
waivers will take effect automatically if the required percentage of the
Company's 11% Notes consent to such amendment, supplement or waiver.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Securities in accordance with 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 is not required to transfer or exchange
any Security selected for redemption. Furthermore, the Company is not required
to transfer or exchange any Security for a period of 15 days before a selection
of such Securities to be redeemed.
BOOK-ENTRY, DELIVERY AND FORM
The New Securities offered pursuant to the Exchange Offer will initially be
issued in the form of one global security for the New Securities (the "Global
Securities"). The Global Securities will be deposited on the date of the Closing
of the sale of the New Securities offered hereby (the "Closing Date") with, or
on behalf of, the Depositary and registered in the name of Cede & Co., as
nominee of the Depositary (such nominee being referred to herein as the "Global
Securities Holder").
The Depositary is limited-purpose trust company that was created to hold
securities for its participating organization (collectively, the "Participants"
or the "Depositary's Participant's") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in the accounts of its Participants. The
Depositary's Participants include securities brokers and dealers (including the
Initial Purchaser), banks
54
and trust companies, clearing corporations and certain other organizations.
Access to the Depositary's system is also available to other entities such as
banks, brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary's Indirect Participants") that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Securities, the Depositary will credit
the accounts of Participants designated by the Initial Purchaser with portions
of the principal amount of the Global Securities and (ii) ownership of the New
Securities will be shown on, and the transfer ownership thereof will be effected
only through, records maintained by the Depositary (with respect to the
interests of the Depositary's Participants), the Depositary's Participants and
the Depositary's Indirect Participants.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer New Securities will be limited to such extent.
So long as the Global Securities Holder is the registered owner of any New
Securities, the Global Securities Holder will be considered the sole owner of
such New Securities under the Indenture. Except as provided below, owners of New
Securities will not be entitled to have New Securities registered in their
names, will not receive or be entitled to receive physical delivery of New
Securities in definitive form, and will not be considered the owners or Holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the Trustee thereunder.
As a result, the ability of a person having a beneficial interest in New
Securities represented by the Global Securities to pledge such interest to
persons or entities that do not participate in the Depositary's system or to
otherwise take actions in respect of such interest, may be affected by the lack
of a physical certificate evidencing such interest.
Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of any New Securities by the Depositary, or for mailing, supervising or
reviewing any records of the Depositary relating to such New Securities.
Payments in respect of the principal of, premium, if any, and interest on
any New Security registered in the name of a Global Securities Holder on the
applicable record date will be payable by the Trustee to or at the direction of
such Global Securities Holder in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names the New Securities, including the Global
Securities, are registered as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever. Consequently,
neither the Company nor the Trustee have or will have any responsibility or
liability for the payment of such amounts to beneficial owners of New Securities
(including principal, premium, if any, and interest), although the Company
understands that it is the Depositary's practice to immediately credit the
accounts of the relevant Participants with such payment, in accounts
proportionate to their respective holdings in principal amount of beneficial
interests in the relevant security as shown on the records of the Depositary.
Payments by the Depositary's Participants and the Depositary's Indirect
Participants to the beneficial owners of Securities will be governed by standing
instructions and customary practice and will be the responsibility of the
Depositary's Participants or the Depositary's Indirect Participants.
CERTIFICATE SECURITIES
If (i) the Company notifies the Trustee in writing that the Depositary is
no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of New
Securities in definitive form under the Indenture, then, upon surrender by the
relevant Global Securities, New Securities in such form will be issued to each
person that such Global Securities Holder and the Depositary identifies as the
beneficial owner of the related Securities. In addition, subject to certain
conditions, any person having a beneficial interest in the Global Securities
may, upon request to the Trustee, exchange such beneficial interest for New
Securities in definitive form. Upon any such issuance, such Trustee
55
is required to register such New Securities in the name of, and cause the same
to be delivered to, such person or persons (or the nominee of any thereof). Such
New Securities would be issued in fully registered form.
Neither the Company nor the Trustee shall be liable for any delay by the
related Global Securities Holder or the Depositary in identifying the beneficial
owners or the related New Securities and each such person may conclusively rely
on, and shall be protected in relying on, instructions from such Global
Securities Holder or of the Depositary for all purposes (including with respect
to the registration and delivery, and the respective principal amounts, of the
Securities to be issued).
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the New Securities
(including principal, premium, if any, and interest) be made in immediately
available funds. Secondary trading in long-term notes and debentures of
corporate issuers is generally settled in clearing-house or next-day funds. In
contrast, the New Securities are expected to be eligible to trade in the PORTAL
Market and to trade in the Depositary's Same-Day Funds Settlement System, and
any permitted secondary market trading activity in the New Securities will
therefore be required by the Depositary to be settled in immediately available
funds. No assurance can be given as to the effect, if any, of such settlement
arrangement on trading activity in the New Securities.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Pursuant to the Registration Rights Agreement, the Company agreed to file
with the Commission promptly after the Closing Date the Registration Statement
of which this Prospectus is a part under the Securities Act with respect to the
New Securities. Upon the effectiveness of the Registration Statement, the
Company will offer to the Holders of Transfer Restricted Securities who are able
to make certain representations the opportunity to exchange their Transfer
Restricted Securities for New Securities. If any Holder of Transfer Restricted
Securities (other than an "affiliate" of the Company, as defined in Rule 144
under the Securities Act) notifies the Company that it is prohibited by law or
commission policy from participating in the Exchange Offer, it may not resell
the New Securities acquired by it in the Exchange Offer to the public without
delivering a Prospectus and the prospectus contained in the Registration
Statement is not appropriate or available for such resales by such holder, or it
is a broker-dealer and holds Securities acquired directly from the Company or
one of its affiliates, the Company will file with the Commission a shelf
registration statement (the "Shelf Registration Statement") to cover resales of
Transfer Restricted Securities by Holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement. The Company will use its best efforts to cause the
Registration Statement to be declared effective by the Commission as promptly as
practicable after the date of filing. For purposes of the foregoing, "Transfer
Restricted Securities" means each Old Security until (i) the date on which such
Old Security has been exchanged for a New Security in the Exchange Offer and is
entitled to be resold to the public by the holder thereof without complying with
the prospectus delivery requirement of the Securities Act, (ii) the date on
which such Old Security has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iii) the
date on which such Old Security 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 Registration Statement (including delivery of
the Prospectus contained therein).
The Registration Rights Agreement provides that (i) the Company and will
file a Registration Statement with the Commission on or prior to 30 days after
the Closing Date, (ii) the Company will use its best efforts to have such
Registration Statement declared effective by the Commission on or prior to 90
days after the Closing Date, and (iii) unless the Exchange Offer would not then
be permitted by a policy of the commission, the Company shall have commenced the
Exchange Offer and shall use its best efforts to issue, on or prior to 30
business days after the date on which the Registration Statement was declared
effective by the Commission (the "Effectiveness Date"), New Securities in
exchange for all Old Securities tendered prior thereto in the Exchange Offer. If
(i) the Registration Statement is not filed with the Commission on or prior to
30 days after the Closing Date, (ii) the Registration Statement has not been
declared effective by the Commission within 90 days after the Closing Date or
the Shelf Registration Statement (if required) is not declared effective within
30 business days after consummation of the Exchange Offer, (iii) the Exchange
Offer has not been consummated within 30 business days after the Effectiveness
Date (unless the Exchange Offer is
56
contrary to established Commission policy) or (iv) the Shelf Registration
Statement is filed and declared effective but shall thereafter cease to be
effective without being succeeded within eight business days thereafter by any
additional Registration Statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default"), the Company
will pay liquidated damages to each Holder of Transfer Restricted Securities,
during 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 Old Securities constituting Transfer Restricted Securities held by
such Holder. The amount of the liquidated damages will increase by an additional
$.05 per week per $1,000 principal amount of Transfer Restricted Securities for
each subsequent 90-day period until the Registration Statement is declared
effective, the Exchange Offer is consummated or the Shelf Registration Statement
again becomes effective, as the case may be, up to a maximum amount of
liquidated damages of $.30 per week per $1,000 principal amount of Old
Securities constituting Transfer Restricted Securities. All accrued liquidated
damages shall be paid to Holder by wire transfer immediately available funds or
by federal funds check by the Company on each Damages Payment Date (as defined
in the Registration Rights Agreement). Following the cure of a Registration
Defaults, the payment of liquidated damages will cease.
Holders of Old Securities will be required to make certain representations
to the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement in order to have
their Securities included in the Shelf Registration Statement and benefit from
the provisions regarding liquidated damages set forth in the preceding sentence.
In addition, for so long as the Old Securities are outstanding, the Company will
continue to provide to holders of Old Securities and to prospective purchasers
of the Old Securities the information required by Rule 144A(d)(4). The Company
will provide a copy of the Registration Rights Agreement to prospective
investors upon request.
CONCERNING THE TRUSTEE
The Indenture contains limitations on the rights of the Trustee, should the
Trustee become a creditor of the Company, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Securities will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provide that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Securities, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to the Company at 10201 Main Street, Houston, Texas
77025, Attention: Corporate Secretary.
CERTAIN DEFINITIONS.
"ACCOUNTS RECEIVABLE SUBSIDIARY" means a Wholly Owned Subsidiary of the
Company or a Subsidiary of such Wholly Owned Subsidiary, in each case which
engages in no activities other than in connection with the financing of accounts
receivable and which is designated by the Board of Directors of the Company as
an Accounts Receivable Subsidiary pursuant to a board resolution set forth in an
Officers' Certificate and delivered to the Trustee, (a) no portion of the
Indebtedness or any other obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any other Subsidiary of the Company, (ii) is
recourse to or obligates the Company or any other Subsidiary of the Company in
any way, other than pursuant to representations and covenants entered into in
the ordinary course of business in connection with sales of accounts receivable
or (iii) subjects any property or asset of the Company or any other
57
Subsidiary of the Company, directly or indirectly, contingently or otherwise, to
the satisfaction thereof, other than pursuant to representations and covenants
entered into in the ordinary course of business in connection with sales of
accounts receivable, (b) with which neither the Company nor any other Subsidiary
of the Company has any contract, agreement, arrangement or understanding other
than on terms no less favorable to the Company or such other Subsidiary than
those that might be obtained at the time from Persons who are not Affiliates of
the Company, other than sales of accounts receivable in accordance with Section
4.10 of the Indenture and fees payable in the ordinary course of business in
connection with servicing accounts receivable and (c) with which neither the
Company nor any other Subsidiary of the Company has any obligation (i) to
subscribe for additional shares of Capital Stock or other Equity Interests
therein or (ii) to maintain or preserve such Subsidiary's financial condition or
to cause such Subsidiary to achieve certain levels of operating results.
"ACQUIRED DEBT" means, with respect to any specified Person, Indebtedness
of any other Person existing at the time such other Person merged with or into
or became a Subsidiary of such specified Person, including Indebtedness incurred
in connection with, or in contemplation of, such other Person merging with or
into or becoming a Subsidiary of 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, HOWEVER,
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.
"BAIN" means Bain Capital, a California limited partnership, and/or Bain
Capital, Inc., a Delaware corporation.
"BANKRUPTCY LAW" means title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"BOARD OF DIRECTORS" means the Board of Directors of the Company, or any
authorized committee of such Board of Directors.
"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 the balance sheet in accordance
with GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock, including, without
limitation, partnership interests.
"CASH EQUIVALENTS" means (i) cash, (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 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 $500,000,000, (iv) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clauses (ii) and (iii) entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper rated
P-1 or the equivalent thereof by Moody's Investors Service, Inc. or A-1 or the
equivalent thereof by Standard & Poor's Corporation and, in each case, maturing
within six months after the date of acquisition.
58
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, to the extent
deducted in computing Consolidated Net Income, (a) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale,
(b) provision for taxes based on income or profits, (c) consolidated interest
expense of such Person for such period, whether paid or accrued (including
amortization of original issue discount, non-cash interest payments and the
interest component of Capital Lease Obligations), (d) the amount of depreciation
and amortization (including amortization of goodwill and other intangibles) of
such Person for such period and (e) the amount of other non-cash charges not in
the ordinary course of business with respect to which there is no corresponding
future cash payment prior to August 15, 2003.
"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 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 to the referent Person
or a Wholly Owned Subsidiary that is a Subsidiary Guarantor, (ii) the Net Income
of any Person that is a Subsidiary shall be included only to the extent (a) of
the amount of dividends or distributions paid to the referent Person or a Wholly
Owned Subsidiary that is a Subsidiary Guarantor or (b) that the declaration or
payment of dividends or similar distributions by such Subsidiary of such Net
Income is at the date of determination permitted without any prior governmental
approval (which has not been obtained) or, directly or indirectly, by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to such Subsidiary or
its stockholders, (iii) 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 (iv) the cumulative effect (net of taxes) of a change in
accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person, the sum of (i)
the consolidated equity of the common stockholders of such Person and its
consolidated Subsidiaries plus (ii) the respective amounts reported on such
Person's most recent balance sheet 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 hereof in the book value of any asset owned by such
Person or a consolidated Subsidiary of such Person, (y) all Investments 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, all of the foregoing determined in
accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board of Directors of ARI who (i) was a member of such Board of Directors
on the date of the Indenture or (ii) was nominated for election or elected to
such Board of Directors with the affirmative vote 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 of the Indenture or such other address as to
which the Trustee may give notice to the Company.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"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.
"DEPOSITORY" means, with respect to the Securities issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 of the
Indenture as the Depository with respect to the Securities, until a successor
shall have been appointed and become such pursuant to the applicable provision
of the Indenture, and, thereafter, "Depository" shall mean or include such
successor.
59
"DESIGNATED SENIOR DEBT" means (i) obligations of the Company under the
Senior Notes and the Senior Note Indenture and (ii) any other Senior Debt
permitted hereunder the principle amount of which is $25 million or more that
has been designated by the Company as Designated Senior Debt.
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), 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 August 15,
2003.
"11% NOTES" means the Company's 11% Series A Senior Subordinated Notes due
2003 and 11% Series B Senior Subordinated Notes due 2003, issued pursuant to the
11% Notes Indenture.
"11% NOTES INDENTURE" means that certain indenture, dated as of August 2,
1993, among the Company, Palais Royal, Inc., a Texas Corporation, and The First
National Bank of Boston, a national banking association, as trustee, as amended
or supplemented from time to time, relating to the 11% Notes.
"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.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries in existence on the date of the Indenture, until such amounts are
repaid.
"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 such period. In the event that the
Company or any of its Subsidiaries incurs or redeems any Indebtedness (other
than revolving credit borrowings) or issues or redeems preferred stock or
consummates an Asset Sale or acquires any assets subsequent to the commencement
of the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the event for which the calculation of the Fixed Charge Coverage Ratio
is made, then the Fixed Charge Coverage Ratio shall be calculated giving pro
forma effect to such incurrence, guarantee or redemption of Indebtedness, or
such issuance or redemption of preferred stock, or the consummation of such
Asset Sale or the acquisition of such assets, as if the same had occurred at the
beginning of the applicable four-quarter period (including, in each case, any
Consolidated Cash Flow related thereto).
"FIXED CHARGES" means, with respect to any Person for any period, the sum
of (a) consolidated interest expense (net of interest income generated from cash
and Cash Equivalents) of such Person for such period, whether paid or accrued,
to the extent such expense was deducted in computing Consolidated Net Income
(including amortization of original issue discount, non-cash interest payments
and the interest component of Capital Lease Obligations but excluding
amortization of deferred financing fees), (b) the interest expense of any other
Person for such period with respect to Indebtedness that is guaranteed by the
referent Person or any of its Subsidiaries and (c) the product of (i) all cash
dividend payments (and non-cash dividend payments in the case of a Person that
is a Subsidiary) (other than dividend payments to the Company or any Wholly
Owned Subsidiary of the Company that is a Subsidiary Guarantor on any series of
preferred stock of such Person, times (ii) 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, determined on a consolidated basis in accordance with GAAP.
"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 on the date of the Indenture.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
60
"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.
"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 Security 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, Securities, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the balance
deferred and unpaid of the purchase price of any property (including pursuant to
capital leases) or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade 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, and also includes, to the extent not otherwise
included, the Guarantee of items that would be included within this definition.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans (including
Guarantees), 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 and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"LIEN" means, 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);
PROVIDED, HOWEVER, that Liens shall not include any interest that the Company or
its Subsidiaries may retain in accounts receivable sold in accordance with
Section 4.10 of the Indenture.
"LIQUIDATED DAMAGES" means all liquidated damages then owing pursuant to
the Registration Rights Agreement.
"MASTER TRUST" means a trust organized for the purpose of securitizing the
accounts receivable held by an Accounts Receivable Subsidiary that does not
engage in any business other than (a) the purchase of accounts receivable or
participation interests therein, (b) the issuance and distribution of
indebtedness and other interests in such trust to (i) the Accounts Receivable
Subsidiary or (ii) to other parties for cash or Cash Equivalents on an
arms-length basis, (c) the servicing of accounts receivable and any indebtedness
or interests in such trust and (d) activities ancillary to the actions described
in clauses (a), (b) and (c).
"MATERIAL 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 of
the Indenture, substituting "5%" for all references in such definition to "10%."
"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, any gain (but not
loss),
61
together with any related provision for taxes on such gain (but not
loss), realized in connection with any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions), and
excluding any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of 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 the subject of such Asset Sale and any
reserve for adjustment in respect of the sale price of such asset or assets.
"NOTE CUSTODIAN" means the Trustee, as custodian with respect to the
Securities in global form, or any successor entity thereto.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERING CIRCULAR" means the offering circular dated July 19, 1995 and the
final offering circular dated July 20, 1995 relating to the offering of the
Securities.
"OFFICER" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"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) Investments by the Company or any Subsidiary of the Company in a Person if,
as a result of such Investment (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)
Investments in an Accounts Receivable Subsidiary received in consideration of
contributions or sales of accounts receivable permitted under Section 4.10 of
the Indenture, (e) other Investments made after the date of the Indenture in an
aggregate amount (measured at the time each such Investment is made) not
exceeding $7.5 million and (f) Investments existing on the date of the
Indenture.
"PERMITTED LIENS" means (a) Liens securing Indebtedness permitted to be
incurred pursuant to clause (a) of the second paragraph of Section 4.09 of the
Indenture; (b) Liens in favor of the Company; (c) 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; (d) 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; (e) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (f)
Liens existing on the date hereof; (g) 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; (h)
Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company with respect to obligations that do not, in the
aggregate, exceed $5 million at any one time outstanding and that are not
incurred in connection with the borrowing of money or the obtaining of advances
or credit (other than trade credit); (i) Liens securing Indebtedness permitted
to be incurred pursuant to clause (i) of the second paragraph of Section 4.09 of
the Indenture; (j) Liens securing Senior Debt and (k) Liens in connection with
Hedging Obligations.
62
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust or unincorporated organization
(including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"PRINCIPALS" means Bain, the Tyler Entities (as defined in the 11%
Securities Offering Circular), Acadia Partners, L.P., FWHY-Coinvestment I
Partners, L.P., Rosecliff-Specialty Retailing 1989 Partners, L.P. and Court
Square Capital Limited.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of the date of the Indenture, by and among the Company and the other
parties named on the signature pages thereof, relating to the Securities, as
such agreement may be amended, modified or supplemented from time to time.
"RELATED PARTY" with respect to any Principal means (a) any stockholder or
partner of such Principal on the date of the Indenture or (b) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (a).
"REPRESENTATIVE" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any
officer within the Corporate Trust Division 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.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR DEBT" means (i) all Obligations of the Company under the Senior
Notes and the Senior Note Indenture and (ii) any other Indebtedness that is
permitted to be incurred by the Company pursuant to this Indenture unless the
instrument under which such Indebtedness is incurred expressly provides that it
is PARI PASSU with or subordinated in right of payment to the Securities.
Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not
include (a) any trade payables, (b) any liability for federal, state, or local
or other taxes owed or owing by the Company, (c) any Indebtedness of the Company
to any of its Subsidiaries or other Affiliates or (d) any Indebtedness that is
incurred in violation of this Indenture.
"SENIOR NOTE INDENTURE" means that certain indenture, dated August 2, 1993,
among the Company, Palais Royal, Inc., a Texas corporation, and The First
National Bank of Boston, as trustee, as amended or supplemented from time to
time, relating to the Senior Securities.
"SENIOR SECURITIES" means the Company's 10% Series A Senior Securities due
2000 and 10% Series B Senior Securities due 2000, if any, issued pursuant to
Senior Note Indenture.
"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 of
the Indenture.
"SUBSIDIARY" means, with respect to any Person, 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
63
or indirectly, by such Person or one or more of the other Subsidiaries of such
Person or a combination thereof other than Unrestricted Subsidiaries (except as
used in the definition thereof).
"SUBSIDIARY GUARANTOR" means any Subsidiary of the Company that executes a
Guarantee of the obligations of the Company under the 11% Notes and the 11%
Notes Indenture, and its successors and assigns.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb)
as in effect on the date on which the Indenture is qualified under the TIA.
"TRUSTEE" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of the Indenture and thereafter
means the successor serving hereunder.
"UNRESTRICTED SUBSIDIARY" means (a) any Wholly Owned Subsidiary of the
Company designated by the Board of Directors of the Company as an Unrestricted
Subsidiary pursuant to a Board Resolution set forth in an Officers' Certificate
and delivered to the Trustee (i) that, at the time of designation, has total
assets not exceeding $1,000, (ii) no portion of the Indebtedness or any other
obligations (contingent or otherwise) of which (A) is guaranteed by the Company
or any other Subsidiary (other than another Unrestricted Subsidiary) of the
Company, (B) is recourse to or obligates the Company or any other Subsidiary
(other than another Unrestricted Subsidiary) of the Company in any way or (C)
subjects any property or asset of the Company or any other Subsidiary (other
than another Unrestricted Subsidiary) of the Company, directly or indirectly,
contingently or otherwise, to the satisfaction thereof, (iii) with which neither
the Company nor any other Subsidiary (other than another Unrestricted
Subsidiary) of the Company has any contract, agreement, arrangement or
understanding other than on terms no less favorable to the Company or such other
Subsidiary than those that might be obtained at the time from Persons who are
not Affiliates of the Company and (iv) with which neither the Company nor any
other Subsidiary (other than another Unrestricted Subsidiary) of the Company has
any obligation (A) to subscribe for additional shares of Capital Stock or other
Equity Interests therein or (B) to maintain or preserve such Subsidiary's
financial condition or to cause such Subsidiary to achieve certain levels of
operating results or (b) any Accounts Receivable Subsidiary.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
principal amount of such Indebtedness into (b) the sum of the products obtained
by multiplying (x) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including payment at
final maturity, in respect thereof, by (y) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment.
"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 or by such
Person and one or more Wholly Owned Subsidiaries of such Person, other than an
Unrestricted Subsidiary (except as used in the definition thereof).
64
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Securities were sold by the Company on July 27, 1995 to the Initial
Purchaser pursuant to the Purchase Agreement. The Initial Purchaser subsequently
placed the Old Securities with qualified institutional buyers in reliance on
Rule 144A under the Securities Act. As a condition to the Purchase Agreement,
the Company and the Initial Purchaser entered into Registration Rights
Agreement, which requires, among other things, that promptly following the sale
of the Old Securities to the Initial Purchaser, the Company will file with the
Commission a Registration Statement under the Securities Act with respect to an
issue of new notes of the Company identical in all material respects to the Old
Securities, will use its best efforts to cause such Registration Statement to
become effective under the Securities Act and, upon the effectiveness of that
Registration Statement, will offer to the Holders of the Old Securities the
opportunity to exchange their Old Securities for a like principal amount of New
Securities, which will be issued without a restrictive legend and may be
reoffered and resold by the Holder without restrictions or limitation under the
Securities Act (other than any such Holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act). A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that New
Securities issued pursuant to the Exchange Offer in exchange for Old Securities
may be offered for resale, resold and otherwise transferred by any Holder of
such New Securities (other than any such Holder which is an "affiliate of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Securities are acquired in the ordinary
course of such Holder's business and such Holder does not intend to participate
and has not arrangement or understanding with any person to participate in the
distribution of such New Securities. Any Holder who tenders in the Exchange
Offer with the intention to participate, or for the purpose of participating, in
a distribution of the New Securities could not rely on the position of the staff
of the Commission enumerated in EXXON CAPITAL HOLDINGS CORPORATION (available
April 13, 1989) or similar no-action letters and, in the exemption therefrom,
must comply with the registration and prospectus deliver requirement of the
Securities Act in connection with any resale transaction. In addition, any such
resale transaction should be covered by an effective registration statement
containing the selling security Holders information required by Item 507 of
Regulation S-K. See "Description of the New Securities-Registration Rights."
Each broker-dealer that receives New Securities for its own account in exchange
for Old Securities, where such Old Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a Prospectus in connection
with any resale of such New Securities. See "Plan of Distribution."
By tendering in the Exchange Offer, each Holder will represent to the
Company that, among other things, (i) the New Securities acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
person receiving such New Securities, whether or not such person is a Holder,
(ii) neither the Holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Securities, (iii) neither the Holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of the Company,
and (iv) the Holder and such other person acknowledge that (a) any person
participating in the Exchange Offer for the purpose of distributing the New
Securities must, in the absence of an exemption therefrom, comply with the
registration and prospectus deliver requirements of the Securities Act in
connection with any resale of the New Securities and cannot rely on the
no-action letter referenced above and (b) failure to comply with such
requirements in such instance could result such Holder incurring liability under
the Securities Act for which such Holder is not indemnified by the Company.
Following the consummation of the Exchange Offer, Holders of the Old
Securities who were eligible to participate in the Exchange Offer but who did
not tender their Old Securities will not have any further registration rights
and such Older Securities will continue to be subject to certain restriction on
transfer. Accordingly, the liquidity of the market for such Old Securities could
be adversely affected.
65
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Securities validly tendered and not withdrawn prior to 5:00 p.m., New York City
time on the Expiration Date. The Company will issue $1,000 principal amount of
New Securities in exchange for each $1,000 principal amount of outstanding Old
Securities. Holders may tender some or all of their Old Securities pursuant to
the Exchange Offer. However, Old Securities may be tendered only in integral
multiples of $1,000.
The form and terms of the New Securities are the same as the form and terms
of the Old Securities except (i) that the New Securities have been registered
under the Securities Act and hence will not bear legends restricting the
transfer thereof and (ii) the Holders of the New Securities will not be entitled
to certain rights under the Registration Rights Agreement, which rights will
terminate when the Exchange Offer is terminated. The New Securities will
evidence the same debt as the Old Securities and will be entitled to the
benefits of the Indenture.
As of the date of this Prospectus, $18,250,000 in aggregate principal
amount of Old Securities were outstanding and registered in the name of Cede &
Co. as nominee for the Depositary. The Company has fixed the close of business
on _____________, 1995 as the record date for the Exchange Offer for purposes of
determining the person to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders or Old Securities do not have any appraisal or dissenters' rights
under the General Corporation Law of Delaware or the Indenture in connection
with the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old
Securities when, as and if the Company has given oral or written notice thereof
to the Exchange Agent. The Exchange Agent will act as agent for the tendering
Holders for the purpose of receiving the New Securities from the Company.
If any tendered Old Securities are not accepted for exchange because of any
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Securities will be
returned, without expense, to the tendering Holder thereof as promptly as
practicable after the Expiration Date.
Holders who tendered Old Securities in the Exchange Offer will not be
required to pay brokerage commissions or fees or subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Old
Securities pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the Exchange Offer. See "The Exchange Offer-Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time,
__________, 1995, unless the Company, in its sold discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
Holders and announcement thereof, each prior to 9:00 a.m., New York City time,
on the next business day after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Securities, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered Holders. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company
66
will promptly disclose such amendment by means of a prospectus supplement that
will be distributed to the registered Holders, and the Company will extend the
Exchange Offer for a period of five to 10 business days, depending upon the
significance of the amendment and the manner of disclosure to the registered
Holders, if the Exchange Offer would otherwise expire during the five to 10
business day period.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement.
INTEREST ON THE NEW SECURITIES
The New Securities will bear interest from their date of issuance. Holders
of Old Securities that are accepted for exchange will receive, in cash, accrued
interest thereon to, but not including, the date of issuance of the New
Securities. Such interest will be paid with the first interest payment of the
New Securities. Interest on the Old Securities accepted for exchange will cease
to accrue upon issuance of the New Securities.
Interest on the New Securities is payable semi-annually on each February 15
and August 15, commencing on the first such date following their date of
issuance.
PROCEDURES FOR TENDERING
Only a Holder of Old Securities may tender such Old Securities in the
Exchange Offer. To tender in the Exchange Offer, a Holder must complete, sign
and date the Letter of Transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile, together with
the Old Securities and any other required documents, to The First National Bank
of Boston (the "Exchange Agent") prior to 5:00 p.m., New York City time, on the
Expiration Date. To be tendered effectively, the Old Securities, Letter of
Transmittal and other required documents must be received by the Exchange Agent
at the address set froth below under "Exchange Agent" prior to 5:00 p.m., New
York City time, on the Expiration Date. Deliver of the Old Securities may be
made by book-entry transfer in accordance with the procedures described below.
Confirmation of such book-entry transfer must be received by the Exchange Agent
prior to the Expiration Date.
By executing the Letter of Transmittal, each Holder will make to the
Company the representations set forth above in the third paragraph under the
heading "-Purpose and Effect of the Exchange Offer."
The tender by a Holder and acceptance thereof by the Company will
constitute agreement between such Holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD SECURITIES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD SECURITIES SHOULD BE SENT TO THE COMPANY. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Securities are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. See "Instruction
to Registered Holder and/or Book-Entry Transfer Facility Participant from Owner"
included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Securities tendered pursuant thereto are tendered (i) by a
registered
67
Holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Old Securities listed therein, such Old Securities must
be endorsed or accompanied by a properly completed bond power, signed by such
registered Holder as such registered Holder's name appears on such Old
Securities with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Securities or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officer of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Old Securities at the book-entry transfer facility, The Depository Trust
Company (the "Book-Entry Transfer Facility"), for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Securities by causing such book-entry
transfer facility to transfer such Old Securities into the Exchange Agent's
account with respect to the Old Securities in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of the Old
Securities may be effected through book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility, an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Securities and withdrawal of tendered Old
Securities will be determined by the Company in it sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Old Securities not properly tendered or any Old Securities
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Securities. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Securities must be cured within such time as the
Company shall determine. Although the Company intends to notify Holders of
defects or irregularities with respect to tenders of Old Securities, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Securities will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any Old Securities received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering Holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
68
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Securities and (i) whose Old
Securities are not immediately available, (ii) who cannot deliver their Old
Securities, the Letter of Transmittal or any other required documents to the
Exchange agent or (iii) who cannot complete the procedures for book-entry
transfer, prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Old Securities and the principal amount of Old Securities tendered,
stating that the tender is being made thereby and guaranteeing that, within
five New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the
certificate(s) representing the Old Securities (or a confirmation of
book-entry transfer of such Old Securities into the Exchange Agent's
account at the Book-Entry Transfer Facility), and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Old Securities in proper form for transfer (or a confirmation of book-entry
transfer of such Old Securities into the Exchange Agent's account at the
Book-Entry Transfer Facility), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within five New
York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent Holders who which to tender their Old Securities according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Securities may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Old Securities in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Securities to be withdrawn (the
"Depositor"), (ii) identify the Old Securities to be withdrawn (including the
certificate number(s) and principal amount of such Old Securities, or, in the
case of Old Securities transferred by book-entry transfer, the name and number
of the account at the Book-Entry Transfer Facility to be credited, (iii) be
signed by the Holder in the same manner as the original signature on the Letter
of Transmittal by which such Old Securities were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Old Securities registered the
transfer of such Old Securities into the name of the person withdrawing the
tender and (iv) specify the name in which any such Old Securities are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Old Securities so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no New Securities will
be issued with respect thereto unless the Old Securities so withdrawn are
validly retendered. Any Old Securities which have been tendered but which are
not accepted for exchange, will be returned to the Holder thereof without cost
to such Holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Securities may be
retendered by the following one of the procedures described above under
"-Procedures for Tendering" at any time prior to the Expiration Date.
69
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange New Securities for, any Old
Securities, and may terminate or amend the Exchange Offer as provided herein
before the acceptance of such Old Securities, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgement of Company, might materially impair the
ability of the Company to proceed with Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries; or
(b) any change, or any development involving a prospective change, in
the business or financial affairs of the Company or any of its subsidiaries
has occurred which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer; or
(c) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the sole
judgment of the Company, might materially impair the ability of the Company
to proceed with Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(d) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Securities and
return all tendered Old Securities to the tendering Holders, (ii) extend the
Exchange Offer and retain all Old Securities tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of Holder to withdraw such
Old Securities (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Securities which have not been withdrawn. If such waiver constitutes a
material change to the Exchange Offer, the Company will promptly disclose such
waiver by means of a prospectus supplement that will be distributed to the
registered Holders, and the Company will extend the Exchange Offer for a period
of five to 10 business days, depending upon the significance of the waiver and
the manner of disclosure to the registered Holders, if the Exchange Offer would
otherwise expire during such five to 10 day period.
EXCHANGE AGENT
The First National Bank of Boston has been appointed as Exchange Agent for
the Exchange Offer. Questions and request for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
The First National Bank of Boston
Blue Hills Office Park
Attn: Corporate Trust Division
Mail Stop 45-02-15
150 Royall Street
Canton, MA 02021
70
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by the telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers or other soliciting
acceptances of the Exchange Offer. The Company, however, will pay the Exchange
Agent reasonable and customary fees for its services and will reimburse it for
its reasonable out-of-pocket expenses in connection therewith and will reimburse
the Holders of the Old Securities for reasonable fees and expenses of not more
than one firm acting as counsel for the Holders of Old Securities should such
Holders deem it advisable to appoint such counsel or more than one firm as
counsel for such Holders, if in the reasonable judgment of counsel to the
Holders and counsel to the Company, a conflict exists among such Holders.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Old Securities pursuant to the Exchange Offer. If, however, certificates
representing the New Securities or the Old Securities for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be issued in
the name of, any person other than the registered Holder of the Old Securities
tendered, or if tendered Old Securities are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of the Old Securities pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered Holder or any other person) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Securities will be recorded at the same carrying values as the Old
Securities, which is face value, as reflected in the Company's accounting
records on the date of exchange. Accordingly, no gain or loss for accounting
purposes will be recognized. The expenses of the Exchange Offer will be expended
over the term of the New Securities.
SHELF REGISTRATION
In addition, pursuant to the Registration Rights Agreement, if the Exchange
Offer is not permissible under applicable federal law, or if any Holder of Old
Securities (other than any Holder who may be deemed to be an "affiliate" of the
Company under Rule 405 of the Securities Act) notifies the Company that its not
permitted by law or any policy of the Commission to participate in the Exchange
Offer, the Company is required to file with the Commission the Shelf
Registration Statement to cover resales of Old Securities by the Holders thereof
who provide certain information to the Company in connection with the Shelf
Registration Statement. In the event that the Company is required to file the
Shelf Registration Statement, it is required to use its best efforts to cause it
to become effective. Unlike resales of New Securities by Holders who comply with
the terms of the Exchange Offer, Holders of Old Securities must make their
offers or sales by a prospectus relating to a registration statement in order
not to be subject to the significant restrictions on transfer applicable to the
Old Securities. See "The Exchange Offer-Resales of the New Securities; and
- -Consequences of Failure to Exchange."
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Securities that are not exchanged for New Securities pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Old
Securities may be resold only (i) to the Company (upon redemption thereof or
otherwise), (ii) so long as the Old Securities are eligible for resale pursuant
to Rule 144A, to a person inside the United
71
States whom the seller reasonably believes is a qualified institutional buyer
within the meaning of Rule 144A under the Securities Act in the transaction
meeting the requirements of Rule 144A, or in accordance with Rule 144 under the
Securities Act, or pursuant to another exemption from the registration
requirement of the Securities Act (and based upon an opinion of counsel if the
Company so requests), (iii) outside the United States to a foreign person in a
transaction meeting the requirements of Rule 904 under the Securities Act, or
(iv) pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States.
RESALE OF THE NEW SECURITIES
With respect to resales of New Securities, based on an interpretation by
the staff of the Commission set forth in no-action letter issued to third
parties, the Company believes that a Holder or other person who receives New
Securities, whether or not such person is the Holder (other than a person that
is an "affiliate" of the Company with the meaning of Rule 405 under the
Securities Act) who receives New Securities in exchange for Old Securities in
the ordinary course of business and who is not participating, does not intend to
participate, and has not established an arrangement or understanding with any
person to participate, in the distribution of the New Securities, will be
allowed to resell the New Securities to the public without further registration
under the Securities Act and without delivering to the purchasers of the New
Securities a prospectus that satisfies the requirements of Section 10 thereof.
However, if any Holder acquires New Securities in the Exchange Offer for the
purpose of distributing or participating in a distribution of the New
Securities, such Holder cannot rely on the position of the staff of the
Commission enunciated in EXXON CAPITAL HOLDINGS CORPORATION (April 13, 1988) and
MORGAN STANLEY & CO., INCORPORATED (June 5, 1991), or similar no-action letters
or any similar interpretive letters, and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction, unless and exemption from registration is otherwise
available. Furthermore, each broker-dealer that receives New Securities for its
own account in exchange for Old Securities, where such Old Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a Prospectus in
connection with any resale of such New Securities.
As contemplated by these no-action letters and the Registration Rights
Agreement, each Holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the New Securities are to be
acquired by the Holder or the person receiving such New Securities, whether or
not such person is the Holder, in the ordinary course of business, (ii) the
Holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the New Securities, (iii) the Holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the New Securities, (iv) neither the Holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act and (v) the Holder or any such other person acknowledges that if
such Holder or other person participates in the Exchange Offer for the purpose
of distributing the New Securities it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the New Securities and cannot rely on those no-action letters. As
indicated above, each broker-dealer that receives New Securities for its own
account in exchange for Old Securities, must acknowledge that it will deliver a
Prospectus in connection with any resale of such New Securities. For description
of the procedures for such resales by broker-dealers, see "Plan of
Distribution."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Department of Treasury regulations,
judicial authority and administrative rulings and practice. There can be no
assurance that the Internal Revenue Service (the "Service") will not take a
contrary view, and no ruling from the Service has been or will be sought.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conditions set forth
herein. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences to Holders. Certain Holders (including
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) may be subject to special rules not discussed
below. The Company recommends that
72
each Holder consult such Holder's own tax advisor as to the particular tax
consequences of exchanging such Holder's Old Securities for New Securities,
including the applicability and effect of any state, local or foreign tax laws.
The exchange of Old Securities for New Securities pursuant to the Exchange
Offer will not be treated as an "exchange" for federal income tax purposes
because the New Securities should not be considered to differ materially in kind
or extent from the Old Securities. Rather, the New Securities received by a
Holder will be treated as a continuation of the Old Securities in the hands of
such Holder. As a result, there will be no federal income tax consequences to
Holders exchanging Old Securities for New Securities pursuant to the Exchange
Offer. If, however, the exchange of Old Securities for New Securities were
treated as an "exchange" for federal income tax purposes, such exchange should
constitute a recapitalization for federal income tax purposes. Holders
exchanging Old Securities for New Securities pursuant to such recapitalization
should not recognize any gain or loss upon the exchange.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
Prospectus in connection with any resale of such New Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Securities received in
exchange for Old Securities where such Old Securities were acquired as a result
of market-making activities or other trading activities. The Company has agreed
that for a period of 90 days after the Expiration Date, it will make this
Prospectus, as amended or supplement, available to any broker-dealer for use in
connection with any such resale. In addition, until _______, 1995 (90 days after
the Expiration Date), all dealers effecting transactions in the New Securities
may be required to deliver a Prospectus.
The Company will not receive any proceeds from any sales of New Securities
by broker-dealers. New Securities received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Securities or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to the purchaser or to or through brokers or dealers who
may receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Securities. Any
broker-dealer that resells the New Securities that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Securities may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Securities and commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period a 90 days after Expiration Date the Company will promptly send
additional copies of this Prospectus and any amendment or supplement to this
Prospectus to any broker-dealer that requests such documents in the Letter of
Transmittal. The Company has agreed to pay all expenses incident to the Exchange
Offer (including the expenses of one counsel for the Holders of the Securities)
other than commissions or concessions of any brokers or dealers and will
indemnify the Holders of the Securities (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
73
LEGAL MATTERS
The validity of the issuance of the New Securities will be passed upon for
the Company by Kirkland & Ellis, 153 East 53rd Street, New York, New York 10022.
Partners of Kirkland & Ellis own 29,372 shares of Common Stock and 8,116 shares
of Class B Common Stock.
EXPERTS
The consolidated financial statements as of January 29, 1994 and January
28, 1995 and for each of the three years in the period ended January 28, 1995
included in this Prospectus and the Registration Statement of which is a part,
have been so included in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as an expert in
auditing and accounting.
74
INDEX TO FINANCIAL STATEMENTS
PAGE
NUMBER
------
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheet at January 28, 1995 and
April 29, 1995 ....................................................... F-2
Consolidated Condensed Statement of Income for the three
months ended April 30, 1994 and April 29, 1995 ....................... F-3
Consolidated Condensed Statement of Cash Flows for the three
months ended April 30, 1994 and April 29, 1995 ....................... F-4
Consolidated Condensed Statement of Stockholder's Equity for the
three months ended April 29, 1995 .................................... F-5
Notes to Unaudited Consolidated Condensed Financial Statements ......... F-6
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants ...................................... F-7
Consolidated Balance Sheet at January 29, 1994 and
January 28, 1995 ..................................................... F-8
Consolidated Statement of Operations for the fiscal years
1992, 1993 and 1994 .................................................. F-9
Consolidated Statement of Cash Flows for the fiscal years
1992, 1993 and 1994 .................................................. F-10
Consolidated Statement of Stockholder's Equity for the
fiscal years 1992, 1993 and 1994 ..................................... F-12
Notes to Consolidated Financial Statements ............................. F-13
F-1
<PAGE>
SPECIALTY RETAILERS, INC.
(A wholly-owned subsidiary of Apparel Retailers, Inc.)
CONSOLIDATED CONDENSED BALANCE SHEET
(in thousands, except par value and number of shares)
<TABLE>
<CAPTION>
JANUARY 28, 1995 APRIL 29, 1995
---------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents ................................................. $ 27,797 $ 8,697
Accounts receivable ....................................................... 70,356 48,533
Merchandise inventories ................................................... 118,039 145,621
Prepaid expenses and other current assets ................................. 18,162 17,902
--------- ---------
Total current assets ................................................ 234,354 220,753
Property, equipment and leasehold improvements, net ....................... 75,602 85,828
Goodwill, net ............................................................. 31,865 32,292
Other assets .............................................................. 20,700 20,947
--------- ---------
$ 362,521 $ 359,820
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable .......................................................... $ 38,330 $ 41,162
Accrued interest .......................................................... 11,372 6,115
Accrued expenses and other accrued liabilities ............................ 34,415 28,406
Accrued taxes, other than income taxes .................................... 2,642 4,256
--------- ---------
Total current liabilities ........................................... 86,759 79,939
Long-term debt ............................................................ 213,827 208,884
Related party debt ........................................................ 39,200 44,200
Other long-term liabilities ............................................... 17,909 17,402
--------- ---------
Total liabilities ................................................... 357,695 350,425
--------- ---------
Common stock, par value $0.01, 5,000 shares
authorized, issued and outstanding
Additional paid-in capital ................................................ 3,317 3,317
Retained earnings ......................................................... 1,509 6,078
--------- ---------
Stockholder's equity ...................................................... 4,826 9,395
--------- ---------
Commitments and contingencies ............................................. -- --
--------- ---------
$ 362,521 $ 359,820
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-2
<PAGE>
SPECIALTY RETAILERS, INC.
(A wholly-owned subsidiary of Apparel Retailers, Inc.)
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(in thousands)
(unaudited)
FOR THE THREE MONTHS ENDED,
------------------------------
APRIL 30, 1994 APRIL 29, 1995
-------------- --------------
Net sales .................................... $ 128,073 $ 142,353
Cost of sales and related buying,
occupancy and distribution expenses ........ (88,217) (96,070)
--------- ---------
Gross profit ................................. 39,856 46,283
Selling, general and
administrative expenses .................... (30,045) (34,127)
Service charge income ........................ 2,133 2,683
--------- ---------
Operating income ............................. 11,944 14,839
--------- ---------
Interest income .............................. 395 150
--------- ---------
Interest expense:
Related party .............................. (471) (1,037)
Other ...................................... (6,726) (6,121)
Amortization of debt issue costs ........... (330) (343)
--------- ---------
(7,527) (7,501)
--------- ---------
Income before income tax and
extraordinary item ........................ 4,812 7,488
Income tax expense ........................... (1,731) (2,919)
--------- ---------
Income before extraordinary item ............. 3,081 4,569
Extraordinary item - early
extinguishment of debt ..................... (326) --
--------- ---------
Net income ................................... $ 2,755 $ 4,569
========= =========
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
SPECIALTY RETAILERS, INC.
(A wholly-owned subsidiary of Apparel Retailers, Inc.)
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED,
--------------------------------
APRIL 30, 1994 APRIL 29, 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................................ $ 2,755 $ 4,569
---------- ----------
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization ..................................... 2,378 2,700
Deferred federal income taxes ..................................... (7) (13)
Accretion of discount ............................................. 178 187
Amortization of debt issue costs .................................. 330 343
Loss on early extinguishment of debt .............................. 535 --
Changes in operating assets and liabilities:
Decrease in accounts receivable ................................. 4,712 11,523
Increase in merchandise inventories ............................. (16,168) (27,582)
Decrease (increase) in other assets ............................. 2,611 (965)
Increase in accounts receivable sold ............................ -- 10,300
Decrease in accounts payable and accrued liabilities ............ (839) (7,342)
---------- ----------
Total adjustments ............................................. (6,270) (10,849)
---------- ----------
Net cash used in operating activities .......................... (3,515) (6,280)
---------- ----------
Cash flows from investing activities:
Decrease in restricted investments .................................. 11,000 --
Additions to property, equipment and leasehold improvements ......... (2,070) (12,495)
---------- ----------
Net cash provided by (used in) investing activities ............. 8,930 (12,495)
---------- ----------
Cash flows from financing activities:
Payments on:
Long-term debt .................................................... (10,326) (115)
Additions to debt issue costs ..................................... (432) (210)
---------- ----------
Net cash used in financing activities ........................... (10,758) (325)
---------- ----------
Net decrease in cash and cash equivalents ..................... (5,343) (19,100)
Cash and cash equivalents:
Beginning of period ............................................... 58,521 27,797
---------- ----------
End of period ................................................... $ 53,178 $ 8,697
========== ==========
Supplemental disclosure of cash flow information:
Interest paid ..................................................... $ 13,707 $ 12,205
========== ==========
Income taxes paid ................................................. $ -- $ 1,800
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
SPECIALTY RETAILERS, INC.
(A wholly-owned subsidiary of Apparel Retailers, Inc.)
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDER'S EQUITY
(in thousands, except numbers of shares)
(unaudited)
COMMON STOCK
------------------- ADDITIONAL
SHARES PAID-IN RETAINED
OUTSTANDING AMOUNT CAPITAL EARNINGS TOTAL
----------- ------ ---------- -------- -------
Balance, January 28, 1995 5,000 $ -- $3,317 $ 1,509 $ 4,826
Net income .............. -- -- -- 4,569 4,569
----- ----- ------ -------- -------
Balance, April 29, 1995 . 5,000 $ -- $3,317 $ 6,078 $ 9,395
===== ===== ====== ======== =======
The accompanying notes are an integral part of this statement.
F-5
SPECIALTY RETAILERS, INC.
(A wholly-owned subsidiary of Apparel Retailers, Inc.)
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated condensed financial
statements of Specialty Retailers, Inc. (the "Company") have been prepared in
accordance with Rule 10-01 of Regulation S-X and do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. Those adjustments, which include only normal
recurring adjustments, that are, in the opinion of management, necessary for a
fair presentation of the results of the interim periods have been made. The
results of operations for such interim periods are not necessarily indicative of
results of operations for a full year. The unaudited consolidated condensed
financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto for the year ended January 28, 1995 filed
with the Company's Annual Report on Form 10-K. Certain reclassifications have
been made to prior year amounts to conform with the current year presentation.
The fiscal years discussed herein end on the Saturday nearest to January 31 in
the following calendar year. For example, references to "1995" mean the fiscal
year ended February 3, 1996.
2. Under the accounts receivable securitization program implemented in
1993 (the "Accounts Receivable Program"), a subsidiary of the Company, SRI
Receivables Purchase Co., Inc. ("SRPC") purchases the accounts receivable
generated under the Company's private label credit card program. Such accounts
receivable are in turn transferred to a trust which has issued certain
certificates representing undivided interests in the trust. SRPC owns an
undivided interest in the accounts receivable not supporting the certificates
issued by the trust. SRPC is a separate corporate entity from the Company and
SRPC's creditors have a claim on its assets prior to those assets becoming
available to any creditor of the Company.
3. The Company has a revolving credit agreement with a bank (the
"Credit Agreement") under which it may draw up to $25.0 million. On March 31,
1995, the Company extended the Credit Agreement to February 3, 1998 and entered
into a separate agreement with the bank under which it may borrow an additional
$10.0 million for seasonal working capital needs (the "Seasonal Credit
Agreement"). Funds are available under the Seasonal Credit Agreement from August
15 through January 15 of each calendar year (the "Seasonal Period"). The
Seasonal Credit Agreement is available through February 3, 1998 and provides for
a commitment fee during each Seasonal Period of 1/2 of 1% of the average daily
unused portion of the commitment amount. Commitment fees are paid on an annual
basis on the first business day following the Seasonal Period then concluded.
Interest is charged on outstanding loans at a base rate plus a specified margin.
The base rate is the higher of the bank's prime rate or 1/2 of 1% above the
Federal Funds Effective Rate. The specified margin range is 1.25% to 2.75% based
on calculated debt service ratios as defined in the agreement.
4. During the fourth quarter of 1994, the Company approved a store
closure plan (the "Store Closure Plan") for the closure of forty Fashion Bar
stores and accrued $5.2 million for the expected costs associated with the plan.
As of April 29, 1995, thirty-nine of such stores had been closed and $3.6
million was charged to the accrual primarily related to lease termination
payments associated with these stores. The Company expects to complete the Store
Closure Plan during 1995.
F-6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Specialty Retailers, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of cash flows and of
stockholder's equity present fairly, in all material respects, the financial
position of Specialty Retailers, Inc. (a wholly-owned subsidiary of Apparel
Retailers, Inc.) and its subsidiaries at January 29, 1994 and January 28, 1995,
and the results of their operations and their cash flows for each of the three
years in the period ended January 28, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
April 14, 1995
F-7
<PAGE>
SPECIALTY RETAILERS, INC.
(A wholly-owned subsidiary of Apparel Retailers, Inc.)
CONSOLIDATED BALANCE SHEET
(in thousands, except par value and number of shares)
<TABLE>
<CAPTION>
JANUARY 29, 1994 JANUARY 28, 1995
---------------- ----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents ............................................................ $ 58,521 $ 27,797
Accounts receivable .................................................................. 42,174 70,356
Merchandise inventories .............................................................. 103,962 118,039
Restricted investments ............................................................... 11,150 338
Prepaid expenses and other current assets ............................................ 13,439 17,824
--------- --------
Total current assets ........................................................... 229,246 234,354
Property, equipment and leasehold improvements, net .................................. 61,508 75,602
Goodwill, net ........................................................................ 26,435 31,865
Other assets ......................................................................... 24,432 20,700
--------- --------
$ 341,621 $362,521
========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable ..................................................................... $ 31,248 $ 38,330
Accrued interest ..................................................................... 12,705 11,372
Accrued employee compensation costs .................................................. 8,145 8,696
Accrued expenses and other accrued liabilities ....................................... 15,832 25,719
Accrued taxes, other than income taxes ............................................... 4,902 2,642
--------- --------
Total current liabilities ...................................................... 72,832 86,759
Long-term debt ....................................................................... 247,235 213,827
Related party debt ................................................................... 15,000 39,200
Deferred income taxes ................................................................ 3,020 4,244
Other long-term liabilities .......................................................... 12,797 13,665
--------- --------
Total liabilities .............................................................. 350,884 357,695
--------- --------
Common stock, par value $0.01, 5,000 shares
authorized, issued and outstanding ................................................. -- --
Additional paid-in capital ........................................................... 3,317 3,317
Accumulated equity (deficit) ......................................................... (12,580) 1,509
--------- --------
Stockholder's equity (deficit) ....................................................... (9,263) 4,826
--------- --------
Commitments and contingencies ........................................................ -- --
--------- --------
$ 341,621 $362,521
========= ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-8
<PAGE>
SPECIALTY RETAILERS, INC.
(A wholly-owned subsidiary of Apparel Retailers, Inc.)
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
FISCAL YEAR
-----------------------------------------------------
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Net sales ........................................................ $ 504,401 $ 557,422 $ 581,463
Cost of sales and related buying,
occupancy and distribution expenses ............................ (350,136) (384,843) (398,659)
--------- --------- ---------
Gross profit ..................................................... 154,265 172,579 182,804
Selling, general and
administrative expenses ........................................ (129,313) (135,209) (135,127)
Service charge income ............................................ 29,670 20,003 8,515
Store closure costs .............................................. -- -- (5,232)
--------- --------- ---------
Operating income ................................................. 54,622 57,373 50,960
--------- --------- ---------
Interest income .................................................. 613 1,212 1,654
--------- --------- ---------
Interest expense:
Related party .................................................. (9,434) (5,908) (2,902)
Other .......................................................... (21,324) (24,852) (25,604)
Amortization of debt issue costs ............................... (1,626) (1,377) (1,237)
--------- --------- ---------
(32,384) (32,137) (29,743)
--------- --------- ---------
Other non-operating expense ..................................... (2,276) -- --
--------- --------- ---------
Income before income tax and
extraordinary item ............................................ 20,575 26,448 22,871
Income tax expense ............................................... (8,340) (9,330) (8,339)
--------- --------- ---------
Income before extraordinary item ................................. 12,235 17,118 14,532
Extraordinary item - early
extinguishment of debt ......................................... -- (16,208) (308)
--------- --------- ---------
Net income ....................................................... $ 12,235 $ 910 $ 14,224
========= ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-9
<PAGE>
SPECIALTY RETAILERS, INC.
(A wholly-owned subsidiary of Apparel Retailers, Inc.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FISCAL YEAR
-------------------------------------
1992 1993 1994
-------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ........................................................................... $ 12,235 $ 910 $ 14,224
-------- --------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ...................................................... 9,065 9,259 9,997
Deferred federal income taxes ...................................................... 2,624 (1,022) 271
Accretion of discount .............................................................. 868 563 772
Amortization of debt issue costs ................................................... 1,626 1,377 1,237
Issuance of long-term debt in lieu of interest payment ............................. 958 1,214 282
Loss (gain) on early extinguishment of debt ........................................ (136) 25,032 474
Changes in operating assets and liabilities:
Increase in accounts receivable .................................................. (6,778) (18,822) (5,378)
Increase in merchandise inventories .............................................. (4,201) (10,862) (14,077)
Increase in other assets ......................................................... (2,136) (6,292) (2,347)
Increase (decrease) in accounts receivable sold .................................. -- 147,100 (7,100)
Increase in accounts payable and accrued liabilities ............................. 8,256 6,087 11,545
-------- --------- --------
Total adjustments .............................................................. 10,146 153,634 (4,324)
-------- --------- --------
Net cash provided by operating activities ....................................... 22,381 154,544 9,900
-------- --------- --------
Cash flows from investing activities:
Decrease (increase) in restricted investments ........................................ -- (2,150) 10,812
Acquisitions, net of cash acquired ................................................... (5,819) -- (20,840)
Payments to former Bealls and Palais Royal shareholders .............................. (1,378) (252) --
Additions to property, equipment and leasehold improvements .......................... (7,631) (8,503) (19,706)
-------- --------- --------
Net cash used in investing activities ............................................ (14,828) (10,905) (29,734)
-------- --------- --------
Cash flows from financing activities:
Proceeds from:
Working capital facility ........................................................... 8,000 -- --
Short-term debt .................................................................... 33,422 19,135 --
Long-term debt ..................................................................... 23,319 272,041 --
Senior redeemable preferred stock .................................................. 1 -- --
Common stock ....................................................................... 74 293 --
Payments on:
Working capital facility ........................................................... (22,000) (1,000) --
Short-term debt .................................................................... (31,540) (24,992) --
Long-term debt ..................................................................... (10,921) (337,254) (10,442)
Redemption of redeemable preferred stock ........................................... (52) (19,797) --
Redemption of common stock ......................................................... (63) (33) --
Additions to debt issue costs ........................................................ (1,330) (8,928) (448)
-------- --------- --------
Net cash used in financing activities ............................................ (1,090) (100,535) (10,890)
-------- --------- --------
Net increase (decrease) in cash .................................................. 6,463 43,104 (30,724)
Cash and cash equivalents:
Beginning of year .................................................................. 8,954 15,417 58,521
-------- --------- --------
End of year ........................................................................ $ 15,417 $ 58,521 $ 27,797
======== ========= ========
F-10
Supplemental disclosure of cash flow information:
Interest paid ........................................................................ $ 29,621 $ 30,142 $ 28,784
======== ========= ========
Income taxes paid .................................................................... $ 3,369 $ 3,857 $ 5,198
======== ========= ========
Supplemental schedule of noncash investing and financing activities:
The Company purchased all of the capital stock of Fashion Bar, Inc.
for $6,262 in cash during 1992. In addition, the Company purchased
a significant portion of the assets of Beall-Ladymon, Inc. for $20,840
in cash during 1994. In conjuction with these acquisitions, liabilities
were assumed as follows:
Fair value allocated to assets acquired ............................................ $ 22,864 $ -- $ 24,043
Cash paid for assets acquired, including acquisition expenses ...................... (6,262) -- (20,840)
Notes issued to former Fashion Bar, Inc. shareholders .............................. (3,143) -- --
-------- --------- --------
Liabilities assumed ................................................................ $ 13,459 $ -- $ 3,203
======== ========= ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-11
<PAGE>
SPECIALTY RETAILERS, INC.
(A wholly-owned subsidiary of Apparel Retailers, Inc.)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(in thousands, except numbers of shares)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------------------
CLASS B
----------------------- ADDITIONAL ACCUMULATED
SHARES SHARES PAID-IN EQUITY
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL (DEFICIT) TOTAL
----------- ------ ----------- -------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 1, 1992 ............ 10,381,266 $ 104 1,468,750 $ 15 $ 890 $(20,509) $(19,500)
---------- ----- --------- -------- -------- -------- --------
Net income ........................... -- -- -- -- -- 12,235 12,235
Dividends on preferred stock ......... -- -- -- -- -- (2,334) (2,334)
Accretion on preferred stock ......... -- -- -- -- -- (17) (17)
Issuance of stock .................... 194,915 2 -- -- 72 -- 74
Retirement of stock .................. (17,014) -- -- -- (63) -- (63)
---------- ----- --------- -------- -------- -------- --------
Balance, January 30, 1993 ............ 10,559,167 $ 106 1,468,750 $ 15 $ 899 $(10,625) $ (9,605)
---------- ----- --------- -------- -------- -------- --------
Net income ........................... -- -- -- -- -- 910 910
Dividends on preferred stock ......... -- -- -- -- -- (1,596) (1,596)
Accretion on preferred stock ......... -- -- -- -- -- (701) (701)
Tax benefits from stock
option activity .................... -- -- -- -- 2,037 -- 2,037
Adjustment for minimum
pension liability .................. -- -- -- -- -- (568) (568)
Issuance of stock .................... 773,924 7 -- -- 286 -- 293
Retirement of stock .................. (11,328,091) (113) (1,468,750) (15) 95 -- (33)
---------- ----- --------- -------- -------- -------- --------
Balance, January 29, 1994 ............ 5,000 $-- -- $ -- $ 3,317 $(12,580) $ (9,263)
---------- ----- --------- -------- -------- -------- --------
Net income ........................... -- -- -- -- -- 14,224 14,224
Adjustment for minimum
pension liability .................. -- -- -- -- -- (135) (135)
---------- ----- --------- -------- -------- -------- --------
Balance, January 28, 1995 ............ 5,000 $-- -- $ -- $ 3,317 $ 1,509 $ 4,826
========== ===== ========= ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-12
<PAGE>
SPECIALTY RETAILERS, INC.
(A wholly-owned subsidiary of Apparel Retailers, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS: Specialty Retailers, Inc. ("SRI" or the
"Company") operates family apparel stores primarily under the
names "Bealls", "Palais Royal" and "Fashion Bar." SRI is a
wholly-owned subsidiary of Apparel Retailers, Inc. ("ARI"). ARI
conducts its business exclusively through SRI and its primary
asset is the common stock of SRI.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany transactions have been
eliminated in consolidation.
On October 31, 1994, Palais Royal, Inc., a wholly-owned subsidiary
of the Company, purchased a significant portion of the assets of
the Beall-Ladymon Corporation ("Beall-Ladymon") for $20.8 million
in cash. The assets acquired consisted primarily of customer
accounts receivable and fixed assets. In addition, the Company
assumed leases for 49 store locations. Beall-Ladymon was a
regional apparel retailer which operated stores primarily in
Louisiana, Arkansas and Mississippi. In accordance with the terms
of the purchase agreement, Beall-Ladymon was required to close all
of the store locations during the fourth quarter of 1994. The
Company will operate 45 of the acquired locations as apparel
retail stores following a brief conversion period.
The following unaudited pro forma information gives effect to the
Beall-Ladymon acquisition as if it had occurred at the beginning
of the periods presented and includes operating activity of
Beall-Ladymon prior to the beginning of the closure period (in
thousands):
FISCAL YEAR
---------------------
1993 1994
-------- --------
Net sales ............................. $609,857 $613,994
======== ========
Income before extraordinary item ...... $ 17,051 $ 12,144
======== ========
Net income ............................ $ 843 $ 11,836
======== ========
The above amounts are based on certain estimates and assumptions
which the Company believes are reasonable. The pro forma results
do not purport to be indicative of the results which would have
occurred if the acquisition had actually taken place at the
beginning of the periods presented; nor are they necessarily
indicative of the results of any future periods.
The Beall-Ladymon acquisition was accounted for under the purchase
method of accounting. Accordingly, the total acquisition cost was
allocated to the assets acquired and liabilities assumed based
upon their estimated fair values. The $4.8 million excess of the
purchase price over the estimated fair value of such assets and
liabilities was recognized as goodwill and will be amortized on a
straight-line basis over fifteen years.
Effective May 30, 1992, SRI acquired all of the outstanding common
and preferred stock of Fashion Bar, Inc. ("Fashion Bar").
Unaudited pro forma net sales and net income for 1992, giving
F-13
effect to the transaction as if it occurred at the beginning of
1992, were $523.6 million and $12.8 million, respectively.
FISCAL YEAR: The fiscal years discussed herein end on the Saturday
nearest to January 31 in the following calendar year. For example,
references to "1994" mean the fiscal year ended January 28, 1995.
RECLASSIFICATIONS: The accompanying consolidated financial statements
include reclassifications from financial statements issued in
previous years. Non-interest credit expenses have been
reclassified to selling, general and administrative expenses on
the Statement of Operations.
MERCHANDISE INVENTORIES: The Company states its merchandise inventories
at the lower of cost or market, cost being determined using the
retail last-in, first-out ("LIFO") method.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS: Property, equipment and
leasehold improvements are stated at cost and depreciated over
their estimated useful lives using the straight line method. The
estimated useful lives of leasehold improvements do not exceed the
term, including renewal options, of the related lease. The
estimated useful lives in years are as follows:
Buildings............................................ 20-25
Store and office fixtures and equipment.............. 7-12
Warehouse equipment.................................. 5-15
Favorable leases and leasehold improvements.......... 15-50
INCOME TAXES: The provision for income taxes is computed based on the
pretax income included in the consolidated statement of
operations. The asset and liability approach is used to recognize
deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts
and the tax basis of assets and liabilities. Beginning in 1993,
the Company is included in the consolidated federal tax return of
its parent. As a result, federal tax amounts for 1993 and 1994
have been determined for the entities in the consolidated group,
including the Company, based upon the impact of each entity's tax
attributes on the consolidated federal tax provision.
POST EMPLOYMENT BENEFITS: The Company adopted Statement of Financial
Accounting Standards No. 112, Employers' Accounting for
Postemployment Benefits ("SFAS 112") during the first quarter of
1994. Due to the Company's limited Postemployment benefits, the
adoption of SFAS 112 did not have a material impact on its
consolidated financial statements.
DEBT ISSUE COSTS: Debt issue costs are accounted for as a deferred
charge and amortized on a straight-line basis over the term of the
related issue.
GOODWILL AND OTHER INTANGIBLES: The Company amortizes goodwill and
intangible assets on a straight-line basis over the estimated
future periods benefited, not to exceed forty years. Amortization
periods for goodwill and other intangibles associated with
acquisitions are currently five to forty years. Each year, the
Company evaluates the remaining useful life associated with
goodwill based upon, among other things, historical and expected
long-term results of operations. Accumulated amortization of
goodwill was $3.2 million and $3.7 million at January 29, 1994 and
January 28, 1995, respectively.
F-14
STORE PRE-OPENING AND ADVERTISING EXPENSES: Pre-opening expenses of new
stores are deferred and charged to operations in the year the
store opens. During 1994, the Company incurred $0.5 million of
pre-opening expenses related to stores which will open in 1995.
Historically, pre-opening costs have been insignificant.
Advertising costs are charged to operations when the related
advertising first takes place. Advertising costs were $19.4
million, $22.3 million, and $22.3 million for 1992, 1993 and 1994,
respectively. Prepaid advertising costs were $0.5 million and $0.9
million at January 29, 1994 and January 28, 1995, respectively.
STATEMENT OF CASH FLOWS: The Company considers highly liquid investments
with initial maturities of less than three months to be cash
equivalents in its statement of cash flows.
FINANCIAL INSTRUMENTS: The Company records all financial instruments at
cost. The fair values of accounts receivable and accounts payable
approximate cost.
NOTE 2 - STORE CLOSURES:
During the fourth quarter of 1994, the Company approved a store closure
plan (the "Store Closure Plan") for the closure of 40 Fashion Bar stores,
primarily located in major regional malls within the Denver area. Management
determined that the investment needed to upgrade these stores and the
promotional efforts required to make these stores more competitive were neither
justified nor compatible with the Company's overall merchandising philosophies.
The Company will operate 15 Fashion Bar stores after completion of the Store
Closure Plan. The Company has accrued $5.2 million for the expected costs
associated with the Store Closure Plan which include: occupancy ($4.2 million);
severance ($0.4 million); write-off of fixed assets and other intangibles ($0.9
million); and other expenses ($0.8 million), and the write-off of negative
goodwill ($1.1 million) allocated to the stores to be closed. The Company
expects to complete the Store Closure Plan during 1995.
Net sales and operating income attributable to the stores to be closed
were as follows (in thousands):
FISCAL YEAR
-------------------------------------
1992 1993 1994
------- -------- -------
Net sales .................. $18,101 $ 25,442 $23,174
======= ======== =======
Operating income (loss) .... $ 1,743 $ (213) $ 618
======= ======== =======
NOTE 3 - REFINANCING:
During 1993, the Company completed its refinancing (the "Refinancing")
which included (i) the replacement of the existing accounts receivable facility
("Accounts Receivable Facility") with a new accounts receivable securitization
program ("Accounts Receivable Program") and (ii) the issuance of 10% senior
notes due 2000 (the "Senior Notes") and 11% senior subordinated notes due 2003
(the "Senior Subordinated Notes") which replaced certain
F-15
previously outstanding debt. As a result of the Refinancing, the Company
recorded an extraordinary charge of $16.2 million net of applicable income taxes
of $8.8 million during 1993.
NOTE 4 - ACCOUNTS RECEIVABLE:
Accounts receivable balances were as follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, 1994 JANUARY 28, 1995
---------------- ----------------
<S> <C> <C>
Gross customer accounts receivable ............. $ 189,237 $ 210,941
Accounts receivable sold ....................... (147,100) (140,000)
Other receivables .............................. 1,981 2,647
--------- ---------
44,118 73,588
Less - allowance for doubtful accounts ......... (1,944) (3,232)
--------- ---------
$ 42,174 $ 70,356
========= =========
</TABLE>
During 1993, the Company implemented the Accounts Receivable Program
which provides a source of funds from the sale of accounts receivable to a
master trust (the "Trust"). Pursuant to the Accounts Receivable Program, the
Company sells all of the accounts receivable generated by the holders of the
Company's private label credit card accounts to its wholly-owned subsidiary, SRI
Receivables Purchase Co., Inc. ("SRPC"), on a daily basis. SRPC is a separate
limited-purpose subsidiary that is operated in a fashion intended to ensure that
its assets and liabilities are distinct from those of the Company and its other
affiliates as SRPC's creditors have a claim on its assets prior to becoming
available to any creditor of the Company. SRPC sells, on a daily basis, the
accounts receivable purchased from the Company to the Trust in exchange for cash
or a certificate representing an undivided interest in the Trust. At its
inception, the Trust issued $140.0 million of term certificates and a $40.0
million revolving certificate representing undivided interests in the Trust. The
Trust did not receive any cash immediately from the issuance of the revolving
certificate. Instead, the holder of the revolving certificate agreed to purchase
interests in the Trust equal to the amount of accounts receivable in the Trust
above the level required to support the term certificates and the transferor's
retained interest (currently $170.0 million), up to a maximum of $40.0 million.
If receivable balances in the Trust fall below the level required to support the
term certificates and revolving certificates, certain principal collections may
be retained in the Trust until such time as the receivable balances exceed the
certificates then outstanding and the required transferor's interest. The
Company owns an undivided interest in the accounts receivable in the Trust not
represented by the term or revolving certificates and will continue to service
all of the accounts receivable in the Trust. The Trust may issue additional
series of certificates from time to time. Terms of any future series will be
determined at the time of issuance. The outstanding balances of the term
certificates totaled $140.0 million at January 29, 1994 and January 28, 1995.
The outstanding balance of the revolving certificate was $7.1 million and zero
at January 29, 1994 and January 28, 1995, respectively.
Total accounts receivable sold to the Trust during 1993 and 1994 were
$285.1 million and $278.6 million, respectively. In addition, the Company
transferred $10.0 million of accounts receivable purchased from Beall-Ladymon
(see Note 1) to the Trust on February 1, 1995. The cash flows generated from the
accounts receivable in the Trust are dedicated to (i) the purchase of new
accounts receivable generated by the Company, (ii) payment of a return on the
certificates and (iii) the payment of a servicing fee to SRI. Any remaining cash
flows are remitted to the Company. The term certificates entitle the holders to
receive a return, based upon the London Interbank Offered Rate ("LIBOR"), plus
F-16
a specified margin paid on a quarterly basis. Principal payments commence in
December 31, 1999 but can be accelerated upon occurrence of certain events. The
revolving certificates entitle the holders to receive a return based upon a
floating LIBOR rate, plus a specified margin, or prime rate, at the option of
the Company paid on a monthly basis. The Company is protected against increases
above 10% under an agreement entered into with a bank. The Company is exposed to
loss in the event of non-performance by the bank. However, the Company does not
anticipate non-performance by the bank. At January 28, 1995, the average rate of
return on the term certificates was 7.4%. The purchase commitment for the
Revolving certificate is five years, subject to renewal at the option of the
parties. The revolving certificate holders are entitled to repayment in the
event the accounts receivable decrease below that required to support such
certificates.
As a result of the implementation of the Accounts Receivable Program in
1993, the Company's financial statements no longer reflect the accounts
receivable, finance charge income, bad debt expense or servicing costs
attributable to the Trust accounts receivable supporting the outstanding term or
revolving certificates. The Company recognized gains of $3.3 million and $1.0
million on the sale of accounts receivable under the Accounts Receivable Program
for 1993 and 1994, respectively, which have been reflected as a reduction of
selling, general and administrative expenses.
The provision for doubtful accounts was $11.5 million, $6.6 million and
$2.6 million for 1992, 1993 and 1994, respectively. The provision for doubtful
accounts for 1993 and 1994 does not reflect the Company's recourse obligations
under the Accounts Receivable Program which have been included in the
calculation of the gain on the sale of accounts receivable.
NOTE 5 - MERCHANDISE INVENTORIES:
The retail LIFO method is used to value all merchandise inventory.
Management believes that the LIFO method, which charges the most recent
merchandise costs to the results of current operations, provides a better
matching of current costs with current revenues in the determination of
operating results. Some companies use the retail first-in, first-out ("FIFO")
method in valuing their inventories. If the retail FIFO method had been used,
inventories at January 29, 1994 and January 28, 1995 would have been higher by
$1.3 million and $0.4 million, respectively.
NOTE 6 - PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Property, equipment and leasehold improvements were as follows (in
thousands):
<TABLE>
<CAPTION>
JANUARY 29, 1994 JANUARY 28, 1995
---------------- ----------------
<S> <C> <C>
Land........................................................ $ 3,074 $ 3,074
Buildings................................................... 16,336 16,313
Fixtures and equipment...................................... 59,969 72,624
Leasehold improvements...................................... 27,528 37,542
--------------- ---------------
106,907 129,553
Less - accumulated depreciation............................. (45,399) (53,951)
--------------- ---------------
$ 61,508 $ 75,602
=============== ===============
</TABLE>
F-17
NOTE 7 - CENTRALIZATION AND CONSOLIDATION PROGRAMS:
At the date of the acquisition of Bealls, the Company undertook a
centralization and consolidation program which included the expected closure of
twenty-six store locations (the "Store Closure Program") and certain operating
facilities, as well as the consolidation of certain duplicate administrative and
distribution functions. At January 30, 1993, twenty-one stores remained in the
Store Closure Program, sixteen of which had been closed. During 1993, based on
the Company's ongoing assessment of scheduled store closures, the remaining five
open stores were removed from the Store Closure Program, and their operating
results for 1993 and 1994 have been included in the Company's results of
operations. As a result of the removal of the remaining five stores from the
Store Closure Program, the Company reduced its consolidation and centralization
accrual by $2.3 million. Of this amount, $1.1 million, before applicable taxes,
was credited to goodwill and the remaining $1.2 million credited to long-term
liabilities to reflect the ongoing adverse lease commitments associated with the
removed stores. At January 29, 1994 and January 28, 1995, the balance of the
consolidation and centralization accrual was $5.4 million and $4.7 million,
respectively, primarily reflecting the lease costs associated with closed
stores. During 1992, 1993 and 1994, the Company charged $2.6 million, $0.8
million and $0.7 million, respectively, to the accrual.
At the date of the acquisition of Fashion Bar, the Company undertook a
consolidation program designed to eliminate certain duplicate administrative and
distribution functions previously performed by Fashion Bar. During 1992, 1993
and 1994, the Company charged $2.1 million, $0.3 million and $0.1 million,
respectively, to the accrual.
NOTE 8 - LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
January 29, 1994 January 28, 1995
---------------- ----------------
<S> <C> <C>
HELD BY THIRD PARTIES:
Senior Notes................................................ $ 125,000 $ 90,800
Senior Subordinated Notes................................... 100,000 100,000
Revolving Credit Agreement.................................. -- --
Bealls Holding Subordinated Notes, net of discount.......... 10,037 10,686
FB Holdings Subordinated Notes, net of discount............. 3,620 3,939
Bealls Holding Junior Subordinated Debentures, net of
discount................................................ 6,009 6,095
Port Arthur IDRB............................................ 2,217 2,117
Other long term debt........................................ 634 451
--------------- ---------------
247,517 214,088
Less - current maturities................................... (282) (261)
--------------- ---------------
$ 247,235 $ 213,827
=============== ===============
HELD BY RELATED PARTY:
Senior Notes................................................ $ 15,000 $ 39,200
=============== ===============
</TABLE>
F-18
The Senior Notes were originally issued with a principal amount of
$150.0 million and bear interest at 10% payable semi-annually on February 15 and
August 15. The Company is required to make a mandatory sinking fund payment on
August 15, 1999 equal to twenty five percent of the original principal amount.
The Company has purchased $20.0 million of the Senior Notes at a cost of $20.4
million which satisfied a portion of the August 15, 1999 sinking fund
requirement. The Senior Notes are general unsecured obligations and rank senior
to all subordinated debt of the Company including the Senior Subordinated Notes.
The Senior Subordinated Notes bear interest at 11% payable
semi-annually on February 15 and August 15. The Company is required to make a
mandatory sinking fund payment on August 15, 2002 equal to forty percent of the
original principal amount. The Senior Subordinated Notes are subordinated to the
obligations under the Senior Notes.
The Senior Notes and Senior Subordinated Notes contain restrictive
covenants which, among other things (i) limit SRI's ability to sell certain
assets, pay dividends, retire its common stock or retire certain debt, (ii)
limit its ability to incur additional debt or issue stock and (iii) limit
certain related party transactions.
The Company has a revolving credit agreement with a bank (the "Credit
Agreement") under which it may draw up to $25.0 million. Of this amount, $15.0
million may be used to support letters of credit. As of January 28, 1995, $10.8
million of the total commitment was used to collateralize letters of credit
resulting in available funds of $14.2 million. Effective March 31, 1995, Company
entered into a separate agreement with the bank under which it may borrow an
additional $10.0 million for seasonal working capital needs (the "Seasonal
Credit Agreement" and together with the Credit Agreement, the "Revolving Credit
Agreement"). Funds are available under the Seasonal Credit Agreement from August
15 through January 15 of each calendar year. The Revolving Credit Agreement is
available through February 3, 1998 and provides for a commitment fee of 1/2 of
1% of the average daily unused portion of the commitment amount paid on a
quarterly basis. Interest is charged on outstanding loans at a base rate plus a
specified margin. The base rate is the higher of the bank's prime rate or 1/2 of
1% above the Federal Funds Effective Rate. The specified margin range is 1.25%
to 2.75% based on calculated debt service ratios as defined in the agreement.
The Revolving Credit Agreement contains covenants which, among other things,
restricts the (i) incurrance of additional debt, (ii) purchase of certain
investments, (iii) payment of dividends, (iv) formation of certain business
combinations, (v) disposition of certain assets, (vi) acquisition of
subordinated debt, (vii) use of proceeds received under the agreement and (viii)
transactions with related parties. The Revolving Credit Agreement also requires
that SRI maintain a debt service ratio above a predetermined level. The
Revolving Credit Agreement is secured by the Company's distribution center
located in Jacksonville, Texas, including equipment located therein, and a
pledge of SRPC stock. The net book value of the distribution center was
approximately $11.0 million at January 28, 1995.
The increasing rate 3 Bealls Holding, Inc. ("Bealls Holding")
subordinated debentures due 2002 (the "Bealls Holding Subordinated Debentures")
in aggregate principal amount of approximately $15.0 million bear interest at
10% through 1994, 11% in 1995 and 12% thereafter until maturity. Interest is
payable semiannually on June 30 and December 31. Original issue discount of $7.3
million is being charged to interest expense over the term to maturity using the
effective interest method. The combination of coupon interest payments and
original issue discount results in an effective interest rate of 20.9%. The
Bealls Holding Subordinated Debentures may be prepaid, at the Company's option,
at their face value. The Company is required to redeem the Bealls Holding
Subordinated Debentures beginning no later than December 31, 1997, in no more
than six equal annual installments. The Bealls Holding Subordinated Debentures
are subordinated to all debt except the ARI Senior Discount Debentures. Due to
the merger of Bealls Holding into SRI in 1993, SRI is the primary obligor under
these debentures.
F-19
In connection with the acquisition of Fashion Bar, FB Holdings issued
approximately $3.6 million aggregate principal amount of 7% FB Holdings
subordinated notes due 2000 ("FB Holdings Subordinated Notes") to former
stockholders of Fashion Bar. The FB Holdings Subordinated Notes were recorded at
their estimated fair value at issuance date of $3.1 million. The difference
between the estimated fair value and principal amount of $0.5 million is being
charged to interest expense over the term to maturity using the effective
interest method. The FB Holdings Subordinated Notes are due in two equal
installments on June 30, 1999 and 2000. SRI is required to prepay certain
principal amounts of the FB Holdings Subordinated Notes in certain
circumstances. The FB Holdings Subordinated Notes may be prepaid at any time in
whole or in part at SRI's option. The FB Holdings Subordinated Notes bear
interest at 7% per annum, payable quarterly. The combination of coupon interest
payments and original issue discount results in an effective interest rate of
9.0%. Prior to and including June 1995, SRI may at its option, pay interest in
the form of additional FB Holdings Subordinated Notes in a principal amount
equal to the amount otherwise payable in cash. The principal amount of FB
Holdings Subordinated Notes at January 28, 1995 was $4.2 million. The FB
Holdings Subordinated Notes are subordinated to all debt except the ARI Senior
Discount Debentures. Due to the merger of FB Holdings into SRI in 1993, SRI is
the primary obligor under these debentures.
In connection with the acquisition of Bealls, Bealls Holding issued the
7% Bealls Holding junior subordinated debentures due 2003 ("Bealls Holding
Junior Subordinated Debentures") at a face value of approximately $12.5 million,
net of discount of approximately $8.4 million. Such discount is being charged to
interest expense over the term to maturity using the effective interest method.
The Bealls Holding Junior Subordinated Debentures are limited to an aggregate
principal amount of approximately $18.3 million. Interest is payable
semiannually on June 30 and December 31. The combination of coupon interest
payments and original issue discount results in an effective interest rate of
39.4%. The principal amount of Bealls Holding Junior Subordinated Debentures
outstanding at January 28, 1995 was $14.3 million. The Bealls Holding Junior
Subordinated Debentures are subordinated to all debt except the ARI Senior
Discount Debentures. Due to the merger of Bealls Holding into SRI in 1993, SRI
is the primary obligor under these debentures.
The Port Arthur industrial development revenue bond (the "Port Arthur
IDRB") bears interest at 75% of the prime rate payable monthly. The interest
rate applied to the Port Arthur IDRB at January 28, 1995 was 6.6%. The Port
Arthur IDRB is collateralized by a building with a net book value of
approximately $1.0 million. Under a separate agreement, the Company is required
to make scheduled annual sinking fund payments ranging from $0.1 million to $0.2
million.
Aggregate maturities of long-term debt for the next five years are:
1995 - $0.3 million; 1996 - $0.3 million; 1997 - $2.7 million; 1998 - $2.7
million and 1999 - $22.2 million.
Management estimates the fair value of its long-term debt to be $279.4
million and $246.0 million at January 29, 1994 and January 28, 1995,
respectively. In developing its estimates, management considered: quoted market
prices for each instrument, if available; current market interest rates in
relation to the coupon interest rates of each instrument; the relative
subordination of each instrument and relative liquidity of the instrument as
indicated by the presence or lack of an active market.
Concurrently with its formation, ARI issued $149.1 million aggregate
principal amount of its 12 3/4% senior discount debentures due 2005 ( the "ARI
Senior Discount Debentures"), net of a $69.1 million discount. The discount
accretes though August 15, 1998 after which cash interest is payable at 12 3/4%
semi-annually through maturity. The ARI Senior Discount Debentures are secured
by a first priority lien and security interest in all of the issued and
F-20
outstanding stock and intercompany debt, if any, of the Company. However, since
the operations of ARI are conducted through the Company, ARI is dependent on the
cash flow of the Company to meet its obligations under the ARI Senior Discount
Debentures. As a result, the ARI Senior Discount Debentures are effectively
subordinated to all debt and all obligations of the Company, which would include
trade accounts payable.
NOTE 9 - MANDATORILY REDEEMABLE PREFERRED STOCK:
On August 2, 1993, the Company, in connection with the Refinancing (see
Note 3), redeemed all of the outstanding shares of its 15% cumulative senior
redeemable preferred stock and 14% cumulative junior redeemable preferred stock
(8,080 and 2,000 shares, respectively) at the aggregate of their liquidation
value plus accrued and unpaid dividends amounting to $16.0 million and $3.8
million, respectively.
NOTE 10 - STOCK OPTION PLAN:
During 1993, the Company adopted the Third Amended and Restated Stock
Option Plan (the "Stock Option Plan") which was designed to provide incentives
to present and future key employees and advisors to the Company (the
"Participants") as selected by the compensation committee of the Board of
Directors (the "Board"). Options to purchase shares of the Company's common
stock may be granted to any Participant at any time, at such price and on such
terms as established by the Board. Options granted under the Stock Option Plan
may be either non-qualified or incentive stock options ("ISOs") within the
meaning of Section 422A of the Internal Revenue Code or in a form consistent
with the Stock Option Plan as the Board may determine.
The number of shares of common stock which may be granted under the
Stock Option Plan shall not exceed 2,000,000 shares. All Options issued as ISOs
under the Stock Option Plan are required to (i) have an exercise price not less
than 100% of the fair value of the common stock at the date of grant, (ii) not
be exercisable more than 10 years after grant date, (iii) be nontransferable and
(iv) be exercisable only during the holder's employment by the Company or a
period not exceeding three months following termination thereof. Options which
are not ISOs may provide that the holder receive cash equal to the excess of the
fair market value per share of common stock at the exercise date over the
exercise price per share, in lieu of issuance of common stock upon exercise of
the option. Upon termination of the Participant's employment with the Company,
the Company may, at its option, repurchase any vested common stock obtained
under the Stock Option Plan at the fair market value of the common stock. Any
unvested common stock obtained under the Stock Option Plan may be repurchased at
the Company's option, at the original issuance cost of the common stock. The
Stock Option Plan also provides that the Company may sell to any Participant
shares of common stock or preferred stock consistent with the Plan and at the
discretion of the Board.
The Company records compensation expense for the difference between the
exercise price of options granted and the fair market value of the underlying
stock as of the date of the grant. Such compensation expense is recognized over
the vesting period of the related options.
During 1993, all of SRI's options with an exercise price of $0.10 were
exercised. Additionally, the Board granted active Participants who exercised
such options one ARI option with an exercise price of $2.15 for every ten SRI
options exercised. All of SRI's options with an exercise price of $5.00 remained
outstanding and were exchanged for ARI options with an exercise price of $0.10
and the right to receive a distribution of $0.95 per option which will be paid
as the options vest. This distribution is being recognized as compensation
expense over the vesting period.
F-21
<PAGE>
All options exercised during 1992 and 1993 were at an exercise price of
$0.10 per share. Prices of options outstanding at the end of 1992 were $0.10 or
$5.00.
A summary of the activity in the Stock Option Plan follows:
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------------------
1992 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Options outstanding at beginning of year................... 931,775 863,625 --
Granted............................................... 122,200 363,100 --
Surrendered........................................... (9,400) (10,400) --
Exercised............................................. (180,950) (736,725) --
Exchanged............................................. -- (479,600) --
----------- ----------- -----------
Options outstanding and exercisable at end of year......... 863,625 -- --
=========== =========== ===========
Options vested at end of year 556,480 -- --
=========== =========== ===========
</TABLE>
NOTE 11 - OPERATING LEASES:
The Company leases stores, service center facilities, the corporate
headquarters and equipment under operating leases. A number of store leases
provide for escalating minimum rent. Rental expense is recognized on a
straight-line basis over the life of such leases. The majority of the Company's
store leases provide for contingent rentals, generally based upon a percentage
of gross sales. The Company has renewal options for most of its store leases;
such leases generally require that the Company pay for utilities, taxes and
maintenance expense. A summary of rental expense associated with operating
leases follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------
1992 1993 1994
------------- ------------- --------------
<S> <C> <C> <C>
Minimum rentals............................................ $ 21,560 $ 22,319 $ 22,979
Contingent rentals......................................... 2,445 2,818 2,874
Equipment rentals.......................................... 1,133 1,273 784
------------- ------------- --------------
$ 25,138 $ 26,410 $ 26,637
============= ============= ==============
</TABLE>
F-22
<PAGE>
Minimum rental commitments on long-term operating leases at January 28,
1995, net of sub-leases, are as follows (in thousands):
<TABLE>
<S> <C>
Fiscal Year:
1995................................................................ $ 26,388
1996................................................................ 25,610
1997................................................................ 24,010
1998................................................................ 22,637
1999................................................................ 20,539
Thereafter........................................................... 105,903
-------------
$ 225,087
=============
</TABLE>
The Company's corporate headquarters and six Palais Royal stores are
leased from a partnership in which a Company director is a general partner. The
lease relating to the corporate headquarters is for a term of fifty years
expiring in 2032 and includes an established minimum annual rate adjusted every
three years for changes in the Consumer Price Index. Three of the Palais Royal
store leases are for terms of twenty years expiring between 1999 and 2000. The
remaining three store leases are for terms of twenty-five years expiring between
2005 and 2010. All of the store leases provide options to extend the term of the
lease and for contingent rentals based on a percentage of gross sales. The
Company recognized rental expense of approximately $2.0 million in each of 1992,
1993 and 1994 for all such leases. Future minimum lease payments total $45.8
million, $9.4 million of which is payable over the next five fiscal years for
all such leases. The Company believes that the terms of all such leases are
comparable to leases with unaffiliated third parties covering similar
properties.
F-23
<PAGE>
NOTE 12 - EMPLOYEE BENEFIT PLANS:
Pension benefits for employees are provided under the SRI Retirement
Plan (the "Plan"), a qualified benefit plan. Benefits are administered through a
Trust arrangement which provides monthly payments or lump sum distributions. The
Plan covers substantially all employees who have completed one year of service
with one thousand hours of service. Benefits under the plan are based upon a
percentage of the participant's earnings during each year of credited service.
The following sets forth the funded status of the Plan and the amounts
recognized in the consolidated financial statements (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, 1994 JANUARY 28, 1995
----------------- -----------------
<S> <C> <C>
Actuarial present value of benefits:
Vested benefit obligations.............................. $ (20,190) $ (18,590)
=============== ===============
Accumulated benefit obligations......................... $ (21,250) $ (19,630)
=============== ===============
Projected benefit obligations............................... $ (26,730) $ (24,530)
Market value of Plan assets, primarily fixed income and
equity securities....................................... 18,950 16,320
--------------- ---------------
Pension obligations in excess of assets..................... (7,780) (8,210)
Unrecognized prior service cost (income).................... 218 (34)
Unrecognized net loss....................................... 6,389 6,078
Adjustment required to recognize minimum liability.......... (1,127) (1,144)
--------------- ---------------
Accrued pension cost........................................ $ (2,300) $ (3,310)
=============== ===============
Assumptions utilized in determining projected obligations
and funding amounts:
Discount rate............................................... 7.5% 8.75%
Rate of increase in compensation levels..................... 4.0% 4.0%
Expected long-term rate of return on Plan assets............ 9.0% 9.0%
</TABLE>
The Company's funding policy for the Plan is to contribute the minimum
amount required by applicable regulations. During 1993 and 1994, in accordance
with Statement of Financial Accounting Standards No. 87, the Company recorded a
$1.1 million and $0.2 million adjustment to recognize the excess of the
accumulated benefit obligation over the market value of the Plan assets,
respectively. Accordingly, the Company recorded a charge to retained earnings of
$0.6 million and $0.1 million, net of applicable tax and unrecognized prior
service cost, for 1993 and 1994, respectively.
F-24
<PAGE>
The components of pension cost for the Plan were as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------
1992 1993 1994
------------- ------------- --------------
<S> <C> <C> <C>
Service cost............................................... $ 681 $ 743 $ 887
Interest cost.............................................. 1,746 1,861 1,995
Actual loss (return) on Plan assets........................ (1,449) (1,955) 940
Net amortization and deferral.............................. (203) 409 (2,174)
------------- ------------- --------------
$ 775 $ 1,058 $ 1,648
============= ============= ==============
</TABLE>
Prior to its acquisition, 3 Beall Brothers 3, Inc. sponsored an
unfunded, nonqualified Benefit Restoration Plan which provided certain key
executives defined pension benefits in excess of limits imposed by federal tax
law. In February 1989, this plan was terminated. The recorded liability for this
plan was $1.3 million at January 28, 1995.
NOTE 13 - RELATED PARTY TRANSACTIONS:
The Company had a consulting agreement with a principal shareholder of
the Company. Pursuant to the consulting agreement, the Company paid the
shareholder $0.6 million and $0.3 million during 1992 and 1993, respectively. In
addition, the Company accrued $0.3 million during 1993 for professional services
rendered by the shareholder in connection with the Refinancing.
The Company's corporate headquarters and six Palais Royal stores are
leased from a partnership in which a Company officer is a general partner (see
Note 11).
An affiliate of a principal shareholder of the Company received fees
for professional services rendered and expense reimbursements in the amounts of
$0.6 million, $1.5 million and $0.6 million for 1992, 1993 and 1994,
respectively.
During 1993, the Company entered into an employment agreement with an
officer of the Company. As part of this agreement, the Company agreed to
purchase the officer's former residence for subsequent resale for $1.2 million
and loaned $0.3 million to him. Such loan is due October 2, 1996 and bears a
market rate of interest.
F-25
<PAGE>
NOTE 14 - INCOME TAXES:
All Company operations are domestic. Income tax expense charged to
continuing operations consisted of the following (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------
1992 1993 1994
------------- ------------- --------------
<S> <C> <C> <C>
Federal income tax expense (benefit):
Current............................................... $ 4,839 $ 9,989 $ 7,297
Deferred.............................................. 1,857 (601) 85
------------- ------------- --------------
6,696 9,388 7,382
------------- ------------- --------------
State income tax expense (benefit):
Current............................................... 877 1,250 771
Deferred.............................................. 767 (1,308) 186
------------- ------------- --------------
1,644 (58) 957
------------- ------------- --------------
$ 8,340 $ 9,330 $ 8,339
============= ============= ==============
</TABLE>
A reconciliation between the federal income tax expense charged to
continuing operations computed at statutory tax rates and the actual income tax
expense recorded follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------
1992 1993 1994
----------- ----------- ----------
<S> <C> <C> <C>
Federal income tax expense at the statutory rate........... $ 6,995 $ 9,256 $ 8,004
State income taxes, net.................................... 1,085 125 797
Permanent difference, net.................................. 181 (12) (462)
Other, net................................................. 79 (39) --
------------- ------------- --------------
$ 8,340 $ 9,330 $ 8,339
============= ============= ==============
</TABLE>
The 1993 income tax benefit relating to the extraordinary item of $8.8
million (see Note 3) is comprised of current federal tax benefit ($7.4 million),
deferred federal tax benefit ($1.3 million) and state tax benefit ($0.1
million). The 1994 income tax benefit relating to the extraordinary item
associated with the retirement of the SRI Senior Notes (see Note 8) is comprised
of $0.2 million current federal tax benefit.
F-26
<PAGE>
Deferred tax liabilities (assets) consist of the following (in
thousands):
<TABLE>
<CAPTION>
JANUARY 29, 1994 JANUARY 28, 1995
---------------- ----------------
<S> <C> <C>
Gross deferred tax liabilities:
Depreciation and amortization.......................... $ 7,333 $ 8,303
Inventory reserves..................................... 2,678 3,175
Gain on sale of accounts receivable.................... 1,130 822
Other.................................................. 770 1,310
--------------- ---------------
11,911 13,610
--------------- ---------------
Gross deferred tax assets:
Allowance for doubtful accounts........................ (3,087) (3,174)
Accrued consolidation costs............................ (2,022) (1,968)
Net operating loss carryforwards....................... (650) --
Accrued expenses....................................... (1,449) (1,518)
Prepaid expenses....................................... (1,405) --
Pensions............................................... (1,364) (1,404)
Escalating leases...................................... (944) (962)
Charitable contribution carryforward................... (917) (620)
Accrued payroll costs.................................. (863) (1,196)
Accrued store closure costs............................ -- (2,085)
Other.................................................. (237) (975)
--------------- ---------------
(12,938) (13,902)
--------------- ---------------
Deferred tax assets valuation allowance..................... 650 --
--------------- ---------------
$ (377) $ (292)
=============== ===============
</TABLE>
The utilization of any carryforwards which originated prior to the
Company's acquisition of Bealls or Fashion Bar are recorded as an adjustment to
goodwill or other intangibles associated with the respective acquisition.
NOTE 15 - SUPPLEMENTAL OPERATING INFORMATION:
Other non-operating expense consisted of the following (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------------------
1992 1993 1994
------------- ----------- ------------
<S> <C> <C> <C>
Gain on extinguishment of debt............................. $ 136 $ -- $ --
Cost of proposed financing transactions.................... (1,669) -- --
Litigation settlement...................................... (743) -- --
------------- ----------- ------------
$ (2,276) $ -- $ --
============= =========== ============
</TABLE>
F-27
<PAGE>
NOTE 16 - SUBSIDIARY FINANCIAL INFORMATION:
Palais Royal guarantees the Senior Notes and the Senior Subordinated
Notes. Summarized financial information for Palais Royal and its wholly owned
subsidiary, SRPC, follows (amounts stated in thousands and exclude intercompany
transactions):
<TABLE>
<CAPTION>
JANUARY 29, 1994 JANUARY 28, 1995
----------------- -----------------
<S> <C> <C>
BALANCE SHEET INFORMATION:
Current assets............................................. $ 156,508 $ 200,347
Noncurrent assets.......................................... 106,878 122,998
Current liabilities........................................ 62,186 73,273
Noncurrent liabilities, including SRI debt allocated to
Palais Royal.......................................... 278,556 265,299
<CAPTION>
FISCAL YEAR
---------------------------------------------
1992 1993 1994
------------- ------------- ---------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS INFORMATION:
Net sales.................................................. $ 504,401 $ 557,422 $ 581,463
Gross margin............................................... 154,265 172,579 182,804
Operating income........................................... 53,242 58,392 51,172
Income before income tax................................... 22,374 28,266 23,371
Net income................................................. 14,227 3,977 14,581
STATEMENT OF CASH FLOW DATA:
Cash provided by operating activities ..................... $ 26,302 $ 151,832 $ 45
Cash used in investing activities.......................... (12,809) (8,064) (38,563)
Cash used in financing activities including SRI debt
allocated to Palais Royal............................. (683) (80,660) (11,189)
</TABLE>
NOTE 17 - COMMITMENTS AND CONTINGENCIES:
LITIGATION: The Company is subject to claims and litigation arising in
the normal course of its business. The Company does not
believe that any of these proceedings will have a material
adverse effect on its financial position or its results of
operations.
LETTERS OF CREDIT: The Company issues letters of credit to support
certain merchandise purchases which are required to be
collateralized. The Company had outstanding letters of credit
totaling $10.8 million at January 28, 1995, all of which were
collateralized by the Revolving Credit Agreement (see Note 8).
These letters of credit expire within twelve months of
issuance.
F-28
CONCENTRATION OF CREDIT RISK: Financial instruments which potentially
subject the Company to concentrations of credit risk are
primarily cash, short-term investments and accounts
receivable. The Company's cash management and investment
policies restrict investments to low risk, highly-liquid
securities and the Company performs periodic evaluations of
the relative credit standing of the financial institutions
with which it deals. The credit risk associated with the
Company's accounts receivable is limited by the large number
of customers in the Company's customer base. Substantially all
of the Company's customers reside in the Southwest and Rocky
Mountain States, principally Texas and Colorado.
F-29
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware, INTER ALIA,
("Section 145") provides that a Delaware corporation may indemnify any persons
who were, or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
were or are threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by reason of the
fact that such person was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit, provided such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the corporation's best
interests, provided that no indemnification is permitted without judicial
approval if the officer, director, employee or agent is adjudged to be liable to
the corporation. Where an officer, director, employee or agent is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
The Company's Certificate of Incorporation provides for the indemnification
of directors and officers of the Company to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as it currently exists or may
hereafter be amended.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
II-1
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following documents are the exhibits to this Registration Statement on
Form S-4. The page number, if any, listed opposite each exhibit indicates the
page number in the sequential numbers system in the manually signed original of
this Registration Statement on Form S-4 where such exhibit can be found.
(a) EXHIBIT SEQUENTIAL PAGE
NUMBER EXHIBIT NUMBER
------- ------- ----------------
3.1 Certificate of Incorporation of Specialty
Retailers, Inc. (Incorporated by Reference to
Exhibit 3.1 of Registration No. 33-54504 of Form
S-1). --
3.2 By-Laws of Specialty Retailers, Inc.,
(Incorporated by Reference to Exhibit 3.2 of
Registration No. 33-27714 of Form S-1). --
4.1 Indenture by and between Specialty Retailers,
Inc. and The First National Bank of Boston, as
Trustee, relating to the 11% Series C and Series
D Senior Subordinated Notes due 2003 of
Specialty Retailers, Inc. dated July 27, 1995
(including form of note). --
4.2 Indenture among Specialty Retailers, Inc., The
First National Bank of Boston, as Trustee, and
Palais Royal, Inc., as Guarantor, relating to
the 10% Senior Notes due 2000 of Specialty
Retailers, Inc., (including form of note) dated
August 2, 1993 (Incorporated by Reference to
Exhibit 4.1 of Registration No. 33-68256 on Form
S-4) --
4.3 Indenture among Specialty Retailers, Inc., The
First National Bank of Boston, as Trustee, and
Palais Royal, Inc., as Guarantor, relating to
the 11% Senior Subordinated Notes due 2003 of
Specialty Retailers, Inc., (including form of
note) dated August 2, 1993 (Incorporated by
Reference to Exhibit 4.2 of Registration No.
33-68256 of Form S-4). --
4.4 Indenture between 3 Bealls Holding Corporation
and Bankers Trust Company, as Trustee, relating
to 3 Bealls Holding Corporation's 9%
Subordinated Debentures due 2002 (Incorporated
by Reference to Exhibit 4.2 of Registration No.
33-24571 on Form S-4) and First Supplemental
Indenture dated August 2, 1993 (Incorporated by
Reference to Exhibit 4.3 of Registration No.
33-68256 on Form S-4). --
4.5 Indenture between 3 Bealls Holding Corporation
and IBJ Schroder Bank and Trust Company, as
Trustee, relating to 3 Bealls Holding
Corporation's 7% Junior Subordinated Debentures
Due 2002 (Incorporated by Reference to Exhibit
4.3 of Registration No. 33-24571 of Form S-4)
and First Supplemental Indenture dated August 2,
1993 (Incorporated by reference to Exhibit 4.4
of Registration No. 3368256 on Form S-4). --
4.6 Pooling and Servicing Agreement among SRI
Receivables Purchase Co., Inc., Specialty
Retailers, Inc., and Bankers Trust (Delaware)
(Incorporated by Reference to Exhibit 4.5 of
Registration No. 33-68256 on Form S-4). --
4.7 Series 1993-1 Supplement among SRI Receivables
Purchase Co., Inc., Specialty Retailers, Inc.,
and Bankers Trust (Delaware) (Incorporated by
Reference to Exhibit 4.7 of Registration No.
33-68256 on Form S-4). --
II-2
4.8 Series 1993-2 Supplement among SRI Receivables
Purchase Co., Inc., Specialty Retailers, Inc.,
and Bankers Trust (Delaware) (Incorporated by
Reference to Exhibit 4.8 of Registration No.
33-68256 on Form S-4). --
4.9 Receivables Purchase Agreement among SRI
Receivables Purchase Co., Inc., and Originators
(Incorporated by Reference to Exhibit 4.8 of
Registration No. 33-68256 on Form S-4). --
4.10 Certificate Purchase Agreement between SRI
Receivables Purchase Co., Inc. and the
Purchasers of the Series 1992-1 Offered
Certificates (Incorporated by Reference to
Exhibit 4.9 of Registration No. 33-68256 on Form
S-4). --
4.11 Revolving Certificate Purchase Agreement between
SRI Receivables Purchase Co., Inc., the Facility
Agent and the Revolving Purchasers with respect
to the Class A-R Certificates (Incorporated by
Reference to Exhibit 4.10 of Registration No.
33-68256 on Form S-4). --
4.12 Revolving Credit Agreement by and among
Specialty Retailers, Inc., Palais Royal, Inc.,
and the First National of Boston, as agent for
itself and other financial institutions
(Incorporated by Reference to Exhibit A of
current report on Form 8-K of Specialty
Retailers, Inc., dated February 9, 1994). --
4.13 First Amendment to Revolving Credit Agreement by
and among Specialty Retailers, Inc., Palais
Royal, Inc., and the First National Bank of
Boston, as agent of itself and other financial
institutions dated as of July 14, 1994
(Incorporated by Reference to Exhibit 4.12 on
Form 10-K of Specialty Retailers, Inc., dated
January 28, 1995). --
4.14 Second Amendment to Revolving Credit Agreement
by and among Specialty Retailers, Inc., Palais
Royal, Inc., and the First National Bank of
Boston, as agent of itself and other financial
institutions dated as of October 31, 1994
(Incorporated by Reference to Exhibit 4.13 on
Form 10-K of Specialty Retailers, Inc., dated
January 28, 1995). --
4.15 Third Amendment to Revolving Credit Agreement by
and among Specialty Retailers, Inc., Palais
Royal, Inc., and the First National Bank of
Boston, as agent of itself and other financial
institutions dated as of July 5, 1995
(Incorporated by Reference to Exhibit 4.14 on
Form 10-K of Specialty Retailers, Inc., dated
January 28, 1995). --
4.16 Fourth Amendment to Revolving Credit Agreement
by and among Specialty Retailers, Inc., Palais
Royal, Inc., and the First National Bank of
Boston, as agent of itself and other financial
institutions dated as of March 31, 1995
(Incorporated by Reference to Exhibit 4.14 on
Form 10-K of Specialty Retailers, Inc., dated
January 28, 1995). --
4.17 Fifth Amendment to Revolving Credit Agreement by
and among Specialty Retailers, Inc., Palais
Royal, Inc., and the First National Bank of
Boston, as agent of itself and other financial
institutions dated as of March 31, 1995. --
II-3
4.18 Sixth Amendment to Revolving Credit Agreement by
and among Specialty Retailers, Inc., Palais
Royal, Inc. and the First National Bank of
Boston, as agent of itself and other financial
institutions dated as of March 31, 1995, --
4.19 Revolving Credit Agreement by and among
Specialty Retailers, Inc., Palais Royal, Inc.,
and the First National of Boston, as agent for
itself and other financial institutions dated
March 31, 1995 (Incorporated by Reference to
Exhibit 4.16 on Form 10-K of Specialty
Retailers, Inc., dated January 28, 1995). --
4.20 First Amendment to Revolving Credit Agreement by
and among Specialty Retailers, Inc., Palais
Royal, Inc., and the First National Bank of
Boston, as agent for itself and other financial
institutions dated March 31, 1995. --
4.21 Second Amendment to Revolving Credit Agreement
by and among Specialty Retailers, Inc., Palais
Royal, Inc., and the First National Bank of
Boston, as agent for itself and other financial
institutions dated March 31, 1995. --
4.22 First Amendment to the Receivables Purchase
Agreement among SRI Receivables Purchase Co.,
Inc. and Originators dated as of October 7,
1994. (Incorporated by Reference to Exhibit 4.1
on Form 10-Q of Specialty Retailers, Inc., dated
April 29, 1995). --
4.23 First Amendment to the Pooling and Servicing
Agreement among SRI Receivables Purchase Co.,
Inc. and Originators dated as of October 7,
1994. (Incorporated by Reference to Exhibit 4.2
on Form 10-Q of Specialty Retailers, Inc., dated
April 29, 1995). --
4.24 Second Amendment to the Receivables Purchase
Agreement among SRI Receivables Purchase Co.,
Inc. and Originators dated as of January 31,
1995. (Incorporated by Reference to Exhibit 4.3
on Form 10-Q of Specialty Retailers, Inc., dated
April 29, 1995). --
4.25 Second Amendment to the Pooling and Servicing
Agreement among SRI Receivables Purchase Co.,
Inc. and Originators dated as of January 31,
1995. (Incorporated by Reference to Exhibit 4.4
on Form 10-Q of Specialty Retailers, Inc., dated
April 29, 1995). --
4.26 Amended and Restated Pooling and Servicing
Agreement by and among SRI Receivables Purchase
Co., Inc., Specialty Retailers, Inc. and Bankers
Trust (Delaware) dated as of August 11, 1995. --
4.27 Series 1995-1 Supplement by and among SRI
Receivables Purchase Co., Inc., Specialty
Retailers, Inc. and Bankers Trust (Delaware) on
behalf of the Series 1995-1 Certificateholders
dated as of August 11, 1995. --
4.28 Amended and Restated Receivables Purchase
Agreement among SRI Receivables Purchase Co.,
Inc. and Originators dated as of August 11,
1995. --
4.29 Certificate Purchase Agreement among SRI
Receivables Purchase Co., Inc., Specialty
Retailers, Inc. and the Certificate Purchaser
dated as of August 11, 1995. --
II-4
4.30 First Amendment to the Series 1993-2 Supplement
and Revolving Certificate Purchase Agreement by
and among Specialty Retailers, Inc., SRI
Receivables Purchase Co., Inc., Bankers Trust
(Delaware) as Trustee for the SRI Receivables
Master Trust, the financial institutions parties
thereto and National Westminster Bank Plc, New
York branch dated as of August 11, 1995. --
5.1 Form of Opinion of Kirkland & Ellis --
10.1 Purchase Agreement dated July 20, 1995 by and
among Specialty Retailers, Inc., Donaldson,
Lufkin & Jenrette Securities Corporation,
relating to the sale of the Company's 11% Series
C Senior Subordinated Notes due 2003. --
10.2 Purchase Agreement dated July 22, 1993 by and
among Specialty Retailers, Inc., Donaldson,
Lufkin & Jenrette Securities Corporation, Bear,
Stearns & Co. Inc., BT Securities Corporation
and Shearson Lehman Brothers, Inc., relating to
the sale of The Company's 10% Senior Notes due
2000 and 11% Senior Subordinated Note due 2003
(Incorporated by Reference to Exhibit 10.1 of
Registration No. 33-68256 on Form S-4). --
10.3 Registration Rights Agreement dated July 27,
1995 by and between Specialty Retailers, Inc.
and Donaldson, Lufkin & Jenrette Securities
Corporation, relating to the sale of the
Company's 11% Series C Senior Subordinated Notes
due 2003. --
10.4 Registration Rights Agreement dated August 2,
1993 by and among Specialty Retailers, Inc.,
Donaldson, Lufkin & Jenrette Securities
Corporation, Bear Stearns & Co. Inc. relating to
the sale of The Company's 10% Senior Notes due
2000 (Incorporated by Reference to Exhibit 10.2
of Registration No. 33-68256 on Form S-4). --
10.5 Registration Rights Agreement dated August 2,
1993 by and among Specialty Retailers, Inc.,
Donaldson, Lufkin & Jenrette Securities
Corporation, Bear, Stearns & Co., Inc. relating
to the sale of The Company's 11% Senior
Subordinated Notes due 2003 (Incorporated by
Reference to Exhibit 10.3 of Registration No.
33-68256 on Form S-4). --
10.6 Senior Management Agreement and Stock Option
Agreement between Specialty Retailers, Inc.,
Bain Venture Capital, Citicorp Venture Capital,
Ltd., and Bernard Fuchs, dated as of May 26,
1989 (Incorporated by Reference to Exhibit 10.8
of Registration No. 33-27714 on Form S-1) and
Amendment to Senior Management Agreement and
Stock Option Agreement dated February 1, 1993
(Incorporated by Reference to Exhibit 10.4 of
Registration No. 33-682256 on Form S-4). --
II-5
10.7 Equity Stock Purchase Agreement by and among
Specialty Retailers, Inc., Tyler Capital Fund,
L.P. Tyler Massachusetts, L.P., Tyler
International, L.P.-I, Tyler International, L.P.
-II, Bain Venture Capital, Citicorp Capital
Investors, Ltd., Acadia Partners, L.P., Drexel
Burnham Lambert Incorporated, and certain other
Purchasers, dated as of December 28, 1988
(Incorporated by Reference to Exhibit 10.9 of
Registration No. 33-27714 on Form S-1) and
Amendments to Equity Stock Purchase Agreement
dated September 21, 1992 and August 2, 1993
(Incorporated by Reference to Exhibit 10.5 of
Registration No. 33-68256 on From S-4). --
10.8 Registration Agreement by and among Specialty
Retailers, Inc., Tyler Capital Fund, L.P. Tyler
Massachusetts, L.P., Tyler International,
L.P.-I, Tyler International, L.P. -II, Bain
Venture Capital, Citicorp Capital Investors,
Ltd., Acadia Partners, L.P., Drexel Burnham
Lambert Incorporated, and certain other
Purchasers, dated as of December 29, 1988
(Incorporated by Reference to Exhibit 10.10 of
Registration No. 33-27714 on Form S-1) and
Amendment to Registration Agreement dated August
2, 1993 (Incorporated by Reference to Exhibit
10.6 of Registration No. 33-68256 on From S-4). --
10.9 Lease Agreement between PR Investments and
Palais Royal, Inc., dated as of August 2, 1982
(Incorporated by Reference to Exhibit 10.11 of
Registration 33-27714 on Form S-1). --
10.10 Lease Agreement between PR Investments and
Palais Royal, Inc., dated as of March 15, 1979,
(Incorporated by Reference to Exhibit 10.12 of
Registration 33-27714 on Form S-1). --
10.11 Lease Agreement between PR Investments and
Palais Royal, Inc., dated as of November 7,
1978, as amended (Incorporated by Reference to
Exhibit 10.13 of Registration 33-27714 on Form
S-1). --
10.12 Lease Agreement between PR Investments and
Palais Royal, Inc., dated as of October 4, 1983,
as amended (Incorporated by Reference to Exhibit
10.14 of Registration 33-27714 on Form S-1). --
10.13 Lease Agreement between PR Investments and
Palais Royal, Inc., dated as of December 21,
1983, as amended (Incorporated by Reference to
Exhibit 10.15 of Registration 33-27714 on Form
S-1). --
10.14 Lease Agreement between PR Investments and
Palais Royal, Inc., dated as of March 21, 1983,
as amended (Incorporated by Reference to Exhibit
10.16 of Registration 33-27714 on Form S-1). --
10.15 Lease Agreement between PR Investments and
Palais Royal, Inc., dated as of November 22,
1985, as amended (Incorporated by Reference to
Exhibit 10.17 of Registration 33-27714 on Form
S-1). --
10.16 Apparel Retailers, Inc., Stock Option Plan
(Incorporated By Reference to Exhibit 10.13 to
Registration No. 33-68256 on Form S-4). --
II-6
10.17 Form of Stock Option Agreement between Apparel
Retailers, Inc., and Executive to be named
therein (Incorporated by Reference to Exhibit
10.15 to Registration No. 33-68256 on Form S-4). --
10.18 Form of Management Agreement by and among
Specialty Retailers, Inc., the Bain Entities,
Citicorp Venture Capital, Ltd., and Executive to
be named therein (Incorporated by Reference to
Exhibit 10.22 of Registration No. 33-32045 on
Form S-1) and Form of First Amendment
(Incorporated by Reference to Exhibit 10.16 to
Registration No. 33-68258 on Form S-1). --
10.19 Professional Services Agreement between
Specialty Retailers, Inc., and Bain Capital
Partners (Incorporated by Reference to Exhibit
10.21 of Registration No. 33-54504 on Form S-1). --
10.20 Employment Agreement between Specialty
Retailers, Inc. and Carl E. Tooker dated June 9,
1993 (Incorporated by Reference to Exhibit 10.18
to Registration No. 33-68256 on Form S-4). --
10.21 Stock Option Agreement between Specialty
Retailers, Inc., and Carl E. Tooker dated June
9, 1993 (Incorporated by Reference to Exhibit
10.19 to Registration No. 33-68256 on Form S-4). --
10.22 Employment Agreement between Mark Shulman and
Specialty Retailers, Inc., dated as of January
8, 1994. (Incorporated by Reference to Exhibit
10.19 to Registration No. 33-68256 on Form S-4).
(Incorporated by Reference to Exhibit 10.1 on
Form 10-Q of Specialty Retailers, Inc., dated
April 29, 1995). --
10.23 Stock Option Agreement between Mark Shulman and
Apparel Retailers, Inc., dated as of January 31,
1994. (Incorporated by Reference to Exhibit 10.2
on Form 10-Q of Specialty Retailers, Inc., dated
April 29, 1995) --
10.24 Employment Agreement between James Marcum and
Specialty Retailers, Inc., dated as of May 15,
1995. (Incorporated by Reference to Exhibit 10.3
on Form 10-Q of Specialty Retailers, Inc., dated
April 29, 1995) --
10.25 Employment Agreement between Stephen Lovell and
Specialty Retailers, Inc., dated as of May 19,
1995. (Incorporated by Reference to Exhibit 10.4
on Form 10-Q of Specialty Retailers, Inc., dated
April 29, 1995) --
12.1 Statement Regarding Computation of Ratio of
Earnings to Fixed Charges. --
21.1 List of Registrants' Subsidiaries --
23.1 Consent of Price Waterhouse --
26.1 Statement of Eligibility and Qualification on
form T-1 of The First National Bank of Boston
dated August 8, 1995, relating to the New
Securities --
28.1 Form of Letter of Transmittal of Specialty
Retailers, Inc. --
28.2 Form of Notice of Guaranteed Delivery --
(b) FINANCIAL STATEMENT SCHEDULES.
See index to Financial Statement Schedules at page S-1.
II-7
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described under
Item 20 or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on August 22, 1995.
SPECIALTY RETAILERS, INC.
By: /s/ JERRY C. IVIE
Name: Jerry C. Ivie
Title: Senior Vice President, Secretary and Treasurer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Jerry C. Ivie
attorney-in-fact for the undersigned in any and all capacities, with the power
of substitution, to sign any amendment to this Registration Statement, and to
file the same with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that said attorney-in-fact, or his substitute or substitutes, may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities and on the dates indicated:
SIGNATURE CAPACITY DATE
--------- -------- ----
/S/ BERNARD FUCHS
Bernard Fuchs Chairman August 22, 1995
/S/ CARL TOOKER
Carl Tooker President, Chief Executive Officer
and Director August 22, 1995
/S/ JIM MARCUM
Jim Marcum Executive Vice President, Chief
Financial Officer August 22, 1995
/S/ JOSHUA BEKENSTEIN
Joshua Bekenstein Vice Chairman August 22, 1995
/S/ JERRY IVIE
Jerry Ivie Senior Vice President, Secretary
and Treasurer August 22, 1995
/S/ LASKER MEYER
Lasker Meyer Director August 22, 1995
/S/ PETER MULVIHILL
Peter Mulvihill Director August 22, 1995
/S/ ADAM KIRSCH
Adam Kirsch Director August 22, 1995
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
PAGE
NUMBER
------
Schedule VIII Valuation Accounts . ................................ S-2
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or the notes thereto.
S-1
<PAGE>
SPECIALTY RETAILERS, INC.
(A wholly-owned susidiary of Apparel Retailers, Inc.)
VALUATION ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
ADDITIONS
---------------------------
BALANCE AT CHARGED CHARGED BALANCE
BEGINNING TO COSTS TO OTHER AT END
OF PERIOD AND EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
---------- ------------ -------- ---------- ---------
DESCRIPTION
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
Fiscal Year:
1992 ....................................... $6,412 $10,767 $725 $10,049 $7,855
====== ======= ==== ======= ======
1993 ....................................... $7,855 $ 6,590 $ -- $12,501 $1,944
====== ======= ==== ======= ======
1994 ....................................... $1,944 $ 3,176 $486 $ 2,374 $3,232
====== ======= ==== ======= ======
Reserve for Shrinkage:
Fiscal Year:
1992 ....................................... $ 128 $ 4,763 $ -- $ 4,731 $ 160
====== ======= ==== ======= ======
1993 ....................................... $ 160 $ 4,042 $ -- $ 4,004 $ 198
====== ======= ==== ======= ======
1994 ....................................... $ 198 $ 4,459 $ -- $ 4,459 $ 198
====== ======= ==== ======= ======
</TABLE>
(1) This represents the initial allowance for doubtful accounts associated
with the accounts receivable acquired in connection with the Company's
purchase of Fashion Bar, Inc.
(2) Includes $6.1 million which has been reclassified to accrued liabilities
as a result of the implementation of the Accounts Receivable Program.
(3) This represents the initial allowance for doubtful accounts associated
with the accounts receivable acquired from Beall-Ladymon.
S-2
Exhibit 4.1
EXECUTION COPY
================================================================================
SPECIALTY RETAILERS, INC.
$35,000,000
11% SERIES C SENIOR SUBORDINATED NOTES DUE 2003
11% SERIES D SENIOR SUBORDINATED NOTES DUE 2003
-----------------------------------------------
-----------------
INDENTURE
Dated as of July 27, 1995
-----------------
-----------------------------------------------
THE FIRST NATIONAL BANK OF BOSTON,
as Trustee
-----------------------------------------------
================================================================================
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;11.02
(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).......................................................... 7.01
(b).......................................................... 7.05,11.02
(c) ........................................................ 7.01
(d).......................................................... 7.01
(e).......................................................... 6.11
316 (a)(last sentence) .......................................... N.A.
(a)(1)(A).................................................... 6.05
(a)(1)(B) ................................................... 6.04
(a)(2) ...................................................... N.A.
(b) ......................................................... 6.07
(c) ......................................................... 2.13
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>
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions........................................... 1
Section 1.02. Other Definitions..................................... 10
Section 1.03. Incorporation by Reference of Trust Indenture Act..... 10
Section 1.04. Rules of Construction................................. 11
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating....................................... 11
Section 2.02. Execution and Authentication.......................... 12
Section 2.03. Registrar and Paying Agent............................ 12
Section 2.04. Paying Agent to Hold Money in Trust................... 12
Section 2.05. Holder Lists.......................................... 13
Section 2.06. Transfer and Exchange................................. 13
Section 2.07. Replacement Notes..................................... 18
Section 2.08. Outstanding Notes..................................... 18
Section 2.09. Treasury Notes........................................ 18
Section 2.10. Temporary Notes....................................... 19
Section 2.11. Cancellation.......................................... 19
Section 2.12. Defaulted Interest.................................... 19
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.................................... 19
Section 3.02. Selection of Notes to Be Redeemed..................... 20
Section 3.03. Notice of Redemption.................................. 20
Section 3.04. Effect of Notice of Redemption........................ 21
Section 3.05. Deposit of Redemption Price........................... 21
Section 3.06. Notes Redeemed in Part................................ 21
Section 3.07. Optional Redemption................................... 21
Section 3.08. Mandatory Redemption.................................. 22
Section 3.09. Offer to Purchase by Application of Excess Proceeds... 23
Section 3.10. Special Purpose Offer to Repurchase or Redeem......... 24
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes...................................... 26
Section 4.02. Maintenance of Office or Agency....................... 26
Section 4.03. Reports............................................... 26
Section 4.04. Compliance Certificate................................ 27
Section 4.05. Taxes................................................. 27
i
PAGE
Section 4.06. Stay, Extension and Usury Laws........................ 28
Section 4.07. Restricted Payments................................... 28
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries......................................... 28
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred
Stock................................................ 28
Section 4.10. Asset Sales........................................... 29
Section 4.11. Transactions with Affiliates.......................... 31
Section 4.12. Liens................................................. 31
Section 4.13. Additional Subsidiary Guarantees...................... 32
Section 4.14. Corporate Existence................................... 32
Section 4.15. Offer to Repurchase Upon Change of Control............ 32
Section 4.16. Line of Business...................................... 32
Section 4.17. Accounts Receivable Subsidiaries...................... 32
Section 4.18. Senior Subordinated Debt.............................. 33
Section 4.19. Repurchases, Etc...................................... 33
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.............. 33
Section 5.02. Successor Corporation Substituted..................... 34
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default..................................... 34
Section 6.02. Acceleration.......................................... 36
Section 6.03. Other Remedies........................................ 36
Section 6.04. Waiver of Past Defaults............................... 37
Section 6.05. Control by Majority................................... 37
Section 6.06. Limitation on Suits................................... 37
Section 6.07. Rights of Holders of Notes to Receive Payment......... 38
Section 6.08. Collection Suit by Trustee............................ 38
Section 6.09. Trustee May File Proofs of Claim...................... 38
Section 6.10. Priorities............................................ 38
Section 6.11. Undertaking for Costs................................. 39
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee..................................... 39
Section 7.02. Rights of Trustee..................................... 40
Section 7.03. Individual Rights of Trustee.......................... 41
Section 7.04. Trustee's Disclaimer.................................. 41
Section 7.05. Notice of Defaults.................................... 41
Section 7.06. Reports by Trustee to Holders of the Notes............ 41
Section 7.07. Compensation and Indemnity............................ 41
ii
PAGE
Section 7.08. Replacement of Trustee................................ 42
Section 7.09. Successor Trustee by Merger, etc...................... 43
Section 7.10. Eligibility; Disqualification......................... 43
Section 7.11. Preferential Collection of Claims Against Company..... 43
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance........................................... 43
Section 8.02. Legal Defeasance and Discharge........................ 44
Section 8.03. Covenant Defeasance................................... 44
Section 8.04. Conditions to Legal or Covenant Defeasance............ 45
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions....... 46
Section 8.06. Repayment to Company.................................. 46
Section 8.07. Reinstatement......................................... 46
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes................... 47
Section 9.02. With Consent of Holders of Notes...................... 47
Section 9.03. Compliance with Trust Indenture Act................... 49
Section 9.04. Revocation and Effect of Consents..................... 49
Section 9.05. Notation on or Exchange of Notes...................... 49
Section 9.06. Trustee to Sign Amendments, etc....................... 49
Section 9.07. Certain Amendments Automatic; Offer to Repurchase..... 49
ARTICLE 10
SUBSIDIARY GUARANTEE
[Intentionally Omitted]
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls......................... 50
Section 11.02. Notices.............................................. 50
Section 11.03. Communication by Holders of Notes with Other
Holders of Notes.................................... 52
Section 11.04. Certificate and Opinion as to Conditions Precedent... 52
Section 11.05. Statements Required in Certificate or Opinion........ 52
Section 11.06. Rules by Trustee and Agents.......................... 52
Section 11.07. No Personal Liability of Directors, Officers,
Employees and Stockholders.......................... 53
Section 11.08. Governing Law........................................ 53
Section 11.09. No Adverse Interpretation of Other Agreements........ 53
Section 11.10. Successors........................................... 53
Section 11.11. Severability......................................... 53
iii
Section 11.12. Counterpart Originals................................ 53
Section 11.13. Table of Contents, Headings, etc..................... 53
ARTICLE 12
SUBORDINATION
Section 12.01. Agreement to Subordinate............................. 54
Section 12.02. Certain Definitions.................................. 54
Section 12.03. Liquidation; Dissolution; Bankruptcy................. 54
Section 12.04. Default on Designated Senior Debt.................... 55
Section 12.05. Acceleration of Notes................................ 55
Section 12.06. When Distribution Must Be Paid Over.................. 55
Section 12.07. Notice by Company.................................... 56
Section 12.08. Subrogation.......................................... 56
Section 12.09. Relative Rights...................................... 56
Section 12.10. Subordination May Not Be Impaired by Company......... 57
Section 12.11. Payment, Distribution or Notice to Representative.... 57
Section 12.12. Rights of Trustee and Paying Agent................... 57
Section 12.13. Authorization to Effect Subordination................ 57
Section 12.14. Amendments........................................... 58
EXHIBITS
Exhibit A Form of Note
Exhibit B Certificate of Transferor
iv
<PAGE>
INDENTURE dated as of July 27, 1995 between Specialty Retailers, Inc.,
a Delaware corporation (the "Company"), and the First National Bank of Boston, a
national banking association, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 11% Series C
Senior Subordinated Notes due 2003 (the "Series C Notes"), the 11% Series D
Senior Subordinated Notes due 2003 (the "Series D Notes") and Holders of any
other series of Notes issued from time to time hereunder (together with the
Series C Notes and the Series D Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACCOUNTS RECEIVABLE SUBSIDIARY" means a Wholly Owned Subsidiary of the
Company or a Subsidiary of such Wholly Owned Subsidiary, in each case which
engages in no activities other than in connection with the financing of accounts
receivable and which is designated by the Board of Directors of the Company as
an Accounts Receivable Subsidiary pursuant to a Board Resolution set forth in an
Officers' Certificate and delivered to the Trustee, (a) no portion of the
Indebtedness or any other obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any other Subsidiary of the Company, (ii) is
recourse to or obligates the Company or any other Subsidiary of the Company in
any way, other than pursuant to representations and covenants entered into in
the ordinary course of business in connection with sales of accounts receivable
or (iii) subjects any property or asset of the Company or any other Subsidiary
of the Company, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to representations and covenants
entered into in the ordinary course of business in connection with sales of
accounts receivable, (b) with which neither the Company nor any other Subsidiary
of the Company has any contract, agreement, arrangement or understanding other
than on terms no less favorable to the Company or such other Subsidiary than
those that might be obtained at the time from Persons who are not Affiliates of
the Company, other than sales of accounts receivable in accordance with Section
4.10 hereof and fees payable in the ordinary course of business in connection
with servicing accounts receivable and (c) with which neither the Company nor
any other Subsidiary of the Company has any obligation (i) to subscribe for
additional shares of Capital Stock or other Equity Interests therein or (ii) to
maintain or preserve such Subsidiary's financial condition or to cause such
Subsidiary to achieve certain levels of operating results.
"ACQUIRED DEBT" means, with respect to any specified Person,
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of 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
1
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, HOWEVER, 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.
"BAIN" means Bain Capital, a California limited partnership, and/or
Bain Capital, Inc., a Delaware corporation.
"BANKRUPTCY LAW" means title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"BOARD OF DIRECTORS" means the Board of Directors of the Company, or
any authorized committee of such Board of Directors.
"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 the balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, partnership interests.
"CASH EQUIVALENTS" means (i) cash, (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 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 $500,000,000, (iv) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clauses (ii) and (iii) entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper rated
P-1 or the equivalent thereof by Moody's Investors Service, Inc. or A-1 or the
equivalent thereof by Standard & Poor's Corporation and, in each case, maturing
within six months after the date of acquisition.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i)
the sale, lease or transfer, in one or a series of related transactions, of all
or substantially all of the Company's assets to any Person or group (as such
term is used in Section 13(d)(3) of the Exchange Act), other than one or more
Principals and their respective Related Parties, (ii) the adoption of a plan
relating to the liquidation or dissolution of the Company, (iii) the acquisition
by any Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act), other than one or more Principals and their respective Related Parties, of
a direct or indirect interest in more than 35% of the voting power of the voting
stock of the Holding Company by way of merger or consolidation or otherwise,
(iv) the first day on which a majority of the members of the Board of Directors
of the Holding Company are not Continuing Directors or (v) the first day on
which the Holding Company ceases to own 100% of the outstanding Equity Interests
of the Company.
2
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus, to the
extent deducted in computing Consolidated Net Income, (a) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale,
(b) provision for taxes based on income or profits, (c) consolidated interest
expense of such Person for such period, whether paid or accrued (including
amortization of original issue discount, non-cash interest payments and the
interest component of Capital Lease Obligations), (d) the amount of depreciation
and amortization (including amortization of goodwill and other intangibles) of
such Person for such period and (e) the amount of other non-cash charges not in
the ordinary course of business with respect to which there is no corresponding
future cash payment prior to August 15, 2003.
"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 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 to the referent
Person or a Wholly Owned Subsidiary that is a Subsidiary Guarantor, (ii) the Net
Income of any Person that is a Subsidiary shall be included only to the extent
(a) of the amount of dividends or distributions paid to the referent Person or a
Wholly Owned Subsidiary that is a Subsidiary Guarantor or (b) that the
declaration or payment of dividends or similar distributions by such Subsidiary
of such Net Income is at the date of determination permitted without any prior
governmental approval (which has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Subsidiary or its stockholders, (iii) 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 (iv) the cumulative effect (net of taxes) of a
change in accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person, the sum of
(i) the consolidated equity of the common stockholders of such Person and its
consolidated Subsidiaries plus (ii) the respective amounts reported on such
Person's most recent balance sheet 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 hereof in the book value of any asset owned by such
Person or a consolidated Subsidiary of such Person, (y) all Investments 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, all of the foregoing determined in
accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of the Holding Company who (i) was a member of
such Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the affirmative vote 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.
3
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"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.
"DEFINITIVE NOTES" means Notes that are in the form of Exhibit A
attached hereto that do not include the information called for by footnotes 1
and 2 thereof.
"DEPOSITORY" 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 Depository 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, "Depository" shall mean or include such successor.
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), 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 August 15,
2003.
"11% NOTES" means the Company's 11% Series A Senior Subordinated Notes
due 2003 and 11% Series B Senior Subordinated Notes due 2003, issued pursuant to
the 11% Notes Indenture.
"11% NOTES INDENTURE" means that certain indenture, dated as of August
2, 1993, among the Company, Palais Royal, Inc., a Texas corporation, and The
First National Bank of Boston, a national banking association, as trustee, as
amended or supplemented from time to time, relating to the 11% Notes.
"11% NOTES OFFERING CIRCULAR" means that certain officer circular dated
July 22, 1993 relating to the 11% Notes.
"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.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries in existence on the date of this Indenture, until such amounts are
repaid.
"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 such period. In the event that the
Company or any of its Subsidiaries incurs or redeems any Indebtedness (other
than revolving credit borrowings) or issues or redeems preferred stock or
consummates an Asset Sale or acquires any assets subsequent to the commencement
of the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the event for which the calculation of the Fixed Charge Coverage Ratio
is made, then the Fixed Charge Coverage Ratio shall be calculated giving pro
forma effect to such incurrence, guarantee or redemption of Indebtedness, or
such issuance or redemption of preferred stock, or the consummation of such
Asset Sale or the acquisition of such assets, as if the same
4
had occurred at the beginning of the applicable four-quarter period (including,
in each case, any Consolidated Cash Flow related thereto).
"FIXED CHARGES" means, with respect to any Person for any period, the
sum of (a) consolidated interest expense (net of interest income generated from
cash and Cash Equivalents) of such Person for such period, whether paid or
accrued, to the extent such expense was deducted in computing Consolidated Net
Income (including amortization of original issue discount, non-cash interest
payments and the interest component of Capital Lease Obligations but excluding
amortization of deferred financing fees), (b) the interest expense of any other
Person for such period with respect to Indebtedness that is guaranteed by the
referent Person or any of its Subsidiaries and (c) the product of (i) all cash
dividend payments (and non-cash dividend payments in the case of a Person that
is a Subsidiary) (other than dividend payments to the Company or any Wholly
Owned Subsidiary of the Company that is a Subsidiary Guarantor on any series of
preferred stock of such Person, times (ii) 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, determined on a consolidated basis in accordance with GAAP.
"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 on the date of this Indenture.
"GLOBAL NOTE" means a Note that is in the form of Exhibit A attached
hereto that contains the paragraph referred to in footnote 1 and the additional
schedule referred to in footnote 2 thereto.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"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.
"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.
"HOLDING COMPANY" means Apparel Retailers, Inc., a Delaware
corporation.
"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 instruments or letters of
credit (or reimbursement agreements in respect thereof) or representing the
balance deferred and unpaid of the purchase price of any property (including
pursuant to capital leases) or representing any Hedging Obligations, except any
such balance that constitutes an accrued expense or
5
trade 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, and also
includes, to the extent not otherwise included, the Guarantee of items that
would be included within this definition.
"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 forms of loans
(including Guarantees), 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 and all other items that are
or would be classified as investments on a balance sheet prepared in accordance
with GAAP.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"LIEN" means, 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);
PROVIDED, HOWEVER, that Liens shall not include any interest that the Company or
its Subsidiaries may retain in accounts receivable sold in accordance with
Section 4.10 hereof.
"LIQUIDATED DAMAGES" means all liquidated damages then owing pursuant
to the Registration Rights Agreement.
"MASTER TRUST" means a trust organized for the purpose of securitizing
the accounts receivable held by an Accounts Receivable Subsidiary that does not
engage in any business other than (a) the purchase of accounts receivable or
participation interests therein, (b) the issuance and distribution of
indebtedness and other interests in such trust to (i) the Accounts Receivable
Subsidiary or (ii) to other parties for cash or Cash Equivalents on an
arms-length basis, (c) the servicing of accounts receivable and any indebtedness
or interests in such trust and (d) activities ancillary to the actions described
in clauses (a), (b) and (c).
"MATERIAL 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 of
this Indenture, substituting "5%" for all references in such definition to
"10%."
"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, any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with any Asset Sale (including, without
limitation, dispositions
6
pursuant to sale and leaseback transactions), and excluding any extraordinary
gain (but not loss), together with any related provision for taxes on such
extraordinary gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of 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 the
subject of such Asset Sale and any reserve for adjustment in respect of the sale
price of such asset or assets.
"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, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERING CIRCULAR" means the offering circular dated July 19, 1995 and
the final offering circular dated July 20, 1995 relating to the offering of the
Notes.
"OFFICER" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal 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 and 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) Investments by the Company or any Subsidiary of the Company in
a Person if, as a result of such Investment (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) Investments in an Accounts Receivable Subsidiary received in
consideration of contributions or sales of accounts receivable permitted under
Section 4.10 hereof, (e) other Investments made after the date of this Indenture
in an aggregate amount (measured at the time each such Investment is made) not
exceeding $7.5 million and (f) Investments existing on the date of this
Indenture.
"PERMITTED LIENS" means (a) Liens securing Indebtedness permitted to be
incurred pursuant to clause (a) of the second paragraph of Section 4.09 hereof;
(b) Liens in favor of the Company; (c) 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; (d) Liens on property
existing at the time of acquisition thereof by the
7
Company or any Subsidiary of the Company; PROVIDED, that such Liens were in
existence prior to the contemplation of such acquisition; (e) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (f) Liens existing on the date hereof; (g) 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; (h) Liens incurred in the ordinary course of business of the
Company or any Subsidiary of the Company with respect to obligations that do
not, in the aggregate, exceed $5 million at any one time outstanding and that
are not incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit); (i) Liens securing Indebtedness
permitted to be incurred pursuant to clause (i) of the second paragraph of
Section 4.09 hereof; (j) Liens securing Senior Debt and (k) Liens in connection
with Hedging Obligations.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust or unincorporated organization
(including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"PRINCIPALS" means Bain, the Tyler Entities (as defined in the 11%
Notes Offering Circular), Acadia Partners, L.P., FWHY-Coinvestment I Partners,
L.P., Rosecliff-Specialty Retailing 1989 Partners, L.P. and Court Square Capital
Limited.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date of this Indenture, by and among the Company and
the other parties named on the signature pages thereof, relating to the Notes,
as such agreement may be amended, modified or supplemented from time to time.
"RELATED PARTY" with respect to any Principal means (a) any stockholder
or partner of such Principal on the date of this Indenture or (b) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (a).
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any
officer within the Corporate Trust Division 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.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR NOTE INDENTURE" means that certain indenture, dated August 2,
1993, among the Company, Palais Royal, Inc., a Texas corporation, and The First
National Bank of Boston, as trustee, as amended or supplemented from time to
time, relating to the Senior Notes.
8
"SENIOR NOTES" means the Company's 10% Series A Senior Notes due 2000
and 10% Series B Senior Notes due 2000, if any, issued pursuant to Senior Note
Indenture.
"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 of this Indenture.
"SUBSIDIARY" means, with respect to any Person, 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 such Person or a combination
thereof other than Unrestricted Subsidiaries (except as used in the definition
thereof).
"SUBSIDIARY GUARANTOR" means any Subsidiary of the Company that
executes a Guarantee of the obligations of the Company under the 11% Notes and
the 11% Notes Indenture, and its successors and assigns.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"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.
"UNRESTRICTED SUBSIDIARY" means (a) any Wholly Owned Subsidiary of the
Company designated by the Board of Directors of the Company as an Unrestricted
Subsidiary pursuant to a Board Resolution set forth in an Officers' Certificate
and delivered to the Trustee (i) that, at the time of designation, has total
assets not exceeding $1,000, (ii) no portion of the Indebtedness or any other
obligations (contingent or otherwise) of which (A) is guaranteed by the Company
or any other Subsidiary (other than another Unrestricted Subsidiary) of the
Company, (B) is recourse to or obligates the Company or any other Subsidiary
(other than another Unrestricted Subsidiary) of the Company in any way or (C)
subjects any property or asset of the Company or any other Subsidiary (other
than another Unrestricted Subsidiary) of the Company, directly or indirectly,
contingently or otherwise, to the satisfaction thereof, (iii) with which neither
the Company nor any other Subsidiary (other than another Unrestricted
Subsidiary) of the Company has any contract, agreement, arrangement or
understanding other than on terms no less favorable to the Company or such other
Subsidiary than those that might be obtained at the time from Persons who are
not Affiliates of the Company and (iv) with which neither the Company nor any
other Subsidiary (other than another Unrestricted Subsidiary) of the Company has
any obligation (A) to subscribe for additional shares of Capital Stock or other
Equity Interests therein or (B) to maintain or preserve such Subsidiary's
financial condition or to cause such Subsidiary to achieve certain levels of
operating results or (b) any Accounts Receivable Subsidiary.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding principal amount of such Indebtedness into (b) the sum of the
products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity,
9
in respect thereof, by (y) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment.
"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 or by
such Person and one or more Wholly Owned Subsidiaries of such Person, other than
an Unrestricted Subsidiary (except as used in the definition thereof).
SECTION 1.02. OTHER DEFINITIONS.
DEFINED IN
TERM SECTION
"Affiliate Transaction"............................. 4.11
"Asset Sale"........................................ 4.10
"Asset Sale Offer".................................. 3.09
"Covenant Defeasance"............................... 8.03
"Designated Senior Debt"............................ 12.02
"Event of Default".................................. 6.01
"Excess Proceeds"................................... 4.10
"incur"............................................. 4.09
"Legal Defeasance" ................................. 8.02
"Offer Amount"...................................... 3.09
"Offer Period"...................................... 3.09
"Paying Agent"...................................... 2.03
"Payment Default" .................................. 6.01
"Permitted Refinancing"............................. 4.09
"Purchase Date"..................................... 3.09
"Refinancing Indebtedness".......................... 4.09
"Representative".................................... 12.02
"Registrar"......................................... 2.03
"Senior Debt"....................................... 12.02
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 SECURITY HOLDER" means a Holder of a Note;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee;
"OBLIGOR" on the Notes means the Company, any successor obligor upon
the Notes.
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.
10
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
(6) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement or 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 Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. Each 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 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 footnotes 1 and 2 thereto), or in
definitive form, substantially in the form of Exhibit A hereto (not including
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.
Notes may be issued in one or more series, having such designations as
the Company shall specify.
11
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal 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 Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Notes for original issue up to the aggregate principal
amount of $35,000,000 from time to time outstanding, at the direction of the
Company. The company shall direct the Trustee to authenticate a particular
principal amount of Notes having a particular designation or series in such
Officers' Certificate. The aggregate principal amount of Notes outstanding at
any time may not exceed such amount except as provided in Section 2.07 hereof.
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 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
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company to act as
Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as the 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 or interest on the Notes, and will notify the Trustee of any default
by the Company 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
12
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
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary 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.
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 ss. 312(a). If the Trustee is
not the Registrar, the Company 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.
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES. When Definitive Notes
are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Notes; or
(y) to exchange such Definitive Notes for an equal principal amount
of Definitive 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
Definitive 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 Definitive 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
13
(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 DEFINITIVE NOTE FOR A BENEFICIAL INTEREST IN A GLOBAL
NOTE. A Definitive 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 Definitive Note, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Trustee,
together with:
(i) if such Definitive 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
Definitive 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; and
(ii) whether or not such Definitive 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,
the Trustee shall cancel such Definitive Note and cause, or direct the Note
Custodian to cause, in accordance with the standing instructions and procedures
existing between the Depository 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 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
Depository, in accordance with this Indenture, which shall include restrictions
on transfer comparable to those set forth herein to the extent required by the
Securities Act and the procedures of the Depository therefor.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL NOTE FOR A DEFINITIVE
NOTE.
(i) Any Person having a beneficial interest in a Global Note
may upon request exchange such beneficial interest for a
Definitive Note. Upon receipt by the Trustee of written
instructions or such other form of instructions as is
customary for the Depository, from the Depository 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 Depository as being the
beneficial owner, a certification to that effect from
such Person (in substantially the form of Exhibit B
hereto); or
14
(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,
the Trustee or the Note Custodian, at the direction of the
Trustee, shall, in accordance with the standing
instructions and procedures existing between the
Depository 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 the Trustee shall authenticate and deliver to the
transferee a Definitive Note in the appropriate principal
amount.
(ii) Definitive 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 Depository, pursuant to instructions
from its direct or indirect participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such
Definitive 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 Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
(f) AUTHENTICATION OF DEFINITIVE NOTES IN ABSENCE OF DEPOSITORY. If at
any time:
(i) the Depository for the Notes notifies the Company that the
Depository is unwilling or unable to continue as
Depository for the Global Notes and a successor Depository
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
Definitive Notes under this Indenture,
then the Company shall execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Notes,
shall authenticate and deliver, Definitive Notes in an aggregate principal
amount equal to the principal amount of the Global Notes, in exchange for such
Global Notes.
15
(g) LEGENDS.
(i) Except as permitted by the following paragraph (ii), each
Note certificate evidencing Global Notes and Definitive
Notes (and all Notes issued in exchange therefor or
substitution thereof) shall bear a legend in substantially
the following form:
"THE NOTE (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 (THE "SECURITIES ACT"), AND THE
NOTE 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 NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE
144A UNDER THE SECURITIES ACT. THE HOLDER OF THE NOTE
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) (a) INSIDE THE UNITED STATES TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER
THE SECURITIES ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR IN ACCORDANCE WITH RULE 144
UNDER THE SECURITIES ACT, OR PURSUANT TO ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (b) TO THE COMPANY, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (2) 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 OF THE NOTE 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 Definitive Note, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted
Security for a Definitive 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 subject to the provisions set
forth in (i) above and shall only be subject to the
provisions of Section
16
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 Definitive Note that does not bear a
legend, 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).
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all
beneficial interests in Global Notes have either been exchanged for Definitive
Notes, redeemed, repurchased or cancelled, all Global Notes shall be returned to
or retained and cancelled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in a Global Note is exchanged for
Definitive 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
Definitive 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, 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 Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Notes
or Global Notes shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Definitive
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
17
(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 Note, and neither the Trustee, any Agent
nor the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Definitive Notes and Global
Notes upon receipt of an Officers' Certificate instructing
it to do so.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the Company and
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 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 or the Company, as the case may be, 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 its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company 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 holds the
Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
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 the
Company, or any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be
18
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.
SECTION 2.10. TEMPORARY NOTES.
Until Definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary securities upon a written order of
the Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate definitive 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 it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it 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, with the consent of the Trustee,
fix each such special record date and payment date. At least 30 days before the
special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail to Holders a notice that states the special
record date, the related payment date and the amount of such interest to be
paid.
ARTICLE 3
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days (unless a shorter period is acceptable to the Trustee) 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 the applicable series of Notes to be redeemed if only Notes of one
or more series are to be redeemed and (iv) the redemption price.
19
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed among the Holders of the Notes on a PRO RATA
basis (among Notes of the series being redeemed), by lot or in accordance with
any other method the Trustee considers fair and appropriate (and in such manner
as complies with applicable legal and stock exchange requirements, if any),
PROVIDED that no Notes of $1,000 or less shall be redeemed in part. In the event
of partial redemption by lot, the particular Notes to be redeemed shall be
selected (among Notes of the series being redeemed), unless otherwise provided
herein, not less than 35 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 3.09 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.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(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;
(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; and
(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.
20
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 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 by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
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 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.
(a) Except as set forth in paragraph (b) of this Section 3.07, the
Company shall not have the option to redeem the Notes pursuant to this Section
3.07 prior to August 15, 1998. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on August 15 of the years indicated below:
21
YEAR PERCENTAGE
1998 .................................................... 105.500%
1999 .................................................... 104.125%
2000 .................................................... 102.750%
2001 .................................................... 101.375%
2002 and thereafter ..................................... 100.000%
(b) Notwithstanding paragraph (a) of this Section 3.07, at any time
prior to August 15, 1996, the Company may redeem Notes with the net proceeds of
an initial public offering of common stock of the Holding Company, to the extent
that such net proceeds thereof are contributed to the Company as common equity,
at a redemption price equal to 110% of the principal amount thereof, plus
accrued and unpaid interest thereon to the applicable redemption date; PROVIDED
that at least $11,929,000 in aggregate principal amount of Notes remain
outstanding immediately after the occurrence of such redemption and that such
redemption occurs within 30 days of the date of the closing of such initial
public offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
In addition to any offer to purchase required by Section 4.10 hereof,
the Notes are subject to redemption on September 15, 2002 through the operation
of the mandatory sinking fund provided by this Section 3.08. The Company will
make a mandatory sinking fund payment sufficient to retire by redemption on such
mandatory redemption date Notes equal to 40% of the aggregate principal amount
of the Notes authenticated and delivered under this Indenture (regardless of the
principal amount of Notes then outstanding) at a redemption price equal to 100%
of the aggregate principal amount thereof, plus accrued and unpaid interest
thereon to the redemption date.
The sinking fund payment shall be made by depositing immediately
available funds sufficient therefor with the Paying Agent one Business Day prior
to September 15, 2002. Selection of Notes to be redeemed pursuant to this
Section 3.08 shall be made by the Trustee in the manner set forth in Section
3.02 hereof and notice of such redemption shall be given by the Company in the
manner set forth in Section 3.03 hereof. The provisions of Sections 3.04, 3.05
and 3.06 shall also be applicable to redemptions pursuant to this Section 3.08.
In satisfaction of all or part of the mandatory sinking fund payment
with respect to the Notes, the Company may elect to credit against such sinking
fund payment an amount equal to 100% of the principal amount (excluding
premiums) of any Notes that the Company has acquired (otherwise than pursuant to
Section 4.10 hereof) and delivered to the Trustee for cancellation. The Company
shall, no later than five Business Days prior to the mandatory sinking fund
payment, provide the Trustee with an Officers' Certificate stating that the
application of such Securities to the sinking fund payment complies with the
provisions of this Section 3.08. The Company shall deliver the Securities that
are to be so credited to the Trustee with such Officers' Certificate (if not
previously delivered to the Trustee for cancellation) for credit in accordance
with such Officers' Certificate.
22
SECTION 3.09. 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"), it 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 3.09 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 any Note accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest on and 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, 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, 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;
23
(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.
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 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 3.09. The Company, the depositary 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 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 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
SECTION 3.10. SPECIAL PURPOSE OFFER TO REPURCHASE OR REDEEM.
In the event that, pursuant to Section 4.19 or Section 9.07 hereof, the
Company shall be required to commence an offer to all Holders to repurchase
Notes (a "SPECIAL PURPOSE OFFER"), it shall follow the procedures specified
below.
The Special Purpose 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 "SPECIAL OFFER PERIOD"). No
later than five Business Days after the termination of the Special Offer Period
(the "SPECIAL PURCHASE DATE"), the Company shall purchase the principal amount
of Notes required to be purchased pursuant to Section 4.19 or Section 9.07
hereof, as applicable (the "SPECIAL OFFER AMOUNT"), or, if less than the Special
Offer Amount has been tendered, all Notes tendered in response to the Special
Purpose Offer. Payment for any Notes so purchased shall be made in the same
manner as interest payments are made.
If the Special 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 Special Purpose Offer.
Upon the commencement of a Special Purpose 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 Special Purpose Offer. The Special
Purpose Offer shall be made to all Holders. The notice, which shall govern the
terms of the Special Purpose Offer, shall state:
24
(a) that the Special Purpose Offer is being made pursuant to this
Section 3.10 and either Section 4.19 or Section 9.07 hereof, as applicable,
and the length of time the Special Purpose Offer shall remain open;
(b) the Special Offer Amount, the purchase price and the Special
Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that any Note accepted for payment pursuant to the Special
Purpose Offer shall cease to accrue interest on and after the Special
Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to a
Special Purpose 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
Special Purpose Offer shall be required to surrender the Note, with the
form entitled "Special Option of Holder to Elect Purchase" on the reverse
of the Note completed, 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 Special 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 Special Offer Period, a
telegram, telex, facsimile transmission or letter setting forth the name of
the Holder, 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; and
(h) 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.
On or before the Special Purchase Date, the Company shall, to the
extent lawful, accept for payment, the Special Offer Amount of Notes tendered
pursuant to the Special Purpose Offer, or if less than the Special Offer Amount
has been tendered, all Notes tendered, and shall deliver to the Trustee an
Officers' Certificate stating that such Notes were accepted for payment by the
Company in accordance with the terms of this Section 3.10. The Company, the
depositary or the Paying Agent, as the case may be, shall promptly (but in any
case not later than five days after the Special 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. 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 Special Purpose
Offer on the Special 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 3.01 through 3.06 hereof.
25
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest 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 a Subsidiary thereof,
holds as of 10:00 a.m. 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 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
(without regard to any applicable grace period) at the same rate to the extent
lawful.
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.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall furnish to all Holders all
quarterly and annual financial information that would be required to be
contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were
required to file such forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and, with respect to the
annual information only, a report thereon by the Company's certified independent
accountants. Whether or not required by the rules and
26
regulations of the SEC, the Company shall file a copy of all such information
with the SEC for public availability and shall promptly make such information
available to all investors who request it in writing.
(b) For so long as any Transfer Restricted Securities remain
outstanding, the Company shall furnish to all Holders and prospective purchasers
of the Notes designated by the Holders of Transfer Restricted Securities,
promptly 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 90 days after the
end of each fiscal year, an Officers' Certificate 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 has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) 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 and what
action the Company is taking or proposes to take with respect thereto.
(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(a) 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 upon any Officer becoming aware of any Default
or Event of Default an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its 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.
27
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company 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 (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.
[Intentionally Omitted.]
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 (a)
pay dividends or make any other distributions to the Company or any of its
Subsidiaries on its Capital Stock or with respect to any other interest or
participation in, or measured by, its profits or pay any Indebtedness owed to
the Company or any of its Subsidiaries, (b) make loans or advances to the
Company or any of its Subsidiaries or (c) transfer any of its properties or
assets to the Company or any of its Subsidiaries, in each case, except for such
encumbrances or restrictions existing under or by reasons of (i) Existing
Indebtedness as in effect on the date hereof, (ii) Indebtedness permitted to be
incurred pursuant to clause (a) of the second paragraph of Section 4.09 hereof,
(iii) this Indenture, (iv) applicable law, (v) 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 anticipation 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, (vi) by reason of non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (vii) with respect to clause (c) above, purchase
money obligations for property acquired in the ordinary course of business or
(viii) permitted Refinancing Indebtedness, PROVIDED that the restrictions
contained in the agreements governing such Refinancing Indebtedness 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 with respect to (collectively, "INCUR") any
Indebtedness (including Acquired Debt), and 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 may incur
Indebtedness if (i) 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 would have been at least (a) 2.25 to 1, if such date is
prior to August 15, 1995 and (b) 2.50 to 1 thereafter, in each case determined
on a pro forma basis (including a pro forma application of the net proceeds
therefrom) as if the additional Indebtedness had been incurred at the beginning
of such four-quarter period and (ii) such Indebtedness is pari passu with or
subordinated in right of payment to the Notes and has a
28
Weighted Average Life to Maturity that is greater than the remaining Weighted
Average Life to Maturity of the Notes.
The foregoing limitations will not apply to (a) the incurrence by the
Company or any of its Subsidiaries of revolving credit Indebtedness and letters
of credit, and any extension, refinancing, renewal, replacement or refunding
thereof, in an aggregate principal amount at any one time outstanding not to
exceed $25 million, less the amount of Net Proceeds of Asset Sales that have
been applied to permanently reduce borrowings and commitments under any such
facility, PROVIDED that the proceeds of such Indebtedness are not used for
acquisitions or other expenditures not in the ordinary course of business, (b)
the incurrence by the Company or any of its Subsidiaries of the Existing
Indebtedness, (c) the incurrence by the Company and its Subsidiaries of
Indebtedness represented by the Notes and the Senior Notes, (d) the incurrence
by the Company or any of its Subsidiaries of Indebtedness issued in exchange
for, or the proceeds of which are used to extend, refinance, renew, replace,
refund or defease, Indebtedness incurred pursuant to the immediately preceding
paragraph or pursuant to clause (b), (c) or (g) of this paragraph ("REFINANCING
INDEBTEDNESS"); PROVIDED, HOWEVER, that (1) the principal amount of such
Refinancing Indebtedness shall not exceed the principal amount of Indebtedness
so extended, refinanced, renewed, replaced, substituted, refunded or defeased,
(2) the Refinancing Indebtedness shall have a Weighted Average Life to Maturity
equal to or greater than either (x) the remaining Weighted Average Life to
Maturity of the Indebtedness being extended, refinanced, renewed, replaced,
refunded or defeased or (y) the remaining Weighted Average Life to Maturity of
the Notes and (3) if applicable, the Refinancing Indebtedness shall be
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, refunded or defeased
(a "PERMITTED REFINANCING"), (e) intercompany Indebtedness between or among the
Company and any of its Wholly Owned Subsidiaries that are Subsidiary Guarantors,
(f) the incurrence by the Company of Hedging Obligations to protect the Company
against interest rate risk with respect to variable rate Indebtedness permitted
to be incurred by this Indenture, (g) additional Indebtedness in an aggregate
principal amount not to exceed $10 million at any one time outstanding, (h)
Capital Lease Obligations in an aggregate principal amount not to exceed $2
million at any one time outstanding, (i) purchase money Indebtedness in an
aggregate principal amount not to exceed $2 million at any one time outstanding,
(j) the incurrence of Indebtedness pursuant to the Registration Rights Agreement
as in effect on the date of this Indenture and (k) the incurrence by the Company
and its Subsidiaries of Hedging Obligations with respect to long-term
Indebtedness of an Accounts Receivable Subsidiary.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Subsidiaries to:
(i) sell, lease, convey or otherwise dispose of any assets (including
by way of a sale-and-leaseback) other than (A) in the ordinary
course of business, (B) contributions, dispositions or other
transfers of accounts receivable to an Accounts Receivable
Subsidiary that is wholly owned, directly or indirectly, by the
Company in exchange for Equity Interests in such Accounts
Receivable Subsidiary or sales of accounts receivable to an
Accounts Receivable Subsidiary for cash and promissory notes, in
each case for consideration having a value at least equal to 95% of
the book value thereof as determined in accordance with GAAP and
(C) sales of assets securing Indebtedness permitted to be incurred
pursuant to clause (a) of the second paragraph of Section 4.09
hereof if the Lien on such assets is permitted by clause (a) of the
definition of Permitted Liens and the net proceeds from the sale of
such assets are applied to permanently reduce commitments and
29
borrowings under such Indebtedness (PROVIDED that the sale, lease,
conveyance or other disposition of all or substantially all of the
assets of the Company shall be governed by Section 5.1 hereof), or
(ii)issue or sell equity securities of any of its Subsidiaries,
in each case, whether in a single transaction or a series of related
transactions, (a) that have a fair market value in excess of $3 million or (b)
for net proceeds in excess of $3 million (each of the foregoing, an "ASSET
SALE"), unless (x) 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 of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets sold or otherwise
disposed of and (y) at least 80% of the consideration received therefor by the
Company or such Subsidiary is in the form of cash; PROVIDED, HOWEVER, that, for
purposes of this clause (y), the amount of (A) any liabilities (as shown on the
Company's or such Subsidiary's most recent balance sheet or in the notes
thereto), of the Company or any Subsidiary (other than liabilities that are by
their terms subordinated to the Notes) that are assumed by the transferee of any
such assets and (B) 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 180 days after any Asset Sale, the Company (or such Subsidiary)
may (a) irrevocably commit to apply the Net Proceeds from such Asset Sale to an
Investment in another business, capital expenditures or other long-term assets,
in each case, in accordance with Section 4.16 hereof, (b) permanently reduce
long-term Senior Debt (including by way of an Asset Sale Offer of Senior Notes),
(c) permanently reduce borrowings and commitments under Indebtedness permitted
to be incurred pursuant to clause (a) of the second paragraph of Section 4.09
hereof, PROVIDED that any Net Proceeds that are committed to be used pursuant to
this sentence are so used within 360 days after such Asset Sale or (d) offer to
redeem and redeem 11% Notes in accordance with the 11% Notes Indenture. Pending
the final application of any such Net Proceeds, the Company (or such Subsidiary)
may temporarily reduce Senior Debt or otherwise invest such Net Proceeds in any
manner that is not prohibited by this Indenture. Any Net Proceeds from such
Asset Sale that are not finally applied or invested as provided in the first
sentence of this paragraph or that remain following consummation of the offer to
redeem contemplated by the 11% Notes Indenture will be deemed to constitute
"EXCESS PROCEEDS." Within five days of each date on which the aggregate amount
of Excess Proceeds exceeds $5 million, the Company shall commence an Asset Sale
Offer pursuant to Section 3.09 hereof 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, if any, to the date fixed for the closing of such offer in
accordance with the procedures set forth in Section 3.09 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 such Subsidiary) may use such
deficiency for general corporate purposes. Upon completion of such offer to
purchase, the amount of Excess Proceeds will be deemed to be reset at zero.
30
Notwithstanding the foregoing, nothing in this Section 4.10 shall
restrict or encumber the ability of the Company and its Subsidiaries to (a) pay
dividends or make other distributions to the Holding Company on its Capital
Stock or with respect to any other interest or participation in, or measured by,
its profits or pay any Indebtedness owed to the Holding Company or any of its
Subsidiaries, (b) make loans or advances to the Holding Company or any of its
Subsidiaries, or (c) transfer any of its properties or assets to the Holding
Company or any of its Subsidiaries.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Subsidiaries to,
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into any contract,
agreement, understanding, loan, advance or Guarantee with, or for the benefit
of, any Affiliate (including any Accounts Receivable Subsidiary) (each of the
foregoing, an "AFFILIATE TRANSACTION"), unless (a) 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 (b) the Company delivers
to the Trustee (i) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $1 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (a) above and such Affiliate Transaction is approved by a
majority of the Board of Directors and (ii) with respect to any Affiliate
Transaction involving aggregate consideration in excess of $2 million (other
than a contribution, disposition or other transfer of accounts receivable to an
Accounts Receivable Subsidiary in accordance with Section 4.10 hereof), an
opinion as to the fairness to the Company or such Subsidiary from a financial
point of view issued by an investment banking firm of national standing;
PROVIDED, HOWEVER, that (i) any employment agreement entered into by the Company
or any of its Subsidiaries in the ordinary course of business of the Company or
such Subsidiary, (ii) transactions between or among the Company and/or its
Wholly Owned Subsidiaries, (iii) transactions permitted under Section 4.07 of
the 11% Notes Indenture and (iv) payments to Bain for services rendered in an
aggregate amount not to exceed $1 million in any fiscal year, plus reasonable
out-of-pocket expenses, shall not be deemed Affiliate Transactions.
Notwithstanding the foregoing, nothing in this Section 4.11 shall
restrict or encumber the ability of the Company and its Subsidiaries to (a) pay
dividends or make other distributions to the Holding Company on its Capital
Stock or with respect to any other interest or participation in, or measured by,
its profits or pay any Indebtedness owed to the Holding Company or any of its
Subsidiaries, (b) make loans or advances to the Holding Company or any of its
Subsidiaries or (c) transfer any of its properties or assets to the Holding
Company or any of its Subsidiaries.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly create, incur, assume or suffer to exist any Lien 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,
unless the Notes are equally and ratably secured thereby.
Notwithstanding the foregoing, nothing in this Section 4.12 shall
restrict or encumber the ability of the Company and its Subsidiaries to (a) pay
dividends or make other distributions to the Holding Company on its Capital
Stock or with respect to any other interest or participation in, or measured by,
its profits or pay any Indebtedness owed to the Holding Company or any of its
Subsidiaries, (b) make
31
loans or advances to the Holding Company or any of its Subsidiaries or (c)
transfer any of its properties or assets to the Holding Company or any of its
Subsidiaries.
SECTION 4.13. ADDITIONAL SUBSIDIARY GUARANTEES.
[Intentionally Omitted.]
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; PROVIDED, HOWEVER, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
[Intentionally Omitted.]
SECTION 4.16. LINE OF BUSINESS.
The Company shall not, and shall not permit any of its Subsidiaries to,
engage in any business other than those businesses in which the Company and its
Subsidiaries are engaged on the date hereof and other businesses directly
related thereto (it being understood that the Company and its Subsidiaries may
engage in retailing activities).
SECTION 4.17. ACCOUNTS RECEIVABLE SUBSIDIARIES.
The Company (a) shall not permit any Accounts Receivable Subsidiary to
sell any accounts receivable purchased from the Company or any of its
Subsidiaries or participation interests therein to any other Person except on an
arms-length basis and solely for consideration in the form of cash, Cash
Equivalents or Indebtedness of or other interests in a Master Trust, PROVIDED
that such Accounts Receivable Subsidiary may not sell such Indebtedness or other
interests to any other Person except on an arms-length basis and solely for
consideration in the form of cash or Cash Equivalents, (b) shall not permit any
Accounts Receivable Subsidiary to incur Indebtedness in an amount in excess of
the book value of such Accounts Receivable Subsidiary's total assets, as
determined in accordance with GAAP, and (c) shall not, and shall not permit any
of its Subsidiaries to, sell accounts receivable to an Accounts Receivable
Subsidiary if (i) such Accounts Receivable Subsidiary, pursuant to or within the
meaning of Bankruptcy Law, (A) commences a voluntary case, (B) consents to the
entry of an order for relief against it in an involuntary case, (C) consents to
the appointment of a Custodian of it or for all or substantially all of its
property or (D) makes a general assignment for the benefit of its creditors or
(ii) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (A) is for relief against such Accounts Receivable
Subsidiary, (B) appoints a Custodian of such Accounts Receivable Subsidiary
32
or for all or substantially all of the property of such Accounts Receivable
Subsidiary or (C) orders the liquidation of such Accounts Receivable Subsidiary.
SECTION 4.18. SENIOR SUBORDINATED DEBT.
The Company shall not incur, create, issue, assume, guarantee or
otherwise become directly or indirectly liable with respect to any Indebtedness
that is subordinated or junior in right of payment to any Senior Debt of the
Company and senior in any respect in right of payment to the Notes.
SECTION 4.19. REPURCHASES, ETC.
The Company shall not, and shall not permit the Holding Company or any
of its Subsidiaries to, redeem, repurchase or otherwise acquire, retire or
defease any portion of the 11% Notes, without either (a) concurrently
repurchasing, redeeming or defeasing at least a pro rata principal amount of the
outstanding Notes or (b) offering to repurchase at least a pro rata principal
amount of the outstanding Notes pursuant to a Special Purpose Offer on the terms
set forth in Section 3.10 hereof at a repurchase price equal to the
consideration per $1,000 in principal amount of Notes that was paid to, or is
proposed to be paid to, the holders of the 11% Notes per $1,000 in principal
amount of 11% Notes for such redemption, repurchase, acquisition, retirement or
defeasance (together with a proportionate additional amount to reflect
additional accrued and unpaid interest and/or Liquidated Damages, if
applicable). In the event that the Company elects to make a Special Purpose
Offer pursuant to Section 3.10 hereof, it shall cause such Special Purpose Offer
to close on or before the date on which the 11% Notes are redeemed, repurchased,
acquired, retired or defeased (the "11% Closing Date"); provided that, except if
all of the outstanding 11% Notes are to be redeemed, repurchased, or otherwise
acquired, retired or defeased, if a concurrent closing date is not feasible,
then such Special Purpose Offer may close up to 20 Business Days after the 11%
Closing Date.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
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 or Person
unless (i) the Company is the surviving corporation 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
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made assumes all the obligations
of the Company pursuant to a supplemental indenture, in a form reasonably
satisfactory to the Trustee, under the Notes and this Indenture, (iii)
immediately after such transaction, no Default or Event of Default exists and
(iv) the Company or any Person formed by or surviving any such consolidation or
merger, 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 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
33
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
clause (a) of the first paragraph of Section 4.09 hereof.
Notwithstanding anything else contained in this Indenture to the
contrary, the Company is entitled to merge with a Wholly Owned Subsidiary of the
Company, PROVIDED that if the Company is not the surviving entity of such
transaction, the surviving entity shall comply with clause (ii) of the
immediately preceding paragraph.
Notwithstanding the foregoing, nothing in this Section 5.01 shall
restrict or encumber the ability of the Company and its Subsidiaries to (a) pay
dividends or make other distributions to the Holding Company on its Capital
Stock or with respect to any other interest or participation in, or measured by,
its profits or pay any Indebtedness owed to the Holding Company or any of its
Subsidiaries, (b) make loans or advances to the Holding Company or any of its
Subsidiaries or (c) transfer any of its properties or assets to the Holding
Company or any of its Subsidiaries.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, 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,
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 has been named
as the Company herein, and the predecessor Company (if not the surviving
corporation) shall be relieved from its obligations under this Indenture and the
Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on the
Notes and the default continues for a period of 30 days (whether or not
prohibited by the provisions of Article 12 hereof);
(b) the Company defaults 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
purchase) or otherwise (whether or not prohibited by the provisions of
Article 12 hereof);
(c) the Company fails to comply with Sections 4.09, 4.10 or 5.01
hereof, which failure remains uncured for 30 days;
34
(d) the Company fails to observe or perform any other covenant,
warranty or other agreement in this Indenture or the Notes for 60 days
after notice to the Company by the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes then outstanding;
(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 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
(i) is caused by a failure to pay at final maturity, principal or
interest on such Indebtedness within the grace period provided in such
Indebtedness (a "PAYMENT DEFAULT") or (ii) has resulted 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 $5 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 Material Subsidiaries and such judgment or
judgments remain undischarged for a period (during which execution
shall not be effectively stayed) of 60 days, PROVIDED that the
aggregate of all such undischarged judgments exceeds $5 million;
(g) the Company, any Significant Subsidiary of the Company or any
group of Material Subsidiaries of the Company that, taken as a whole,
would constitute a Significant Subsidiary of the Company pursuant to or
within the meaning of Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in
an involuntary case;
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property; and
(iv) makes a general assignment for the benefit of its
creditors;
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law, which order or decree remains in effect and
unstayed for 60 consecutive days, that:
(i) is for relief against the Company, any Significant
Subsidiary of the Company or any group of Material Subsidiaries of
the Company that, taken as a whole, would constitute a Significant
Subsidiary of the Company in an involuntary case;
(ii) appoints a Custodian of the Company, any Significant
Subsidiary of the Company or any group of Material Subsidiaries of
the Company that, taken as a whole, would constitute a Significant
Subsidiary of the Company or for all or substantially all of the
property of the Company, any Significant Subsidiary of the Company
or any group of Material Subsidiaries of the Company that, taken as
a whole, would constitute a Significant Subsidiary of the Company;
or
35
(iii) orders the liquidation of the Company, any Significant
Subsidiary of the Company or any group of Material Subsidiaries of
the Company that, taken as a whole, would constitute a Significant
Subsidiary of the Company;
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Material Subsidiaries that, taken as a
whole, 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;
PROVIDED, that so long as any Indebtedness permitted to be incurred pursuant to
clause (a) of the second paragraph of Section 4.09 hereof shall be outstanding,
such acceleration shall not be effective until the earlier of (i) an
acceleration under any such other Indebtedness or (ii) five business days after
receipt by the Company of written notice of such acceleration of the Notes.
Notwithstanding the foregoing, if an Event of Default specified in clause (g) or
(h) of Section 6.01 hereof occurs with respect to the Company, any Significant
Subsidiary or any group of Material Subsidiaries that, taken as a whole, 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 (including the related payment default) 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 the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to Section
3.07 hereof, an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law, anything in this Indenture or in the
Notes to the contrary notwithstanding. If an Event of Default occurs prior to
August 15, 1998 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to such date, then the premium
payable for purposes of this paragraph for each of the years beginning on August
15 of the years set forth below shall be as set forth in the following table
expressed as a percentage of the amount that would otherwise be due but for the
provisions of this sentence, plus accrued interest, if any, to the date of
payment:
YEAR PERCENTAGE
1995 ................................................ 108.800%
1996 ................................................ 107.700%
1997 ................................................ 106.600%
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, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
36
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 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, except a continuing Default or Event of Default in the payment of
the principal of, premium, if any, or interest on, the Notes (including in
connection with an offer to purchase); 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.
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.
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.
37
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, premium, if any, and interest
on the Note, on or after the respective due dates expressed in the Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default 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, 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.
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 and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(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 of the Notes
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 Holders, 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;
38
SECOND: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes for
principal, premium, if any and interest, respectively; and
THIRD: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes.
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 litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
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 their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee
need perform only those duties that are specifically set
forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own 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;
39
(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 paragraphs
(a), (b), and (c) of this Section.
(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 Holder, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(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 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 and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith 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 shall be sufficient if
signed by an Officer of the Company.
(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.
40
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 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 it must eliminate such conflict within 90 days, 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 or the Notes, 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 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. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
SECTION 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, the Trustee shall mail to the Holders of the Notes a
brief report dated as of such reporting date that complies with TIA ss. 313(a)
(but if no event described in TIA ss. 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The Trustee
also shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by
mail all reports as required by TIA ss. 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. The Company shall promptly notify the
Trustee when the Notes are listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
41
The Company 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 without
negligence or bad faith on its part. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure by the Trustee to
so notify the Company shall not relieve the Company of its obligations
hereunder. The Company shall defend the claim and the Trustee shall cooperate in
the defense. The Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not pay for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's 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.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) 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 or public officer takes charge of the Trustee or its
property; 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 60 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
42
amount of the then outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
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 successor Trustee 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 ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated 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 of Directors 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.
43
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes 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 its 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, premium, if any, and interest on such Notes when such payments
are due, (b) the Company's obligations with respect to such Notes under Article
Two 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 its 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 shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.08, 4.09, 4.10, 4.11,
4.12, 4.16, 4.17, 4.19 and Article Five 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, such 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, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, Sections 6.01(c), 6.01(d), 6.01(e),
6.01(f), 6.01(i), 6.01(j) and 6.01(k) hereof shall not constitute Events of
Default.
44
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, cash in United States dollars,
non-callable Government Securities, or 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, premium, if any, and interest on the Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may
be, of such principal or installment of principal of, premium, if any,
or interest on the Notes;
(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 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 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 incurrence of Indebtedness all or a
portion of the proceeds of which will be used to defease the Notes
pursuant to this Article Eight concurrently with such incurrence) or
insofar as Sections 6.01(g) and 6.01(h) hereof are concerned, at any
time in the period ending on the 91st day after the date of such
deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under this
Indenture or any other material agreement or instrument 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
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company; and
45
(g) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with.
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 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 or a Subsidiary 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 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 Company's
request 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 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, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, 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 Note shall thereafter, as an
unsecured general 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
edition), 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
46
prohibiting such application, then the Company's obligations under this
Indenture and the Notes 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 the Company
makes any payment of principal of, premium, if any, or interest on any Note
following the reinstatement of its obligations, the Company 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
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company 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 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 Note; 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 accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
9.06 hereof, the Trustee shall join with the Company 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.
The Company and the Trustee may amend or supplement this Indenture
(including Sections 3.09, 3.10, 4.10, 4.19 or 9.07 hereof) 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, or interest on the Notes, except a payment default resulting
from an acceleration that has been rescinded) 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
47
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for the Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors 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 9.06 hereof, the Trustee shall
join with the Company 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. Notwithstanding the foregoing, without the consent of each
Holder affected, an amendment or waiver may not (with respect to any Notes held
by a non-consenting Holder):
(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;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest 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 interest on the Notes;
(g) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions; or
(h) make any change in Article 12 hereof that adversely affects any
Holder.
Notwithstanding the above, if any amendment, supplement or waiver to
this Indenture or the Notes disproportionately impacts any particular series of
Notes exclusively, then the Company shall also
48
be required to obtain the consent of the applicable percentage of the
outstanding principal amount of Notes in such series, voting as a separate
class, before such amendment, supplement or waiver becomes effective.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in an amended or supplemental Indenture that complies with the TIA as
then in effect.
SECTION 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 Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
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. The Company
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it.
SECTION 9.07. CERTAIN AMENDMENTS AUTOMATIC; OFFER TO REPURCHASE.
Notwithstanding any other provision in this Indenture to the contrary
and except as provided in the TIA, in the event that an amended or supplemental
Indenture or other written document is executed under the provisions of the 11%
Notes Indenture, amending, supplementing or otherwise modifying or altering such
Indenture, or in the event that the Company or any of its Affiliates seeks and
obtains a waiver to any provision of the 11% Notes Indenture, then this
Indenture shall automatically be so amended, modified, supplemented, altered or
waived to the extent necessary to effect a comparable amendment, modification,
supplement, alteration or waiver to the provisions of this Indenture.
Any such amendment, modification, supplement, alteration or waiver
under the provisions of the 11% Notes Indenture shall not be effective under
this Indenture unless and until such time as the Company pays each Holder of
Notes an amount per $1,000 in principal amount of Notes equal to the
49
average amount of consideration paid to the holders of the 11% Notes per $1,000
in principal amount of 11% Notes outstanding in connection with such amendment,
modification, supplement, alteration or waiver to the 11% Notes Indenture, if
any.
In the event that the aggregate principal amount of the 11% Notes and
the Notes that voted in favor of the proposed amendment, modification,
supplement, alteration or waiver, taken as a single class for purposes of this
paragraph and expressed as a percentage of the aggregate principal amount of 11%
Notes and Notes then outstanding, does not exceed the requisite percentage set
forth in the 11% Notes Indenture required for such an amendment, modification,
supplement, alteration or waiver, then the Company shall commence a Special
Purpose Offer, on or before the date on which any such amendment, modification,
supplement, alteration or waiver becomes effective under the 11% Notes Indenture
or this Indenture, to repurchase all of the Notes then outstanding, pursuant to
Section 3.10 hereof, at a repurchase price equal to the lesser of (i) 101% of
the principal amount of such Notes or (ii) the applicable redemption price then
in effect pursuant to Section 3.07 hereof, in each case, plus accrued and unpaid
interest and Liquidated Damages to the date of repurchase.
ARTICLE 10
SUBSIDIARY GUARANTEE
[Intentionally Omitted]
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA ss.318(c), the imposed duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Trustee to the 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:
Specialty Retailers, Inc.
10201 Main Street
Houston, Texas 77025
Telecopier No.: (713) 660-3342
Attention: Chief Financial Officer
50
With a copy to:
Bain Capital
Two Copley Place, 7th Floor
Boston, Massachusetts 02116
Telecopier No.: (617) 572-3274
Attention: Joshua Bekenstein
and to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Stret
New York, New York 10022
Telecopier No.: (212) 838-4223
Attention: Lance C. Balk, Esq.
If to the Trustee:
The First National Bank of Boston
Blue Hills Office Park
150 Royale Street
Canton, Massachusetts 02021
Telecopier No.: (617) 575-2078
Attention: Corporate Trust Division
Mail Stop 45-02-15
(Specialty Retailers, Inc. 11% Series C and Series D
Senior Subordinated Notes due 2003)
The Company 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 ss. 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.
51
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.
SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA ss.
312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company 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 ss. 314(a)(4)) shall comply with the provisions of TIA ss.
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.
52
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES
AND STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes or this Indenture 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 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 and the Notes.
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.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its 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 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.
53
ARTICLE 12
SUBORDINATION
SECTION 12.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that
the Obligations with respect to such Note is subordinated in right of payment,
to the extent and in the manner provided in this Article 12, to the prior
payment in full of all Senior Debt (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed), and that the subordination
is for the benefit of the holders of Senior Debt.
SECTION 12.02. CERTAIN DEFINITIONS.
"DESIGNATED SENIOR DEBT" means (i) Obligations of the Company under the
Senior Notes and the Senior Note Indenture and (ii) any other Senior Debt
permitted hereunder the principal amount of which is $25 million or more that
has been designated by the Company as Designated Senior Debt.
"REPRESENTATIVE" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
"SENIOR DEBT" means (i) all Obligations of the Company under the Senior
Notes and the Senior Note Indenture and (ii) any other Indebtedness that is
permitted to be incurred by the Company pursuant to this Indenture unless the
instrument under which such Indebtedness is incurred expressly provides that it
is PARI PASSU with or subordinated in right of payment to the Notes.
Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not
include (a) any trade payables, (b) any liability for federal, state, or local
or other taxes owed or owing by the Company, (c) any Indebtedness of the Company
to any of its Subsidiaries or other Affiliates or (d) any Indebtedness that is
incurred in violation of this Indenture.
For purposes of this Article 12, a distribution may consist of cash,
securities or other property, by set-off or otherwise. As used in this Indenture
and the Notes, the term "payment" of or with respect to Obligations relating to
the Notes and similar phrases include any payment (including by issuance of
additional securities of any kind), redemption, acquisition, deposit,
segregation, retirement, sinking fund payment and defeasance of or with respect
to any Obligations relating to the Notes.
SECTION 12.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any payment or distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, in an assignment for the benefit of creditors or any marshalling of
the Company's assets and liabilities:
(1) holders of Senior Debt shall be entitled to receive payment in full
of all Obligations due in respect of such Senior Debt (including interest
after commencement of any such proceeding at the rate specified in the
applicable Senior Debt) before any Holder shall be entitled to receive any
payment or distribution with respect to the Notes (except that Holders may
receive securities that are subordinated to at least the same extent as the
Notes to (a) Senior Debt and (b) any securities issued in exchange for
Senior Debt); and
54
(2) until all Obligations with respect to Senior Debt (as provided in
subsection (1) above) are paid in full, any payment or distribution to
which Holders would be entitled but for this Article 12 shall be made to
holders of Senior Debt (except that Holders may receive securities that are
subordinated to at least the same extent as the Notes to (a) Senior Debt
and (b) any securities issued in exchange for Senior Debt), as their
interests may appear.
SECTION 12.04. DEFAULT ON DESIGNATED SENIOR DEBT.
The Company may not make any payment or distribution to the Trustee or
any Holder upon or in respect of Obligations with respect to the Notes and may
not acquire from the Trustee or any Holder any Notes for cash, securities or
other property (other than securities that are subordinated to at least the same
extent as the Notes to (a) Senior Debt and (b) any securities issued in exchange
for Senior Debt), until all principal and other Obligations with respect to the
Senior Debt have been paid in full, if:
(a) a default in the payment of any principal, premium, if any,
interest or other Obligations with respect to Designated Senior Debt occurs
and is continuing beyond any applicable period of grace (whether upon
maturity, as a result of acceleration or otherwise); or
(b) a default occurs and is continuing that then permits holders of the
Designated Senior Debt as to which such default relates to accelerate its
maturity, and the Trustee receives a written notice of the default (a
"Payment Blockage Notice") from the holders, or from the Representative of
the holders, of any such Designated Senior Debt. If the Trustee receives
any such notice, a subsequent notice received within 360 days thereafter
shall not be effective for purposes of this Section 12.04. 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 for a period of at least 180 days.
The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(i) the date upon which the default is cured or waived, or
(ii) in the case of a default referred to in clause (b) of this Section
12.04, 179 days pass after the date on which the applicable Payment
Blockage Notice is received, unless the maturity of any Designated Senior
Debt has been accelerated,
if this Article 12 otherwise permits such payment, distribution or acquisition
at the time of such payment, distribution or acquisition.
SECTION 12.05. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Debt of such acceleration.
SECTION 12.06. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect the Notes at a time when the Trustee or such Holder has
knowledge that such payment is prohibited by this Article 12, such payment or
distribution shall be held by the Trustee or such Holder, in trust for the
55
benefit of, and shall be paid forthwith over and delivered, upon written request
to, the holders of Senior Debt as their interests may appear or their
Representative under the indenture or other agreement (if any) pursuant to which
Senior Debt may have been issued, as their respective interests may appear, for
application to the payment of all Obligations with respect to Senior Debt
remaining unpaid to the extent necessary to pay such Obligations in full in
accordance with their terms in cash or Cash Equivalents, after giving effect to
any concurrent payment or distribution to or for the holders of Senior Debt.
If a distribution is made to the Trustee or any Holder that because of
this Article 12 should not have been made to it, the Trustee or such Holder who
receives the distribution shall hold it in trust for the benefit of, and upon
written request pay it over to, the holders of Senior Debt as their interests
may appear, or their Representative under the indenture or other agreement (if
any) pursuant to which Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Senior Debt remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 12, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 12, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
SECTION 12.07. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 12, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article 12.
SECTION 12.08. SUBROGATION.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Debt. A distribution made under this Article 12 to holders of Senior
Debt that otherwise would have been made to Holders is not, as between the
Company and Holders, a payment by the Company on the Notes.
SECTION 12.09. RELATIVE RIGHTS.
This Article 12 defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Indenture shall:
(a) impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of and
interest on the Notes in accordance with their terms;
56
(b) affect the relative rights of Holders and other creditors of the
Company, other than Holders' rights in relation to holders of Senior Debt;
or
(c) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Debt to receive distributions and payments
otherwise payable to Holders.
If the Company fails because of this Article 12 to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
SECTION 12.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness with respect to the Notes shall be impaired by any act or
failure to act by the Company or any Holder or by the failure of the Company or
any Holder to comply with this Indenture.
SECTION 12.11. PAYMENT, DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a payment or distribution is to be made or a notice given to
holders of Senior Debt, the payment or distribution may be made and the notice
given to their Representative.
Upon any payment or distribution of assets, securities or other
property of the Company referred to in this Article 12, the Trustee and the
Holders shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of the Senior Debt
and other Indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 12.
SECTION 12.12. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 12 or any other
provision of this Indenture, the Trustee shall not (a) be deemed to be a
fiduciary for any holder of Senior Debt or (b) be charged with knowledge of the
existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent (other than
the Company and its Affiliates) may continue to make payments on the Notes,
unless the Trustee shall have received at the Corporate Trust Office of the
Trustee at least five Business Days prior to the date of such payment, written
notice of facts that would cause the payment of any Obligations with respect to
the Notes to violate this Article 12. Only the Company or a Representative may
give the notice. Nothing in this Article 12 shall impair the claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may do
the same with like rights.
SECTION 12.13. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the
57
subordination as provided in this Article 12, and appoints the Trustee the
Holder's attorney-in-fact for any and all such purposes. If the Trustee does not
file a proper proof of claim or proof of debt in the form required in any
proceeding referred to in Section 6.09 hereof at least 30 days before the
expiration of the time to file such claim, the Representatives are hereby
authorized to file an appropriate claim for and on behalf of the Holders of the
Notes.
SECTION 12.14. AMENDMENTS.
The provisions of this Article 12 shall not be amended or modified
without the written consent of the holders of all Senior Debt.
[Signatures on following page]
58
SIGNATURES
Dated as of July 27, 1995 SPECIALTY RETAILERS, INC.
By: JAMES A. MARCUN
Name: James A. Marcun
Title: EVP/CFO
Attest: JERRY C. IVIE
(SEAL)
Dated as of July 27, 1995 THE FIRST NATIONAL BANK OF BOSTON,
as Trustee
By: ROLAND S. GUSTAFSEN
Name: Roland S. Gustafsen
Title: Senior Account Manager
Attest: K CALDWELL
(SEAL)
<PAGE>
EXHIBIT A
(Face of Note)
11% Series [C/D/other] Senior Subordinated Notes due 2003
No. $__________
SPECIALTY RETAILERS, INC.
promises to pay to
or registered assigns,
the principal sum of
Dollars on August 15, 2003.
Interest Payment Dates: February 15 and August 15, commencing August 15, 1995
Record Dates: February 1 and August 1
Dated:
SPECIALTY RETAILERS, INC.
By: _________________________
Name:
Title:
By: _________________________
Name:
Title:
(SEAL)
This is one of the Notes
referred to in the within-
mentioned Indenture:
THE FIRST NATIONAL BANK OF BOSTON,
as Trustee
By: _____________________________
Authorized Signatory
<PAGE>
(Back of Note)
11% Series [C/D/other] Senior Subordinated 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
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as 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 NOTE (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 (THE "SECURITIES ACT"), AND THE NOTE
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 NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES
ACT. THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1) (a) INSIDE THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, OR IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR PURSUANT
TO ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (b)
TO THE COMPANY, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (2) 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 OF THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH
IN (A) ABOVE."
THIS NOTE HAS ORIGINAL ISSUE DISCOUNT FOR FEDERAL INCOME TAX PURPOSES,
DETERMINED PURSUANT TO SECTIONS 1272 THROUGH 1275 OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED, AND THE TREASURY REGULATIONS PROMULGATED THEREUNDER. FOR
FEDERAL INCOME TAX PURPOSES, THE ISSUE PRICE IS $901.80 PER $1,000 PRINCIPAL
AMOUNT OF THIS NOTE AND THE TOTAL AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $98.20
PER $1,000 PRINCIPAL AMOUNT OF THIS NOTE. THE
- --------
(1) This paragraph should be included only if the Note is issued in global form.
A-2
ISSUE DATE OF THIS NOTE IS JULY 20, 1995. THE YIELD TO MATURITY OF THIS NOTE IS
13% (BASED ON SEMI-ANNUAL COMPOUNDING).
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Specialty Retailers, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 11%
per annum from the date this Note is issued until maturity. The Company will pay
interest semi-annually on February 15 and August 15 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 Notes 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, to but not including the Interest Payment Date; 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 August 15, 1995. 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 (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 to the
Persons who are registered Holders of Notes at the close of business on the
February 1 or August 1 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 that the Company will pay defaulted interest as provided in
Section 2.12 of the Indenture. The Notes will be payable both as to principal
and interest 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 may be made by check mailed to the Holders at their
addresses set forth in the register of Holders.
3. PAYING AGENT AND REGISTRAR. Initially, The First National Bank of
Boston, 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 its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as of
July 27, 1995 (the "Indenture") between the Company 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 ss.ss. 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 unsecured obligations of the Company and are part of a series of Notes
issued under the Indenture, which provides for a total issuance of $35,000,000
in aggregate principal amount from time to time outstanding, at the discretion
of the Company, plus amounts, if any, sufficient to pay interest and premium, if
any, on outstanding Notes as set forth in Paragraph 2 hereof. The Notes and
other indebtedness issued under the Indenture shall be pari passu with the
Company's existing 11% Senior Subordinated Notes due 2003.
A-3
5. OPTIONAL REDEMPTION.
(a) Except as set forth in paragraph (b) below, the Company shall not have
the option to redeem the Notes prior to August 15, 1998. Thereafter, the Company
shall have the option to redeem the Notes, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on August 15, of the years indicated below:
YEAR PERCENTAGE
1998 .................................................... 105.500%
1999 .................................................... 104.125%
2000 .................................................... 102.750%
2001 .................................................... 101.375%
2002 and thereafter ..................................... 100.000%
(b) Notwithstanding paragraph (a) above, at any time prior to August 15,
1996, the Company may redeem Notes with the net proceeds of an initial public
offering of common stock of the Holding Company, to the extent such net proceeds
are contributed to the Company as common equity, at a redemption price equal to
110% of the principal amount thereof, plus accrued and unpaid interest to the
redemption date; PROVIDED that at least $11.929 million in aggregate principal
amount of Notes remain outstanding immediately after the occurrence of such
redemption and that such redemption occurs within 30 days of the date of the
closing of such initial public offering.
6. MANDATORY REDEMPTION.
The Company will be required to make a mandatory sinking fund payment
on September 15, 2002 sufficient to retire by redemption on such mandatory
redemption date Notes equal to 40% of the aggregate principal amount of the
Notes authenticated and delivered under the Indenture (regardless of the
principal amount of Notes then outstanding) at a redemption price equal to 100%
of the aggregate principal amount thereof, plus accrued and unpaid interest
thereon. In satisfaction of all or part of the mandatory sinking fund payment
with respect to the Notes, the Company may elect to credit against such sinking
fund payment an amount equal to 100% of the principal amount (excluding
premiums) of any Notes that the Company has acquired (otherwise than pursuant to
Section 4.10 of the Indenture) and delivered to the Trustee for cancellation.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If the Company or any Subsidiary consummates any Asset Sales, within
five days of each date on which the aggregate amount of Excess Proceeds exceeds
$5 million, the Company shall commence an offer to all Holders of Notes (as
"Asset Sale Offer") pursuant to Sections 3.09 and 4.10 of the Indenture to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds based upon an offer price in cash in an amount equal to 100% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
date fixed for the closing of such offer in accordance with the procedures set
forth in Section 3.09 of the Indenture. 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 such Subsidiary) may use such deficiency for general
corporate purposes. 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
A-4
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.
(b) If the Company commences any Special Purpose Offer, pursuant to
Sections 3.10 and 4.19 or 9.07, Holders of Notes that are the subject to the
Special Purpose Offer will receive a Special Purpose Offer from the Company
prior to any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Special Option of Holder to Elect Purchase" on the
reverse of the Notes.
8. NOTICE OF REDEMPTION. 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.
9. SUBORDINATION. Each Holder by accepting a Note agrees that the
Indebtedness evidenced by each Note is subordinated in right of payment, to the
extent and in the manner provided in the Indenture, to the prior payment in full
of all Senior Debt (whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed or guaranteed), and that the subordination
is for the benefit of the holders of Senior Debt.
10. 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, the Company
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.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. 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 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 Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act. In addition,
pursuant to Section 9.07 of the Indenture, certain amendments, supplements and
waivers will take effect automatically if the required percentages of the
Company's 11% Series A and Series B Senior Subordinated Notes due 2003 consent
to such amendment, supplement or waiver.
A-5
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest on the Notes; (ii) 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 purchase) or otherwise, (iii) failure by the Company to comply
with Section 4.09, 4.10 or 5.01 of the Indenture, which failure remains uncured
for 30 days; (iv) failure by the Company for 60 days after notice to the Company
by the Trustee or the Holders of at least 25% in aggregate principal amount of
the Notes then outstanding to comply with certain other agreements in the
Indenture or the Notes; (v) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness 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 the Indenture, which default (a) is caused by a Payment
Default or (b) has resulted 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 $5 million or more; (vi) 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 Material Subsidiaries and such
judgment or judgments remain undischarged for a period (during which execution
shall not be effectively stayed) of 60 days, PROVIDED that the aggregate of all
such undischarged judgments exceeds $5 million; (vii) certain events of
bankruptcy or insolvency with respect to the Company. 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 immediately; PROVIDED, that so long as any Indebtedness
permitted to be incurred pursuant to clause (a) of the second paragraph of
Section 4.09 of the Indenture shall be outstanding, such acceleration shall not
be effective until the earlier of (i) an acceleration under any such
Indebtedness or (ii) five business days after receipt by the Company of written
notice of such acceleration of the Notes. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Company, any Significant Subsidiary or any group
of Material Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Notes pursuant to
the optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law.
If an Event of Default occurs prior to August 15, 1998 by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Notes prior to
such date, then the premium specified in the Indenture shall also become
immediately due and payable to the extent permitted by law. 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.
A-6
14. TRUSTEE DEALINGS WITH 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 Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture 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.
16. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. 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).
18. 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 referred to above.
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:
Specialty Retailers, Inc.
10201 Main Street
Houston, Texas 77025
Attention: Chief Financial Officer
A-7
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
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10, check the box below:
[ ] Section 4.10
Date: ____________________ Your Signature: __________________________________
(Sign exactly as your name appears
on the Note)
Tax Identification No.: ____________
Signature Guarantee.
A-9
SPECIAL OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.19 or Section 9.07 of the Indenture, check the box below:
[ ] Section 4.19 [ ] Section 9.07
Date: ____________________ Your Signature: __________________________________
(Sign exactly as your name appears
on the Note)
Tax Identification No.: _____________
Signature Guarantee.
A-10
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTE2
The following exchanges of a part of this Global Note for Definitive
Notes have been made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase in Principal Amount of Signature of
Principal Amount of Principal Amount of this Global Note authorized officer
this this following such of Trustee or
Date of Exchange Global note Global Note decrease (or increase) Note Custodian
- ---------------- --------------------- ---------------------- ---------------------- ------------------
<S> <C>
</TABLE>
- --------
2. This should be included only if the Debenture is issued in global form.
A-11
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF NOTES
Re: 11% Series [C/D/other] Senior Subordinated Notes
due 2003 of Specialty Retailers, Inc.
This Certificate relates to $_____ principal amount of Notes held in
*_______________ book-entry or *______________ definitive 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 Depository a Note or
Notes in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such Global Note
(or the portion thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes.
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 (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
[ ] 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
Exhibit 4.17
-1-
FIFTH AMENDMENT
TO REVOLVING CREDIT AGREEMENT
Fifth Amendment to Revolving Credit Agreement dated as of July 7, 1995
(the "FIFTH AMENDMENT"), by and among SPECIALTY RETAILERS, INC., a Delaware
corporation ("SRI"), PALAIS ROYAL, INC., a Texas corporation (the "BORROWER"),
THE FIRST NATIONAL BANK OF BOSTON and the other lending institutions listed on
SCHEDULE 1 to the Credit Agreement (as hereinafter defined) (the "BANKS") and
THE FIRST NATIONAL BANK OF BOSTON, as agent for the Banks (in such capacity, the
"AGENT"), amending certain provision of the Revolving Credit Agreement dated as
of January 28, 1994 (as amended and in effect from time to time, the "CREDIT
AGREEMENT") by and among SRI, the Borrower, the Banks and the Agent. Terms not
otherwise defined herein which are defined in the Credit Agreement shall have
the same respective meanings herein as therein.
WHEREAS, SRI, the Borrower, the Banks and the Agent have agreed to
modify certain terms and conditions of the Credit Agreement as specifically set
forth in this Fifth Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ss.1. AMENDMENT TO ss.1 OF THE CREDIT AGREEMENT. Section 1.1 of the
Credit Agreement is hereby amended by inserting the following definitions in the
appropriate alphabetical order:
"SZOLDS. Szolds, Inc., a ____________ corporation."
"SZOLDS ACQUISITION. The acquisition by the
Borrower of certain of the assets of Szolds pursuant to the
terms of the Szolds Purchase Agreement."
"SZOLDS PURCHASE AGREEMENT. The [Purchase and Sale
Agreement] dated as of May 5, 1995 between Szolds and the
Borrower, which agreement shall be in form and substance
satisfactory to the Agent."
ss.2. AMENDMENT TO ss.9 OF THE CREDIT AGREEMENT. Section 9 of the
Credit Agreement is hereby amended by deleting ss.9.5.1 in its entirety and
restating it as follows:
"9.5.1. MERGERS AND ACQUISITIONS. Neither SRI nor the
Borrower will become a party to any merger or consolidation, or agree
to or effect any asset
-2-
acquisition or stock acquisition (other than the acquisition of assets
in the ordinary course of business consistent with past practice or the
merger of SRI and the Borrower) except the Borrower may effect the
Acquisition, the Kline Acquisition, the Mammoth Acquisition and the
Szolds Acquisition, PROVIDED, that (a) no Default or Event of Default
has occurred or is continuing or would exist after giving effect
thereto; (b) the Borrower has provided the Agent with prior written
notice of each of the Acquisition, the Kline Acquisition, the Mammoth
Acquisition and the Szolds Acquisition; (c) the aggregate total
consideration for (i) the Acquisition does not exceed, in the
aggregate, $21,400,000, and the consideration for assets acquired in
the Acquisition other than the Purchased Receivables does not exceed
$5,000,000 in the aggregate; (ii) the Kline Acquisition does not
exceed, in the aggregate, $200,000; (iii) the Mammoth Acquisition does
not exceed, in the aggregate, $1,800,000; and (iv) the Szolds
Acquisition does not exceed, in the aggregate, $500,000, and (d) the
Borrower has demonstrated to the Agent based on a PRO FORMA Compliance
Certificate covenant compliance with ss.10 on a PRO FORMA basis
immediately prior to and after giving effect to each of the
Acquisition, the Kline Acquisition, the Mammoth Acquisition and the
Szolds Acquisition on the assumption that each such acquisition
occurred at the beginning of the covenant calculations period.
In the event any new Subsidiary is formed as a result of or in
connection with the Acquisition, the Kline Acquisition, the Mammoth
Acquisition or the Szolds Acquisition, the Loan Documents shall be
amended and/or supplemented as necessary to make the terms and
conditions of the Loan Documents applicable to such Subsidiary, and
such Subsidiary shall be required to execute and deliver to the Agent
(a) a guaranty satisfactory to the Agent guaranteeing the Obligations
of the Borrower to the Agent and the Banks and (b) a security agreement
and such other security documents as the Agent and the Banks shall
require in order to grant to the Agent for the benefit of the Agent and
the Banks a first priority perfected security interest in all of such
new Subsidiary's assets.
ss.3. AMENDMENT TO ss.10 OF THE CREDIT AGREEMENT. Section 10 of the
Credit Agreement is hereby amended as follows:
(a) Section 10.1 of the Credit Agreement is hereby amended by
deleting the table set forth in ss.10.1 in its entirety and restating its as
follows:
Period Ratio
------ -----
Fiscal Quarters ending April 29, 1995
through October 28, 1995............................ 0.90:1.00
Fiscal Quarter ending February 3, 1996................ 1.25:1.00
Fiscal Quarters ending May 4, 1996
through February 1, 1997............................ 1.30:1.00
-3-
each fiscal quarter thereafter........................ 1.40:1.00
(b) Section 10 of the Credit Agreement is further amended by inserting
immediately after the text of ss.10.1 the following:
ss.10.2 CAPITAL EXPENDITURES. The Borrower will not make,
or permit any Subsidiary to make, Capital Expenditures (including any
expenditures made in connection with any permitted acquisitions) in
the fiscal year ending February 3, 1996 that exceed, in the aggregate,
$28,000,000 for such fiscal year.
ss.4. CONDITIONS TO EFFECTIVENESS. This Fifth Amendment shall not
become effective until the Agent receives the following:
(a) a counterpart of this Fifth Amendment executed by SRI,
the Borrower, the Banks and the Agent;
(b) a copy of the Szolds Purchase Agreement, pursuant to which
the Borrower will be acquiring certain assets of Szolds (the "Proposed
Szolds Acquisition"), which Szolds Purchase Agreement shall be in form
and substance satisfactory to the Agent and the Banks;
(c) a PRO FORMA Compliance Certificate demonstrating
compliance with ss.10 of the Credit Agreement on a PRO FORMA basis
immediately prior to and after giving effect to the Proposed Szolds
Acquisition on the assumption that such acquisition occurred at the
beginning of the covenant calculations period;
(d) a letter from the Borrower and SRI detailing any changes
to the Perfection Certificate of the Borrower or SRI as a result of the
Proposed Szolds Acquisition;
(e) evidence satisfactory to the Agent that the assets to be
acquired pursuant to the Proposed Szolds Acquisition will be acquired
free and clear of any and all liens and encumbrances, which evidence
shall include but not be limited to, copies of filed UCC-3 termination
statements and mortgage discharges; and
(f) any UCC-1 financing statements and other documents and
instruments requested by the Agent in order to grant to the Agent,
for the benefit of the Banks and the Agent, a perfected first priority
security interest in the assets acquired pursuant to the Proposed
Szolds Acquisition which constitute general intangibles; and
ss.5. REPRESENTATIONS AND WARRANTIES. Each of SRI and the Borrower
hereby repeats, on and as of the date hereof, each of the representations and
warranties made by it in ss.7 of the Credit Agreement, PROVIDED, that all
references therein to the Credit Agreement shall refer to such Credit Agreement
as amended hereby.
ss.6. RATIFICATION, ETC. Except as expressly amended hereby, the
Credit Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the
-4-
Security Documents, are hereby ratified and confirmed in all respects and shall
continue in full force and effect. The Credit Agreement and this Fifth Amendment
shall be read and construed as a single agreement. All references in the Credit
Agreement or any related agreement or instrument to the Credit Agreement shall
hereafter refer to the Credit Agreement as amended hereby.
ss.7. NO WAIVER. Nothing contained herein shall constitute a waiver of,
impair or otherwise affect any Obligations, any other obligation of SRI, the
Borrower or any rights of the Agent or the Banks consequent thereon.
ss.8. COUNTERPARTS. This Fifth Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but which together
shall constitute one and the same instrument.
ss.9. GOVERNING LAW. THIS FIFTH AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-5-
IN WITNESS WHEREOF, the parties hereto have executed this Fifth
Amendment as a document under seal as of the date first above written.
SPECIALTY RETAILERS, INC.
By: JERRY C. IVIE
Title: Senior Vice President,
Secretary and Treasurer
PALAIS ROYAL, INC.
By: JERRY C. IVIE
Title: Senior Vice President,
Secretary and Treasurer
THE FIRST NATIONAL BANK
OF BOSTON, individually and
as Agent
By: BRIAN GARRETY
Title: Vice President
UNION BANK
By: ANITA HOLLINGSWORTH
Title: Vice President
-6-
RATIFICATION OF GUARANTY
The undersigned guarantor (the "Guarantor") hereby acknowledges and
consents to the foregoing Fifth Amendment as of July 7, 1995 and agrees that the
Guaranty dated as of January 28, 1994, in favor of the Agent for the benefit of
the Agent and the Banks, and all other Loan Documents to which the Guarantor is
a party remain in full force and effect, and the Guarantor confirms and ratifies
all of its obligations thereunder.
SPECIALTY RETAILERS, INC.
By: JERRY C. IVIE
Title: Senior Vice President,
Secretary and Treasurer
<PAGE>
Exhibit 4.18
-1-
SIXTH AMENDMENT
TO REVOLVING CREDIT AGREEMENT
Sixth Amendment to Revolving Credit Agreement dated as of July 27, 1995
(the "SIXTH AMENDMENT"), by and among SPECIALTY RETAILERS, INC., a Delaware
corporation ("SRI"), PALAIS ROYAL, INC., a Texas corporation (the "BORROWER"),
THE FIRST NATIONAL BANK OF BOSTON and the other lending institutions listed on
SCHEDULE 1 to the Credit Agreement (as hereinafter defined) (the "BANKS") and
THE FIRST NATIONAL BANK OF BOSTON, as agent for the Banks (in such capacity, the
"AGENT"), amending certain provisions of the Revolving Credit Agreement dated as
of January 28, 1994 (as amended and in effect from time to time, the "CREDIT
AGREEMENT") by and among SRI, the Borrower, the Banks and the Agent. Terms not
otherwise defined herein which are defined in the Credit Agreement shall have
the same respective meanings herein as therein.
WHEREAS, SRI, the Borrower, the Banks and the Agent have agreed to
modify certain terms and conditions of the Credit Agreement as specifically set
forth in this Sixth Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ss.1. AMENDMENT TO ss.1 OF THE CREDIT AGREEMENT. Section 1.1 of the
Credit Agreement is hereby amended as follows:
(a) The definition of "Subordinated Debt" is hereby amended by
inserting immediately after the words "The Senior Subordinated Notes" in the
first sentence of such definition a comma and the words "the SRI Subordinated
Notes"; and
(b) By inserting the following definitions in the appropriate
alphabetical order:
"SRI SUBORDINATED NOTES. The 11% Series C Senior
Subordinated Notes Due 2003 and the 11% Series D Senior
Subordinated Notes Due 2003, issued pursuant to the SRI
Subordinated Notes Indenture in aggregate principal amount not
to exceed $18,250,000."
"SRI SUBORDINATED NOTES INDENTURE. The Indenture,
dated as of July 27, 1995, entered into between SRI and The
First National Bank of Boston as Trustee in connection with
the issuance of the SRI Subordinated Notes, in the form of the
counterpart previously delivered to the Agent, and as amended,
supplemented or modified from time to time as permitted by
ss.9.9."
-2-
ss.2. AMENDMENT TO ss.8 OF THE CREDIT AGREEMENT. Section 8 of the
Credit Agreement is hereby amended by inserting immediately after ss.8.13 the
following:
ss.8.14. USE OF PROCEEDS OF SRI SUBORDINATED NOTES. SRI will
use the proceeds of the SRI Subordinated Notes solely for general
corporate purposes, including permitted acquisitions, of SRI and its
Subsidiaries.
ss.3. CONDITIONS TO EFFECTIVENESS. This Sixth Amendment shall not
become effective until the Agent receives the following:
(a) a counterpart of this Sixth Amendment executed by SRI, the
Borrower, the Banks and the Agent;
(b) a copy of the SRI Subordinated Notes Indenture and the SRI
Subordinated Notes, which SRI Subordinated Notes Indenture and SRI
Subordinated Notes shall be in form and substance satisfactory to the
Agent;
(c) evidence satisfactory to the Agent of the effectiveness of
the SRI Subordinated Notes Indenture;
(d) corporate resolutions of each of SRI and the Borrower
authorizing the transactions contemplated by this Sixth Amendment and
the SRI Subordinated Notes Indenture;
(e) a legal opinion of Kirkland & Ellis, counsel to SRI and
the Borrower, as to authorization, execution and delivery of this
Sixth Amendment, the SRI Subordinated Notes and SRI Subordinated Notes
Indenture and an opinion that the Indebtedness incurred pursuant to the
SRI Subordinated Notes Indenture constitutes Subordinated Debt;
(f) an amended and restated side letter between the Banks, the
Agent and the Borrower as to repayments under the Credit Agreement; and
(g) payment to the Agent, for the respective accounts of the
Banks, of an amendment fee in the amount of $10,000.
ss.4. REPRESENTATIONS AND WARRANTIES. Each of SRI and the Borrower
hereby repeats, on and as of the date hereof, each of the representations and
warranties made by it in ss.7 of the Credit Agreement, PROVIDED, that all
references therein to the Credit Agreement shall refer to such Credit Agreement
as amended hereby.
ss.5. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this Sixth Amendment shall be read and construed as a
-3-
single agreement. All references in the Credit Agreement or any related
agreement or instrument to the Credit Agreement shall hereafter refer to the
Credit Agreement as amended hereby.
ss.6. NO WAIVER. Nothing contained herein shall constitute a waiver of,
impair or otherwise affect any Obligations, any other obligation of SRI, the
Borrower or any rights of the Agent or the Banks consequent thereon.
ss.7. COUNTERPARTS. This Sixth Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
ss.8. GOVERNING LAW. THIS SIXTH AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-4-
IN WITNESS WHEREOF, the parties hereto have executed this Sixth
Amendment as a document under seal as of the date first above written.
SPECIALTY RETAILERS, INC.
By: JERRY C. IVIE
Title: Senior Vice President,
Secretary and Treasurer
PALAIS ROYAL, INC.
By: RONALD H. SELLS
Title: VP Controller
THE FIRST NATIONAL BANK
OF BOSTON, individually and
as Agent
By: BRIAN GARRETY
Title: V.P.
UNION BANK
By: ANITA HOLLINGSWORTH
Title: Vice President
-5-
RATIFICATION OF GUARANTY
The undersigned guarantor (the "Guarantor") hereby acknowledges and
consents to the foregoing Sixth Amendment as of July 27, 1995 and agrees that
the Guaranty dated as of January 28, 1994, in favor of the Agent for the benefit
of the Agent and the Banks, and all other Loan Documents to which the Guarantor
is a party remain in full force and effect, and the Guarantor confirms and
ratifies all of its obligations thereunder.
SPECIALTY RETAILERS, INC.
By: JERRY C. IVIE
Title: Senior Vice President,
Secretary and Treasurer
<PAGE>
Exhibit 4.20
-1-
FIRST AMENDMENT
TO REVOLVING CREDIT AGREEMENT
First Amendment to Revolving Credit Agreement dated as of July 7, 1995
(the "FIRST AMENDMENT"), by and among SPECIALTY RETAILERS, INC., a Delaware
corporation ("SRI"), PALAIS ROYAL, INC., a Texas corporation (the "BORROWER"),
THE FIRST NATIONAL BANK OF BOSTON and the other lending institutions listed on
SCHEDULE 1 to the Credit Agreement (as hereinafter defined) (the "BANKS") and
THE FIRST NATIONAL BANK OF BOSTON, as agent for the Banks (in such capacity, the
"AGENT"), amending certain provision of the Revolving Credit Agreement dated as
of March 31, 1995 (as amended and in effect from time to time, the "CREDIT
AGREEMENT") by and among SRI, the Borrower, the Banks and the Agent. Terms not
otherwise defined herein which are defined in the Credit Agreement shall have
the same respective meanings herein as therein.
WHEREAS, SRI, the Borrower, the Banks and the Agent have agreed to
modify certain terms and conditions of the Credit Agreement as specifically set
forth in this First Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ss.1. AMENDMENT TO ss.1 OF THE CREDIT AGREEMENT. Section 1.1 of the
Credit Agreement is hereby amended as follows:
(a) by inserting the following definitions in the appropriate
alphabetical order:
"SZOLDS. Szolds, Inc., a ____________ corporation."
"SZOLDS ACQUISITION. The acquisition by the Borrower
of certain of the assets of Szolds pursuant to the terms of
the Szolds Purchase Agreement."
"SZOLDS PURCHASE AGREEMENT. The [Purchase and Sale
Agreement] dated as of May 5, 1995 between Szolds and the
Borrower, which agreement shall be in form and substance
satisfactory to the Agent."
ss.2. AMENDMENT TO ss.8 OF THE CREDIT AGREEMENT. Section 8.5.1 of the
Credit Agreement is hereby amended by deleting ss.8.5.1 in its entirety and
restating it as follows:
"8.5.1. MERGERS AND ACQUISITIONS. Neither SRI nor the Borrower
will become a party to any merger or consolidation, or agree to or
effect any asset
-2-
acquisition or stock acquisition (other than the acquisition of assets
in the ordinary course of business consistent with past practice or the
merger of SRI and the Borrower) except the Borrower may effect the
Szolds Acquisition, PROVIDED, that (a) no Default or Event of Default
has occurred or is continuing or would exist after giving effect
thereto; (b) the Borrower has provided the Agent with prior written
notice of the Szolds Acquisition; (c) the aggregate total consideration
for the Szolds Acquisition does not exceed, in the aggregate, $500,000,
and (d) the Borrower has demonstrated to the Agent based on a PRO FORMA
Compliance Certificate covenant compliance with ss.9 on a PRO FORMA
basis immediately prior to and after giving effect to the Szolds
Acquisition on the assumption that such acquisition occurred at the
beginning of the covenant calculations period.
In the event any new Subsidiary is formed as a result of or in
connection with any acquisition permitted by this ss.8.5.1, the Loan
Documents shall be amended and/or supplemented as necessary to make the
terms and conditions of the Loan Documents applicable to such
Subsidiary, and such Subsidiary shall be required to execute and
deliver to the Agent a guaranty satisfactory to the Agent guaranteeing
the Obligations of the Borrower to the Agent and the Banks.
ss.3. AMENDMENT TO ss.9 OF THE CREDIT AGREEMENT. Section 9 of the
Credit Agreement is hereby amended as follows:
(a) Section 9.1 of the Credit Agreement is hereby amended by deleting
the table set forth in ss.10.1 in its entirety and restating its as follows:
Period Ratio
------ -----
Fiscal Quarters ending April 29, 1995
through October 28, 1995 ........................... 0.90:1.00
Fiscal Quarter ending February 3, 1996 ............... 1.25:1.00
Fiscal Quarters ending May 4, 1996
through February 1, 1997 ........................... 1.30:1.00
each fiscal quarter thereafter ....................... 1.40:1.00
(b) Section 9 of the Credit Agreement is further amended by inserting
immediately after the text of ss.9.1 the following:
ss.9.2 CAPITAL EXPENDITURES. The Borrower will not make, or
permit any Subsidiary to make, Capital Expenditures (including any
expenditures made in connection with any permitted acquisitions) in the
fiscal year ending February 3, 1996 that exceed, in the aggregate,
$28,000,000 for such fiscal year.
-3-
ss.4. CONDITIONS TO EFFECTIVENESS. This First Amendment shall not
become effective until the Agent receives the following:
(a) a counterpart of this First Amendment executed by SRI, the
Borrower, the Banks and the Agent;
(b) a copy of the Szolds Purchase Agreement, pursuant to which
the Borrower will be acquiring certain assets of Szolds (the "Proposed
Szolds Acquisition"), which Szolds Purchase Agreement shall be in form
and substance satisfactory to the Agent and the Banks;
(c) a PRO FORMA Compliance Certificate demonstrating
compliance with ss.9 of the Credit Agreement on a PRO FORMA basis
immediately prior to and after giving effect to the Proposed Szolds
Acquisition on the assumption that such acquisition occurred at the
beginning of the covenant calculations period; and
(d) evidence satisfactory to the Agent that the assets to be
acquired pursuant to the Proposed Szolds Acquisition will be acquired
free and clear of any and all liens and encumbrances, which evidence
shall include but not be limited to, copies of filed UCC-3 termination
statements and mortgage discharges.
ss.5. REPRESENTATIONS AND WARRANTIES. Each of SRI and the Borrower
hereby repeats, on and as of the date hereof, each of the representations and
warranties made by it in ss.6 of the Credit Agreement, PROVIDED, that all
references therein to the Credit Agreement shall refer to such Credit Agreement
as amended hereby.
ss.6. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
Agreement and all documents, instruments and agreements related thereto are
hereby ratified and confirmed in all respects and shall continue in full force
and effect. The Credit Agreement and this First Amendment shall be read and
construed as a single agreement. All references in the Credit Agreement or any
related agreement or instrument to the Credit Agreement shall hereafter refer to
the Credit Agreement as amended hereby.
ss.7. NO WAIVER. Nothing contained herein shall constitute a waiver of,
impair or otherwise affect any Obligations, any other obligation of SRI, the
Borrower or any rights of the Agent or the Banks consequent thereon.
ss.8. COUNTERPARTS. This First Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
ss.9. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-4-
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as a document under seal as of the date first above written.
SPECIALTY RETAILERS, INC.
By: JERRY C. IVIE
Title: Senior Vice President,
Secretary and Treasurer
PALAIS ROYAL, INC.
By: JERRY C. IVIE
Title: Senior Vice President,
Secretary and Treasurer
THE FIRST NATIONAL BANK
OF BOSTON, individually and
as Agent
By: BRIAN GARRETY
Title: Vice President
UNION BANK
By: ANITA HOLLINGSWORTH
Title: Vice President
-5-
RATIFICATION OF GUARANTY
The undersigned guarantor (the "Guarantor") hereby acknowledges and
consents to the foregoing First Amendment as of July 7, 1995 and agrees that the
Guaranty dated as of March 31, 1995, in favor of the Agent for the benefit of
the Agent and the Banks, and all other Loan Documents to which the Guarantor is
a party remain in full force and effect, and the Guarantor confirms and ratifies
all of its obligations thereunder.
SPECIALTY RETAILERS, INC.
By: JERRY C. IVIE
Title: Senior Vice President,
Secretary and Treasurer
<PAGE>
Exhibit 4.21
-1-
SECOND AMENDMENT
TO REVOLVING CREDIT AGREEMENT
Second Amendment to Revolving Credit Agreement dated as of July 27,
1995 (the "SECOND AMENDMENT"), by and among SPECIALTY RETAILERS, INC., a
Delaware corporation ("SRI"), PALAIS ROYAL, INC., a Texas corporation (the
"BORROWER"), THE FIRST NATIONAL BANK OF BOSTON and the other lending
institutions listed on SCHEDULE 1 to the Credit Agreement (as hereinafter
defined) (the "BANKS") and THE FIRST NATIONAL BANK OF BOSTON, as agent for the
Banks (in such capacity, the "AGENT"), amending certain provisions of the
Revolving Credit Agreement dated as of March 31, 1995 (as amended and in effect
from time to time, the "CREDIT AGREEMENT") by and among SRI, the Borrower, the
Banks and the Agent. Terms not otherwise defined herein which are defined in the
Credit Agreement shall have the same respective meanings herein as therein.
WHEREAS, SRI, the Borrower, the Banks and the Agent have agreed to
modify certain terms and conditions of the Credit Agreement as specifically set
forth in this Second Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ss.1. AMENDMENT TO ss.1 OF THE CREDIT AGREEMENT. Section 1.1 of the
Credit Agreement is hereby amended as follows:
(a) The definition of "Subordinated Debt" is hereby amended by
inserting immediately after the words "The Senior Subordinated Notes" in the
first sentence of such definition a comma and the words "the SRI Subordinated
Notes"; and
(b) By inserting the following definitions in the appropriate
alphabetical order:
"SRI SUBORDINATED NOTES. The 11% Series C Senior
Subordinated Notes Due 2003 and the 11% Series D Senior
Subordinated Notes Due 2003, issued pursuant to the SRI
Subordinated Notes Indenture in aggregate principal amount not
to exceed $18,250,000."
"SRI SUBORDINATED NOTES INDENTURE. The Indenture,
dated as of July 27, 1995, entered into between SRI and The
First National Bank of Boston as Trustee in connection with
the issuance of the SRI Subordinated Notes, in the form of the
counterpart previously delivered to the Agent, and as amended,
supplemented or modified from time to time as permitted by
ss.8.9."
-2-
ss.2. AMENDMENT TO ss.7 OF THE CREDIT AGREEMENT. Section 7 of the
Credit Agreement is hereby amended by inserting immediately after ss.7.13 the
following:
ss.7.14. USE OF PROCEEDS OF SRI SUBORDINATED NOTES. SRI will
use the proceeds of the SRI Subordinated Notes solely for general
corporate purposes, including permitted acquisitions, of SRI and its
Subsidiaries.
ss.3. AMENDMENT TO ss.8 OF THE CREDIT AGREEMENT. Section 8 of the
Credit Agreement is hereby amended as follows:
(a) Section 8.4 of the Credit Agreement is hereby amended by deleting
the text of ss.8.4 in its entirety and substituting in place thereof the words
"Neither SRI nor the Borrower will make any Distributions to any Person other
than ARI or any of its Subsidiaries."; and
(b) Section 8.5.2 of the Credit Agreement is hereby amended by (i)
deleting the word "and" which appears immediately before the letter "(d)" in the
first sentence (tenth line) of ss.8.5.2 and (ii) inserting immediately after the
words "in any fiscal year" at the end of ss.8.5.2 the words "and (e) the
disposition of assets to ARI or any of its Subsidiaries".
ss.4. CONDITIONS TO EFFECTIVENESS. This Second Amendment shall not
become effective until the Agent receives the following:
(a) a counterpart of this Second Amendment executed by SRI,
the Borrower, the Banks and the Agent;
(b) a copy of the SRI Subordinated Notes Indenture and the SRI
Subordinated Notes, which SRI Subordinated Notes Indenture and SRI
Subordinated Notes shall be in form and substance satisfactory to the
Agent;
(c) evidence satisfactory to the Agent of the effectiveness
of the SRI Subordinated Notes Indenture;
(d) corporate resolutions of each of SRI and the Borrower
authorizing the transactions contemplated by this Second Amendment and
the SRI Subordinated Notes Indenture;
(e) a legal opinion of Kirkland & Ellis, counsel to SRI and
the Borrower, as to authorization, execution and delivery of this
Second Amendment, the SRI Subordinated Notes and SRI Subordinated Notes
Indenture and an opinion that the Indebtedness incurred pursuant to the
SRI Subordinated Notes Indenture constitutes Subordinated Debt; and
(f) an amended and restated side letter between the Banks, the
Agent and the Borrower as to repayments under the Credit Agreement.
ss.4. REPRESENTATIONS AND WARRANTIES. Each of SRI and the Borrower
hereby repeats, on and as of the date hereof, each of the representations and
warranties made by it in ss.6 of the
-3-
Credit Agreement, PROVIDED, that all references therein to the Credit Agreement
shall refer to such Credit Agreement as amended hereby.
ss.5. RATIFICATION, ETC. Except as expressly amended hereby, the Credit
Agreement and all documents, instruments and agreements related thereto, are
hereby ratified and confirmed in all respects and shall continue in full force
and effect. The Credit Agreement and this Second Amendment shall be read and
construed as a single agreement. All references in the Credit Agreement or any
related agreement or instrument to the Credit Agreement shall hereafter refer to
the Credit Agreement as amended hereby.
ss.6. NO WAIVER. Nothing contained herein shall constitute a waiver of,
impair or otherwise affect any Obligations, any other obligation of SRI, the
Borrower or any rights of the Agent or the Banks consequent thereon.
ss.7. COUNTERPARTS. This Second Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but which together
shall constitute one and the same instrument.
ss.8. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-4-
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as a document under seal as of the date first above written.
SPECIALTY RETAILERS, INC.
By: JERRY C. IVIE
Title: Senior Vice President,
Secretary and Treasurer
PALAIS ROYAL, INC.
By: RONALD H. SELLS
Title: VP Controller
THE FIRST NATIONAL BANK
OF BOSTON, individually and
as Agent
By: BRIAN GARRETY
Title: Vice President
UNION BANK
By: ANITA HOLLINGSWORTH
Title: Vice President
-5-
RATIFICATION OF GUARANTY
The undersigned guarantor (the "Guarantor") hereby acknowledges and
consents to the foregoing Second Amendment as of July 27, 1995 and agrees that
the Guaranty dated as of March 31, 1995, in favor of the Agent for the benefit
of the Agent and the Banks, and all other Loan Documents to which the Guarantor
is a party remain in full force and effect, and the Guarantor confirms and
ratifies all of its obligations thereunder.
SPECIALTY RETAILERS, INC.
By: JERRY C. IVIE
Title: Senior Vice President,
Secretary and Treasurer
<PAGE>
Exhibit 4.26
SRI RECEIVABLES PURCHASE CO., INC.
Transferor
SPECIALTY RETAILERS, INC.
Servicer
and
BANKERS TRUST (DELAWARE)
Trustee
on behalf of Certificateholders
of the SRI Receivables Master Trust
----------------------------------------------------------
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of August 11, 1995
-1-
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS................................................. 1
Section 1.1 Definitions.......................................... 1
Section 1.2 Other Definitional Provisions........................ 22
ARTICLE II CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES........................................... 24
Section 2.1 Conveyance of Receivables............................ 24
Section 2.2 Acceptance by Trustee................................ 27
Section 2.3 Representations and Warranties of the Transferor..... 27
Section 2.4 Representations and Warranties of the Transferor
Relating to this Agreement and the Receivables.............. 30
Section 2.5 Covenants of the Transferor.......................... 35
Section 2.6 Addition of Accounts................................. 38
Section 2.7 Removal of Accounts.................................. 42
Section 2.8 Discount Option...................................... 44
ARTICLE III ADMINISTRATION AND SERVICING
OF RECEIVABLES..................................................... 45
Section 3.1 Acceptance of Appointment and Other Matters
Relating to the Servicer.................................... 45
Section 3.2 Servicing Compensation............................... 46
Section 3.3 Representations and Warranties of the Servicer....... 47
Section 3.4 Reports and Records for the Trustee.................. 49
-i-
Section 3.5 Quarterly Servicer's Certificate..................... 51
Section 3.6 Annual Independent Accountants' Servicing Report..... 51
Section 3.7 Tax Treatment........................................ 52
Section 3.8 Adjustments.......................................... 52
Section 3.9 Notices to SRI....................................... 53
ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS..................................... 54
Section 4.1 Rights of Certificateholders......................... 54
Section 4.2 Establishment of Accounts............................ 54
Section 4.3 Collections and Allocations.......................... 56
ARTICLE V [ARTICLE V IS RESERVED AND SHALL BE SPECIFIED IN ANY
SUPPLEMENT WITH RESPECT TO ANY SERIES]............................. 61
ARTICLE VI THE CERTIFICATES............................................ 62
Section 6.1 The Certificates..................................... 62
Section 6.2 Authentication of Certificates....................... 62
Section 6.3 Registration of Transfer and Exchange of
Certificates................................................ 63
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates.... 65
Section 6.5 Persons Deemed Owners................................ 66
Section 6.6 Appointment of Paying Agent.......................... 66
Section 6.7 Access to List of Certificateholders' Names
and Addresses............................................... 67
Section 6.8 Authenticating Agent................................. 67
Section 6.9 Tender of Exchangeable Transferor Certificate........ 69
Section 6.10 Book-Entry Certificates.............................. 71
-ii-
Section 6.11 Notices to Clearing Agency........................... 72
Section 6.12 Definitive Certificates.............................. 72
Section 6.13 Global Certificate; Euro-Certificate Exchange
Date........................................................ 73
ARTICLE VII OTHER MATTERS RELATING TO
THE TRANSFEROR..................................................... 74
Section 7.1 Liability of the Transferor.......................... 74
Section 7.2 Merger or Consolidation of, or Assumption of
the Obligations of, the Transferor......................... 74
Section 7.3 Limitation on Liability.............................. 75
Section 7.4 Liabilities.......................................... 75
Section 7.5 Transferor's Records................................. 76
ARTICLE VIII OTHER MATTERS RELATING TO
THE SERVICER....................................................... 77
Section 8.1 Liability of the Servicer............................ 77
Section 8.2 Merger or Consolidation of, or Assumption of
the Obligations of, the Servicer............................ 77
Section 8.3 Limitation on Liability of the Servicer and
Others...................................................... 78
Section 8.4 Servicer Indemnification of the Transferor, the
Trust and the Trustee....................................... 78
Section 8.5 The Servicer Not to Resign........................... 79
Section 8.6 Access to Certain Documentation and Information
Regarding the Receivables................................... 79
Section 8.7 Delegation of Duties................................. 80
Section 8.8 Maintenance of Property; Insurance................... 80
-iii-
ARTICLE IX PAY OUT EVENTS.............................................. 82
Section 9.1 Pay Out Events....................................... 82
Section 9.2 Additional Rights Upon the Occurrence of
Certain Events.............................................. 82
ARTICLE X SERVICER DEFAULTS........................................... 85
Section 10.1 Servicer Defaults.................................... 85
Section 10.2 Trustee to Act; Appointment of Successor............. 87
Section 10.3 Notification to Certificateholders................... 89
Section 10.4 Waiver of Past Defaults.............................. 89
ARTICLE XI THE TRUSTEE................................................. 90
Section 11.1 Duties of Trustee.................................... 90
Section 11.2 Certain Matters Affecting the Trustee................ 92
Section 11.3 Trustee Not Liable for Recitals in Certificates...... 93
Section 11.4 Trustee May Own Certificates......................... 93
Section 11.5 The Servicer to Pay Trustee's Fees and Expenses...... 94
Section 11.6 Eligibility Requirements for Trustee................. 94
Section 11.7 Resignation or Removal of Trustee.................... 94
Section 11.8 Successor Trustee.................................... 95
Section 11.10 Appointment of Co-Trustee or Separate Trustee........ 96
Section 11.11 Tax Returns.......................................... 97
Section 11.12 Trustee May Enforce Claims Without Possession
of Certificates............................................. 98
Section 11.13 Suits for Enforcement................................ 98
Section 11.14 Rights of Certificateholders to Direct Trustee....... 98
-iv-
Section 11.15 Representations and Warranties of Trustee............ 98
Section 11.16 Maintenance of Office or Agency...................... 99
ARTICLE XII TERMINATION................................................. 100
Section 12.1 Termination of Trust................................. 100
Section 12.2 Optional Termination................................. 101
Section 12.3 Final Payment with Respect to any Series............. 102
Section 12.4 Termination Rights of Holder of Exchangeable
Transferor Certificate...................................... 103
ARTICLE XIII MISCELLANEOUS PROVISIONS.................................... 104
Section 13.1 Amendment............................................ 104
Section 13.2 Protection of Right, Title and Interest to Trust..... 106
Section 13.3 Limitation on Rights of Certificateholders........... 106
Section 13.4 Governing Law........................................ 107
Section 13.5 Notices.............................................. 107
Section 13.6 Severability of Provisions........................... 108
Section 13.7 Assignment........................................... 108
Section 13.8 Certificates Non-Assessable and Fully Paid........... 108
Section 13.9 Further Assurances................................... 108
Section 13.10 No Waiver; Cumulative Remedies....................... 109
Section 13.11 Counterparts......................................... 109
Section 13.12 Third-Party Beneficiaries............................ 109
Section 13.13 Actions by Certificateholders........................ 109
-v-
Section 13.14 Rule 144A Information................................ 110
Section 13.15 Merger and Integration............................... 110
Section 13.16 Headings............................................. 110
EXHIBIT A FORM OF EXCHANGEABLE TRANSFEROR CERTIFICATE................. A-1
EXHIBIT B FORM OF ASSIGNMENT OF RECEIVABLES IN SUPPLEMENTAL
ACCOUNTS........................................................... B-1
EXHIBIT C FORM OF DAILY REPORT........................................ C-1
EXHIBIT D FORM OF SETTLEMENT STATEMENT................................ D-1
EXHIBIT E FORM OF QUARTERLY SERVICER'S CERTIFICATE.................... E-1
EXHIBIT F FORM OF OPINION OF COUNSEL REGARDING SUPPLEMENTAL
ACCOUNTS........................................................... F-1
EXHIBIT G FORM OF ANNUAL OPINION OF COUNSEL........................... G-1
EXHIBIT H FORM OF REASSIGNMENT OF RECEIVABLES......................... H-1
EXHIBIT I FORM OF RECONVEYANCE OF RECEIVABLES......................... I-1
EXHIBIT J FORM OF AGREED-UPON PROCEDURES.............................. J-1
-vi-
<PAGE>
This AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, dated
as of August 11, 1995 ("THIS AGREEMENT") is by and among SRI RECEIVABLES
PURCHASE CO., INC., a corporation organized and existing under the laws of the
State of Delaware, as Transferor (the "TRANSFEROR"), SPECIALTY RETAILERS, INC.,
a corporation organized and existing under the laws of the State of Delaware, as
Servicer (the "SERVICER"), and BANKERS TRUST (DELAWARE), a banking corporation
organized and existing under the laws of the State of Delaware, as Trustee (the
"TRUSTEE").
WHEREAS, this Agreement was originally executed and delivered as
of July 30, 1993;
WHEREAS, this Agreement was amended by the First Amendment to
Pooling and Servicing Agreement dated October 7, 1994, and the Second Amendment
to Pooling and Servicing Agreement dated January 31, 1995, and is being amended
and restated pursuant to Section 13.1(a) hereof on the date hereof.
In consideration of the mutual agreements herein contained, each
party agrees as follows for the benefit of the other parties and the
Certificateholders:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:
"ACCOUNT INFORMATION" shall have the meaning specified in
subsection 2.2(b).
"ACCOUNT" shall mean (a) each credit card account established
pursuant to a Charge Account Agreement between an Originator and any Person, the
Receivables from which are designated for sale by an Originator to the
Transferor, which is identified by (i) an account number, (ii) the amount of
Receivables outstanding in such Account as of its Cut-Off Date and (iii) the
amount of Principal Receivables in such Account as of its Cut-Off Date, in each
case in the computer file or microfiche list delivered to the Trustee or the
bailee of the Trustee by the Transferor pursuant to this Agreement, (b) each
Automatic Additional Account, and (c) each Supplemental Account identified in
each file or list delivered to the Trustee or the bailee of the Trustee by the
Transferor pursuant to subsection 2.6(e) of this Agreement. The Definition of
Account shall include each Transferred Account but shall not include any Purged
Accounts. The term "Account" shall be deemed to refer to a Supplemental Account
only from and after the Addition Date with respect thereto, and the term
"Account" shall be deemed to refer to any Removed Account only prior to the
Removal Date with respect thereto.
"ACCOUNT PROPERTY" shall have the meaning specified in subsection
2.1(iv).
-1-
"ACTIVE ACCOUNTS" shall mean, as of any Business Day, any Account
in which there has been either purchase or merchandise return activity within
the preceding 12 Monthly Periods.
"ADDITION CUT-OFF DATE" shall mean each date as of which
Supplemental Accounts shall be selected and specified to be included as Accounts
pursuant to subsection 2.6(c) or (d).
"ADDITION DATE" shall mean each date as of which Receivables
under Supplemental Accounts are included in the Trust as Accounts pursuant to
subsection 2.6(c) or (d).
"ADDITIONAL ORIGINATOR AGREEMENT" has the meaning it is given in
the Receivables Purchase Agreement.
"ADJUSTMENT PAYMENT" shall have the meaning specified in
subsection 3.8(a).
"AFFILIATE" means, with respect to a particular Person,(a) any
Person that, directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person, or (b) any Person who is a director or
officer or general partner (i) of such Person, (ii) of any subsidiary of such
Person, or (iii) of any Person described in clause (a) above. For purposes of
this definition, control of a Person shall mean the power, direct or indirect,
(i) to vote 5% or more of the securities having ordinary voting power to elect
the directors of such Person, or (ii) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"AGGREGATE INVESTED AMOUNT" shall mean, as of any date of
determination, the sum of the Invested Amounts of all Series of Certificates
issued and outstanding on such date of determination.
"AGGREGATE INVESTOR PERCENTAGE" with respect to Principal
Collections, Finance Charge Collections and Receivables in Defaulted Accounts,
as the case may be, shall mean, as of any date of determination, the sum of such
Investor Percentages of all Series of Certificates issued and outstanding on
such date of determination; PROVIDED, HOWEVER, that the Aggregate Investor
Percentage shall not exceed 100%.
"AGGREGATE PRINCIPAL RECEIVABLES" shall mean, for any day, the
aggregate amount of Principal Receivables at the end of such day.
"AGREEMENT" shall mean this Pooling and Servicing Agreement and
all amendments hereof and supplements hereto, including any Supplement.
"AMORTIZATION PERIOD" shall mean, with respect to any Series, the
period following the related Revolving Period for such Series, which shall be
the Amortization Period, the Early Amortization Period, or other amortization or
accumulation period, in each case as defined with respect to such Series in the
related Supplement.
-2-
"AMORTIZATION PERIOD COMMENCEMENT DATE" shall mean with respect
to any Series, the date on which the Amortization Period with respect thereto
commences.
"APPLICANTS" shall have the meaning specified in Section 6.7.
"APPOINTMENT DAY" shall have the meaning specified in subsection
9.2(a).
"ASSIGNED PROPERTY" shall have the meaning specified in
subsection 2.1(iii).
"ASSIGNMENT" shall have the meaning specified in subsection
2.6(e)(ii).
"AUTHORIZED NEWSPAPER" shall mean a newspaper of general
circulation in the Borough of Manhattan, The City of New York printed in the
English language and customarily published on each Business Day, whether or not
published on Saturdays, Sundays and holidays.
"AUTOMATIC ADDITIONAL ACCOUNT" shall mean
(a) a consumer revolving credit card account (or any successor
credit card account designation used by the Transferor) coming into existence
after the applicable Cut-Off Date:
(i) which is originated by an Originator during the normal
operation of such Originator's credit card business and is not acquired
by the Transferor or such Originator from another credit card issuer;
(ii) which was in existence and owned by such Originator
and the Receivables of which had been transferred to the Transferor
pursuant to the Receivables Purchase Agreement on the date on which
Receivables generated in such account are to be added to the Trust and
is in existence at the close of business on the date of its designation
for inclusion in the Trust;
(iii) which is payable in Dollars;
(iv) the Receivables in which have not been charged off
prior to the date of their designation for inclusion in the Trust; and
(v) the Originator of which is an Originator on the date
hereof or has been designated as an "Originator" by the Transferor after
compliance with the requirements of clause (b); and
(b) any other consumer revolving credit card account, Receivables
from which each Rating Agency permits to be added automatically to the Trust;
PROVIDED that the Transferor (x) shall have received written confirmation from
each Rating Agency that the inclusion of such accounts as Automatic Additional
Accounts pursuant to this paragraph (b) will not result in the
-3-
reduction or withdrawal of its then existing rating of any Class of Investor
Certificates then issued and outstanding and (y) shall have delivered such
notice to the Trustee.
"BEARER CERTIFICATES" shall have the meaning specified in Section
6.1.
"BEARER RULES" shall mean the provisions of the Internal Revenue
Code, in effect from time to time, governing the treatment of bearer
obligations, including sections 163(f), 871, 881, 1441, 1442 and 4701, and any
regulations thereunder including, to the extent applicable to any Series,
proposed or temporary regulations of the Internal Revenue Service.
"BILLED FINANCE CHARGES" shall mean with respect to any Monthly
Period the amount of finance charges, late fees and other fees and charges
billed to Obligors on the Receivables.
"BOOK-ENTRY CERTIFICATES" shall mean certificates evidencing a
beneficial interest in the Investor Certificates, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 6.10; PROVIDED, that after the occurrence of a condition whereupon
book-entry registration and transfer are no longer authorized and Definitive
Certificates are to be issued to the Certificate Owners, such certificates shall
no longer be "Book-Entry Certificates."
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday
or a day on which banking institutions in New York, New York (or, with respect
to any Series, any additional city specified in the related Supplement) are
authorized or obligated by law or executive order to be closed, and such other
days in each year designated by the Servicer in writing to the Trustee by the
first day of December in the preceding year; PROVIDED, HOWEVER, that the
Servicer shall not designate more than eight days in each year (excluding
Saturdays and Sundays) as non-Business Days of which no more than four
(inclusive of Saturdays and Sundays) shall be consecutive.
"CASH EQUIVALENTS" shall mean, unless otherwise provided in the
Supplement with respect to any Series, (a) negotiable instruments or securities
represented by instruments in bearer or registered form which evidence (i)
obligations of or fully guaranteed by the United States of America; (ii) time
deposits, promissory notes, or certificates of deposit of any depositary
institution or trust company; PROVIDED, HOWEVER, that at the time of the Trust's
investment or contractual commitment to invest therein, the certificates of
deposit or short-term deposits of such depositary institution or trust company
shall have a credit rating from Standard & Poor's of A-1+; (iii) commercial
paper having, at the time of the Trust's investment or contractual commitment to
invest therein, a rating from Standard & Poor's of A-1+; (iv) bankers
acceptances issued by any depositary institution or trust company described in
clause (a)(ii) above; and (v) investments in money market funds rated AAA-m or
AAA-mg by Standard & Poor's or otherwise approved in writing by the Rating
Agency (PROVIDED that each such fund has offering materials which explicitly
state that such fund will not invest in derivative instruments); (b) time
deposits and demand deposits in the name of the Trust or the Trustee in any
depositary institution or trust company referred to in clause(a)(ii) above; (c)
securities not represented by an instrument that are registered in the name
-4-
of the Trustee or its nominee (which may not be SRI or an Affiliate) upon books
maintained for that purpose by or on behalf of the issuer thereof and identified
on books maintained for that purpose by the Trustee as held for the benefit of
the Trust or the Certificateholders, and consisting of (x) shares of an open end
diversified investment company which is registered under the Investment Company
Act which (i) invests its assets exclusively in obligations of or guaranteed by
the United States of America or any instrumentality or agency thereof having in
each instance a final maturity date of less than one year from their date of
purchase or other Permitted Investments, (ii) seeks to maintain a constant net
asset value per share, (iii) has aggregate net assets of not less than
$100,000,000 on the date of purchase of such shares, (iv) has offering materials
which explicitly state that such investment company will not invest in
derivative instruments and (v) which the Rating Agency designates in writing
will not result in a withdrawal or downgrading of its then current rating of any
Series rated by it or (y) Eurodollar time deposits of a depository institution
or trust company that are rated A-1+ by Standard & Poor's; PROVIDED HOWEVER,
that at the time of the Trust's investment or contractual commitment to invest
therein, the Eurodollar deposits of such depositary institution or trust company
shall have a credit rating from Standard & Poor's of A-1+; and (d) any other
investment if the Rating Agency confirms in writing that such investment will
not adversely affect its then current rating of the Investor Certificates.
"CEDEL" shall mean Cedel S.A.
"CERTIFICATE" shall mean any one of the Investor Certificates of
any Series or the Exchangeable Transferor Certificate.
"CERTIFICATEHOLDER" or "HOLDER" shall mean the Person in whose
name a Certificate is registered in the Certificate Register and, if applicable,
the holder of any Bearer Certificate or Coupon, as the case may be.
"CERTIFICATE INTEREST" shall mean interest payable in respect of
the Investor Certificates of any Series pursuant to Article IV of the Supplement
for such Series.
"CERTIFICATE OWNER" shall mean, with respect to a Book-Entry
Certificate, the Person who is the beneficial owner of such Book-Entry
Certificate, as may be reflected on the books of the Clearing Agency, or on the
books of a Person maintaining an account with such Clearing Agency (directly or
as an indirect participant, in accordance with the rules of such Clearing
Agency).
"CERTIFICATE PRINCIPAL" shall mean principal payable in respect
of the Investor Certificates of any Series pursuant to Article IV of this
Agreement.
"CERTIFICATE RATE" shall mean, with respect to any Series of
Certificates (or, for any Series with more than one Class, for each Class of
such Series), the percentage (or formula on the basis of which such rate shall
be determined) stated in the related Supplement; PROVIDED, that unless otherwise
provided in a Supplement, such rate shall be calculated on the basis of a
360-day year consisting of twelve 30-day months.
-5-
"CERTIFICATE REGISTER" shall mean the register maintained
pursuant to Section 6.3, providing for the registration of the Certificates and
transfers and exchanges thereof.
"CHARGE ACCOUNT AGREEMENT" means the agreement pursuant to which
a Person is obligated to pay for purchased merchandise or services under a
credit plan that permits such Person to purchase merchandise and services on
credit, together with any finance charges and other charges related thereto, as
such agreement may be amended, modified or supplemented from time to time;
PROVIDED that only agreements between such Person and (i) an Originator or (ii)
the creditor of an account approved by each Rating Agency as an Automatic
Additional Account or Supplemental Account shall be considered a Charge Account
Agreement hereunder.
"CLASS" shall mean, with respect to any Series, any one of the
classes of Certificates of that Series as specified in the related Supplement.
"CLEARING AGENCY" shall mean an organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended.
"CLEARING AGENCY PARTICIPANT" shall mean a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency or Foreign Clearing Agency effects book-entry transfers and
pledges of securities deposited with the Clearing Agency or Foreign Clearing
Agency.
"CLOSING DATE" shall mean, with respect to any Series, the date
of issuance of such Series of Certificates, as specified in the related
Supplement.
"COLLECTION ACCOUNT" shall have the meaning specified in
subsection 4.2(a).
"COLLECTIONS" shall mean all payments received by the Servicer in
respect of the Receivables, in the form of cash, checks or any other form of
payment in accordance with the Charge Account Agreement in effect from time to
time on any Receivables.
"COLLECTIONS IN PROCESS" shall have the meaning specified in
subsection 4.3(c)(iii).
"CORPORATE TRUST OFFICE" shall mean the principal office of the
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at 1001 Jefferson Street, Wilmington, Delaware 19801, Attention:
Corporate Trust and Agency Group.
"COUPON" shall have the meaning specified in Section 6.1.
"CREDIT AND COLLECTION POLICY" means the credit, collection,
customer relations and service policies of the Originators that apply to
Eligible Accounts, as such policies currently exist
-6-
and as such policies may be amended, modified or supplemented from time to time
subject to Section 5.2(c) of the Receivables Purchase Agreement.
"CUT-OFF DATE" shall mean, for Receivables in Accounts owned by
each Initial Originator, July 30, 1993, and for Receivables in Accounts owned by
each Additional Originator, the date specified as such in the Additional
Originator Agreement.
"DAILY REPORT" shall mean a report in the form specified in
subsection 1.2(e) as may be supplemented pursuant to any Supplement.
"DATE OF PROCESSING" shall mean, with respect to any transaction,
the date on which such transaction is first recorded on the Servicer's computer
master file of consumer revolving credit card accounts (without regard to the
effective date of such recordation).
"DEFAULT AMOUNT" shall mean, on any Business Day, the aggregate
amount of Principal Receivables in Accounts which became Defaulted Accounts on
such Business Day; it being understood that such amount shall not exclude any
Defaulted Receivables by reason of their repurchase pursuant to Section 2.4(f).
"DEFAULTED ACCOUNT" shall mean each Account with respect to
which, in accordance with the Credit and Collection Policy or the Servicer's
customary and usual servicing procedures, the Servicer has charged off the
Receivables in such Account as uncollectible; an Account shall become a
Defaulted Account on the day on which such Receivables are recorded as charged
off as uncollectible on the Servicer's computer master file of consumer credit
card revolving accounts. Notwithstanding any other provision hereof, any
Receivables in a Defaulted Account that are Ineligible Receivables shall be
treated as Ineligible Receivables rather than Receivables in Defaulted Accounts.
"DEFAULTED RECEIVABLE" means any Receivable in a Defaulted
Account.
"DEFAULTED RECEIVABLE RECEIPTS" shall have the meaning specified
in the definition for "Recoveries."
"DEFAULTED RECEIVABLE REPURCHASE AMOUNT" shall have the meaning
specified in subsection 2.4(f)(ii).
"DEFEASANCE ACCOUNT" shall have the meaning specified in the
applicable Supplement.
"DEFINITIVE CERTIFICATE" shall have the meaning specified in
Section 6.10.
"DEPOSITARY" shall have the meaning specified in Section 6.10.
-7-
"DEPOSITARY AGREEMENT" shall mean, with respect to each Series,
the agreement among the Transferor, the Trustee and the Clearing Agency, or as
otherwise provided in the related Supplement.
"DETERMINATION DATE" shall mean the second Business Day prior to
each Distribution Date.
"DISCOUNT OPTION RECEIVABLES" shall mean, on and after the date
on which the Transferor's exercise of its discount option pursuant to Section
2.8 takes effect, the sum of (a) the aggregate Discount Option Receivables at
the end of the prior day (which amount, prior to the date on which the
Transferor's exercise of its discount option takes effect and with respect to
Receivables generated prior to such date, shall be zero) PLUS (b) any New
Discount Option Receivables created on such day MINUS (c) any Discount Option
Receivables Collections received on such Date of Processing.
"DISCOUNT OPTION RECEIVABLES COLLECTIONS" shall mean on any Date
of Processing, on and after the date on which the Transferor's exercise of its
discount option pursuant to Section 2.8 takes effect, the product of (a) a
fraction the numerator of which is the amount of Discount Option Receivables and
the denominator of which is the sum of the Principal Receivables and the
Discount Option Receivables in each case (for both numerator and denominator) at
the end of the prior Monthly Period and (b) Collections of Principal Receivables
(without giving effect to the proviso in the definition of Principal
Receivables) created on each Date of Processing falling on or after the date on
which the Transferor exercises its discount option, received on such Date of
Processing.
"DISCOUNT PERCENTAGE" shall mean the fixed percentage, if any,
designated by the Transferor pursuant to Section 2.8.
"DISTRIBUTION ACCOUNT" shall have the meaning specified in
subsection 4.2(c).
"DISTRIBUTION DATE" shall mean, unless otherwise specified in any
Supplement for the related Series, the fifteenth day of each month or, if such
fifteenth day is not a Business Day, the next succeeding Business Day.
"DIVIDEND CONDITION" shall mean that the Transferor, as of any
Distribution Date, shall have declared a dividend in respect of its common stock
to Palais Royal, Inc., the holder of its common stock, in an amount equal to the
Defaulted Receivable Repurchase Amount for such Distribution Date.
"DOLLARS", "$" or "U.S. $" shall mean United States dollars.
"ELIGIBLE ACCOUNT" shall mean, as of the Initial Closing Date
(or, with respect to Supplemental Accounts as of each Addition Date and with
respect to Automatic Additional
-8-
Accounts, as of the date the Receivables arising in such Accounts are designated
for inclusion in the Trust), each Account owned by an Originator:
(a) which is payable in Dollars;
(b) which has not been identified by such Originator in its
computer files as an account as to which such Originator or the Servicer has any
confirmed record of any fraud-related activity by the Obligor;
(c) which has not been sold or pledged to any other party and
which does not have Receivables which have been sold or pledged to any other
party;
(d) which was created in accordance with the Credit and
Collection Policy of such Originator at the time of creation of such account or
the Receivables of which each Rating Agency permits to be added automatically to
the Trust;
(e) the Receivables in which such Originator has not charged off
in its customary and usual manner for charging off Receivables in such Accounts
as of the Initial Closing Date (or, with respect to Supplemental Accounts as of
the Addition Date and with respect to Automatic Additional Accounts, as of the
date the Receivables of such Accounts are first designated for inclusion in the
Trust) unless such Account is subsequently reinstated; and
(f) which is not an Automatic Additional Account which, during
the period specified in subsection 2.6(b)(i) or (ii), is in excess of the
percentage test specified in subsection 2.6(b)(i) or (ii), respectively.
"ELIGIBLE RECEIVABLE" shall mean each Receivable that satisfies
each of the following criteria:
(a) it arises under an Eligible Account;
(b) it constitutes an "account" or a "general intangible" as
defined in Article 9 of the UCC as then in effect in each Relevant UCC State;
(c) it is at the time of its transfer to the Trust the legal,
valid and binding obligation of a Person who (i) is living, (ii) is not a minor
under the laws of his/her state of residence and (iii) is competent to enter
into a contract and incur debt (or, with respect to obligations from Persons who
do not qualify under clauses (ii) or (iii), is so guaranteed by a Person who
qualifies under clauses (i), (ii) and (iii)); PROVIDED, HOWEVER, that (1) no
more than 10% of all Eligible Receivables shall be from Obligors which are (x)
non-U.S. Persons or (y) the United States, a state or any instrumentality
thereof and (2) no such Receivables shall be obligations of Affiliates (other
than directors, officers and employees) of the Transferor; and PROVIDED,
FURTHER, that no more than
-9-
6% of all Eligible Receivables shall be from Obligors which are non-U.S.
Persons, unless the Rating Agency provides its written consent to an increase in
such percentage;
(d) it and the underlying Charge Account Agreement do not
contravene in any material respect any laws, rules or regulations applicable
thereto (including, without limitation, rules and regulations relating to truth
in lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) that could reasonably
be expected to have an adverse impact on the amount of Collections thereunder,
and the Originator under the underlying Charge Account Agreement is not in
violation of any such laws, rules or regulations in any respect material to such
Charge Account Agreement;
(e) all material consents, licenses, or authorizations of, or
registrations with, any governmental authority required to be obtained or given
in connection with the creation of such Receivable or the execution, delivery,
creation and performance of the underlying Charge Account Agreement have been
duly obtained or given and are in full force and effect as of the date of the
creation of such Receivables;
(f) at the time of its transfer to the Trust, the Transferor or
the Trust will have good and marketable title free and clear of all Liens and
security interests arising under or through the Transferor (other than Permitted
Liens);
(g) it is not, at the time of its transfer to the Trust, a
Receivable in a Defaulted Account or a Receivable owing from a bankrupt Obligor;
and
(h) it arises under a Charge Account Agreement that has been duly
authorized by the applicable Originator and which, together with such
Receivable, is in full force and effect and constitutes the legal, valid and
binding obligation of the Obligor of such Receivable enforceable against such
Obligor in accordance with its terms and is not subject at the time of transfer
to the Trust to any dispute, offset, counterclaim or defense whatsoever.
"ENHANCEMENT" shall mean, with respect to any Series, the cash
collateral account, letter of credit, guaranteed rate agreement, maturity
guaranty facility, tax protection agreement, interest rate caps, interest rate
swap, subordination of the rights of one class to another or any other contract,
agreement or arrangement for the benefit of the Certificateholders of such
Series (or Certificateholders of a Class within such Series) as designated in
the applicable Supplement.
"ENHANCEMENT PROVIDER" shall mean, with respect to any Series,
the Person, if any, designated as such in the related Supplement.
"EQUALIZATION ACCOUNT" shall have the meaning specified in
subsection 4.2(d).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
-10-
"EUROCLEAR OPERATOR" shall mean Morgan Guaranty Trust Company of
New York, Brussels, Belgium office, as operator of the Euroclear System.
"EXCHANGE" shall mean either of the procedures described in
Section 6.9(b).
"EXCHANGEABLE TRANSFEROR CERTIFICATE" shall mean the certificate
executed by the Transferor and authenticated by the Trustee, substantially in
the form of Exhibit A and exchangeable as provided in Section 6.9; PROVIDED,
that at any time there shall be only one Exchangeable Transferor Certificate.
"EXCHANGE DATE" shall have the meaning, with respect to any
Series issued pursuant to an Exchange, specified in subsection 6.9(b).
"EXCHANGE NOTICE" shall have the meaning, with respect to any
Series issued pursuant to an Exchange, specified in subsection 6.9(b).
"EXTENDED TRUST TERMINATION DATE" shall have the meaning
specified in subsection 12.1(a).
"FDIC" shall mean the Federal Deposit Insurance Corporation, or
any successor thereto.
"FINANCE CHARGE COLLECTIONS" shall mean, with respect to any
Business Day, Collections received by the Servicer with respect to Finance
Charge Receivables on such Business Day.
"FINANCE CHARGE RECEIVABLES" shall mean all amounts billed from
time to time to the Obligors on any Account in respect of (i) Periodic Finance
Charges, (ii) over limit fees, (iii) late charges, (iv) returned check fees, (v)
annual membership fees and annual service charges, if any, (vi) transaction
charges and (vii) all other fees and charges, plus (x) Recoveries, (y) Discount
Option Receivables, if any, and (z) investment earnings on amounts on deposit in
the Equalization Account, if any.
"FIXED ALLOCATION PERCENTAGE" shall mean for a Series for any
Business Day or Distribution Date, as applicable, the percentage equivalent of a
fraction, the numerator of which is the Invested Amount of such Series at the
end of the Revolving Period of such Series and the denominator of which is the
greater of (a) the total amount of Principal Receivables in the Trust and
amounts on deposit in the Equalization Account as of the end of the last day of
the Revolving Period and (b) the sum of the numerators used to calculate the
allocation percentages with respect to Principal Collections for all Series.
"FLOATING ALLOCATION PERCENTAGE" shall mean for a Series on any
Business Day the sum of the percentage equivalents of fractions, the numerator
of each of which is the Invested
-11-
Amount (or Adjusted Invested Amount as specified in the applicable Supplement)
for each Class of such Series as of the end of the preceding Business Day and
the denominator of which is the greater of (a) the sum of the amount of
Principal Receivables in the Trust and the amount on deposit in the Equalization
Account as of the end of the preceding Business Day and (b) with respect to
Principal Collections only, the sum of the numerators for all classes of all
Series then outstanding used to calculate the applicable allocation percentage.
"FOREIGN CLEARING AGENCY" shall mean CEDEL and the Euroclear
Operator.
"GLOBAL CERTIFICATE" shall have the meaning specified in Section
6.13.
"GOVERNMENTAL AUTHORITY" shall mean the United States of America,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"HOLDER" or "CERTIFICATEHOLDER" shall mean the Person in whose
name a Certificate is registered in the Certificate Register, and if applicable,
the holder of any Bearer Certificate or Coupon, as the case may be.
"INELIGIBLE RECEIVABLE" shall have the meaning specified in
subsection 2.4(d).
"INITIAL CLOSING DATE" shall mean July 30, 1993.
"INITIAL INVESTED AMOUNT" shall mean, with respect to any Series
of Certificates, the amount stated in the related Supplement.
"INSOLVENCY EVENT" shall have the meaning specified in subsection
9.2(a).
"IN-STORE PAYMENTS" shall mean any payment made by an Obligor
with respect to a Receivable by delivery of cash, check, money order or any
other form of payment to a cashier or other employee of any SRI Store.
"INTEREST FUNDING ACCOUNT" shall have the meaning specified in
subsection 4.2(b).
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of
1986, as amended from time to time.
"INVESTED AMOUNT" shall have, with respect to any Series of
Certificates, the meaning stated in the related Supplement.
"INVESTMENT COMPANY ACT" shall mean the Investment Company Act of
1940, as amended from time to time.
-12-
"INVESTOR ACCOUNT" shall mean each of the Interest Funding
Account, any Principal Account, the Equalization Account, any Distribution
Account and any Series Account.
"INVESTOR CERTIFICATE" shall mean any one of the certificates
(including, without limitation, the Bearer Certificates or the Registered
Certificates) executed by the Transferor and authenticated by the Trustee
substantially in the form (or forms in the case of a Series with multiple
classes) of the investor certificate or variable funding certificate attached to
the related Supplement.
"INVESTOR CERTIFICATEHOLDER" shall mean the Holder of an Investor
Certificate.
"INVESTOR CHARGE OFF" shall have, with respect to each Series,
the meaning specified in the applicable Supplement.
"INVESTOR DEFAULT AMOUNT" shall have, with respect to any Series
of Certificates, the meaning stated in the related Supplement.
"INVESTOR EXCHANGE" shall have the meaning specified in
subsection 6.9(b).
"INVESTOR PERCENTAGE" shall mean, with respect to Principal
Collections, Finance Charge Collections and Receivables in Defaulted Accounts,
and any Series of Certificates, the Floating Allocation Percentage or the Fixed
Allocation Percentage, as applicable.
"LATE FEES" shall have, with respect to any Account, the meaning
specified in the Charge Account Agreement applicable to such Account for late
fees or similar charges.
"LATEST RATING AGENCY APPROVAL DATE" shall mean the most recent
date of written confirmation from the Rating Agency that the addition of
accounts to such date would not result in a downgrading of the Investor
Certificates of such Series.
"LICENSED NAMES" shall have the meaning specified in Section 2.1.
"LIEN" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, participation or equity interest, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever, including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing and the filing of any financing statement under
the UCC (other than any such financing statement filed for informational
purposes only) or comparable law of any jurisdiction to evidence any of the
foregoing; PROVIDED, HOWEVER, that any assignment pursuant to Section 7.2 shall
not be deemed to constitute a Lien.
"MINIMUM AGGREGATE PRINCIPAL RECEIVABLES" shall mean, as of any
date of determination, an amount equal to the sum of (a) the Initial Invested
Amounts for all outstanding
-13-
Series on such date except a Series created pursuant to a Variable Funding
Supplement at any time or a Paired Series during its Amortization Period, (b)
with respect to a Series created pursuant to a Variable Funding Supplement,
during the Revolving Period for such Series, the Invested Amount of such Series
on such date of determination or, during the Amortization Period for such
Series, the Invested Amount of such Series on the last day of the Revolving
Period for such Series and (c) with respect to any Paired Series during its
Amortization Period, the Invested Amount of such Series as of the preceding
Distribution Date (after taking into account any payments or adjustments made on
such Distribution Date).
"MINIMUM RETAINED INTEREST" shall mean the product of (i) the sum
of (a) the Aggregate Principal Receivables and (b) the amounts on deposit in the
Equalization Account and (ii) the Minimum Retained Percentage.
"MINIMUM RETAINED PERCENTAGE" shall mean the highest Minimum
Retained Percentage specified in any Supplement.
"MINIMUM TRANSFEROR INTEREST" shall mean, as of any date of
determination, the product of (i) the sum of (a) the Aggregate Principal
Receivables and (b) the amounts on deposit in the Equalization Account and (ii)
the Minimum Transferor Percentage on such date of deter mination; PROVIDED,
HOWEVER, that beginning on the fifth Business Day prior to the beginning of each
Monthly Period, solely as used in subsections 2.4(d), 3.8(a), 4.3(e) and 4.3(f),
the applicable Minimum Transferor Percentage shall be the higher of the Minimum
Transferor Percentage for the Current Monthly Period and the Minimum Transferor
Percentage for the next succeeding Monthly Period.
"MINIMUM TRANSFEROR PERCENTAGE" shall mean the highest Minimum
Transferor Percentage specified in any Supplement.
"MONTHLY INVESTOR SERVICING FEE" shall mean the Servicing Fee
payable to the Servicer with respect to a Monthly Period.
"MONTHLY PERIOD" shall mean, unless otherwise defined with
respect to a Series in the related Supplement, the period from and including the
first day of each fiscal month of the Transferor to and including the last day
of such fiscal month.
"NEW ACCOUNT" shall mean, as of any Business Day, any Account
which was originated and became an Active Account within the immediately
preceding twelve Monthly Periods.
"NEW DISCOUNT OPTION RECEIVABLES" shall mean, on any Date of
Processing on and after the date on which the Transferor's exercise of its
discount option pursuant to Section 2.8 takes effect, the product of the amount
of any Principal Receivables created on such Date of Processing
-14-
(without giving effect to the proviso in the definition of Principal
Receivables) and the Discount Percentage.
"NOTICE DATE" shall have the meaning specified in subsection 2.6
(e)(i).
"OBLIGOR" shall mean a Person obligated to make payments with
respect to a Receivable arising under an Account pursuant to a Charge Account
Agreement.
"OFFICER'S CERTIFICATE" shall mean a certificate signed by any
Vice President or more senior officer of the Transferor or Servicer and
delivered to the Trustee.
"OPINION OF COUNSEL" shall mean a written opinion of counsel, who
may be counsel for or an employee of the Person providing the opinion, and who
shall be reasonably acceptable to the Trustee.
"ORIGINATORS" shall mean certain subsidiaries of SRI which are
party from time to time to the Receivables Purchase Agreement .
"OUTSTANDING BALANCE" shall mean, with respect to a Receivable on
any day, the aggregate amount owed by the Obligor thereunder as of the close of
business on the prior Business Day (net of returns and adjustments).
"PAIRED SERIES" shall mean each Series which has been paired with
a prefunded Series, and such prefunded Series.
"PAYING AGENT" shall mean any paying agent appointed pursuant to
Section 6.6 and shall initially be Bankers Trust (Delaware).
"PAY OUT COMMENCEMENT DATE" shall mean, with respect to each
Series, the date on which (a) a Trust Pay Out Event is deemed to occur pursuant
to Section 9.1 or (b) a Series Pay Out Event is deemed to occur pursuant to the
Supplement for such Series.
"PAY OUT EVENT" shall mean, with respect to each Series, a Trust
Pay Out Event or a Series Pay Out Event.
"PERIODIC FINANCE CHARGES" shall have, with respect to any
Account, the meaning specified in the Charge Account Agreement applicable to
such Account for finance charges (due to periodic rate) or any similar term.
"PERMITTED LIEN" shall mean with respect to the Receivables: (i)
Liens in favor of the Transferor created pursuant to the Receivables Purchase
Agreement assigned to the Trustee pursuant to this Agreement; (ii) Liens in
favor of the Trustee pursuant to this Agreement; (iii) the rights to repurchase
Defaulted Receivables granted to the Transferor in Section 2.4(f) and to each
Originator
-15-
in Section 2.04(c) of the Receivables Purchase Agreement; and (iv) Liens which
secure the payment of taxes, assessments and governmental charges or levies, if
such taxes are either (a) not delinquent or (b) being contested in good faith by
appropriate legal or administrative proceedings and as to which adequate
reserves in accordance with generally accepted accounting principles shall have
been established, but only so long as such proceedings could not subject the
Originators, the Transferor, the Servicer or the Certificateholders to any civil
or criminal penalty or liability or involve any risk of loss, sale or forfeiture
of any property, rights or interests covered by this Agreement.
"PERSON" shall mean any legal person, including any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, governmental entity or other entity of
similar nature.
"POOL FACTOR" shall mean, as of any Record Date, a number carried
out to seven decimals representing the ratio of the applicable Invested Amount
as of such Record Date (determined after taking into account any reduction in
the Invested Amount which will occur on the following Distribution Date) to the
applicable Initial Invested Amount unless otherwise specified with respect to a
Series in the related Supplement.
"PRINCIPAL ACCOUNT" shall have the meaning specified in
subsection 4.2(b).
"PRINCIPAL COLLECTIONS" shall mean with respect to any Business
Day the Collections received with respect to each Principal Receivable on such
Business Day.
"PRINCIPAL RECEIVABLES" shall mean amounts shown on the
Servicer's records as amounts payable by Obligors with respect to Eligible
Receivables on any Account other than such amounts that are Finance Charge
Receivables or Receivables in Defaulted Accounts and shall include, without
limitation, amounts payable for purchases of goods or services; PROVIDED,
HOWEVER that if the Transferor shall have exercised its option pursuant to
Section 2.8, Principal Receivables on any date of determination thereafter shall
mean Principal Receivables as otherwise determined pursuant to this definition
minus the amount of any Discount Option Receivables. A Receivable shall be
deemed to have been created at the end of the day on the Date of Processing of
such Receivable. In calculating the aggregate amount of Principal Receivables on
any day, the amount of Principal Receivables shall be reduced by the aggregate
amount of credit balances in the Accounts on such day.
"PRINCIPAL SHORTFALLS" shall mean, with respect to any Business
Day, the aggregate amount for all outstanding Series which the related
Supplements specify as "Principal Shortfalls" for such Business Day.
"PRINCIPAL TERMS" shall have the meaning, with respect to any
Series issued pursuant to an Exchange, specified in subsection 6.9(c).
-16-
"PRIOR YEAR'S DEFAULT RATIO" shall have the meaning specified in
subsection 2.4(f)(i).
"PRO FORMA CONDITION" shall mean the determination by the
Servicer that, as of any Distribution Date, the principal amount of Defaulted
Receivables to be repurchased pursuant to Section 2.4(f) on the applicable
Distribution Date is not greater than the amount by which (i) the aggregate
amount of all Collections that would be allocated and distributed to the
Transferor hereunder on such Distribution Date after giving pro forma effect to
the repurchase of such Defaulted Receivables exceeds (ii) the aggregate amount
of all Collections that would be allocated and distributed to the Transferor
hereunder on such Distribution Date without giving effect to such repurchase of
Defaulted Receivables.
"PROSPECTIVE PAY OUT EVENT" shall have the meaning specified in
subsection 2.3(l).
"PUBLICATION DATE" shall have the meaning specified in subsection
9.2(a).
"PURGED ACCOUNT" shall mean an Account that has an Outstanding
Balance of zero and has been terminated pursuant to the applicable Credit and
Collection Policy due to an extended period of inactivity.
"QUALIFIED INSTITUTION" shall have the meaning specified in
subsection 4.2(a)(ii).
"RATING AGENCY" shall mean, with respect to each Series, the
rating agency or agencies, if any, specified in the related Supplement.
"REASSIGNMENT" shall have the meaning specified in subsection
2.7(b)(i).
"REASSIGNMENT DATE" shall have the meaning specified in
subsection 2.4(e).
"RECEIVABLE" shall mean, with respect to any Obligor, any account
or general intangible representing the indebtedness of such Obligor under a
Charge Account Agreement arising in an Account from a sale of merchandise or
services, and includes the right to payment of any interest or finance charges
and other obligations of such Obligor with respect thereto. Each Receivable
includes, without limitation, all rights of the Originator and obligations of
the Obligor under the applicable Charge Account Agreement. Each increase in the
Outstanding Balance of any Receivable (other than any such increase resulting
from the accrual of interest or finance charges or other fees with respect to
such Receivable) shall, for purposes of Article II, constitute a separate
Receivable.
"RECEIVABLES PURCHASE AGREEMENT" shall mean the Amended and
Restated Receivables Purchase Agreement dated as of August 11, 1995 between
Palais Royal, Inc., the other Originators named therein and each Additional
Originator which may from time to time become a party thereto, as sellers, and
the Transferor, as purchaser, as amended or otherwise modified from time to
time.
-17-
"RECEIVABLES SOFTWARE" shall have the meaning specified in
Section 8.8.
"RECORD DATE" shall mean, with respect to any Distribution Date,
the last Business Day of the preceding Monthly Period.
"RECOVERIES," with respect to any period, shall mean the PRODUCT
of (i) any amounts received during such period with respect to Receivables in
Accounts which previously became Defaulted Accounts ("DEFAULTED RECEIVABLE
RECEIPTS") and (ii) the fraction resulting from (A) one MINUS (B) a fraction,
the numerator of which is the aggregate Defaulted Receivable Repurchase Amount
paid by the Originators during the preceding six full Monthly Periods pursuant
to Section 2.4(f), and the denominator of which is the total principal amount of
Receivables which become Defaulted Receivables during such six Monthly Periods.
"REGISTERED CERTIFICATES" shall have the meaning specified in
Section 6.1.
"RELATED PERSON" shall mean a Person who is, or is an Affiliate
of, SRI, Bankers Trust Company, any Investor Certificateholder, any Enhancement
Provider, or any other Person whose affiliation with the Transferor or the Trust
would violate the condition contained in Section (4)(i) of Rule 3a-7 under the
Investment Company Act of 1940, as amended.
"RELATED CONTRACTS" shall have the meaning specified in Section
2.1.
"RELEVANT UCC STATE" shall mean each jurisdiction in which the
filing of a UCC financing statement is necessary to perfect the ownership
interest of the Transferor pursuant to the Receivables Purchase Agreement or the
ownership or security interest of the Trustee established under this Agreement.
"REMOVAL DATE" shall have the meaning specified in subsection
2.7(b).
"REMOVAL NOTICE DATE" shall mean the day, no later than the fifth
Business Day prior to a Removal Date, on which the Transferor gives notice to
the Trustee pursuant to Section 2.7(a) of its intention to remove Accounts from
the Trust.
"REMOVED ACCOUNTS" shall have the meaning specified in subsection
2.7(a).
"REQUIREMENTS OF LAW" for any Person shall mean the certificate
of incorporation or articles of association and by-laws or other organizational
or governing documents of such Person, and any law, treaty, rule or regulation,
or determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether federal, state or local (including, without limitation, usury laws, the
federal Truth in Lending Act and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).
-18-
"RESPONSIBLE OFFICER" shall mean any officer within the Corporate
Trust Office (or any successor group of the Trustee), including the President,
any Vice President or any other officer of the Trustee customarily performing
functions similar to those performed by any person who at the time shall be an
above designated officer and who shall have direct responsibility for the
administration of this Agreement.
"RETAINED INTEREST" shall mean, on any date of determination, the
sum of the Transferor Interest and the Invested Amount represented by any
Transferor Retained Certificate.
"RETAINED PERCENTAGE" shall mean, on any date of determination,
the percentage equivalent of a fraction the numerator of which is the Retained
Interest and the denominator of which is the aggregate amount of Principal
Receivables at the end of the day immediately prior to such date of
determination plus all amounts on deposit in the Equalization Account (but not
including investment earnings on such amounts).
"REVOLVING PERIOD" shall have, with respect to each Series, the
meaning specified in the related Supplement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SERIES" shall mean any series of Investor Certificates, which
may include within any such Series a Class or Classes of Investor Certificates
subordinate to another such Class or Classes of Investor Certificates.
"SERIES ACCOUNT" shall mean any account or accounts established
pursuant to a Supplement for the benefit of the related Series.
"SERIES PAY OUT EVENT" shall have, with respect to any Series,
the meaning specified in the related Supplement.
"SERIES SERVICING FEE PERCENTAGE" shall mean, with respect to any
Series, the amount specified as such in the related Supplement.
"SERIES TERMINATION DATE" shall mean, with respect to any Series
of Certificates, the date stated as such in the related Supplement.
"SERVICE TRANSACTION FEES" shall have, with respect to any
Account, the meaning specified in the Charge Account Agreement applicable to
such Account for any service transaction fees or similar terms.
"SERVICER" shall mean initially SRI and thereafter any Person
appointed as successor as herein provided to service the Receivables.
-19-
"SERVICER DEFAULT" shall have the meaning specified in Section
10.1.
"SERVICING FEE" shall have the meaning specified in the related
Supplements.
"SETTLEMENT STATEMENT" shall mean a report in the form specified
in subsection 1.2(e) as may be supplemented pursuant to any Supplement.
"SHARED PRINCIPAL COLLECTIONS" shall mean, with respect to any
Business Day, the aggregate amount for all outstanding Series of Principal
Collections which the related Supplements specify are to be treated as "Shared
Principal Collections" for such Business Day.
"SRI" shall mean Specialty Retailers, Inc., a corporation
organized and existing under the laws of the State of Delaware.
"SRI STORE" shall mean any merchant which sells merchandise or
services on credit pursuant to a Charge Account Agreement.
"STANDARD & POOR'S" shall mean Standard & Poor's Ratings Group or
its successor.
"SUCCESSOR SERVICER" shall have the meaning specified in
subsection 10.2(a).
"SUPPLEMENT" shall mean, with respect to any Series, a supplement
to this Agreement complying with the terms of Section 6.9 of this Agreement,
executed in conjunction with any issuance of Certificates of such Series (or, in
the case of the Issuance of Certificates on the Initial Closing Date, the
supplements executed in connection with the issuance of such Certificates).
"SUPPLEMENTAL ACCOUNTS" shall have the meaning specified in
subsection 2.6(c).
"TERMINATION NOTICE" shall have, with respect to any Series, the
meaning specified in Section 10.1.
"TRANSFER" shall mean transfer, sell, exchange, pledge,
hypothecate, participate, or otherwise assign, in whole or in part.
"TRANSFER AGENT AND REGISTRAR" shall have the meaning specified
in Section 6.3 and shall initially be Bankers Trust Company, a New York banking
corporation.
"TRANSFER DATE" shall mean, with respect to any Series, the
Business Day immediately prior to each Distribution Date.
"TRANSFEROR" shall mean SRI Receivables Purchase Co., Inc., a
corporation organized and existing under the laws of the State of Delaware, and
any successor thereto.
-20-
"TRANSFEROR EXCHANGE" shall have the meaning specified in
subsection 6.9(b).
"TRANSFEROR FISCAL YEAR" shall mean the approximately twelve
month period ending on the Saturday nearest to January 31st.
"TRANSFEROR INTEREST" shall mean, on any date of determination,
the aggregate amount of Principal Receivables at the end of the day immediately
prior to such date of determination PLUS all amounts on deposit in the
Equalization Account (but not including investment earnings on such amounts) at
the end of such immediately preceding day, minus the Aggregate Invested Amount
at the end of such immediately preceding day.
"TRANSFEROR PERCENTAGE" shall mean, on any date of determination,
when used with respect to Principal Collections, Finance Charge Collections and
Receivables in Defaulted Accounts, a percentage equal to 100% MINUS the
Aggregate Investor Percentage with respect to such categories of Receivables.
"TRANSFEROR RETAINED CERTIFICATES" shall mean Investor
Certificates of any Series which the Transferor is required to retain pursuant
to the terms of any Supplement.
"TRANSFERRED ACCOUNT" shall mean an Account with respect to which
a new credit account number has been issued by the Servicer or the Transferor
under circumstances resulting from a lost or stolen credit card and not
requiring standard application and credit evaluation procedures under the Credit
and Collection Policy, and which can be traced or identified by reference to or
by way of the computer files or microfiche lists delivered to the Trustee or the
bailee of the Trustee pursuant to Section 2.1 or 2.6 as an account into which an
Account has been transferred.
"TRUST" shall mean the trust created by this Agreement, the
corpus of which shall consist of the Trust Property.
"TRUST EXTENSION" shall have the meaning specified in subsection
12.1(a).
"TRUST PAY OUT EVENT" shall have, with respect to each Series,
the meaning specified in Section 9.1.
"TRUST PROPERTY" shall have the meaning assigned in Section 2.1.
"TRUST TERMINATION DATE" shall mean the earlier to occur of (i)
unless a Trust Extension shall have occurred, the day after the Distribution
Date with respect to any Series following the date on which funds shall have
been deposited in the Distribution Account or the applicable Series Account for
the payment of Investor Certificateholders of each Series then issued and
outstanding sufficient to pay in full the Aggregate Invested Amount plus
interest accrued at the applicable Certificate Rate through the end of the day
prior to the Distribution Date with respect to
-21-
each such Series and certain other amounts as may be specified in any Series
Supplement, (ii) if a Trust Extension shall have occurred, the Extended Trust
Termination Date, and (iii) the date specified in Section 12.1.
"TRUSTEE" shall mean Bankers Trust (Delaware) and its successors
and any Person resulting from or surviving any consolidation or merger to which
it or its successors may be a party and any successor trustee appointed as
herein provided.
"UCC" shall mean the Uniform Commercial Code, as amended from
time to time, as in effect in the applicable jurisdiction.
"UNDIVIDED INTEREST" shall mean the undivided interest in the
Trust evidenced by an Investor Certificate.
"VARIABLE FUNDING CERTIFICATES" shall mean a series of Investor
Certificates, in one or more Classes, issued pursuant to Section 6.9 and a
Variable Funding Supplement hereto.
"VARIABLE FUNDING SUPPLEMENT" shall mean a supplement executed in
connection with the issuance of Variable Funding Certificates.
"YEAR-TO-DATE PERIOD" shall have the meaning specified in
subsection 2.4(f)(i).
Section 1.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in any Supplement or this Agreement shall
have the defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in Section
1.1, and accounting terms partially defined in Section 1.1 to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles. To the extent that the definitions of accounting
terms herein are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained herein shall control.
(c) The agreements, representations and warranties of SRI in this
Agreement and in any Supplement in its capacity as Servicer and of SRI
Receivables Purchase Co., Inc. in its capacity as Transferor shall be deemed to
be the agreements, representations and warranties of SRI and SRI Receivables
Purchase Co., Inc. solely in each such capacity for so long as either of them
acts in each such capacity under this Agreement.
(d) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to any Supplement or this
Agreement as a whole and not
-22-
to any particular provision of this Agreement or any Supplement; and Section,
subsection, Schedule and Exhibit references contained in this Agreement or any
Supplement are references to Sections, subsections, Schedules and Exhibits in or
to this Agreement or any Supplement unless otherwise specified.
(e) The Daily Report and Settlement Statement shall be in
substantially the forms of Exhibits C and D, with such changes as the Servicer
may determine to be necessary or desirable; PROVIDED, HOWEVER, that no such
change shall serve to exclude information required by this Agreement or any
Supplement and each such change shall be reasonably acceptable to the Trustee.
The Servicer shall, upon making such determination and receiving the consent of
the Trustee to such change, deliver to the Trustee and each Rating Agency an
Officer's Certificate to which shall be annexed the form of the related Exhibit,
as so changed. Upon the delivery of such Officer's Certificate to the Trustee,
the related Exhibit, as so changed, shall for all purposes of this Agreement
constitute such Exhibit. The Trustee may conclusively rely upon such Officer's
Certificate in determining whether the related Exhibit, as changed, conforms to
the requirements of this Agreement.
-23-
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES
Section 2.1 CONVEYANCE OF RECEIVABLES. The Transferor does hereby
transfer, assign, set-over, and otherwise convey to the Trust for the benefit of
the Certificateholders, without recourse, all of its right, title and interest
in, to and under the following (collectively, the "TRUST PROPERTY"):
(i) all right, title and interest of the Transferor in and to the
Receivables now existing and hereafter created and arising in connection
with the Accounts and any accounts that meet the definition of Automatic
Additional Accounts, including, without limitation, all accounts,
contract rights, chattel paper, instruments, general intangibles and
other obligations of any Obligor with respect to any such Receivables,
now or hereafter existing, whether or not arising out of or in
connection with the sale or lease of goods or the rendering of services,
including without limitation the right to payment of any interest,
Finance Charge Receivables, returned check fees or late charges and
other obligations of an Obligor with respect to any such Receivables,
and all rights in and to all security agreements, and other contracts
securing or otherwise relating to any such accounts, contract rights,
chattel paper, instruments, general intangibles or obligations (any and
all such security agreements and other contracts being the "RELATED
CONTRACTS");
(ii) all guarantees, insurance and other agreements or
arrangements of whatever character from time to time supporting or
securing payment of any Receivables;
(iii) the Receivables Purchase Agreement including, without
limitation, (A) all rights of the Transferor to receive moneys due and
to become due under or pursuant to the Receivables Purchase Agreement,
whether payable as fees, expenses, costs or otherwise, (B) all rights of
the Transferor to receive proceeds of any insurance, indemnity, warranty
or guaranty with respect to the Receivables Purchase Agreement, (C)
claims of the Transferor for damages arising out of or for breach of or
default under the Receivables Purchase Agreement, (D) the right of the
Transferor to amend, waive or terminate the Receivables Purchase
Agreement, to perform thereunder and to compel performance and otherwise
exercise all remedies thereunder and (E) all other rights, remedies,
powers, privileges and claims of the Transferor under or in connection
with the Receivables Purchase Agreement (the Trust Property described in
this paragraph (iii) of Section 2.01 being sometimes described herein as
the "ASSIGNED PROPERTY");
(iv) the following (the "ACCOUNT PROPERTY"):
(A) any lock boxes maintained by the Servicer or an
Originator, the Collection Account, any Interest Funding Account,
any Principal Account, any
-24-
Distribution Account and the Equalization Account, all funds, and
all certificates and instruments, if any, from time to time
representing or evidencing or held in any such lock boxes, the
Collection Account, any Interest Funding Account, any Principal
Ac count, any Distribution Account and the Equalization Account;
(B) all eligible investments from time to time and all
certificates and instruments, if any, from time to time
representing or evidencing the eligible investments;
(C) all notes, certificates of deposit and other
instruments from time to time hereafter delivered to or otherwise
possessed by the Trustee for and on behalf of the Transferor in
substitution for or in addition to any of the then existing
Account Property;
(D) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any and all of the
existing Account Property; and
(E) all additional property that may from time to time
hereafter be assigned or pledged to the Trustee for the benefit
of the Certificateholders hereunder by the Transferor or by any
Person on the Transferor's behalf;
(v) proceeds of any and all of the Trust Property described in
subparagraphs (i) through (iv) above (including, without limitation,
Recoveries and proceeds that constitute property of the types described
in clauses (i) through (iv) above) and, to the extent not otherwise
included, all payments under insurance (whether or not the Trustee is
the loss payee thereof), or any indemnity, warranty or guaranty, payable
by reason of loss or damage to or otherwise with respect to any of such
foregoing Trust Property.
The foregoing transfer, assignment, set-over and conveyance does not constitute
and is not intended to result in a creation or an assumption by the Trust, the
Trustee or any Investor Certificateholder of any obligation of the Transferor,
the Servicer or any other Person in connection with the Accounts or Receivables
or any agreement or instrument relating thereto, including, without limitation,
any obligation to any Obligors or insurers, or in connection with the
Receivables Purchase Agreement.
In connection with such transfer, assignment, set-over and
conveyance, the Transferor agrees to record and file, at its own expense, one or
more financing statements (including any continuation statements with respect to
such financing statements when applicable) with respect to the Receivables now
existing and hereafter created for the transfer of accounts or general
intangibles (as defined in Section 9-106 of the UCC as in effect in the Relevant
UCC State) meeting the require ments of applicable state law in such manner and
in such jurisdictions as are necessary to perfect the assignment of the
Receivables to the Trust, and to deliver file stamped copies of such financing
statements or continuation statements or other evidence of such filing (which
may, for purposes of
-25-
this Section 2.1, consist of telephone confirmation of such filing) to the
Trustee on or prior to the date of issuance of the Certificates, and in the case
of any continuation statements filed pursuant to this Section 2.1, as soon as
practicable after receipt thereof by the Transferor. The foregoing transfer,
assignment, set-over and conveyance to the Trust shall be made to the Trustee,
on behalf of the Trust, and each reference in this Agreement to such transfer,
assignment, set-over and conveyance shall be construed accordingly.
In connection with such transfer, the Transferor agrees, at its
own expense, on or prior to each Cut-Off Date on which Accounts of an Originator
are designated to the Trust (i) to annotate and indicate in its computer files
that Receivables created in connection with such Accounts have been transferred
to the Trust pursuant to this Agreement for the benefit of the
Certificateholders and (ii) to deliver to the Trustee or the bailee of the
Trustee a computer file or microfiche list containing a true and complete list
of all such Accounts, identified by account number and setting forth the
Outstanding Balance of each Receivable as of the applicable Cut-Off Date. Such
file or list shall be marked as Schedule 1 to this Agreement (or as a supplement
thereto), delivered to the Trustee or the bailee of the Trustee as confidential
and proprietary, and is hereby incorporated into and made a part of this
Agreement. The Transferor further agrees not to alter the file designation
referenced in clause (i) of this paragraph with respect to any Account during
the term of this Agreement unless and until such Account becomes a Removed
Account.
The Transferor and SRI hereby grant to the Trustee a
non-exclusive and, except to the extent provided below, non-transferable license
to use the various tradenames listed in Schedule VI to the Receivables Purchase
Agreement and any additional tradenames that may from time to time be used by
any Originator (collectively, the "LICENSED NAMES") and to use the Receivables
Software. This license and the rights of use hereunder are contingent on the
occurrence and continuance of a Servicer Default. Following such event, these
licenses and the right of use of the Licensed Names and the Receivables Software
hereunder may be transferred by the Trustee to the extent necessary to collect
the Receivables in a commercially reasonable manner. The rights of use granted
under these licenses are limited to such uses of the Licensed Names and
Receivables Software as are reasonably necessary to the collection by the
Trustee in a commercially reasonable manner of the Receivables and are further
subject to (i) in the case of the Receivables Software, the terms of any
third-party licenses thereof and consents in relation thereto and (ii) in the
case of the Licensed Names, maintaining standards of quality of the business of
the Servicer as conducted prior to the Servicer Default. The licenses are
limited to actions taken in accordance with the terms of this Agreement and
shall expire on the expiration of a reasonable time for the collection of all
Receivables. Notwithstanding any other provisions to the contrary in this
Agreement or in any other agreement between the parties, no other uses or
display of the Licensed Names or Receivables Software shall be made by Trustee
except as granted in this paragraph.
The Transferor hereby grants and transfers to the Trustee a first
priority perfected security interest in all of the Transferor's right, title and
interest in, to and under the Trust Property to secure a loan in an amount equal
to the unpaid principal amount of the Investor Certificates issued hereunder or
to be issued pursuant to this Agreement and the interest accrued thereon at the
related
-26-
Certificate Rate and to secure all of the Transferor's and Servicer's
obligations hereunder, including, without limitation, the Transferor's
obligation to transfer Receivables hereafter created to the Trust (the "SECURED
OBLIGATIONS"), and agrees that this Agreement shall constitute a security
agreement under applicable law. On the Initial Closing Date, the Transferor will
also deposit $11,000,000 into the Equalization Account.
Section 2.2 ACCEPTANCE BY TRUSTEE.
(a) The Trustee hereby acknowledges its acceptance, on behalf of
the Trust, of all right, title and interest previously held by the Transferor
in, to and under the Trust Property and declares that it shall maintain such
right, title and interest, upon the Trust herein set forth, for the benefit of
all Certificateholders. The Trustee further acknowledges that, prior to or
simultaneously with the execution and delivery of this Agreement, the Transferor
delivered to the Trustee or the bailee of the Trustee the computer file or
microfiche list that was represented as being the computer file or microfiche
list described in the third paragraph of Section 2.1.
(b) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
Section 2.3 REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR. The
Transferor hereby represents and warrants to the Trustee, on behalf of the
Trust, as of the Initial Closing Date and, with respect to any Series of
Certificates, as of the date of the related Supplement and the related Closing
Date for such Series:
(a) ORGANIZATION AND GOOD STANDING. The Transferor is a
corporation duly organized and validly existing in good standing under the laws
of the State of Delaware and has full corporate power, authority and legal right
to own its properties and conduct its business as such properties are presently
owned and such business is presently conducted, and to execute, deliver and
perform its obligations under this Agreement, any Supplement and the Receivables
Purchase Agreement and to execute and deliver to the Trustee the Certificates
pursuant hereto.
(b) DUE QUALIFICATION. The Transferor is duly qualified to do
business and is in good standing (or is exempt from such requirement) in any
state required in order to conduct business, and has obtained all necessary
licenses and approvals with respect to the Transferor required under federal and
Delaware law; PROVIDED, HOWEVER, that no representation or warranty is made with
respect to any qualifications, licenses or approvals which the Trustee would
have to obtain to do business in any state in which the Trustee seeks to enforce
any Receivable.
(c) DUE AUTHORIZATION. The execution and delivery of this
Agreement, any Supplement and the Receivables Purchase Agreement and the
execution and delivery to the Trustee of the Certificates by the Transferor and
the consummation of the transactions provided for in this Agreement, any
Supplement and the Receivables Purchase Agreement have been duly authorized
-27-
by the Transferor by all necessary corporate action on its part and this
Agreement will remain, from the time of its execution, an official record of the
Transferor.
(d) NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Receivables Purchase Agreement, and any Supplement and the
Certificates, the performance of the transactions contemplated by this
Agreement, the Receivables Purchase Agreement, and any Supplement and the
fulfillment of the terms hereof by the Transferor, do not (i) contravene its
charter or By-Laws, (ii) violate any provision of, or require any filing (except
for the filings under the UCC required by this Agreement, each of which has been
duly made and is in full force and effect), registration, consent or approval
under, any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to the
Transferor, except for such filings, registrations, consents or approvals as
have already been obtained and are in full force and effect, (iii) result in a
breach of or constitute a default or require any consent under any indenture or
loan or credit agreement or any other agreement, lease or instrument to which
the Transferor is a party or by which it or its properties may be bound or
affected except those as to which a consent or waiver has been obtained and is
in full force and effect and an executed copy of which has been delivered to the
Trustee, or (iv) result in, or require, the creation or imposition of any Lien
upon or with respect to any of the properties now owned or hereafter acquired by
the Transferor other than as specifically contemplated by this Agreement.
(e) TAXES. The Transferor has filed on a timely basis all tax
returns (federal, state and local) required to be filed and has paid or made
adequate provision for the payment of all taxes, assessments and other
governmental charges due from the Transferor or is contesting any such tax,
assessment or other governmental charge in good faith through appropriate
proceedings. The Transferor knows of no basis for any material additional tax
assessment for any fiscal year for which adequate reserves have not been
established.
(f) NO VIOLATION. The execution and delivery of this Agreement,
any Supplement and the Receivables Purchase Agreement and the execution and
delivery to the Trustee of the Certificates, the performance of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof will not
conflict with or violate any Requirements of Law applicable to the Transferor.
(g) NO PROCEEDINGS. There are no outstanding injunctions, writs
or restraining orders, and no proceedings or investigations pending or, to the
knowledge of the Transferor, threatened against the Transferor before any court,
regulatory body, administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement, any Supplement,
the Receivables Purchase Agreement or the Certificates, (ii) seeking to prevent
the issuance of the Certificates or the consummation of any of the transactions
contemplated by this Agreement, any Supplement, the Receivables Purchase
Agreement or the Certificates, (iii) seeking any determination or ruling that,
in the reasonable judgment of the Transferor, would materially and adversely
affect the performance by the Transferor of its obligations under this
Agreement, any Supplement or the Receivables Purchase Agreement, (iv) seeking
any determination or ruling that
-28-
would materially and adversely affect the validity or enforceability of this
Agreement, any Supple ment, the Receivables Purchase Agreement or the
Certificates or (v) seeking to affect adversely the income tax attributes of the
Trust.
(h) ALL CONSENTS OBTAINED. All approvals, authorizations,
consents, orders or other actions of any Person or of any governmental body or
official required in connection with the execution and delivery of this
Agreement, any Supplement, the Receivables Purchase Agreement and the
Certificates, the performance of the transactions contemplated by this
Agreement, any Supplement and the Receivables Purchase Agreement and the
fulfillment of the terms hereof, have been obtained.
(i) BONA FIDE RECEIVABLES. Each Receivable is or will be an
account receivable arising out of an Originator's performance (or, in the case
of an Account that is an Automatic Additional Account pursuant to clause (b) of
the definition of Automatic Additional Account, the performance of the
originator of such Account at the time such Receivable was originated) in
accordance with the terms of the Charge Account Agreement giving rise to such
Receivable. The Transferor has no knowledge at the time of the initial creation
of an interest of the Trust in any Eligible Receivable hereunder of any fact
which should have led it to expect that such Eligible Receivable would not be
enforceable against the Obligor when due.
(j) PLACE OF BUSINESS. The principal place of business and chief
executive office of the Transferor is in Houston, Texas, and the offices where
the Transferor keeps its records concerning the Receivables and related
contracts are in Houston, Texas. Such locations have not changed within the last
four months.
(k) USE OF PROCEEDS. No proceeds of the issuance of any
Certificate will be used by the Transferor to purchase or carry any margin
security.
(l) PAY OUT EVENT. As of the Initial Closing Date, no Pay Out
Event and no condition that with the giving of notice and/or the passage of time
would constitute a Pay Out Event (a "PROSPECTIVE PAY OUT EVENT"), has occurred
and is continuing.
(m) NOT AN INVESTMENT COMPANY. The Transferor is not an
"investment company" or "controlled" by an "investment company" within the
meaning of the Investment Company Act, or is exempt from all provisions of such
Act.
For the purposes of the representations and warranties contained
in this Section 2.3 and made by the Transferor on the Initial Closing Date,
"Certificates" shall mean the Certificates issued on the Initial Closing Date.
The representations and warranties set forth in this Section 2.3 shall survive
the transfer and assignment of the respective Receivables to the Trust, and
termination of the rights and obligations of the Servicer pursuant to Section
10.1. The Transferor hereby repre sents and warrants to the Trust, with respect
to any Series of Certificates, as of its Closing Date, unless otherwise stated
in the related Supplement, that the representations and warranties of the
-29-
Transferor set forth in Section 2.3, are true and correct as of such date (for
the purposes of such representations and warranties, "Certificates" shall mean
the Certificates issued on the related Closing Date). Upon discovery by the
Transferor, the Servicer or a Responsible Officer of the Trustee of a breach of
any of the foregoing representations and warranties, the party discovering such
breach shall give prompt written notice to the others.
Section 2.4 REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR
RELATING TO THIS AGREEMENT AND THE RECEIVABLES. (a) BINDING OBLIGATION; VALID
TRANSFER AND ASSIGNMENT. The Transferor hereby represents and warrants to the
Trustee, on behalf of the Trust, that, as of the Initial Closing Date and with
respect to any Series of Certificates, as of the date of its related Supplement
and Closing Date, and, with respect to any Series and matters involving (X)
Supplemental Accounts, as of the applicable Addition Date and (Y) Automatic
Additional Accounts, as of the date the Receivables of such Accounts are first
designated for inclusion in the Trust:
(i) The Receivables Purchase Agreement, this Agreement and
any Supplement each constitutes the legal, valid and binding obligation
of the Transferor, enforceable against the Transferor in accordance with
its terms, except (A) as such en forceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights in general, and (B) as such enforceability may be
limited by general principles of equity (whether considered in a suit at
law or in equity).
(ii) This Agreement constitutes either (A) a valid
transfer, assignment, set-over and conveyance to the Trust of all right,
title and interest of the Transferor in and to the Trust Property, and
such Trust Property will be held by the Trust free and clear of any Lien
of any Person claiming through or under the Transferor or any of its
Affiliates except for (x) Permitted Liens, (y) the interest of the
Transferor as Holder of the Exchangeable Transferor Certificate and any
other Class of Certificates held by the Transferor from time to time and
(z) the Transferor's right, if any, to interest accruing on, and
investment earnings, if any, in respect of any Interest Funding Account,
any Principal Account, the Equalization Account, or any Series Account,
as provided in this Agreement or the related Supplement, or (B) a grant
of a security interest (as defined in the UCC as in effect in the
Relevant UCC State) in, to and under the Trust Property, which grant is
enforceable with respect to the existing Receivables and any Receivables
in Automatic Additional Accounts designated for inclusion in the Trust
(other than Receivables in Supplemental Accounts) and the proceeds
thereof upon execution and delivery of this Agreement, and which will be
enforceable with respect to such Receivables hereafter created and the
proceeds thereof, upon such creation. If this Agreement constitutes the
grant of a security interest to the Trust in such property, upon the
filing of the financing statement described in Section 2.1 and in the
case of the Receivables hereafter created and proceeds thereof, upon
such creation, the Trust shall have a first priority perfected security
interest in such property, except for Permitted Liens. Except as
contemplated in this Agreement or any Supplement, neither the Transferor
nor any Person claiming through or under the Transferor shall have any
claim to or interest in the Collection
-30-
Account, any Principal Account, any Interest Funding Account, the
Distribution Account, the Equalization Account, any principal funding
account for any Series or any other Series Account, except for the
Transferor's rights to receive interest accruing on, and investment
earnings in respect of, any such account as provided in this Agreement
(or, if applicable, any Series Account as provided in any Supplement)
and, if this Agreement constitutes the grant of a security interest in
such property, except for the interest of the Transferor in such
property as a debtor for purposes of the UCC as in effect in the
Relevant UCC State. The Receivables Purchase Agreement constitutes a
valid transfer, assignment, set-over and conveyance to the Transferor of
all right, title and interest of the Originators in and to the
Receivables purported to be sold thereunder, whether then existing or
thereafter created in the applicable Accounts and the proceeds thereof.
(iii) The Transferor is not insolvent and has adequate
capital to conduct its business as it is presently being conducted.
(iv) The Transferor is (or, with respect to Receivables
arising after the date hereof, will be) the legal and beneficial owner
of all right, title and interest in and to each Receivable and each
Receivable has been or will be transferred to the Trust free and clear
of any Lien other than Permitted Liens.
(v) All consents, licenses, approvals or authorizations of
or registrations or declarations with any Governmental Authority
required to be obtained, effected or given by the Transferor in
connection with the transfer of Trust Property to the Trust have been
duly obtained, effected or given and are in full force and effect.
(vi) The Transferor has clearly and unambiguously marked
all its computer records and all its microfiche storage files regarding
the Receivables as the property of the Trust and shall maintain such
records in a manner such that the Trust shall have a perfected interest
in such Receivables.
(vii) As of the Initial Closing Date, SCHEDULE I to this
Agreement is and will be an accurate and complete listing of all
Accounts in all material respects as of such day and the information
contained therein with respect to the identity of each Account and the
aggregate unpaid balance of the Receivables existing thereunder is and
will be true and correct in all material respects as of such day; as of
the close of business on the Business Day preceding the Initial Closing
Date the aggregate Outstanding Balance for all Eligible Receivables was
$159,131,000 and the initial deposit to the Equalization Account was
$11,000,000.
(viii) Each Account classified as an "Eligible Account" by
the Transferor in any document or report delivered hereunder will
satisfy the requirements contained in the definition of Eligible Account
as of the time of such document or report and each Receivable classified
as an "Eligible Receivable" by the Transferor in any document or report
delivered
-31-
hereunder will satisfy the requirements contained in the definition of
Eligible Receivable as of the time of such document or report.
(ix) All information with respect to the Accounts and the
Receivables provided to the Trustee by the Transferor was true and
correct in all material respects as of the Closing Date, or with respect
to Supplemental Accounts as of each Addition Date and with respect to
Automatic Additional Accounts, as of the day Receivables arising under
each such Account are first designated for inclusion in the Trust, as
the case may be.
(x) Each Receivable then existing has been conveyed to the
Trust free and clear of any Lien of any Person claiming through or under
the Transferor or any of its Affiliates (other than Permitted Liens) and
in compliance, in all material respects, with all Requirements of Law
applicable to the Transferor.
(xi) With respect to each Receivable then existing, all
consents, licenses, approvals or authorizations of or registrations or
declarations with any Governmental Authority required to be obtained,
effected or given by the Transferor in connection with the conveyance of
such Receivable to the Trust have been duly obtained, effected or given
and are in full force and effect.
(b) DAILY REPRESENTATIONS AND WARRANTIES. On each day on which
any new Receivable is purchased by the Transferor, the Transferor shall be
deemed to represent and warrant to the Trust that (A) each Receivable purchased
by the Transferor on such day has been conveyed to the Trust in compliance, in
all material respects, with all Requirements of Law applicable to the Transferor
and free and clear of any Lien of any Person claiming through or under the
Transferor or any of its Affiliates (other than Permitted Liens) and (B) with
respect to each such Receivable, all consents, licenses, approvals or
authorizations of or registrations or declarations with, any Governmental
Authority required to be obtained, effected or given by the Transferor in
connection with the conveyance of such Receivable to the Trust have been duly
obtained, effected or given and are in full force and effect.
(c) NOTICE OF BREACH. The representations and warranties set
forth in this Section 2.4 shall survive the transfer and assignment of the
respective Receivables to the Trust. Upon discovery by the Transferor, the
Servicer or a Responsible Officer of the Trustee of a breach of any of the
representations and warranties set forth in this Section 2.4, the party
discovering such breach shall give prompt written notice to the other parties
mentioned above. The Transferor agrees to cooperate with the Servicer and the
Trustee in attempting to cure any such breach.
(d) DESIGNATION OF INELIGIBLE RECEIVABLES. In the event of a
breach with respect to a Receivable of any representations and warranties set
forth in subsection 2.3(i) or subsections 2.4(a)(iii) through (xi) or subsection
2.4(b), or in the event that a Receivable is not an Eligible Receivable as a
result of the failure to satisfy the conditions set forth in the definition of
Eligible Receivable, such Receivable shall be designated an "Ineligible
Receivable" and shall be assigned
-32-
an Outstanding Balance of zero for the purpose of determining the aggregate
amount of Principal Receivables on any day; PROVIDED HOWEVER, that if such
representations and warranties with respect to such Receivable shall
subsequently be true and correct in all material respects as if such Receivable
had been created on such day or such Receivable shall subsequently satisfy the
conditions set forth in the definition of Eligible Receivable, such Receivable
shall be designated an Eligible Receivable, and the principal amount of such
Receivable shall be included in determining the aggregate amount of Principal
Receivables on such day. On and after the date of its designation as an
Ineligible Receivable, each Ineligible Receivable shall not be given credit in
determining the aggregate amount of Principal Receivables used in the
calculation of any Investor Percentage, the Transferor Percentage or the
Transferor Interest. In the event that on any Business Day the exclusion of an
Ineligible Receivable from the calculation of the Transferor Interest would
cause the Transferor Interest to be reduced below the Minimum Transferor
Interest, the Transferor shall immediately make a deposit in the Equalization
Account (for allocation as a Principal Receivable) in immediately available
funds prior to the next succeeding Business Day in an amount equal to the amount
by which the Transferor Interest would be reduced below the Minimum Transferor
Interest as a result of the exclusion of such Ineligible Receivable. The portion
of such deposit allocated to the Investor Certificates of each Series shall be
distributed to the Investor Certificateholders of each Series in the manner
specified in Article IV.
(e) REASSIGNMENT OF TRUST PORTFOLIO. In the event of a breach of
any of the representations and warranties set forth in subsections 2.3(a), (b)
and (c) and 2.4(a)(i) and (ii) with respect to any Series, either the Trustee or
the Holders of Investor Certificates evidencing Undivided Interests aggregating
more than 50% of the Aggregate Invested Amount of such Series, by notice then
given in writing to the Transferor (and to the Trustee and the Servicer, if
given by the Investor Certificateholders), may direct the Transferor to accept
reassignment of an amount of Principal Receivables equal to the face amount of
the Invested Amount to be repurchased (as specified below) within 60 days of
such notice (or within such longer period as may be specified in such notice),
and the Transferor shall be obligated to accept reassignment of such Principal
Receivables on a Distribu tion Date specified by the Transferor (such
Distribution Date, the "REASSIGNMENT DATE") occurring within such applicable
period on the terms and conditions set forth below; PROVIDED, HOWEVER, that no
such reassignment shall be required to be made, and no notice of such
reassignment may be given, if, at any time during such applicable period, the
representations and warranties contained in subsections 2.3(a), (b) and (c) and
subsections 2.4(a)(i) and (ii) shall then be true and correct in all material
respects. The Transferor shall, on the Transfer Date (in next day funds)
preceding the Reassignment Date, deposit an amount equal to the reassignment
deposit amount for such Series in the related Distribution Account or Series
Account, as provided in the related Supplement, for distribution to the Investor
Certificateholders pursuant to Article XII. The reassignment deposit amount with
respect to any Series, unless otherwise stated in the related Supplement, shall
be equal to (i) the Invested Amount of such Series at the end of the day on the
last day of the Monthly Period preceding the Reassignment Date PROVIDED,
HOWEVER, that with respect to any Series issued pursuant to a Variable Funding
Supplement such amount shall be the Invested Amount of such Series as of the
Reassignment Date, less the amount, if any, previously allocated for payment of
principal to such Certificateholders on the related Reassignment Date, in the
Monthly Period in which the
-33-
Reassignment Date occurs), PLUS (ii) an amount equal to all interest accrued but
unpaid on the Investor Certificates of such Series at the applicable Certificate
Rate through such last day, less the amount, if any, previously allocated for
payment of interest to the Certificateholders of such Series on the related
Distribution Date in the Monthly Period in which the Reassignment Date occurs
plus any other amounts accrued and owing as specified in the applicable
Supplement. Payment of the reassignment deposit amount with respect to any
Series, and all other amounts in the Distribution Account or the applicable
Series Account in respect of the preceding Monthly Period, shall be considered a
prepayment in full of the Receivables represented by the Investor Certificates
of such Series. On the Distribution Date following the Transfer Date on which
such amount has been deposited in full into the Distribution Account or the
applicable Series Account, the Receivables and all monies due or to become due
with respect thereto and all proceeds of the Receivables allocated to the
Receivables pursuant to the related Supplement shall be released to the
Transferor after payment of all amounts otherwise due hereunder on or prior to
such dates and the Trustee shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, representation or
warranty, as shall be prepared by and as are reasonably requested by the
Transferor to vest in the Transferor, or its designee or assignee, all right,
title and interest of the Trust in and to such Receivables, all monies due or to
become due with respect thereto and all proceeds of such Receivables allocated
to such Receivables pursuant to the related Supplement. If the Trustee or the
Investor Certificateholders of any Series give notice directing the Transferor
to accept reassignment as provided above, the obligation of the Transferor to
accept reassignment of the applicable Receivables and pay the reassignment
deposit amount pursuant to this subsection 2.4(e) shall consti tute the sole
remedy respecting a breach of the representations and warranties contained in
subsections 2.3(a), (b) and (c) and 2.4(a)(i) and (ii) available to the Investor
Certificateholders of such Series or the Trustee on behalf of the Investor
Certificateholders of such Series. The Trustee shall have no duty to conduct any
affirmative investigation as to the occurrence of any condition requiring the
repurchase of any Receivable by the Transferor pursuant to this Agreement or any
Supplement or the eligibility of any Receivable for purposes of this Agreement
or any Supplement.
(f) LIMITED REPURCHASE OF DEFAULTED RECEIVABLES. (i) On each
Distribution Date with respect to a Monthly Period during each fiscal year of
the Transferor, the Transferor shall repurchase from the Trust all Receivables
transferred to the Trust by the Transferor which have theretofore become
Defaulted Receivables during the period commencing on the first day of such
fiscal year and ending on the last day of such Monthly Period (the "YEAR-TO-DATE
PERIOD"); provided, that (A) the Pro Forma Condition has been satisfied as of
such date, (B) the Dividend Condition has been satisfied as of such date, (C) no
Amortization Period is then in effect for any Series, and (D) the Transferor
shall not repurchase, with respect to any Monthly Period, an amount of Defaulted
Receivables which will cause the aggregate cumulative principal amount of
Defaulted Receivables repurchased by the Transferor for the Year-to-Date Period
to exceed 95% of the product of (1) the cumulative principal amount of
Receivables transferred pursuant to this Agreement by the Transferor during such
Year-to-Date Period MULTIPLIED by (2) the percentage equivalent of a fraction,
the numerator of which is the aggregate principal amount of Defaulted
Receivables recorded by the Transferor during the immediately preceding fiscal
year, and the denominator of which is the cumulative principal amount of
Receivables transferred pursuant to this Agreement by the
-34-
Transferor during the immediately preceding fiscal year (such percentage
equivalent, the "PRIOR YEAR'S DEFAULT RATIO").
(ii) The Transferor shall deposit, on the Transfer
Date (in next day funds) preceding each Distribution Date, an
amount equal to the principal amount of Defaulted Receivables
being repurchased (the "DEFAULTED RECEIVABLE REPURCHASE AMOUNT")
into the Collection Account. On such Distribution Date, such
repurchased Defaulted Receivables and all monies due or to become
due with respect thereto and all proceeds of such repurchased
Defaulted Receivables allocated to such repurchased Defaulted
Receivables for which the Defaulted Receivable Repurchase Amount
has been paid shall be released to the Transferor after payment
of all amounts otherwise due hereunder on or prior to such dates
and the Trustee shall execute and deliver such instruments of
transfer or assignment, in each case without recourse,
representation or warranty, as shall be prepared by and as are
reasonably requested by the Transferor to vest in the Transferor
or its designee or assign, all right, title and interest of the
Trust in and to such repurchased Defaulted Receivables, all
monies due or to become due with respect thereto and all proceeds
of such repurchased Defaulted Receivables. Thereafter, such
repurchased Defaulted Receivables shall not be considered
Receivables for any purpose hereunder other than (x) for purposes
of calculating a Prior Year's Default Ratio and (y) to the extent
provided in the definition of "Default Amount."
(iii) In consideration for the Transferor's
obligation to repurchase Defaulted Receivables as set forth in
this subsection 2.4(f), so long as the Transferor complies with
such obligation, the Transferor shall retain any amounts other
than Recoveries received by the Transferor with respect to
Defaulted Receivables.
SECTION 2.5 COVENANTS OF THE TRANSFEROR. The Transferor hereby
covenants that:
(a) RECEIVABLES TO BE ACCOUNTS OR GENERAL INTANGIBLES. The
Transferor will take no action to cause any Receivable to be evidenced by any
instrument (as defined in the UCC as in effect in the Relevant UCC State). The
Transferor will take no action to cause any Receivable to be anything other than
an "account" or "general intangible" (each as defined in the UCC as in effect in
the Relevant UCC State).
(b) SECURITY INTERESTS. Except for the conveyances hereunder, the
Transferor will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien, on any Receivable,
whether now existing or hereafter created, or any interest therein; the
Transferor will immediately notify the Trustee of the existence of any Lien on
any Receivable; and the Transferor shall defend the right, title and interest of
the Trust in, to and under the Receiv ables, whether now existing or hereafter
created, against all claims of third parties claiming through or under the
Transferor; PROVIDED, HOWEVER, that nothing in this subsection 2.5(b) shall
prevent or be deemed to prohibit the Transferor from suffering to exist upon any
of the Receivables any Permitted Lien.
-35-
(c) CHARGE ACCOUNT AGREEMENTS AND CREDIT AND COLLECTION POLICIES.
The Transferor shall comply with and perform its obligations and shall take all
actions reasonably within its control to cause the Originators to comply with
and perform their obligations under the Charge Account Agreements relating to
the Accounts and the Credit and Collection Policy except insofar as any failure
to comply or perform would not materially and adversely affect the rights of the
Trust or the Certificateholders hereunder or under the Certificates. The
Transferor may change, and permit the Originators to change, the terms and
provisions of the Charge Account Agreements or the Credit and Collection Policy
in any respect (including, without limitation, the reduction of the required
minimum monthly payment, the calculation of the amount, or the timing, of charge
offs and the periodic finance charges and other fees to be assessed thereon)
only if such change (individually or taken together with all prior changes to
the terms and provisions of the Charge Account Agreements or the Credit and
Collection Policy) (i) would not, in the reasonable belief of the Transferor,
cause, immediately or with the passage of time, a Pay Out Event to occur and
(ii) (A) (if it owns a comparable segment of charge card accounts) is made
applicable to the comparable segment of the revolving credit card accounts owned
by the Transferor, if any, which have characteristics the same as, or
substantially similar to, the Accounts that are the subject of such change and
(B) (if it does not own such a comparable segment) will not be made with the
intent to materially benefit the Transferor over the Investor Certificateholders
or to materially adversely affect the Investor Certificateholders, except as
otherwise restricted by an endorsement, sponsorship, or other agreement between
the Transferor and an unrelated third party or by the terms of the Charge
Account Agreements.
(d) ACCOUNT ALLOCATIONS. In the event that the Transferor is
unable for any reason to transfer Receivables to the Trust in accordance with
the provisions of this Agreement (including, without limitation, by reason of
the application of the provisions of Section 9.2 or an order by any Governmental
Authority or any court of competent jurisdiction that the Transferor not
transfer any additional Receivables to the Trust) then, in any such event, (A)
the Transferor agrees to allocate and pay to the Trust, after the date of such
inability, all Collections with respect to Principal Receivables, and all
amounts which would have constituted Collections with respect to Principal
Receivables but for the Transferor's inability to transfer such Receivables; (B)
the Transferor agrees to have such amounts applied as Collections in accordance
with Article IV; and (C) for only so long as all Collections and all amounts
which would have constituted Collections are allocated and applied in accordance
with clauses (A) and (B) above, Principal Receivables (and all amounts which
would have constituted Principal Receivables but for the Transferor's inability
to transfer Receivables to the Trust) that are written off as uncollectible in
accordance with the applicable Credit and Collection Policy shall continue to be
allocated in accordance with Article IV, and all amounts that would have
constituted Principal Receivables but for the Transferor's inability to trans
fer Receivables to the Trust shall be deemed to be Principal Receivables for the
purpose of calculating (i) the applicable Investor Percentage with respect to
any Series and (ii) the Aggregate Investor Percentage thereunder. If the
Transferor is unable pursuant to any Requirement of Law to allocate Collections
as described above, the Transferor agrees that it shall in any such event
allocate, after the occurrence of such event, payments on each Account with
respect to the principal balance of such Account first to the oldest principal
balance of such Account and to have such payments
-36-
applied as Collections in accordance with Article IV. The parties hereto agree
that Finance Charge Receivables, whenever created, accrued in respect of
Principal Receivables that have been conveyed to the Trust, or that would have
been conveyed to the Trust but for the above described inability to transfer
such Receivables, shall continue to be a part of the Trust notwithstanding any
cessation of the transfer of additional Principal Receivables to the Trust and
Collections with respect thereto shall continue to be allocated and paid in
accordance with Article IV.
(e) DELIVERY OF COLLECTIONS. In the event that the Transferor
receives Collections, the Transferor agrees to deposit such Collections into the
Collection Account as soon as practicable after the receipt thereof, but in no
event later than two Business Days after receipt thereof.
(f) CONVEYANCE OF ACCOUNTS. The Transferor covenants and agrees
that it will not permit the Originators to convey, assign, exchange or otherwise
transfer any Account, unless it is a Removed Account, to any Person other than
the Transferor prior to the termination of this Agreement pursuant to Article
XII; PROVIDED, HOWEVER, that the Transferor shall not be prohibited hereby from
permitting an Originator to convey, assign, exchange or otherwise transfer an
Account of such Originator (the removal of which is permitted by Section 2.7) in
connection with a transaction in which such Originator and its successor agree
to comply with provisions substantially similar to those of either Section 2.7
or Section 7.2; PROVIDED, FURTHER, that nothing set forth in this Agreement
shall prevent one Originator from merging with another Originator.
(g) NOTICE OF LIENS. The Transferor shall notify the Trustee
promptly after becoming aware of any Lien on any Receivable other than Permitted
Liens.
(h) NO OTHER BUSINESS. The Transferor agrees to engage in no
business other than the business contemplated hereunder and under the
Receivables Purchase Agreement.
(i) ENFORCEMENT OF RECEIVABLES PURCHASE AGREEMENT. The Transferor
agrees to take all action necessary and appropriate to enforce its rights and
claims under the Receivables Purchase Agreement.
(j) SEPARATE BUSINESS. Other than with respect to In-Store
Payments, the Transferor will not permit its assets to be commingled with those
of SRI or any Affiliate of SRI, the Transferor shall maintain separate corporate
records and books of account from those of SRI and its Affiliates, and the
Transferor shall conduct its business from an independent office. The Transferor
will conduct its business solely in its own name and will cause SRI and its
Affiliates to conduct their business solely in their own names so as not to
mislead others as to the identity of the entity with which those others are
concerned. The Transferor will provide for its own operating expenses and
liabilities from its own funds, except that the organizational expenses of the
Transferor may be paid by SRI. The Transferor will not hold itself out, or
permit itself to be held out, as having agreed to pay, or as being liable for,
the debts of SRI or any of its Affiliates. The Transferor shall cause SRI and
its Affiliates not to hold themselves out, or permit themselves to be held out,
as having agreed to pay, or as being liable for, the debts of the Transferor.
The Transferor will
-37-
maintain an arm's length relationship with SRI and its Affiliates with respect
to any transactions between the Transferor, on the one hand, and SRI or its
Affiliates, on the other.
(k) ORIGINATORS. The Transferor shall not acquire Receivables
from any Person other than an Originator which has become a party to the
Receivables Purchase Agreement. The Transferor will not permit any additional
originator to become a party to the Receivables Purchase Agreement as an
"Originator" except following an acquisition of Accounts or other transaction
which has satisfied the requirements of clause (b) of the definition of
Automatic Additional Accounts.
(l) RECEIVABLES PURCHASE AGREEMENT NOTICES. The Transferor (i)
shall promptly give the Trustee copies of any notices, reports or certificates
given or delivered to the Transferor under the Receivables Purchase Agreement,
(ii) shall not, without the consents, approvals and opinions, if any, required
by Section 13.1, as if Section 13.1 related to the Receivables Purchase
Agreement rather than this Agreement, enter into any amendment, supplement or
other modification to, or waiver of any provision of, the Receivables Purchase
Agreement and (iii) shall not permit the addition or removal of an Account or
Receivable to or from the operation of the Receivables Purchase Agreement unless
there is a corresponding right or obligation of the Transferor to add or remove
such Account or Receivable to or from the Trust.
(m) Notwithstanding any other provisions of this Agreement and
only at such time as a Related Person shall be Trustee hereunder, in the event
that (i) the sum of cash and Cash Equivalents in the Equalization Account
divided by (ii) the sum of the Aggregate Principal Re ceivables and the amount
described in clause (i) above is greater than (x) 15% on six consecutive
Determination Dates or (y) 30% on any monthly Determination Date, each after
giving effect to all payments made or to be made on the monthly Distribution
Date next succeeding the applicable monthly Determination Date, then such
Related Person shall be replaced as Trustee, pursuant to Sections 11.7(c) and
11.8, with a successor Trustee who is not a Related Person.
Section 2.6 ADDITION OF ACCOUNTS. (a) All Accounts which meet the
definition of Automatic Additional Accounts shall be included as Accounts from
and after the date upon which such Automatic Additional Accounts are created and
all Receivables in such Automatic Additional Accounts, whether such Receivables
are then existing or thereafter created, shall be transferred automatically to
the Trust upon purchase by the Transferor. For all purposes of this Agreement,
all receivables of such Automatic Additional Accounts shall be treated as
Receivables upon their creation and shall be subject to the eligibility criteria
specified in the definitions of "Eligible Receivable" and "Eligible Account".
(b) On any day on which the Receivables in Automatic Additional
Accounts are to be transferred to the Trust, such Accounts shall be included as
Eligible Accounts if, in addition to satisfying the requirements of clauses (a)
through (e) of the definition thereof, the following conditions are met:
-38-
(i) the cumulative number of Accounts the
Receivables of which have been added or are designated to be
added to the Trust pursuant to subsection 2.6(a) since the later
of the Initial Closing Date and the first day of the twelfth
preceding Monthly Period which satisfy the conditions of clause
(a) of the definition of "Automatic Additional Accounts" on such
date shall not be in excess of 20% of the amount equal to (w) the
number of the Active Accounts as of the later of the Initial
Closing Date, the Latest Rating Agency Approval Date and the last
day of the twelfth preceding Monthly Period PLUS (x) the number
of Accounts the Receivables of which were designated to be added
to the Trust pursuant to clause (b) of the definition of
"Automatic Additional Accounts" on the first day of any such
addition after the later of the Initial Closing Date, the Latest
Rating Agency Approval Date and the last day of the twelfth
preceding Monthly Period PLUS (y) the number of Supplemental
Accounts, if any, the Receivables of which were designated to be
added to the Trust after the later of the Initial Closing Date,
the Latest Rating Agency Approval Date and the last day of the
twelfth preceding Monthly Period MINUS (z) any Removed Accounts
removed after the later of the Initial Closing Date, the Latest
Rating Agency Approval Date and the last day of the twelfth
preceding Monthly Period; and
(ii) the cumulative number of Accounts the
Receivables of which have been added or are designated to be
added to the Trust pursuant to subsection 2.6(a) since the later
of the Initial Closing Date and the first day of the second
preceding Monthly Period which satisfy the conditions of clause
(a) of the definition of Automatic Additional Accounts on such
date shall not be in excess of 15% of the amount equal to (w) the
number of the Active Accounts as of the latest of the Initial
Closing Date, the Latest Rating Agency Approval Date and the
first day of the second preceding Monthly Period PLUS (x) the
number of Accounts the Receivables of which were designated to be
added to the Trust pursuant to clause (b) of the definition of
"Automatic Additional Accounts" on the first day of any such
addition and were added after the latest of the Initial Closing
Date, the Latest Rating Agency Approval Date and the first day of
the second preceding Monthly Period PLUS (y) the number of
Supplemental Accounts, if any, designated during such three month
period and thereafter added after the later of the Initial
Closing Date and the first day of the second preceding Monthly
Period MINUS (z) any Removed Account removed after the later of
the Initial Closing Date and the first day of the second
preceding Monthly Period.
If any Automatic Additional Accounts would have been included as an Account but
for the provisions of Section 2.6(b)(i) or (ii), they shall be included as
Accounts on the first date thereafter permitted by Section 2.6(b)(i) and (ii).
(c) The Transferor may elect at any time to terminate or suspend
the inclusion in Accounts of Automatic Additional Accounts by delivering to the
Trustee, the Servicer and the Rating Agency 15 days prior written notice of such
election. If the Transferor has elected
-39-
to terminate or suspend the inclusion of Automatic Additional Accounts and (i)
on any Record Date, the Transferor Interest for the related Monthly Period is
less than the Minimum Transferor Interest, the Transferor shall designate
additional credit card accounts or any successor credit card account designation
accounts ("SUPPLEMENTAL ACCOUNTS") to be included as Accounts in a sufficient
amount such that the Transferor Interest as a percentage of the Aggregate
Principal Receivables for such Monthly Period after giving effect to such
addition is at least equal to the Minimum Transferor Interest, (ii) on any
Record Date, the Retained Interest for the related Monthly Period is less than
the Minimum Retained Interest, the Transferor shall designate Supplemental
Accounts to be included as Accounts in a sufficient amount such that the
Retained Interest as a percentage of the Aggregate Principal Receivables for
such Monthly Period after giving effect to such addition is at least equal to
the Minimum Retained Interest, or (iii) on any Record Date, the aggregate amount
of Principal Receivables is less than the Minimum Aggregate Principal
Receivables, the Transferor shall designate Supplemental Accounts to be included
as Accounts in a sufficient amount such that the Aggregate Principal Receivables
will be equal to or greater than the Minimum Aggregate Principal Receivables.
Receivables from such Supplemental Accounts shall be transferred to the Trust on
or before the tenth Business Day following such Record Date. On any day on which
the Receivables in Supplemental Accounts are to be transferred to the Trust, the
Receivables in such Accounts shall be included as Eligible Receivables if they
satisfy the requirements of the definition of "Eligible Receivables".
(d) In addition to its obligation under subsection 2.6(c), if and
for so long as the Transferor has elected to terminate or suspend the inclusion
of Automatic Additional Accounts, the Transferor may, by giving twenty Business
Days' notice to the Trustee and each Rating Agency, but shall not be obligated
to, designate from time to time Supplemental Accounts of the Transferor to be
included as Accounts.
(e) The Transferor agrees that any such transfer of Receivables
from Supplemental Accounts, under subsection 2.6(c) or (d), shall satisfy the
following conditions (to the extent provided below):
(i) on or before the fifth Business Day prior to
the Addition Date with respect to additions pursuant to
subsection 2.6(c) and on or before the twentieth Business Day
prior to the Addition Date with respect to additions pursuant to
subsection 2.6(d) (as applicable, the "NOTICE DATE"), the
Transferor shall give the Trustee, each Rating Agency and the
Servicer written notice that such Supplemental Accounts will be
included, which notice shall specify the approximate aggregate
amount of the Receivables to be transferred;
(ii) on or before the applicable Addition Date,
the Transferor shall have delivered to the Trustee a written
assignment (including an acceptance by the Trustee on behalf of
the Trust for the benefit of the Investor Certificateholders) in
substantially the form of Exhibit B (the "ASSIGNMENT") and the
Transferor shall have indicated in its computer files that the
Receivables created in connection with the
-40-
Supplemental Accounts have been transferred to the Trust and,
within five Business Days thereafter, the Transferor shall have
delivered to the Trustee or the bailee of the Trustee a computer
file or microfiche list containing a true and complete list of
all Supplemental Accounts, identified by account number and the
Outstanding Balance of the Receivables in such Supplemental
Accounts, as of the Addition Cut Off Date, which computer file or
microfiche list shall be as of the date of such Assignment
incorporated into and made a part of such Assignment and Schedule
1 to this Agreement;
(iii) the Transferor shall represent and warrant
that (x) no selection procedure which is materially adverse to
the interests of the Investor Certificateholders was utilized in
selecting the Supplemental Accounts and (y) as of the applicable
Addition Date, the Transferor is not insolvent;
(iv) the Transferor shall represent and warrant
that, as of the Addition Date, the Assignment constitutes either
(x) a valid transfer and assignment to the Trust of all right,
title and interest of the Transferor in and to (A) the Receiv
ables then existing and thereafter created in the Supplemental
Accounts, the Related Contracts and all proceeds (as defined in
the UCC as in effect in the Relevant UCC State) of such
Receivables and (B) Recoveries, and such Receivables and all
proceeds thereof will be held by the Trust free and clear of any
Lien of any Person claiming through or under the Transferor or
any of its Affiliates, except for (i) Permitted Liens, (ii) the
interest of the Transferor as Holder of the Exchangeable
Transferor Certificate and any other Class or Series of
Certificates and (iii) the Transferor's right to receive interest
accruing on, and investment earnings in respect of, the
Collection Account and any Interest Funding Account and any
Principal Account, or any Series Account as provided in this
Agreement and any related Supplement or (y) a grant of a security
interest (as defined in the UCC as in effect in the Relevant UCC
State) in such property to the Trust, which is enforceable with
respect to then existing Receivables of the Supplemental
Accounts, the proceeds (as defined in the UCC as in effect in the
Relevant UCC State) thereof upon the conveyance of such
Receivables to the Trust, and which will be enforceable with
respect to the Receivables thereafter created in respect of
Supplemental Accounts conveyed on such Addition Date and the
proceeds (as defined in the UCC as in effect in the Relevant UCC
State) thereof upon such creation; and (z) if the Assignment
constitutes the grant of a security interest to the Trust in such
property, upon the filing of a financing statement as described
in Section 2.1 with respect to such Supplemental Accounts and in
the case of the Receivables thereafter created in such
Supplemental Accounts and the proceeds (as defined in the UCC as
in effect in the Relevant UCC State) thereof, upon such creation,
the Trust shall have a first priority perfected security interest
in such property, except for Permitted Liens;
-41-
(v) the Transferor shall deliver to the Trustee an
Officer's Certificate substantially in the form of Schedule 2 to
Exhibit B confirming the items set forth in paragraph (ii) above;
(vi) the Transferor shall deliver to the Trustee an
Opinion of Counsel with respect to the Receivables in the
Supplemental Accounts (with a copy to the Rating Agencies)
substantially in the form of Exhibit F; and
(vii) the Transferor shall have received written
notice from the Rating Agencies that the inclusion of such
accounts as Supplemental Accounts pursuant to subsection 2.6(c)
or (d), as the case may be, will not result in the reduction or
with drawal of its then existing rating of any Series of Investor
Certificates then issued and outstanding and shall have delivered
such notice to the Trustee.
(f) The Transferor shall also comply with the requirements of
clauses (v) and (vi) of subsection 2.6(e) in connection with each addition of
Automatic Additional Accounts pursuant to clause (b) of the definition thereof.
Section 2.7 REMOVAL OF ACCOUNTS.
(a) On each Determination Date that the Transferor Interest for
the related Monthly Period exceeds 5% of the Aggregate Principal Receivables in
the Trust with respect to such Determination Date, the Trustee shall be deemed
to have offered to the Transferor automatically and without any notice to or
action by or on behalf of the Trustee, as of such Determination Date, the right
to remove from the Trust all of the Trust's right, title and interest in, to and
under the Receivables then existing and thereafter created, all monies then due
or to become due and all amounts thereafter received with respect thereto and
all proceeds thereof in or with respect to those Accounts designated by the
Transferor (the "REMOVED ACCOUNTS") in an aggregate amount not greater than (i)
at any time the excess of the Transferor Interest over the Minimum Transferor
Interest, (ii) at any time the excess of the Retained Interest over the Minimum
Retained Interest and (iii) if any Amortization Period has commenced and is
continuing with respect to any Series, the lesser of (x) the excess of the
Transferor Interest over the Minimum Transferor Interest and (y) the excess of
Aggregate Principal Receivables over the Minimum Aggregate Principal
Receivables. To accept such offer, the Transferor is required to furnish to the
Trustee and each Rating Agency written notice by the fifth Business Day after
the Determination Date specifying the approximate aggregate amount of Principal
Receivables covered by the offer that the Transferor intends to accept. There
shall be no more than one such removal with respect to any Monthly Period.
(b) In addition to the satisfaction of the conditions set forth
in subsection 2.7(a), the Transferor shall be permitted to accept reassignment
to it of the Receivables from Removed Accounts only upon satisfaction of the
following conditions:
-42-
(i) On each date specified by the Transferor for
removal of the Removed Accounts (a "REMOVAL DATE"), the
Transferor shall prepare and the Trustee shall execute and
deliver to the Transferor a written reassignment in substantially
the form of Exhibit H (the "REASSIGNMENT") and the Transferor
shall deliver to the Trustee or the bailee of the Trustee a
computer file or microfiche list containing a true and complete
schedule identifying all Accounts the Receivables of which remain
in the Trust specifying for each such Account, as of the Removal
Notice Date, its account number and the Outstanding Balance of
such Account. Such computer file or microfiche list shall be
incorporated into and made part of this Agreement as of the date
of such Reassignment.
(ii) The Transferor shall represent and warrant as
of each Removal Notice Date that (a) the list of the Accounts not
removed from the Trust, as of the Removal Notice Date, complies
in all material respects with the requirements of paragraph (i)
above and (b) no selection procedure used by the Transferor which
is materially adverse to the interests of the Investor
Certificateholders was utilized in selecting the Removed
Accounts.
(iii) The Transferor shall represent and warrant
that the removal of any Receivables in any Removed Accounts on
any Removal Date shall not, in the reasonable belief of the
Transferor, cause, immediately or with the passage of time, a Pay
Out Event to occur.
(iv) The Transferor shall have delivered at least
20 days' (or such lesser number as any Rating Agency may agree)
prior written notice (which may be given prior to the Removal
Date in expectation that the Trustee will make the offer
described in subsection 2.7(a)) of such removal to each Rating
Agency which has rated any outstanding Series and the Trustee
shall have received written confirmation from each such Rating
Agency that such Rating Agency will not reduce or withdraw its
rating on any outstanding Series as a result of such removal.
(v) The Transferor shall have delivered to the
Trustee an Officer's Certificate confirming the Transferor's
compliance with the items set forth in paragraphs (i) through
(iv) above. The Trustee may conclusively rely on such
certificate, shall have no duty to make inquiries with regard to
the matters set forth therein and shall incur no liability in so
relying.
(c) Upon satisfaction of the conditions set forth in subsections
2.7(a) and (b), the Trustee shall execute and deliver the Reassignment to the
Transferor, and the Receivables from the Removed Accounts shall no longer
constitute a part of the Trust.
(d) Notwithstanding any other provisions of this Section 2.7 (but
subject to having no more than one removal in any Monthly Period and maintaining
the Minimum
-43-
Transferor Interest), the Transferor will be permitted to designate Removed
Accounts and to remove from the Trust all of the Trust's right, title and
interest in, to and under the Receivables then existing in such Removed Accounts
together with all monies then due or to become due and all amounts then received
with respect thereto and all proceeds thereof or with respect to such Removed
Accounts in connection with the sale by SRI or any Affiliate of SRI of all or
substantially all of the capital stock or assets of any Originator or any former
Originator if the conditions in clauses (i), (iii) and (iv) of subsection 2.7(b)
have been satisfied and the Transferor shall have delivered to the Trustee an
Officer's Certificate confirming compliance with such conditions; PROVIDED,
HOWEVER, that the Transferor will have the option under such circumstances, if
it provides the Trustee with an Opinion of Counsel to the effect that the Trust
will continue to have a first priority perfected security interest in all
Receivables remaining in the Trust subsequent to such Reassignment, to leave in
the Trust all of the Trust's right, title and interest in, to and under the
Receivables then existing, together with all monies due or to become due and all
amounts received with respect thereto and all proceeds thereof in or with
respect to the Removed Accounts and cease, from and after the applicable Removal
Date, to transfer, assign, set over or otherwise convey to the Trust the
Receivables thereafter created and arising in connection with the Removed
Accounts, all monies due or to become due and all amounts received with respect
thereto and all proceeds thereof in or with respect to the Removed Accounts, in
which case the Reassignment shall be modified accordingly.
Section 2.8 DISCOUNT OPTION. (a) The Transferor shall have the
option to designate a fixed percentage (the "DISCOUNT PERCENTAGE"), not less
than 2% and not greater than 4%, of the principal balance of all Receivables,
other than such amounts that are included in clauses (i) through (vii) of the
definition of Finance Charge Receivables, investment earnings on amounts on
deposit in the Equalization Account and Receivables in Defaulted Accounts,
arising on or after the date of such designation determination to be treated as
Finance Charge Receivables. The election to exercise this option shall be
irrevocable. The Transferor shall provide to the Servicer, the Trustee, any
Enhancement Provider and the Rating Agency 30 days' prior written notice of such
designation, and such designation shall become effective on the date designated
therein (i) unless such designa tion in the reasonable belief of the Transferor
would cause a Pay Out Event to occur, or an event which, with notice or the
lapse of time or both, would constitute a Pay Out Event and (ii) only if the
Rating Agency shall have delivered a letter to the Transferor and the Trustee
confirming that its then current rating of the Investor Certificates of any
Series then outstanding will not be reduced or withdrawn as a result of such
designation.
(b) After the date on which the Transferor's exercise of its
discount option takes effect, and with respect to Receivables generated on and
after such date, the Transferor, in accordance with Section 4.3, shall deposit
into the Collection Account in immediately available funds an amount equal to
the amount of the Discount Option Receivables Collections processed on such day.
The deposit made by the Transferor into the Collection Account under the
preceding sentence shall be considered a payment of such Discount Option
Receivables and shall be applied as Finance Charge Receivables in accordance
with Article IV.
-44-
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.1 ACCEPTANCE OF APPOINTMENT AND OTHER MATTERS RELATING
TO THE SERVICER.
(a) SRI agrees to act as the Servicer under this Agreement. The
Investor Certificateholders of each Series by their acceptance of the related
Certificates consent to SRI acting as Servicer. Notwithstanding the foregoing or
any other provisions of this Agreement or any Supplement, the Investor
Certificateholders consent to an Affiliate of SRI acting as Servicer hereunder,
in full substitution thereof; PROVIDED that such Affiliate shall expressly
assume in writing (unless such assumption occurs by operation of law), by an
agreement supplemental hereto, executed and delivered to the Trustee, the
performance of every covenant and obligation of the Servicer, as applicable
hereunder, and shall in all respects be designated the Servicer under this
Agreement; PROVIDED, FURTHER, that SRI will remain jointly and severally liable
with such Affiliate.
(b) The Servicer shall service and administer the Receivables and
shall collect payments due under the Receivables in accordance with its
customary and usual servicing procedures and the Credit and Collection Policies
and shall have full power and authority, acting alone or through any party
properly designated by it hereunder, to do any and all things in connection with
such servicing and administration which it may deem necessary or desirable.
Without limiting the generality of the foregoing and subject to Section 10.1,
the Servicer is hereby authorized and empowered (i) to make withdrawals from the
Collection Account as set forth in this Agreement, (ii) unless such power and
authority is revoked by the Trustee on account of the occurrence of a Servicer
Default pursuant to Section 10.1, to instruct the Trustee in writing to make
withdrawals and payments, from any Interest Funding Account, the Equalization
Account, any Principal Account and any Series Account, in accordance with such
instructions as set forth in this Agreement, (iii) unless such power and
authority is revoked by the Trustee on account of the occurrence of a Servicer
Default pursuant to Section 10.1, to instruct the Trustee in writing to take any
action permitted or required under any Enhancement at such time as set forth in
this Agreement and any Supplement, (iv) to execute and deliver, on behalf of the
Trust for the benefit of the Certificateholders, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Receivables and, after the
delinquency of any Receivable and to the extent permitted under and in
compliance with applicable law and regulations, to commence enforcement
proceedings with respect to such Receivables, (v) to make any filings, reports,
notices, applications, registrations with, and to seek any consents or
authorizations from, the Securities and Exchange Commission and any state
securities authority on behalf of the Trust as may be necessary or advisable to
comply with any federal or state securities or reporting requirements and (vi)
to delegate certain of its service, collection, enforcement and administrative
duties hereunder with respect to the Accounts and the Receivables to any Person
who agrees to conduct such duties in accordance with the Credit and Collection
Policies. The Trustee
-45-
agrees that it shall promptly follow the instructions of the Servicer to
withdraw funds from any Principal Account, any Interest Funding Account, the
Equalization Account, or any Series Account and to take any action required
under any Enhancement at such time as required under this Agreement. The Trustee
shall execute at the Servicer's written request such documents prepared by the
Transferor and acceptable to the Trustee as the Servicer certifies are necessary
or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder.
(c) In the event that the Transferor is unable for any reason to
transfer Receivables to the Trust in accordance with the provisions of this
Agreement (including, without limitation, by reason of the application of the
provisions of Section 9.2 or the order of any court of competent jurisdiction
that the Transferor not transfer any additional Principal Receivables to the
Trust) then, in any such event, (A) the Servicer agrees to allocate, after such
date, all Collections with respect to Principal Receivables, and all amounts
which would have constituted Collections with respect to Principal Receivables
but for the Transferor's inability to transfer such Receivables in accordance
with subsection 2.5(d); (B) the Servicer agrees to apply such amounts as
Collections in accordance with Article IV, and (C) for only so long as all
Collections and all amounts which would have constituted Collections are
allocated and applied in accordance with clauses (A) and (B) above, Principal
Receivables and all amounts which would have constituted Principal Receivables
but for the Transferor's inability to transfer Receivables to the Trust that are
written off as uncollectible in accordance with this Agreement shall continue to
be allocated in accordance with Article IV and all amounts which would have
constituted Principal Receivables but for the Transferor's inability to transfer
Receivables to the Trust shall be deemed to be Principal Receivables for the
purpose of calculating the applicable Investor Percentage thereunder. If the
Servicer is unable pursuant to any Requirement of Law to allocate payments on
the Accounts as described above, the Servicer agrees that it shall in any such
event allocate, after the occurrence of such event, payments on each Account
with respect to the principal balance of such Account first to the oldest
principal balance of such Account and to have such payments applied as
Collections in accordance with Article IV.
(d) The Servicer shall not be obligated to use separate servicing
procedures, offices or employees for servicing the Receivables from the
procedures, offices and employees used by the Servicer in connection with
servicing other credit card receivables.
Section 3.2 SERVICING COMPENSATION. As compensation for its
servicing activities hereunder and reimbursement for its expenses as set forth
in the immediately following paragraph, the Servicer shall be entitled to
receive a servicing fee in respect of each day prior to the termination of the
Trust pursuant to Section 12.1 (the "SERVICING FEE"), payable in arrears on each
date and in the manner specified in the applicable Supplement, equal to the
product of (i) a fraction, the numerator of which is the actual number of days
in the measuring period specified in the applicable Supplement and the
denominator of which is the actual number of days in the year, (ii) the weighted
average Series Servicing Fee Percentage (based upon the Series Servicing Fee
Percentage for each Series and the Invested Amount of such Series) and (iii) the
daily average aggregate Outstanding Balance of all Principal Receivables over
the term of such measuring period.
-46-
The share of the Servicing Fee allocable to each Series with respect to any date
of payment shall be equal to the product of (i) a fraction, the numerator of
which is the actual number of days in the measuring period specified in the
applicable Supplement and the denominator of which is the actual number of days
in the year, (ii) the applicable Series Servicing Fee Percentage for such Series
and (iii) the Invested Amount of such Series, as appropriate, as of the date of
determination for such payment as specified in the applicable Supplement. The
remainder of the Servicing Fee shall be paid by the Transferor, or retained by
the Servicer as provided in Article IV, and in no event shall the Trust, the
Trustee, any Enhancement Provider, or the Investor Certificateholders be liable
for the share of the Servicing Fee to be paid by the Transferor.
The Servicer shall be responsible for its own expenses, which
shall include the amounts due to the Trustee pursuant to Section 11.5 and the
reasonable fees and disbursements of independent public accountants and all
other expenses incurred by the Servicer in connection with its activities
hereunder; PROVIDED, that the Servicer shall not be liable for any liabilities,
costs or expenses of the Trust, the Investor Certificateholders or the
Certificate Owners arising under any tax law, including without limitation any
federal, state or local income or franchise taxes or any other tax imposed on or
measured by income (or any interest, penalties or additions with respect thereto
or arising from a failure to comply therewith). In the event that the Servicer
fails to pay any amounts due to the Trustee pursuant to Section 11.5, the
Trustee shall be entitled to deduct and receive such amounts from the Servicing
Fee prior to the payment thereof to the Servicer. The Servicer shall be required
to pay such expenses for its own account and shall not be entitled to any
payment therefor other than the Servicing Fee.
Section 3.3 REPRESENTATIONS AND WARRANTIES OF THE SERVICER. SRI,
as initial Servicer, hereby makes, and any Successor Servicer by its appointment
hereunder shall make, the following representations and warranties on which the
Trustee has relied in accepting the Receiv ables in trust and in authenticating
the Certificates issued on the Initial Closing Date:
(a) ORGANIZATION AND GOOD STANDING. The Servicer is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and has full corporate power, authority and legal right
to own its properties and conduct its business as such properties are presently
owned and such business is presently conducted, and to execute, deliver and
perform its obligations under this Agreement and any Supplement.
(b) DUE QUALIFICATION. The Servicer is duly qualified to do
business and is in good standing (or is exempt from such requirements) as a
foreign corporation in any state where such qualification is necessary in order
to service the Receivables as required by this Agreement and any Supplement and
has obtained all necessary licenses and approvals as required under Federal and
state law in order to service the Receivables as required by this Agreement, and
if the Servicer shall be required by any Requirement of Law to so qualify or
register or obtain such license or approval, then it shall do so except where
the failure to obtain such license or approval does not materially affect the
Servicer's ability to perform its obligations hereunder or the enforceability of
any Receivable.
-47-
(c) DUE AUTHORIZATION. The execution, delivery, and performance
of this Agreement and any Supplement have been duly authorized by the Servicer
by all necessary corporate action on the part of the Servicer and this Agreement
and any Supplement will remain, from the time of its execution, an official
record of the Servicer.
(d) BINDING OBLIGATION. This Agreement and any Supplement
constitutes a legal, valid and binding obligation of the Servicer, enforceable
in accordance with its terms, except as enforceability be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereinafter in effect, affecting the enforcement of creditors' rights in general
and as such enforceability may be limited by general principles of equity
(whether considered in a proceeding at law or in equity).
(e) NO VIOLATION. The execution and delivery of this Agreement
and any Supplement by the Servicer, and the performance of the transactions
contemplated by this Agreement and any Supplement and the fulfillment of the
terms hereof applicable to the Servicer, will not conflict with, violate, result
in any breach of any of the material terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, any
Requirement of Law applicable to the Servicer or any indenture, contract,
agreement, mortgage, deed of trust or other instrument to which the Servicer is
a party or by which it is bound.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the knowledge of the Servicer, threatened against the Servicer
before any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by this Agreement,
seeking any determination or ruling that, in the reasonable judgment of the
Servicer, would materially and adversely affect the performance by the Servicer
of its obligations under this Agreement or any Supplement, or seeking any
determination or ruling that would materially and adversely affect the validity
or enforceability of this Agreement or any Supplement.
(g) COMPLIANCE WITH REQUIREMENTS OF LAW. The Servicer shall duly
satisfy all obligations on its part to be fulfilled under or in connection with
each Receivable and the related Account, will maintain in effect all
qualifications required under Requirements of Law in order to service properly
each Receivable and the related Account and will comply in all material respects
with all other Requirements of Law in connection with servicing each Receivable
and the related Account the failure to comply with which would have a material
adverse effect on the Certificateholders or any Enhancement Provider.
(h) PROTECTION OF CERTIFICATEHOLDERS' RIGHTS. The Servicer shall
take no action which, nor omit to take any action the omission of which, would
impair the rights of Certificateholders in any Receivable or the related Account
or the rights of any Enhancement Provider, nor shall it reschedule, revise or
defer payments due on any Receivable except in accordance with the Credit and
Collection Policies.
-48-
POOLING2.FNL
(i) ALL CONSENTS. All authorizations, consents, orders or
approvals of or registrations or declarations with any Governmental Authority
required to be obtained, effected or given by the Servicer in connection with
the execution and delivery of this Agreement by the Servicer and the performance
of the transactions contemplated by this Agreement by the Servicer, have been
duly obtained, effected or given and are in full force and effect; PROVIDED,
HOWEVER, that the Servicer makes no representation or warranty regarding State
securities or "Blue Sky" laws in connection with the distribution of the
Certificates.
(j) RESCISSION OR CANCELLATION. The Servicer shall not permit any
rescission or cancellation of any Receivable except as ordered by a court of
competent jurisdiction or other Governmental Authority or in accordance with the
Credit and Collection Policy or the normal operating procedures of the Servicer.
(k) RECEIVABLES NOT TO BE EVIDENCED BY PROMISSORY NOTES. Except
in connection with its enforcement or collection of an Account (in which case
any such promissory note would be made in the name of the Trust on behalf of the
Certificateholders), the Servicer will take no action to cause any Receivable to
be evidenced by an instrument (as defined in the UCC as in effect in the
Relevant UCC State).
(l) PRINCIPAL PLACE OF BUSINESS. The Servicer shall at all times
maintain its principal place of business within the United States.
Section 3.4 REPORTS AND RECORDS FOR THE TRUSTEE.
(a) DAILY RECORDS. Upon reasonable prior notice by the Trustee,
the Servicer shall make available at an office of the Servicer (or other
location designated by the Servicer if such records are not accessible by the
Servicer at an office of the Servicer) selected by the Servicer for inspection
by the Trustee or its agent (reasonably acceptable to the Servicer) on a
Business Day during the Servicer's normal business hours a record setting forth
(i) the Collections on each Receivable and (ii) the amount of Receivables for
the Business Day preceding the date of the inspection. The Servicer shall, at
all times, maintain its computer files with respect to the Receivables in such a
manner so that the Receivables may be specifically identified and, upon
reasonable prior request of the Trustee, shall make available to the Trustee, at
an office of the Servicer (or other location designated by the Servicer if such
computer files are not located at an office of the Servicer) selected by the
Servicer, on any Business Day of the Servicer during the Servicer's normal
business hours any computer programs necessary to make such identification.
(b) DAILY REPORT.
(i) On each Business Day the Servicer shall prepare a completed
Daily Report.
-49-
(ii) The Servicer shall deliver to the Trustee,
Texas Commerce Bank, National Association and the Paying Agent
the Daily Report by 2:30 p.m. (New York City time) on each
Business Day with respect to activity in the Receivables for the
prior Business Day (or, in the case of a Daily Report delivered
on the second Business Day following a Saturday, Sunday or other
non-Business Day, the aggregate activity for the preceding
Business Day and such preceding non-Business Days).
(iii) Upon discovery of any error or receipt of
notice of any error in any Daily Report, the Servicer, the
Transferor and the Trustee shall arrange to confer and shall
agree upon any adjustments necessary to correct any such errors.
If any such error is material, the Servicer or the Trustee, as
the case may be, shall retain all Collections (or such lesser
amount as the Trustee and the Servicer shall agree to be
necessary to cover any such error) in the Collection Account
until such material error is corrected. Unless the Trustee has
received written notice of any error or discrepancy, the Trustee
may rely on each Daily Report delivered to it for all purposes
hereunder.
(c) SETTLEMENT STATEMENT. On the second Business Day prior to the
fifteenth calendar day of each month, the Servicer shall, prior to 3:00 p.m.
(New York City time) on such day, deliver to the Trustee, Texas Commerce Bank,
National Association and the Paying Agent the Settlement Statement for the
related Monthly Period substantially in the form of Exhibit D hereto, including
the following information (which, in the case of clauses (iii), (iv) and (v)
below, will be stated on the basis of an original principal amount of $1,000 per
Certificate): (i) the aggregate amount of Collections received in the Collection
Account for the Monthly Period preceding such Determination Date and the
aggregate amount of Finance Charge Collections and the aggregate amount of
Principal Collections processed during such Monthly Period; (ii) the aggregate
amount of the applicable Investor Percentage of Collections of Principal
Receivables on the last day of the preceding Monthly Period of each Series of
Certificates and the aggregate amount of the applicable Investor Percentage of
Collections on the last day of the preceding Monthly Period of each Series of
Certificates with respect to Finance Charge Collections and Receivables in
Defaulted Accounts; (iii) for each Series and for each Class within any such
Series, the total amount to be distributed to Investor Certificateholders on the
next succeeding Distribution Date; (iv) for each Series and for each Class
within any such Series, the amount of such distribution allocable to principal;
(v) for each Series and for each Class within any such Series, the amount of
such distribution allocable to interest; (vi) for each Series and each Class
within a Series, the Investor Default Amount for the immediately preceding
Monthly Period; (vii) for each Series and each Class within a Series, the amount
of the Investor Charge-Offs and the amount of the reimbursements of Investor
Charge-Offs for such Distribution Date; (viii) for each Series, the monthly
investor servicing fee for such Distribution Date; (ix) for each Series, the
existing deficit controlled amortization amount, if applicable; (x) the
aggregate amount of Receivables in the Trust at the close of business on the
last day of the Monthly Period preceding such Distribution Date; (xi) for each
Series, the Invested Amount at the close of business on the last day of the
Monthly Period
-50-
immediately preceding such Distribution Date; (xii) the available amount of any
Enhancement for each Class of each Series, if any; (xiii) for each Series and
each Class within a Series, the Pool Factor as of the end of the related Monthly
Period; (xiv) whether a Pay Out Event or a Prospective Pay Out Event with
respect to any Series shall have occurred during or with respect to the related
Monthly Period; (xv) the aggregate amount of Discount Option Receivables in the
Trust at the close of business on the last day of the Monthly Period preceding
such Distribution Date; (xvi) the aggregate amount of Discount Option
Receivables Collections processed during such Monthly Period; and (xvii) such
other calculations as may be required by any Supplement. The Trustee shall be
under no duty to recalculate, verify or recompute the information supplied to it
under this Section 3.4 or such other matters as are set forth in any Settlement
Statement.
Section 3.5 QUARTERLY SERVICER'S CERTIFICATE. The Servicer will
deliver, as provided in Section 13.5, to the Trustee, any Enhancement Provider
and the Rating Agencies on or before forty-five days following the end of each
of the February, May, August and November Monthly Periods, beginning with the
November 1993 Monthly Period, an Officer's Certificate substantially in the form
of Exhibit E stating that (a) a review of the activities of the Servicer during
the three-month period (which shall be the period from the first day of the
second preceding Monthly Period to and including the last day of such Monthly
Period) and of its performance under this Agreement was made under the
supervision of the officer signing such certificate and (b) to such officer's
knowledge, based on such review, the Servicer has fully performed all its
obligations under this Agreement throughout such period, or, if there has been a
default in the performance of any such obligation, specifying each such default
known to such officer and the nature and status thereof. A copy of such
certificate may be obtained by any Investor Certificateholder by a request in
writing to the Trustee addressed to the Corporate Trust Office.
Section 3.6 ANNUAL INDEPENDENT ACCOUNTANTS' SERVICING REPORT.
(a) On or before the 15th day of December of each year, beginning
with December 15, 1993, the Servicer shall cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Transferor) to furnish a report with respect to the twelve-month
period ending on last day of the August Monthly Period for such year (or, in the
case of the initial such period, the August 1993 Monthly Period) to the Trustee,
any Enhancement Provider and each Rating Agency, to the effect that such firm
has applied certain procedures, agreed upon with the Servicer and the Trustee
and substantially as set forth in Exhibit J hereto, which would re-perform
certain accounting performed by the Servicer to certain documents and records
relating to the servicing of Accounts under this Agreement. In addition, each
report shall set forth the agreed upon procedures performed and the results of
such procedures. On or before the 150th day following the end of each Transferor
Fiscal Year, beginning with the Trans feror Fiscal Year ending February 5, 1993,
the Servicer shall also cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer or the
Transferor) to furnish to the Trustee, any Enhancement Provider and each Rating
Agency audited financial statements with respect to SRI, the Transferor and the
Trust along with a copy of the annual management letter prepared by such
auditors pertaining to SRI and its subsidiaries. A copy
-51-
of each such report and set of financial statements will be sent to each
Investor Certificateholder by the Trustee.
(b) On or before the 15th day of December of each year, beginning
with December 15, 1993, the Servicer shall cause a firm of nationally recognized
independent certified public accountants (who may also render other services to
the Servicer or the Transferor) to furnish a report to the Trustee, any
Enhancement Provider and the Rating Agency to the effect that they have compared
the mathematical calculations set forth in each of the monthly certificates
forwarded by the Servicer pursuant to subsection 3.4(c) during the period
covered by such report (which shall be the twelve fiscal months ending with the
August Monthly Period of such year, or for the initial period, the August 1993
Monthly Period) with the computer reports which were the source of such amounts
and that on the basis of such comparison, such amounts are in agreement, except
for such exceptions as they believe to be immaterial and such other exceptions
as shall be set forth in such report. A copy of such report may be obtained by
any Investor Certificateholder by a request in writing to the Trustee.
Section 3.7 TAX TREATMENT. The Transferor has structured this
Agreement and the Investor Certificates with the intention that the Investor
Certificates will qualify under applicable federal, state, local and foreign tax
law as indebtedness. Except to the extent expressly specified to the contrary in
any Supplement, the Transferor, the Servicer, the Holder of the Exchangeable
Transferor Certificate, each Investor Certificateholder, and each Certificate
Owner agree to treat and to take no action inconsistent with the treatment of
the Investor Certificates (or beneficial interests therein) as indebtedness for
purposes of federal, state, local and foreign income or franchise taxes and any
other tax imposed on or measured by income. Each Investor Certificateholder,
Holder of a Variable Funding Certificate and the Holder of the Exchangeable
Transferor Certificate, by acceptance of its Certificate and each Certificate
Owner, by acquisition of a beneficial interest in a Certificate, agrees to be
bound by the provisions of this Section 3.7. Each Certificateholder agrees that
it will cause any Certificate Owner acquiring an interest in a Certificate
through it to comply with this Agreement as to treatment as indebtedness under
applicable tax law, as described in this Section 3.7. Furthermore, subject to
Section 11.11, the Trustee shall treat the Trust as a security device only, and
shall not file tax returns or obtain an employer identification number on behalf
of the Trust.
Section 3.8 ADJUSTMENTS. (a) If the Servicer adjusts downward the
amount of any Receivable because of a rebate, refund, unauthorized charge or
billing error to an Obligor, because such Receivable was created in respect of
merchandise which was refused or returned by an Obligor, or if the Servicer
otherwise adjusts downward the amount of any Receivable without receiving
Collections therefor or without charging off such amount as uncollectible, then,
in any such case, the Transferor Interest will be reduced and the aggregate
amount of the Principal Receivables used to calculate the Floating Allocation
Percentages applicable to any Series will be reduced by the principal amount of
any such Receivable. Similarly, the aggregate amount of the Principal
Receivables used to calculate the Floating Allocation Percentages applicable to
any Series will be reduced by the amount of any Principal Receivable which was
discovered as having been
-52-
created through a fraudulent or counterfeit charge or with respect to which the
covenant contained in subsection 2.5(b) was breached. Any adjustment required
pursuant to either of the two preceding sentences shall be made on or prior to
the end of the Monthly Period in which such adjustment obligation arises. In the
event that, following any such exclusion, the Transferor Interest would be less
than the Minimum Transferor Interest, within two Business Days of the date on
which such adjustment obligation arises, the Transferor shall pay to the
Servicer, for deposit into the Equalization Account, in immediately available
funds an amount equal to the amount by which the Transferor Interest would be
reduced below the Minimum Transferor Interest. Any amount deposited into the
Equalization Account in connection with the adjustment of a Receivable (an
"ADJUSTMENT PAYMENT") shall be applied in accordance with Article IV and the
terms of each Supplement.
(b) If (i) the Servicer makes a deposit into the Collection
Account in respect of a Collection of a Receivable and such Collection was
received in the form of a check which is not honored for any reason or (ii) the
Servicer makes a mistake with respect to the amount of any Collection and
deposits an amount that is less than or more than the actual amount of such
Collection, the Servicer shall appropriately adjust the amount subsequently
deposited into the Collection Account to reflect such dishonored check or
mistake. Any Receivable in respect of which a dishonored check is received shall
be deemed not to have been paid. Notwithstanding the first two sentences of this
paragraph, no adjustments shall be made pursuant to this paragraph that will
change any amount of Collections previously reported pursuant to subsection 3.4
(b).
Section 3.9 NOTICES TO SRI. In the event that SRI or any
Affiliate thereof is no longer acting as Servicer, any Successor Servicer
appointed pursuant to Section 10.2 shall deliver or make available to SRI each
certificate and report required to be prepared, forwarded or delivered
thereafter pursuant to Sections 3.4, 3.5 and 3.6.
-53-
POOLING2.FNL
<PAGE>
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
Section 4.1 RIGHTS OF CERTIFICATEHOLDERS. Each Series of Investor
Certificates shall represent Undivided Interests in the Trust, including the
benefits of any Enhancement issued with respect to such Series and the right to
receive the Collections and other amounts at the times and in the amounts
specified in this Article IV to be deposited in the Investor Accounts or to be
paid to the Investor Certificateholders of such Series; PROVIDED, HOWEVER, that
the aggregate interest represented by such Certificates at any time in the
Principal Receivables shall not exceed an amount equal to the Invested Amount of
such Certificates. The Exchangeable Transferor Certificate shall represent the
remaining undivided interest in the Trust, including the right to receive the
Collections and other amounts at the times and in the amounts specified in this
Article IV to be paid to the Holder of the Exchangeable Transferor Certificate;
PROVIDED, HOWEVER, that the aggregate interest represented by such Certificate
at any time in the Principal Receivables shall not exceed the Transferor
Interest at such time and such Certificate shall not represent any interest in
the Investor Accounts, except as provided in this Agreement, or the benefits of
any Enhancement issued with respect to any Series.
Section 4.2 ESTABLISHMENT OF ACCOUNTS. (a) THE COLLECTION
ACCOUNT. The Servicer, for the benefit of the Certificateholders, shall
establish in the name of the Trustee, on behalf of the Trust, a non-interest
bearing segregated account (the "COLLECTION ACCOUNT") bearing a designation
clearly indicating that the funds deposited therein are held in trust for the
benefit of the Certificateholders, and shall cause such Collection Account to be
established and maintained, (i) in a segregated trust account with the corporate
trust department of a depositary institution or trust company (which may include
the Trustee) organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia and whose deposits are insured
to the limits provided by law by the FDIC having corporate trust powers and
acting as trustee for funds deposited therein (PROVIDED, HOWEVER, that such
account need not be maintained as a segregated trust account with the corporate
trust department of such institution if at all times the certificates of
deposit, short-term deposits or commercial paper or the long-term unsecured debt
obligations (other than such obligation whose rating is based on collateral or
on the credit of a Person other than such institution or trust company) of such
depositary institution or trust company shall have a credit rating from Standard
& Poor's of at least A-1+ (and, if rated by Duff & Phelps Credit Rating Co.,
D-1+) in the case of the certificates of deposit, short-term deposits or
commercial paper, or a rating from Standard & Poor's of AAA (and, if rated by
Duff & Phelps Credit Rating Co., AAA) in the case of the long-term unsecured
debt obligations) or (ii) with a depositary institution, which may include the
Trustee, which is acceptable to the Rating Agency (in the case of (i) and (ii),
a "QUALIFIED INSTITUTION"). The Servicer shall give written notice to the
Trustee of the location and account number of the Collection Account and shall
notify the Trustee in writing prior to any subsequent change thereof. Pursuant
to authority granted to it pursuant to subsection 3.1(b), the
-54-
Servicer shall have the revocable power to withdraw funds from the Collection
Account for the purposes of carrying out its duties hereunder.
(b) THE INTEREST FUNDING AND PRINCIPAL ACCOUNTS. The Servicer,
for the benefit of the Investor Certificateholders, shall establish and maintain
with a Qualified Institution in the name of the Trust two segregated trust
accounts for each Series (an "INTEREST FUNDING ACCOUNT" and a "PRINCIPAL
ACCOUNT," respectively), each bearing a designation clearly indicating that the
funds therein are held for the benefit of the Investor Certificateholders of
such Series. The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in any Interest Funding Account and any
Principal Account and in all proceeds thereof. Except as provided in subsection
4.2(e), each Interest Funding Account and each Principal Account shall be under
the sole dominion and control of the Trustee for the benefit of the Investor
Certificateholders. Pursuant to authority granted to it hereunder, the Servicer
shall have the revocable power to instruct the Trustee to withdraw funds from
the Interest Funding Account and any Principal Account for any purpose of
carrying out the Servicer's or the Trustee's duties hereunder. The Trustee at
all times shall maintain accurate records reflecting each transaction in each
Principal Account and each Interest Funding Account and that funds held therein
shall at all times be held in trust for the benefit of the Investor
Certificateholders of such Series.
(c) DISTRIBUTION ACCOUNTS. The Servicer, for the benefit of the
Investor Certificateholders of each Series, shall cause to be established and
maintained in the name of the Trust, with an office or branch of a Qualified
Institution a non-interest-bearing segregated demand deposit account for each
Series (a "DISTRIBUTION ACCOUNT") bearing a designation clearly indicating that
the funds deposited therein are held in trust for the benefit of the Investor
Certificateholders of such Series. The Trustee shall possess all right, title
and interest in all funds on deposit from time to time in each Distribution
Account and in all proceeds thereof. Each Distribution Account shall be under
the sole dominion and control of the Trustee for the benefit of the Investor
Certificateholders of the related Series.
(d) THE EQUALIZATION ACCOUNT. The Servicer, for the benefit of
the Certificateholders, shall cause to be established in the name of the
Trustee, on behalf of the Certificateholders, with a Qualified Institution, a
segregated trust account (the "EQUALIZATION ACCOUNT") bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Certificateholders. The Servicer shall give written notice to the Trustee of
the location and account number of the Equalization Account and shall notify the
Trustee in writing prior to any subsequent change thereof. Except as provided in
subsection 4.3(f), the Equalization Account shall, except as otherwise provided
herein, be under the sole dominion and control of the Trustee for the benefit of
the Certificateholders. Pursuant to the authority granted to the Servicer
herein, the Servicer shall have the power, revocable by the Trustee, to make
withdrawals and payments from the Equalization Account for the purpose of
carrying out the Servicer's or Trustee's duties hereunder.
(e) ADMINISTRATION OF THE PRINCIPAL ACCOUNTS AND THE INTEREST
FUNDING ACCOUNTS. Funds on deposit in each Principal Account and each Interest
Funding Account shall at
-55-
all times be invested by the Servicer (or, at the direction of the Transferor,
by the Trustee) on behalf of the Transferor in Cash Equivalents. Any such
investment shall mature and such funds shall be available for withdrawal on or
prior to the Transfer Date following the Monthly Period in which such funds were
processed for collection. The Trustee shall maintain for the benefit of the
Investor Certificateholders possession of the negotiable instruments or
securities evidencing the Cash Equivalents described in clause (a) of the
definition thereof from the time of purchase thereof until the time of sale or
maturity. At the end of each month, all interest and earnings (net of losses and
investment expenses) on funds on deposit in each Principal Account and each
Interest Funding Account (unless otherwise specified in the applicable
Supplement) shall be deposited by the Trustee in a separate deposit account with
a Qualified Institution in the name of the Servicer, or a Person designated in
writing by the Servicer, which shall not constitute a part of the Trust, or
shall otherwise be turned over by the Trustee to the Servicer not less
frequently than monthly. Subject to the restrictions set forth above, the
Servicer, or a Person designated in writing by the Servicer, of which the
Trustee shall have received written notification, shall have the authority to
instruct the Trustee with respect to the investment of funds on deposit in any
Principal Account and any Interest Funding Account. Any investment instructions
to the Trustee shall be in writing and shall include a certification that the
proposed investment is a Cash Equivalent that matures at or prior to the time
required by this Agreement. For purposes of determining the availability of
funds or the balances in any Interest Funding Account and any Principal Account
for any reason under this Agreement, all investment earnings on such funds shall
be deemed not to be available or on deposit.
Section 4.3 COLLECTIONS AND ALLOCATIONS.
(a) COLLECTIONS. Obligors shall make payments on the Receivables
(i) to the Servicer who shall deposit all such payments in the Collection
Account no later than the first Business Day following the date of receipt or
(ii) as In-Store Payments, which shall be deposited in the Collection Account no
later than the second Business Day following the date of receipt.
The Servicer shall allocate such amounts to each Series of
Investor Certificates and to the Holder of the Exchangeable Transferor
Certificate in accordance with this Article IV and shall withdraw the required
amounts from the Collection Account or pay such amounts to the Holder of the
Exchangeable Transferor Certificate in accordance with this Article IV. The
Servicer shall make such deposits or payments on the date indicated therein by
wire transfer or as otherwise provided in the Supplement for any Series of
Certificates with respect to such Series.
Notwithstanding anything in this Agreement to the contrary, but
subject the terms of any Supplement, for so long as, and only so long as, SRI or
an Affiliate of SRI shall remain the Servicer hereunder, and (a) (i) SRI or an
Affiliate of SRI provides to the Trustee a letter of credit or other form of
Enhancement rated in the highest rating category by the Rating Agency covering
the risk of collection of the Servicer, and (ii) the Transferor shall not have
received a notice from any Rating Agency that such a letter of credit or other
form of Enhancement would result in the lowering of such Rating Agency's then
existing rating of the Investor Certificates, or (b) SRI shall have and maintain
a short-term credit rating of at least A-1 by Standard & Poor's, the Servicer
need
-56-
not deposit Collections from the Collection Account into the Principal Account
or the Interest Funding Account or any Series Account, or make payments to the
Holder of the Exchangeable Transferor Certificate, prior to the close of
business on the day any Collections are deposited in the Collection Account as
otherwise provided in this Article IV, but may instead make such deposits,
payments and withdrawals on each Transfer Date in an amount equal to the net
amount of such deposits, payments and withdrawals which would have been made but
for the provisions of this paragraph. The Servicer shall deposit all Defaulted
Receivable Receipts into the Collection Account no later than the first Business
Day following the date of receipt (unless such Defaulted Receivable Receipts are
In-Store Payments, which shall be deposited no later than the second Business
Day following the date of receipt). Upon its determination that any Defaulted
Receivable Receipts are in the Collection Account, the Servicer shall be
entitled to withdraw the portion of such Defaulted Receivable Receipts not
constituting Recoveries from the Collection Account and to transfer such funds
to the Transferor (or to any Person who acquired the Defaulted Receivables from
the Transferor).
(b) ALLOCATIONS FOR THE EXCHANGEABLE TRANSFEROR CERTIFICATE.
Throughout the existence of the Trust, unless otherwise stated in any
Supplement, on each Business Day the Servicer shall allocate to the Holder of
the Exchangeable Transferor Certificate an amount equal to the product of (A)
the Transferor Percentage as of the end of the preceding Business Day and (B)
the aggregate amount of Principal Collections and Finance Charge Collections
available in the Collection Account. The Servicer shall pay such amount to the
Holder of the Exchangeable Transferor Certificate on each Business Day;
PROVIDED, HOWEVER, that amounts payable to the Holder of the Exchangeable
Transferor Certificate pursuant to this clause (b) shall instead be deposited in
the Equalization Account to the extent necessary to prevent the Transferor
Interest from being less than the Minimum Transferor Interest.
(c) ALLOCATION OF FINANCE CHARGE COLLECTIONS; ALLOCATIONS TO
EQUALIZATION ACCOUNT.
(i) Any amounts received as Defaulted Receivable
Repurchase Amounts shall be deemed Principal Collections which
are available in the Collections Account on the applicable
Distribution Date.
(ii) For purposes of Section 4.3(d), the amount of
Finance Charge Collections that are available in the Collection
Account on any Business Day shall equal the total Collections
which are available in the Collection Account on such Business
Day (other than Collections representing Defaulted Receivable
Repurchase Amounts) MULTIPLIED by a fraction, the numerator of
which is equal to the Collections received by the Servicer with
respect to Finance Charge Receivables on the immediately
preceding Business Day (other than Collections representing
Defaulted Receivable Repurchase Amounts), and the denominator of
which is all Collections received by the Servicer on the
immediately preceding Business Day. All other
-57-
Collections which are available in the Collection Account on such
Business Day shall be deemed Principal Collections.
(iii) For the purpose of this Section 4.3, on any
day which is not a Business Day, the Servicer shall be permitted
to allocate to the Equalization Account a senior undivided
interest in Collections previously received by the Servicer which
have not yet become available funds (such Collections being
"COLLECTIONS IN PROCESS"). The Servicer shall be permitted to
allocate Collections in Process to the Equalization Account in an
amount (which may be a variable amount) sufficient to ensure that
(x) the sum of the Principal Receivables held by the Trust and
the amount (including any interest in Collections in Process) in
the Equalization Account is equal to or greater than (y) the sum
of the Aggregate Invested Amount and the Minimum Transferor
Interest. As soon as Collections become available in the
Collection Account thereafter, they shall be deposited into the
Equalization Account in an amount sufficient to reduce the
undivided interest of the Equalization Account in Collections in
Process to zero.
(d) ALLOCATION FOR SERIES. On each Business Day, (i) the amount
of Finance Charge Collections available in the Collection Account allocable to
each Series shall be determined by multiplying the aggregate amount of such
Finance Charge Collections by the Floating Allocation Percentage for such
Series, (ii) the amount of Principal Collections available in the Collection
Account allocable to each Series shall be determined by multiplying the
aggregate amount of such Principal Collections by (x) during the Revolving
Period for a Series, the Floating Allocation Percentage for such Series and (y)
during any Amortization Period for a Series, the Fixed Allocation Percentage for
such Series, and (iii) the Receivables in Defaulted Accounts allocable to each
Series shall be determined by multiplying the aggregate amount of such
Receivables in Defaulted Accounts by the Floating Allocation Percentage for such
Series. The Servicer shall, prior to the close of business on the day any
Collections are deposited in the Collection Account, withdraw the required
amounts from the Collection Account and deposit such amounts into the applicable
Principal Account, the applicable Interest Funding Account, the Equalization
Account, or any Series Account or pay such amounts to the Holder of the
Exchangeable Transferor Certificate in accordance with the provisions of this
Article IV.
(e) UNALLOCATED PRINCIPAL COLLECTIONS: EQUALIZATION ACCOUNT. On
each Business Day, Shared Principal Collections shall be allocated to each
outstanding Series PRO RATA based on the Principal Shortfall, if any, for each
such Series, and then, at the option of the Trans feror, any remainder may be
applied as principal with respect to the Variable Funding Certificates. The
Servicer shall pay any remaining Shared Principal Collections on such Business
Day to the Transferor; PROVIDED, that if the Transferor Interest as determined
on such Business Day does not exceed the Minimum Transferor Interest, then such
remaining Shared Principal Collections shall be deposited in the Equalization
Account to the extent necessary to increase the Transferor Interest above the
Minimum Transferor Interest; PROVIDED, FURTHER, that if an Amortization Period
has commenced and is continuing with respect to more than one outstanding
Series, such remaining
-58-
Shared Principal Collections shall be allocated to such Series pro rata based on
the Investor Percentage for Principal Receivables applicable for such Series.
(f) AMOUNTS IN EQUALIZATION ACCOUNT. Amounts on deposit in the
Equalization Account on any Business Day will be invested by the Servicer (or,
at the direction of the Transferor, by the Trustee) on behalf of the Transferor
in Cash Equivalents which shall mature and be available on or before the next
Business Day on which amounts may be released from the Equalization Account.
Earnings from such investments received shall be deposited in the Collection
Account and treated as Finance Charge Collections. Any investment instructions
to the Trustee shall be in writing and shall include a certification that the
proposed investment is a Cash Equivalent that matures at or prior to the date
required by this Agreement. If on any Business Day other than a Business Day on
which a Prospective Pay Out Event has occurred and is continuing, the Transferor
Interest is greater than the Minimum Transferor Interest, amounts on deposit in
the Equalization Account may, at the option of the Transferor, be released to
the Holder of the Exchangeable Transferor Certificate. On the first Business Day
of the Amortization Period for any Series, funds on deposit in the Equalization
Account will be deposited in the Principal Account for such Series to the extent
of the lesser of (x) the Invested Amount of such Series and (y) the product of
(i) the product of (A) 100% minus the Transferor Percentage minus the Fixed
Allocation Percentage represented by any Class of Transferor Retained
Certificates and (B) the amount on deposit in the Equalization Account at the
beginning of such Amortization Period and (ii) a fraction the numerator of which
is equal to the Invested Amount of such Series less the Invested Amount of any
Class of Transferor Retained Certificates of such Series and the denominator of
which is equal to the sum of the Invested Amounts of all Series in Amortization
Periods on such day (less any amounts on deposit in Principal Accounts for such
Series and less the Invested Amount of any Class of Transferor Retained
Certificates of such Series). Any funds retained in the Equalization Account
during the Amortization Period for any Series pursuant to the preceding sentence
will be allocated to Investor Certificates of such Series other than any
Transferor Retained Class to the extent that Default Amounts allocated to the
Transferor Interest or adjustments as described in subsection 3.8 would cause
the Transferor Interest to be less than the Minimum Transferor Interest and,
with respect to any credit adjustment, the Transferor has not made an Adjustment
Payment to the Equalization Account, in an amount equal to the product of (i)
such reduction below the Transferor Interest and (ii) a fraction the numerator
of which is equal to the sum of the Invested Amount of such Series and the
denominator of which is equal to the sum of the Invested Amounts of all Series
in Amortization Periods on such day (less any amounts on deposit in Principal
Accounts for such Series). On and after the day on which principal payments are
being allocated for payment to any Transferor Retained Class of a Series any
amounts remaining on deposit in the Equalization Account will be deposited in
the Principal Account for such Series in an amount not to exceed the Invested
Amount of such Transferor Retained Class of such Series.
[THE REMAINDER OF ARTICLE IV IS
RESERVED AND SHALL BE SPECIFIED IN ANY
SUPPLEMENT WITH RESPECT TO ANY SERIES]
-59-
-60-
ARTICLE V
[ARTICLE V IS RESERVED AND SHALL BE SPECIFIED IN
ANY SUPPLEMENT WITH RESPECT TO ANY SERIES]
-61-
ARTICLE VI
THE CERTIFICATES
Section 6.1 THE CERTIFICATES. Subject to Sections 6.10 and 6.13,
the Investor ________________ Certificates of each Series and any Class thereof
may be issued in bearer form (the "BEARER CERTIFICATES") with attached interest
coupons and a special coupon (collectively, the "COUPONS") or in fully
registered form (the "REGISTERED CERTIFICATES"), and shall be substantially in
the form of the exhibits with respect thereto attached to the related
Supplement. The Exchangeable Transferor Certificate shall be substantially in
the form of Exhibit A. The Investor Certificates and the Exchangeable Transferor
Certificate shall, upon issue pursuant hereto or to Section 6.9 or Section 6.10,
be executed and delivered by the Transferor to the Trustee for authentication
and redelivery as provided in Sections 2.1 and 6.2. Any Investor Certificate
shall be issuable in a minimum denomination of $1,000 Undivided Interest and
integral multiples thereof, unless otherwise specified in any Supplement, and
shall be issued upon original issuance in an original aggregate principal amount
equal to the Initial Invested Amount. The Exchangeable Transferor Certificate
shall be issued as a single certificate. Each Certificate shall be executed by
manual or facsimile signature on behalf of the Transferor by its President or
any Vice President. Certificates bearing the manual or facsimile signature of
the individual who was, at the time when such signature was affixed, authorized
to sign on behalf of the Transferor or the Trustee shall not be rendered
invalid, notwithstanding that such individual has ceased to be so authorized
prior to the authentication and delivery of such Certificates or does not hold
such office at the date of such Certificates. No Certif icate shall be entitled
to any benefit under this Agreement, or be valid for any purpose, unless there
appears on such Certificate a certificate of authentication substantially in the
form provided for herein, executed by or on behalf of the Trustee by the manual
signature of a duly authorized signatory, and such certificate upon any
Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been validly issued and duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication
except Bearer Certificates which shall be dated the applicable issuance date as
provided in the related Supplement.
Section 6.2 AUTHENTICATION OF CERTIFICATES. Contemporaneously
with the initial assignment and transfer of the Receivables, whether now
existing or hereafter created (other than Receivables in Additional Accounts)
and the other components to the Trust, the Trustee shall authenticate and
deliver the initial Series of Investor Certificates, upon the written order of
the Transferor. Upon the issuance of such Investor Certificates, such Investor
Certificates shall be validly issued, fully paid and non-assessable. The Trustee
shall authenticate and deliver the Exchangeable Transferor Certificate to the
Transferor simultaneously with its delivery of the initial Series of Investor
Certificates. Upon an Exchange as provided in Section 6.9 and the satisfaction
of certain other conditions specified therein, the Trustee shall authenticate
and deliver the Investor Certificates of additional Series (with the designation
provided in the related Supplement), upon the written order of the Transferor,
to the persons designated in such Supplement. Upon the written order of the
Transferor, the Certificates of any Series shall be duly authenticated by or on
behalf of the Trustee, in authorized denominations equal to (in the aggregate)
the Initial Invested Amount of
-62-
such Series of Investor Certificates. If specified in the related Supplement for
any Series, the Trustee shall authenticate and deliver outside the United States
the Global Certificate that is issued upon original issuance thereof, upon the
written order of the Transferor, to the Depositary. If specified in the related
Supplement for any Series, the Trustee shall authenticate Book-Entry
Certificates that are issued upon original issuance thereof, upon the written
order of the Transferor, to a Clearing Agency or its nominee as provided in
Section 6.10.
Section 6.3 REGISTRATION OF TRANSFER AND EXCHANGE OF
CERTIFICATES.
(a) The Trustee shall cause to be kept at the office or agency to
be maintained by a transfer agent and registrar (the "TRANSFER AGENT AND
REGISTRAR") in accordance with the provisions of Section 11.16, a register (the
"CERTIFICATE REGISTER") in which, subject to such reasonable regulations as it
may prescribe, the Transfer Agent and Registrar shall provide for the
registration of the Investor Certificates of each Series (unless otherwise
provided in the related Supplement) and of transfers and exchanges of the
Investor Certificates as herein provided. Bankers Trust Company is hereby
initially appointed Transfer Agent and Registrar for the purposes of registering
the Investor Certificates and transfers and exchanges of the Investor
Certificates as herein provided. If any form of Investor Certificate is issued
as a Global Certificate, Bankers Trust Company may, or if and so long as any
Series of Investor Certificates are listed on a stock exchange and such exchange
shall so require, Bankers Trust Company shall appoint a co-transfer agent and
co-registrar, which will also be a co-paying agent, in such city as the
Transferor may specify. Any reference in this Agreement to the Transfer Agent
and Registrar shall include any co-transfer agent and co-registrar unless the
context otherwise requires. Bankers Trust Company shall be permitted to resign
as Transfer Agent and Registrar upon 30 days' written notice to the Servicer. In
the event that Bankers Trust Company shall no longer be the Transfer Agent and
Registrar, the Transferor shall appoint a successor Transfer Agent and
Registrar.
Upon surrender for registration of transfer of any Certificate at
any office or agency of the Transfer Agent and Registrar, the Transferor shall
execute, subject to the provisions of subsection 6.3(c), and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of like
aggregate Undivided Interests; PROVIDED, that the provisions of this paragraph
shall not apply to Bearer Certificates.
At the option of an Investor Certificateholder, Investor
Certificates may be exchanged for other Investor Certificates of the same Series
in authorized denominations of like aggregate Undivided Interests, upon
surrender of the Investor Certificates to be exchanged at any such office or
agency. At the option of any Holder of Registered Certificates, Registered
Certificates may be exchanged for other Registered Certificates of the same
Series in authorized denominations of like aggregate Undivided Interests in the
Trust, upon surrender of the Registered Certificates to be exchanged at any
office or agency of the Transfer Agent and Registrar maintained for such
purpose. At the option of a Bearer Certificateholder, subject to applicable laws
and regulations (including without limitation, the Bearer Rules), Bearer
Certificates may be exchanged
-63-
for other Bearer Certificates or Registered Certificates of the same Series in
authorized denominations of like aggregate Undivided Interests in the Trust, in
the manner specified in the Supplement for such Series, upon surrender of the
Bearer Certificates to be exchanged at an office or agency of the Transfer Agent
and Registrar located outside the United States. Each Bearer Certificate
surrendered pursuant to this Section 6.3 shall have attached thereto (or be
accompanied by) all unmatured Coupons, provided that any Bearer Certificate so
surrendered after the close of business on the Record Date preceding the
relevant Distribution Date after the related Series Termination Date need not
have attached the Coupons relating to such Distribution Date.
Whenever any Investor Certificates of any Series are so
surrendered for exchange, the Transferor shall execute, and the Trustee shall
authenticate and (unless the Transfer Agent and Registrar is different than the
Trustee, in which case the Transfer Agent and Registrar shall) deliver, the
Investor Certificates of such Series which the Certificateholder making the ex
change is entitled to receive. Every Investor Certificate presented or
surrendered for registration of transfer or exchange shall be accompanied by a
written instrument of transfer in a form satisfactory to the Trustee and the
Transfer Agent and Registrar duly executed by the Certificateholder thereof or
his attorney-in-fact duly authorized in writing.
The preceding provisions of this Section 6.3 notwithstanding, the
Trustee or the Transfer Agent and Registrar, as the case may be, shall not be
required to register the transfer or exchange of any Investor Certificate of any
Series for a period of 15 days preceding the due date for any payment with
respect to the Investor Certificates of such Series.
Unless otherwise provided in the related Supplement, no service
charge shall be made for any registration of transfer or exchange of
Certificates, but the Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
All Investor Certificates (together with any Coupons attached to
Bearer Certificates) surrendered for registration of transfer or exchange shall
be canceled by the Transfer Agent and Registrar and disposed of in a manner
satisfactory to the Trustee. The Trustee shall cancel and destroy the Global
Certificates upon its exchange in full for Definitive Certificates and shall
deliver a certificate of destruction to the Transferor. Such certificate shall
also state that a certificate or certificates of each Foreign Clearing Agency to
the effect referred to in Section 6.13 was received with respect to each portion
of the Global Certificate exchanged for Definitive Certificates.
The Transferor shall execute and deliver to the Trustee or the
Transfer Agent and Registrar, as applicable, Bearer Certificates and Registered
Certificates in such amounts and at such times as are necessary to enable the
Trustee to fulfill its responsibilities under this Agreement and the
Certificates.
-64-
(b) Except as provided in Section 6.9 or 7.2 or in any
Supplement, in no event shall the Exchangeable Transferor Certificate or any
interest therein be transferred, sold, exchanged, pledged, participated or
otherwise assigned hereunder (each of the above, a "TRANSFER"), in whole or in
part.
(c) Unless otherwise provided in the related Supplement,
registration of transfer of Registered Certificates containing a legend relating
to the restrictions on transfer of such Registered Certificates (which legend
shall be set forth in the Supplement relating to such Investor Certificates)
shall be effected only if the conditions set forth in such related Supplement
are satisfied.
Whenever a Registered Certificate containing the legend set forth
in the related Supplement is presented to the Transfer Agent and Registrar for
registration of transfer, the Transfer Agent and Registrar shall promptly seek
instructions from the Servicer regarding such transfer. The Transfer Agent and
Registrar and the Trustee shall be entitled to receive written instructions
signed by a Servicing Officer prior to registering any such transfer or
authenticating new Registered Certificates, as the case may be. The Servicer
hereby agrees to indemnify the Transfer Agent and Registrar and the Trustee and
to hold each of them harmless against any loss, liability or expense incurred
without negligence or bad faith on their part arising out of or in connection
with actions taken or omitted by them in reliance on any such written
instructions furnished pursuant to this subsection 6.3(c).
(d) The Transfer Agent and Registrar will maintain at its expense
in the Borough of Manhattan, The City of New York, an office or offices or an
agency or agencies where Investor Certificates of such Series may be surrendered
for registration of transfer or exchange.
Section 6.4 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If
(a) any mutilated Certificate (together, in the case of Bearer Certificates,
with all unmatured Coupons, if any, appertaining thereto) is surrendered to the
Transfer Agent and Registrar, or the Transfer Agent and Registrar receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate and (b) there is delivered to the Transfer Agent and Registrar and
the Trustee such security or indemnity as may be required by them to hold each
of them and the Trust harmless, then, in the absence of notice to the Trustee
that such Certificate has been acquired by a bona fide purchaser, the Transferor
shall execute and the Trustee shall authenticate and (unless the Transfer Agent
and Registrar is different from the Trustee, in which case the Transfer Agent
and Registrar shall) deliver (in compliance with applicable law), in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a
new Certificate of like tenor and aggregate Undivided Interest. In connection
with the issuance of any new Certificate under this Section 6.4, the Trustee or
the Transfer Agent and Registrar may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Trustee
and the Transfer Agent and Registrar) connected therewith. Any duplicate
Certificate issued pursuant to this Section 6.4 shall constitute complete and
indefeasible evidence
-65-
of ownership in the Trust, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.
Section 6.5 PERSONS DEEMED OWNERS. Prior to due presentation of a
Certificate for registration of transfer, the Trustee, the Paying Agent, the
Transfer Agent and Registrar and any agent of any of them may treat the Person
in whose name any Certificate is regis tered as the owner of such Certificate
for the purpose of receiving distributions pursuant to Article V (as described
in any Supplement) and Article XII and for all other purposes whatsoever, and
neither the Trustee, the Paying Agent, the Transfer Agent and Registrar nor any
agent of any of them shall be affected by any notice to the contrary; PROVIDED,
HOWEVER, that in determining whether the holders of Investor Certificates
evidencing the requisite Undivided Interests have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Investor
Certificates owned by the Transferor, the Servicer or any Affiliate thereof
shall be disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Investor Certificates which a Responsible Officer in the Corporate Trust Office
of the Trustee knows to be so owned shall be so disregarded. Investor
Certificates so owned that have been pledged in good faith shall not be
disregarded as outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Investor Certificates
and that the pledgee is not the Transferor, the Servicer or an Affiliate
thereof.
In the case of a Bearer Certificate, the Trustee, the Paying
Agent, the Transfer Agent and Registrar and any agent of any of them may treat
the holder of a Bearer Certificate or Coupon as the owner of such Bearer
Certificate or Coupon for the purpose of receiving distributions pursuant to
Article V (as described in any Supplement) and Article XII and for all other
purposes whatsoever, and neither the Trustee, the Paying Agent, the Transfer
Agent and Registrar nor any agent of any of them shall be affected by any notice
to the contrary. Certificates so owned which have been pledged in good faith
shall not be disregarded and may be regarded as outstanding, if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Investor Certificates and that the pledgee is not the
Transferor, the Servicer or an Affiliate thereof.
Section 6.6 APPOINTMENT OF PAYING AGENT. (a) The Paying Agent
shall make distributions to Investor Certificateholders from the appropriate
account or accounts maintained for the benefit of Certificateholders as
specified in this Agreement or the related Supplement for any Series pursuant to
Articles IV and V hereof. Any Paying Agent shall have the revocable power to
withdraw funds from such appropriate account or accounts for the purpose of
making distributions referred to above. The Trustee (or the Servicer if the
Trustee is the Paying Agent) may revoke such power and remove the Paying Agent,
if the Trustee (or the Servicer if the Trustee is the Paying Agent) determines
in its sole discretion that the Paying Agent shall have failed to perform its
obligations under this Agreement in any material respect or for other good
cause. The Paying Agent, unless the Supplement with respect to any Series states
otherwise, shall initially be the Trustee. The Trustee shall be permitted to
resign as Paying Agent upon 30 days' written notice to the Servicer. In the
event that the Trustee, shall no longer be the Paying Agent, the Transferor
shall
-66-
appoint a successor to act as Paying Agent (which shall be a bank or trust
company). Any reference in this Agreement to the Paying Agent shall include any
co-paying agent unless the context requires otherwise.
If specified in the related Supplement for any Series, so long as
the Investor Certificates of such Series are outstanding and the Paying Agent is
not located in New York City, the Transferor shall maintain a co-paying agent in
New York City (for Registered Certificates only) or any other city designated in
such Supplement.
(b) The Trustee shall cause each Paying Agent (other than itself)
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent will hold all sums, if any,
held by it for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto and waive all rights of set off the Paying
Agent may have against any sums held by it until such sums shall be paid to such
Certificateholders and shall agree, and if the Trustee is the Paying Agent it
hereby agrees, that it shall comply with all requirements of the Internal
Revenue Code regarding the withholding by the Trustee of payments in respect of
federal income taxes due from Certificate owners.
Section 6.7 ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES. The Trustee will furnish or cause to be furnished by the Transfer
Agent and Registrar to the Servicer or the Paying Agent, within five Business
Days after receipt by the Trustee of a request therefor from the Servicer or the
Paying Agent, respectively, in writing, a list in such form as the Servicer or
the Paying Agent may reasonably require, of the names and addresses of the
Investor Certificateholders as of the most recent Record Date for payment of
distributions to Investor Certificateholders. Unless otherwise provided in the
related Supplement, holders of Investor Certificates evidencing Undivided
Interests aggregating not less than lot of the Invested Amount of the Investor
Certificates of any Series (the "APPLICANTS") may apply in writing to the
Trustee, and if such application states that the Applicants desire to
communicate with other Investor Certificateholders of any Series with respect to
their rights under this Agreement or under the Investor Certificates and is
accompanied by a copy of the communication which such Applicants propose to
transmit, then the Trustee, after having been adequately indemnified by such
Applicants for its costs and expenses, shall afford or shall cause the Transfer
Agent and Registrar to afford such Applicants access during normal business
hours to the most recent list of Certificateholders held by the Trustee and
shall give the Servicer notice that such request has been made, within five
Business Days after the receipt of such application. Such list shall be as of a
date no more than 45 days prior to the date of receipt of such Applicants'
request. Every Certificateholder, by receiving and holding a Certificate, agrees
with the Trustee that neither the Trustee, the Transfer Agent and Registrar, nor
any of their respective agents shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the
Certificateholders hereunder, regardless of the source from which such
information was obtained.
Section 6.8 AUTHENTICATING AGENT. (a) The Trustee may appoint one
or more au thenticating agents with respect to the Certificates which shall be
authorized to act on behalf of the
-67-
Trustee in authenticating the Certificates in connection with the issuance,
delivery, registration of transfer, exchange or repayment of the Certificates.
Whenever reference is made in this Agreement to the authentication of
Certificates by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication on behalf of the Trustee by
an authenticating agent and a certificate of authentication executed on behalf
of the Trustee by an authenticating agent. Each authenticating agent must be
acceptable to the Transferor. The Trustee hereby initially appoints Bankers
Trust Company as its Authenticating Agent.
(b) Any institution succeeding to the corporate agency business
of an authenticating agent shall continue to be an authenticating agent without
the execution or filing of any paper or any further act on the part of the
Trustee or such authenticating agent.
(c) An authenticating agent may at any time resign by giving
written notice of resignation to the Trustee and to the Transferor. The Trustee
may at any time terminate the agency of an authenticating agent by giving notice
of termination to such authenticating agent and to the Transferor. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time an authenticating agent shall cease to be acceptable to the Trustee or
the Transferor, the Trustee promptly may appoint a successor authenticating
agent. Any successor authenticating agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
authenticating agent. No successor authenticating agent shall be appointed
unless acceptable to the Trustee and the Transferor.
(d) The Servicer agrees to pay each authenticating agent from
time to time reasonable compensation for its services under this Section 6.8.
(e) The provisions of Sections 11.1, 11.2 and 11.3 shall be
applicable to any authenticating agent.
(f) Pursuant to an appointment made under this Section 6.8, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
This is one of the certificates described in the Pooling and
Servicing Agreement.
-----------------------------------------------
as Authenticating Agent or the Trustee,
By: -----------------------------------------------
Authorized Signatory
-68-
Section 6.9 TENDER OF EXCHANGEABLE TRANSFEROR CERTIFICATE. (a)
Upon any Exchange, the Transferor shall deliver to the Trustee for
authentication under Section 6.2, one or more new Series of Investor
Certificates. Any such Series of Investor Certificates shall be sub stantially
in the form specified in the related Supplement and shall bear, upon its face,
the designation for such Series to which it belongs, as selected by the
Transferor. Except as specified in any Supplement for a related Series, all
Investor Certificates of any Series shall rank PARI PASSU and be equally and
ratably entitled as provided herein to the benefits hereof (except that the
Enhancement provided for any Series shall not be available for any other Series)
without preference, priority or distinction on account of the actual time or
times of authentication and delivery, all in accordance with the terms and
provisions of this Agreement and the related Supplement.
(b) The Holder of the Exchangeable Transferor Certificate may (i)
tender the Exchangeable Transferor Certificate to the Trustee in exchange for
(A) one or more newly issued Series of Investor Certificates or, with respect to
any prefunded Series, interests therein and (B) a reissued Exchangeable
Transferor Certificate, (ii) request the Trustee to issue to it one or more
Classes of any newly issued Series of Investor Certificates which upon payment
by the purchaser thereof of the initial Invested Amount of such Certificates to
a Defeasance Account, will represent an interest in the Trust equal to such
Initial Invested Amount (an "UNFUNDED CERTIFICATE") or (iii) take a combination
of the actions specified in clauses (i) and (ii) provided that the sum of the
amount of Transferor Interest which is tendered under clause (i) and the amount
to be paid to the Defeasance Account under clause (ii) equals the Initial
Invested Amount of the Investor Certificates delivered to the Holder of the
Exchangeable Transferor Certificate (any such event under clauses (i), (ii) or
(iii), a "TRANSFEROR EXCHANGE"). In addition, to the extent permitted for any
Series of Investor Certificates as specified in the related Supplement, the
Investor Certificateholders of such Series may tender their Investor
Certificates and the Holder of the Exchangeable Transferor Certificate may
tender the Exchangeable Transferor Certificate to the Trustee pursuant to the
terms and conditions set forth in such Supplement in exchange for (i) one or
more newly issued Series of Investor Certificates and (ii) a reissued
Exchangeable Transferor Certificate (an "INVESTOR EXCHANGE"). Notwithstanding
anything to the contrary herein, the Transferor shall not be permitted to
deposit money into any Defeasance Account. The Transferor Exchange and Investor
Exchange are referred to collectively herein as an "Exchange." The Holder of the
Exchangeable Transferor Certificate may perform an Exchange by notifying the
Trustee, in writing, at least five Business Days in advance (an "EXCHANGE
NOTICE") of the date upon which the Exchange is to occur (an "EXCHANGE DATE").
Any Exchange Notice shall state the designation of any Series to be issued on
the Exchange Date and, with respect to each such Class or Series: (a) its
Initial Invested Amount (or the method for calculating such Initial Invested
Amount), which at any time may not be greater than the current principal amount
of the Exchangeable Transferor Certificate at such time (or in the case of an
Investor Exchange, the sum of the Invested Amount of any Class or Series of
Investor Certificates to be exchanged plus the current principal amount of the
Exchangeable Transferor Certificate) taking into account any Receivables
transferred to the Trust simultaneous with such Exchange, (b) its Certificate
Rate (or the method for allocating interest payments or other cash flows to such
Series), if any, and (c) the Enhancement Provider, if any, with respect to such
Series. On the Exchange Date, the Trustee shall authenticate and deliver any
such Class or Classes of Series
-69-
of Investor Certificates only upon delivery to it of the following: (a) a
Supplement satisfying the criteria set forth in subsection 6.9(c) and in form
reasonably satisfactory to the Trustee executed by the Transferor and the
Servicer and specifying the Principal Terms of such Series, (b) the applicable
Enhancement, if any, (c) the agreement, if any, pursuant to which the
Enhancement Provider agrees to provide the Enhancement, if any, (d) an Opinion
of Counsel to the effect that (i) any Class of the newly issued Series of
Investor Certificates sold to third parties will be characterized as either
indebtedness or partnership interests for Federal and applicable state income
tax purposes, (ii) that the issuance of the newly issued Series of Investor
Certificates will not adversely affect the Federal and applicable state income
tax characterization of any outstanding Series of Investor Certificates and
(iii) the issuance of the newly issued Series will not result in the Trust being
subject to tax at the entity level for federal or applicable state tax purposes,
(e) written confirmation from each Rating Agency that the Exchange will not
result in such Rating Agency's reducing or withdrawing its rating on any then
outstanding Series as to which it is a Rating Agency, (f) an Officer's
Certificate of the Transferor, that on the Exchange Date (i) the Transferor,
after giving effect to the Exchange, would not be required to add Supplemental
Accounts pursuant to subsection 2.6(c), (ii) after giving effect to such
Exchange, the Transferor Interest would be at least equal to the Minimum
Transferor Interest, (iii) the Retained Interest would be at least equal to the
Minimum Retained Interest, and (iv) taking into account the certificates of the
newly issued series, more than 20% (by Certificate Principal Amount and by
value) of the outstanding Certificates issued by the Trust with respect to which
no Opinion of Counsel was issued that such class will be treated as debt for
federal income tax purposes (including the Transferor Certificate and all
Transferor Retained Classes) may not, by their terms, be Transferred, (g) the
existing Exchangeable Transferor Certificate or applicable Investor
Certificates, as the case may be and (h) such other documents, certificates and
Opinions of Counsel as may be required by the applicable Supplement. Upon
satisfaction of such conditions, the Trustee shall cancel the existing
Exchangeable Transferor Certificate or applicable Investor Certificates, as the
case may be, and issue, as provided above, such Series of Investor Certificates
and a new Exchangeable Transferor Certificate, dated the Exchange Date. There is
no limit to the number of Exchanges that may be performed under this Agreement.
(c) In conjunction with an Exchange, the parties hereto shall
execute a Supplement, which shall specify the relevant terms with respect to any
newly issued Series of Investor Certificates, which may include without
limitation: (i) its name or designation, (ii) the Initial Invested Amount or the
method of calculating the Initial Invested Amount, (iii) the Certificate Rate
(or formula for the determination thereof), (iv) the Closing Date, (v) the
rating agency or agencies rating such Series, (vi) the name of the Clearing
Agency, if any, (vii) the rights of the Holder of the Exchangeable Transferor
Certificate that have been transferred to the Holders of such Series pursuant to
such Exchange (including any rights to allocations of Collections of Finance
Charge Receivables and Principal Receivables), (viii) the interest payment date
or dates and the date or dates from which interest shall accrue, (ix) the method
of allocating Collections with respect to Principal Receivables for such Series
and, if applicable, with respect to any Paired Series and the method by which
the principal amount of Investor Certificates of such Series shall amortize or
accrete and the method for allocating Collections with respect to Finance Charge
Receivables and Receivables in Defaulted Accounts, (x) the names of any accounts
to be used by such Series and the
-70-
terms governing the operation of any such account, (xi) the Series Servicing Fee
Percentage, (xii) the Minimum Transferor Interest, (xiii) the Series Termination
Date, (xiv) the terms of any Enhancement with respect to such Series, (xv) the
Enhancement Provider, if applicable, (xvi) the base rate applicable to such
Series, (xvii) the terms on which the Certificates of such Series may be
repurchased or remarketed to other investors, (xviii) any deposit into any
account provided for such Series, (xix) the number of Classes of such Series,
and if more than one Class, the rights and priorities of each such Class, (xx)
whether any fees will be included in the funds available to be paid for such
Series, (xxi) the subordination of such Series to any other Series, (xxii) the
Pool Factor, (xxiii) the Minimum Aggregate Principal Receivables, (xxiv) whether
such Series will be a part of a group or subject to being paired with any other
Series, (xxv) whether such Series will be prefunded, and (xxvi) any other
relevant terms of such Series (including whether or not such Series will be
pledged as collateral for an issuance of any other securities, including
commercial paper) (all such terms, the "PRINCIPAL TERMS" of such Series). The
terms of such Supplement may modify or amend the terms of this Agreement solely
as applied to such new Series. If on the date of the issuance of such Series
there is issued and outstanding one or more Series of Investor Certificates and
no Series of Investor Certificates is currently rated by a Rating Agency, then
as a condition to such Exchange a nationally recognized investment banking firm
or commercial bank shall also deliver to the Trustee an officer's certificate
stating, in substance, that the Exchange will not have an adverse effect on the
timing or distribution of payments to such other Series of Investor Certificates
then issued and outstanding.
Section 6.10 BOOK-ENTRY CERTIFICATES. Unless otherwise provided
in any related Supplement, the Investor Certificates, upon original issuance,
shall be issued in the form of typewritten Certificates representing the
Book-Entry Certificates, to be delivered to the depositary specified in such
Supplement (the "DEPOSITARY") which shall be the Clearing Agency or Foreign
Clearing Agency, by or on behalf of such Series. The Investor Certificates of
each Series shall, unless otherwise provided in the related Supplement,
initially be registered on the Certificate Register in the name of the nominee
of the Clearing Agency or Foreign Clearing Agency. No Certificate Owner will
receive a Definitive Certificate representing such Certificate Owner's interest
in the related Series of Investor Certificates, except as provided in Section
6.12. Unless and until definitive, fully registered Investor Certificates of any
Series ("DEFINITIVE CERTIFICATES") have been issued to Certificate Owners
pursuant to Section 6.12:
(i) the provisions of this Section 6.10 shall be
in full force and effect with respect to each such Series;
(ii) the Transferor, the Servicer, the Paying
Agent, the Transfer Agent and Registrar and the Trustee may deal
with the Clearing Agency and the Clearing Agency Participants for
all purposes (including the making of distributions on the
Investor Certificates of each such Series) as the authorized
representatives of the Certificate Owners;
-71-
(iii) to the extent that the provisions of this
Section 6.10 conflict with any other provisions of this
Agreement, the provisions of this Section 6.10 shall control with
respect to each such Series; and
(iv) the rights of Certificate Owners of Investor
Certificates of each such Series shall be exercised only through
the Clearing Agency or Foreign Clearing Agency and the applicable
Clearing Agency Participants and shall be limited to those
established by law and agreements between such Certificate Owners
and the Clearing Agency or Foreign Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Depositary
Agreement applicable to a Series, unless and until Definitive
Certificates of such Series are issued pursuant to Section 6.12,
the initial Clearing Agency will make book-entry transfers among
the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the Investor
Certificates to such Clearing Agency Participants.
Section 6.11 NOTICES TO CLEARING AGENCY. Whenever notice or other
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Certificates shall have been issued to Certificate Owners
pursuant to Section 6.12, the Trustee shall give all such notices and
communications specified herein to be given to Holders of the Investor
Certificates to the Clearing Agency or Foreign Clearing Agency.
Section 6.12 DEFINITIVE CERTIFICATES. If (i) (A) the Transferor
advises the Trustee in writing that the Clearing Agency or Foreign Clearing
Agency is no longer willing or able to discharge properly its responsibilities
under the applicable Depositary Agreement, and (B) the Transferor is unable to
locate a qualified successor, (ii) the Transferor, at its option, advises the
Trustee in writing that it elects to terminate the book-entry system through the
Clearing Agency or Foreign Clearing Agency with respect to any Series of
Certificates or (iii) after the occurrence of a Servicer Default, Certificate
Owners of a Series representing beneficial interests aggregating not less than
50% of the Invested Amount of such Series advise the Trustee and the applicable
Clearing Agency or Foreign Clearing Agency through the applicable Clearing
Agency Participants in writing that the continuation of a book-entry system
through the applicable Clearing Agency or Foreign Clearing Agency is no longer
in the best interests of the Certificate Owners, the Trustee shall notify all
Certificate Owners of such Series, through the applicable Clearing Agency
Participants, of the occurrence of any such event and of the availability of
Definitive Certificates to Certificate Owners of such Series requesting the
same. Upon surrender to the Trustee of the Investor Certificates of such Series
by the applicable Clearing Agency or Foreign Clearing Agency, accompanied by
registration instructions from the applicable Clearing Agency or Foreign
Clearing Agency for registration, the Trustee shall issue the Definitive
Certificates of such Series. Neither the Transferor nor the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Certificates of such Series, all references herein to obligations
imposed upon or to be performed by the applicable Clearing Agency or Foreign
Clearing Agency shall be deemed to be imposed upon and performed by the Trustee,
to the extent applicable with respect to such Definitive Certificates,
-72-
and the Trustee shall recognize the Holders of the Definitive Certificates of
such Series as Certifi cateholders of such Series hereunder.
Section 6.13 GLOBAL CERTIFICATE; EURO-CERTIFICATE EXCHANGE DATE.
If specified in the related Supplement for any Series, the Investor Certificates
may be initially issued in the form of a single temporary Global Certificate
(the "GLOBAL CERTIFICATE") in bearer form, without interest coupons, in the
denomination of the Initial Invested Amount of such Series and substantially in
the form attached to the related Supplement. Unless otherwise specified in the
related Supplement, the provisions of this Section 6.13 shall apply to such
Global Certificate. The Global Certificate will be authenticated by the Trustee
upon the same conditions, in substantially the same manner and with the same
effect as the Definitive Certificates. The Global Certificate may be exchanged
in the manner described in the related Supplement for Registered or Bearer
Certificates in definitive form.
Section 6.14 MEETINGS OF CERTIFICATEHOLDERS.
To the extent provided by the Supplement for any Series issued in
whole or in part in Bearer Certificates, the Servicer or the Trustee may at any
time call a meeting of the Certificateholders of such Series, to be held at such
time and at such place as the Servicer or the Trustee, as the case may be, shall
determine, for the purpose of approving a modification of or amendment to, or
obtaining a waiver of, any covenant or condition set forth in this Agreement
with respect to such Series or in the Certificates of such Series, subject to
Section 13.1 of this Agreement.
-73-
ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFEROR
Section 7.1 LIABILITY OF THE TRANSFEROR. The Transferor shall be
liable in accordance herewith solely to the extent of the obligations
specifically undertaken by the Transferor.
Section 7.2 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE TRANSFEROR.
(a) The Transferor shall not consolidate with or merge into any
other corporation or convey or transfer its properties and assets substantially
as an entirety to any Person, unless:
(i) the corporation formed by such consolidation
or into which the Transferor is merged or the Person which
acquires by conveyance or transfer the properties and assets of
the Transferor substantially as an entirety shall be, if the
Transferor is not the surviving entity, organized and existing
under the laws of the United States of America or any State or
the District of Columbia and shall expressly assume, by an
agreement supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the performance of
every covenant and obligation of the Transferor, as applicable
hereunder and shall benefit from all the rights granted to the
Transferor, as applicable hereunder. To the extent that any
right, covenant or obligation of the Transferor, as applicable
hereunder, is inapplicable to the successor entity, such
successor entity shall be subject to such covenant or obligation,
or benefit from such right, as would apply, to the extent
practicable, to such successor entity. In furtherance hereof, in
applying this Section 7.2 to a successor entity, Section 9.2
hereof shall be applied by reference to events of involuntary
liquidation, receivership or conservatorship applicable to such
successor entity as shall be set forth in the officer's
certificate described in subsection 7.2(a)(ii);
(ii) the Transferor shall have delivered to the
Trustee an Officer's Certificate signed by a Vice President (or
any more senior officer) of the Transferor stating that such
consolidation, merger, conveyance or transfer and such
supplemental agreement comply with this Section 7.2 and that all
conditions precedent herein provided for relating to such
transaction have been complied with and an Opinion of Counsel
that such supplemental agreement is legal, valid and binding and
that the entity surviving such consolidation, conveyance or
transfer is organized and existing under the laws of the United
States of America or any State or the District of Columbia and,
subject to customary limitations and qualifications, such entity
will not be substantively consolidated with any Originator or the
Servicer;
-74-
(iii) the Transferor shall have delivered notice to
the Rating Agencies of such consolidation, merger, conveyance or
transfer and the Rating Agency shall have provided written
confirmation that such consolidation, merger, conveyance or
transfer will not result in the Rating Agency reducing or
withdrawing its rating on any then outstanding Series as to which
it is a Rating Agency;
(iv) the successor entity shall be a special
purpose bankruptcy remote entity; and
(v) if the Transferor is not the surviving entity,
the Transferor shall file new UCC-1 financing statements with
respect to the interest of the Trust in the Receivables.
(b) The obligations of the Transferor hereunder shall not be
assignable nor shall any Person succeed to the obligations of the Transferor
hereunder except for mergers, consolidations, assumptions or transfers in
accordance with the provisions of the foregoing para graph.
Section 7.3 LIMITATION ON LIABILITY. The directors, officers,
employees or agents of the Transferor shall not be under any liability to the
Trust, the Trustee, the Certificateholders, any Enhancement Provider or any
other Person hereunder or pursuant to any document delivered hereunder, it being
expressly understood that all such liability is expressly waived and released as
a condition of, and as consideration for, the execution of this Agreement and
any Supplement and the issuance of the Certificates; PROVIDED, HOWEVER, that
this provision shall not protect the officers, directors, employees, or agents
of the Transferor against any liability which would otherwise be imposed upon
them by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. Except as provided in Sections 7.1 and 7.4 with respect to the
Trust and the Trustee and its officers, directors, employees and agents, the
Transferor shall not be under any liability to the Trust, the Trustee, its
officers, directors, employees and agents, the Certificateholders, any
Enhancement Provider or any other Person for any action taken or for refraining
from the taking of any action in its capacity as Transferor pursuant to this
Agreement or any Supplement whether arising from express or implied duties under
this Agreement or any Supplement or otherwise; PROVIDED, HOWEVER, that this
provision shall not protect the Transferor against any liability which would
otherwise be imposed upon it by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Transferor and any director, officer,
employee or agent may rely in good faith on any document of any kind PRIMA FACIE
properly executed and submitted by any Person respecting any matters arising
hereunder.
Section 7.4 LIABILITIES. The Transferor agrees to be liable to
and to indemnify and hold harmless the Trust and the Trustee from and against
any loss, liability, reasonable expense, damage or injury suffered or sustained
by reason of any acts or omissions or alleged acts or omissions arising out of
or based upon the arrangement created by this Agreement as though this
-75-
Agreement created a partnership under the Delaware Uniform Partnership Law in
which the Transferor is a general partner and pursuant to which Agreement it
agreed to provide the foregoing indemnity; PROVIDED, HOWEVER, that the
Transferor shall not be liable to or indemnify or hold harmless the Trustee or
any of its officers, directors, employees or agents as to any loss, liability,
expense, damage or injury suffered or sustained by reason of fraud, negligence
or willful misconduct on the part of the Trustee or any of its officers,
directors, employees or agents; and PROVIDED FURTHER, HOWEVER, that, in no event
will the Transferor be liable, directly or indirectly, for or in respect of any
indebtedness or obligation evidenced or created by any Certificate, recourse as
to which shall be limited solely to the assets of the Trust allocated for the
payment thereof as provided in this Agreement and any applicable Supplement.
Section 7.5 TRANSFEROR'S RECORDS. The Transferor shall clearly
and unambiguously mark its accounting records evidencing the Receivables being
purchased pursuant to the Receivables Purchase Agreement with a legend stating
that such Receivables have been conveyed to the Trust pursuant to this
Agreement.
-76-
ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER
Section 8.1 LIABILITY OF THE SERVICER. The Servicer shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer in such capacity herein.
Section 8.2 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER. Subject to subsection 3.1(a), the Servicer shall
not consolidate with or merge into any other corporation or convey or transfer
its properties and assets substantially as an entirety to any Person, unless:
(i) the corporation formed by such consolidation or
into which the Servicer is merged or the Person which acquires by
conveyance or transfer the properties and assets of the Servicer
substantially as an entirety shall be a corporation organized and
existing under the laws of the United States of America or any
State or the District of Columbia and, if the Servicer is not the
surviving entity, shall expressly assume, by an agreement
supplemental hereto, executed and delivered to the Trustee in
form satisfactory to the Trustee, the performance of every
covenant and obligation of the Servicer hereunder (to the extent
that any right, covenant or obligation of the Servicer, as
applicable hereunder, is inapplicable to the successor entity,
such successor entity shall be subject to such covenant or
obligation, or benefit from such right, as would apply, to the
extent practicable, to such successor entity);
(ii) the Servicer shall have delivered to the
Trustee an Officer's Certificate that such consolidation, merger,
conveyance or transfer and such supplemental agreement comply
with this Section 8.2 and that all conditions precedent herein
provided for relating to such transaction have been complied with
and an Opinion of Counsel that such supplemental agreement is
legal, valid and binding with respect to the Servicer and that
the entity surviving such consolidation, conveyance or transfer
is organized and existing under the laws of the United States of
America or any State or the District of Columbia; and
(iii) the Servicer shall have delivered notice to
the Rating Agency of such consolidation, merger, conveyance or
transfer and the Rating Agency shall have provided written
confirmation that such consolidation, merger, conveyance or
transfer will not result in the Rating Agency reducing or
withdrawing its rating on any then outstanding Series as to which
it is a Rating Agency.
-77-
Section 8.3 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.
The directors, officers, employees or agents of the Servicer shall not be under
any liability to the Trust, the Trustee, the Certificateholders, any Enhancement
Provider or any other Person hereunder or pursuant to any document delivered
hereunder, it being expressly understood that all such liability is expressly
waived and released as a condition of, and as consideration for, the execution
of this Agreement and any Supplement and the issuance of the Certificates;
PROVIDED, HOWEVER, that this provision shall not protect the directors,
officers, employees and agents of the Servicer against any liability which would
otherwise be imposed upon them by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. Except as provided in Sections 8.1 and 8.4
with respect to the Trustee, its officers, directors, employees and agents, the
Servicer shall not be under any liability to the Trust, the Trustee, its
officers, directors, employees and agents, the Certificateholders, any
Enhancement Provider or any other Person for any action taken or for refraining
from the taking of any action in its capacity as Servicer pursuant to this
Agreement or any Supplement; PROVIDED, HOWEVER, that this provision shall not
protect the Servicer against any liability which would otherwise be imposed upon
it by reason of willful misfeasance, bad faith or negligence in the performance
of duties or by reason of its reckless disregard of its obligations and duties
hereunder or under any Supplement. The Servicer may rely in good faith on any
document of any kind PRIMA FACIE properly executed and submitted by any Person
respecting any matters arising hereunder. The Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its duties to service the Receivables in accordance with this
Agreement which in its reasonable opinion may involve it in any expense or
liability.
Section 8.4 SERVICER INDEMNIFICATION OF THE TRANSFEROR, THE TRUST
AND THE TRUSTEE. Subject to the limitations on liability set forth in Section
8.3, the Servicer shall indemnify and hold harmless the Transferor and the Trust
(each, an "INDEMNIFIED PARTY") from and against any loss, liability, reasonable
expense, damage or injury, including, but not limited to, any judgment, award,
settlement, reasonable attorneys' fees and other costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim, suffered or sustained by reason of any acts or omissions or alleged acts
or omissions of the Servicer with respect to activities of the Trust or the
Trustee for which the Servicer is responsible pursuant to this Agreement;
PROVIDED, HOWEVER, that the Servicer shall not indemnify or hold harmless an
Indemnified Party if such acts, omissions or alleged acts or omissions
constitute or are caused by fraud, negligence, or willful misconduct by such
Indemnified Party (or any of such Indemnified Party's officers, directors,
employees or agents) or the Investor Certificateholders; PROVIDED, FURTHER, that
the Servicer shall not indemnify or hold harmless the Trust, the Investor
Certificateholders or the Certificate Owners for any losses, liabilities,
expenses, damages or injuries suffered or sustained by any of them with respect
to any action taken by the Trustee at the request of the Investor
Certificateholders; PROVIDED FURTHER, that the Servicer shall not indemnify or
hold harmless the Trust, the Investor Certificateholders or the Certificate
Owners as to any losses, liabilities, expenses, damages or injuries suffered or
sustained by any of them in their capacities as investors, including without
limitation losses incurred as a result of Defaulted Accounts or Receivables
which are written off as uncollectible; PROVIDED FURTHER, that the Servicer
shall not indemnify or hold harmless the Transferor,
-78-
the Trust, the Investor Certificateholders or the Certificate Owners for any
losses, liabilities, expenses, damages or injuries suffered or sustained by the
Trust, the Investor Certificateholders or the Certificate Owners arising under
any tax law, including without limitation, any federal, state, local or foreign
income or franchise taxes or any other tax imposed on or measured by income (or
any interest, penalties or additions with respect thereto or arising from a
failure to comply therewith) required to be paid by the Trust, the Investor
Certificateholders or the Certificate Owners in connection herewith to any
taxing authority; and, PROVIDED, FURTHER, that in no event will the Servicer be
liable, directly or indirectly, for or in respect of any indebtedness or
obligation evidenced or created by any Certificate, recourse as to which shall
be limited solely to the assets of the Trust allocated for the payment thereof
as provided in this Agreement and any applicable Supplement. Any such
indemnification shall not be payable from the assets of the Trust, but the
Servicer shall be subrogated to the rights of the Trust with respect to the
foregoing matters if and to the extent that the Servicer shall have indemnified
the Trust with respect thereto. The Servicer shall indemnify and hold harmless
the Trustee and its officers, directors, employees or agents from and against
any loss, liability, reasonable expense, damage or injury suffered or sustained
by reason of the acceptance of this Trust by the Trustee, the issuance by the
Trust of the Certificates or any of the other matters contemplated herein or in
any Supplement; provided, however, that the Servicer shall not indemnify the
Trustee or its officers, directors, employees or agents for any loss, liability,
expense, damage or injury caused by the fraud, negligence or willful misconduct
of any of them. The provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations hereof and shall
survive the resignation or removal of the Servicer, the resignation or removal
of the Trustee and/or the termination of the Trust and shall survive the
termination of this Agreement.
Section 8.5 THE SERVICER NOT TO RESIGN. Subject to subsection
3.1(a), the Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that (i) the performance of its duties
hereunder is no longer permissible under applicable law and (ii) there is no
reasonable action which the Servicer could take to make the performance of its
duties hereunder permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced as to clause (i)
above by an Opinion of Counsel to such effect delivered to the Trustee. No such
resignation shall become effective until the Trustee or a Successor Servicer
shall have assumed the responsibilities and obligations of the Servicer in
accordance with Section 10.2 hereof. If the Trustee is unable within 120 days of
the date of delivery to it of such Opinion of Counsel to appoint a Successor
Servicer, the Trustee shall serve as Successor Servicer hereunder (but shall
have continued authority to appoint another Person as Successor Servicer).
Section 8.6 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING THE RECEIVABLES. The Servicer shall provide to the Trustee and its
agents (who shall be reasonably acceptable to the Servicer) access to the
documentation regarding the Accounts and the Receivables in such cases where the
Trustee is required in connection with the enforcement of the rights of the
Investor Certificateholders, or by applicable statutes or regulations, to review
such documentation, such access being afforded without charge but only (i) upon
reasonable request, (ii) during normal business hours, (iii) subject to the
Servicer's normal security and confidentiality procedures and
-79-
(iv) at offices designated by the Servicer. Nothing in this Section 8.6 shall
derogate from the obligation of the Transferor, the Trustee or the Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Obligors and the failure of the Servicer to provide access as provided in this
Section 8.6 as a result of such obligations shall not constitute a breach of
this Section 8.6.
Section 8.7 DELEGATION OF DUTIES. In the ordinary course of
business, the Servicer may at any time delegate any duties hereunder to any
Person who agrees to conduct such duties in accordance with the Credit and
Collection Policies. Any such delegations shall not relieve the Servicer of its
liability and responsibility with respect to such duties, and shall not
constitute a resignation within the meaning of Section 8.5 hereof and the
Servicer will remain jointly and severally liable with such Person for any
amounts which would otherwise be payable pursuant to this Article VIII as if the
Servicer had performed such duty; PROVIDED, HOWEVER, that in the case of any
significant delegation to a Person other than an Affiliate of SRI (i) written
notice shall be given to the Trustee and to each Rating Agency of such
delegation and (ii) neither Rating Agency shall have notified the Transferor or
the Trustee in writing that such delegation will result in the lowering or
withdrawal of its then existing rating of any Series or Class of Investor
Certificates.
Section 8.8 MAINTENANCE OF PROPERTY; INSURANCE. The Servicer will
(i) keep all property and assets useful and necessary in its business as
Servicer in good working order and condition (normal wear and tear excepted),
(ii) maintain, with financially sound and reputable insurance companies,
insurance on all its property and assets necessary in its business as Servicer
in at least such amounts and against at least such risks (and with such risk
retention) in the Servicer's reasonable judgment as are usually insured against
in the same general area by companies of established repute engaged in the same
or a similar business, (iii) furnish to the Trustee, upon written request, full
information as to the insurance carried, (iv) within five days of receipt of
notice from any insurer, furnish the Trustee with a copy of any notice of
cancellation or material change in coverage from that existing on the Closing
Date and (v) forthwith, furnish the Trustee with notice of any cancellation or
nonrenewal of coverage by the Servicer. The Servicer will (A) maintain disaster
recovery systems and other information management systems that, in the
Servicer's reasonable judgment, are sufficient to enable it to perform its
obligations as Servicer without material interruption or loss of the Receivables
or the collections, in the event of damage to, or loss or destruction of, its
primary computer and information management systems and (B) furnish to the
Trustee (x) full information as to such disaster recovery systems and (y)
back-up computer operating systems and applications software used for the
collection of Receivables (the "RECEIVABLES SOFTWARE"); PROVIDED, that the
Servicer shall only be obligated to use its reasonable efforts to obtain
sublicenses or consents from third party licensors of such Receivables Software
to the license set forth in Section 2.1 and "Receivables Software" shall not
include operating systems or software licensed from such third parties unless
and until such sublicense or consent has been obtained. During the continuance
of a Payout Event, Prospective Payout Event, Servicer Default or event which,
upon the giving of notice or passage of time, would be a Servicer Default the
Trustee may (at the request of the holders of a majority of the Invested Amount,
or the related Commitments, of any Class) request, and the Servicer shall
provide to the Trustee, copies of back-up data regarding
-80-
the Receivables, such data to be provided with such frequency as designated by
the Trustee. The Servicer shall use its reasonable efforts to obtain amendments
to the agreement between the Servicer and Ferren & Long Company to provide, and
will provide in any new software back-up agreement, that Ferren & Long Company
or such other back-up provider shall provide copies of back-up data to the
Trustee at such times as specified in the preceding sentence. The Transferor and
the Servicer hereby represent and warrant that, upon delivery by the Servicer of
the Receivables Software, the Licensed Names and the back-up data specified in
the proviso to the second preceding sentence of this Section 8.8, and assuming
that the third party sublicenses and consents referenced in this Section 8.8 and
the amendment or new software back-up agreement referenced in the preceding sen
tence of this Section 8.8, the Trustee shall have adequate proprietary rights,
Receivables Software and backup data to permit orderly collection of the
Receivables without the participation of the Servicer.
-81-
ARTICLE IX
PAY OUT EVENTS
Section 9.1 PAY OUT EVENTS. If any one of the following events
(each, a "TRUST PAY OUT EVENT") shall occur:
(a) the Transferor, any Originator or SRI shall consent to the
appointment of a bankruptcy trustee or receiver or liquidator in any bankruptcy
proceeding or any other insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings of or relating to all or substantially
all of its property; or a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
bankruptcy trustee or receiver or liquidator in any bankruptcy proceeding or any
other insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Transferor, any Originator or SRI; or the
Transferor, any Originator or SRI shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute including the U.S. bankruptcy
code, make an assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations; or the Transferor shall become unable for any reason
to transfer Receivables to the Trust in accordance with the provisions of this
Agreement; or
(b) the Trust shall become subject to regulation by the
Securities and Exchange Commission as an "investment company" within the meaning
of the Investment Company Act; or
(c) SRI shall fail to own or control, directly or indirectly,
100% of the issued and outstanding stock of the Transferor; then a Pay Out Event
with respect to all Series of Certificates shall occur without any notice or
other action on the part of the Trustee or the Investor Certificateholders
immediately upon the occurrence of such event.
Section 9.2 ADDITIONAL RIGHTS UPON THE OCCURRENCE OF CERTAIN
EVENTS.
(a) If (x) the Transferor shall consent to the appointment of a
bankruptcy trustee or receiver or liquidator for the winding-up or liquidation
of its affairs, or a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
bankruptcy trustee or receiver or liquidator for the winding-up or liquidation
of its affairs shall have been entered against the Transferor (an "INSOLVENCY
EVENT"), on the day of such Insolvency Event (the "APPOINTMENT DAY") or (y) the
Retained Percentage shall at any time be equal to or less than 1% (a "TRIGGER
EVENT"), the following actions shall be taken and processes begun:
-82-
(i) If an Insolvency Event shall have occurred, the Transferor
shall immediately cease to transfer Principal Receivables to the Trust and shall
promptly give written notice to the Trustee of such Insolvency Event.
Notwithstanding any cessation of the transfer to the Trust of additional
Principal Receivables, receivables accrued in respect of periodic finance
charges, late fees and similar fees and charges, whenever created, accrued in
respect of Receivables which have been transferred to the Trust, shall continue
to be a part of the Trust, and Collections with respect thereto shall continue
to be allocated and paid in accordance with Article IV.
(ii) If an Insolvency Event or a Trigger Event shall have
occurred, this Agreement and the Trust shall be deemed to have terminated,
subject to the liquidation, winding-up and dissolution procedures described
below. Within 15 days of the date of written notice to the Trustee, the Trustee
shall (i) publish a notice in an Authorized Newspaper that an Insolvency Event
or a Trigger Event has occurred, that the Trust has terminated, and that the
Trustee intends to sell, dispose of or otherwise liquidate the Receivables
pursuant to this Agreement in a commercially reasonable manner and on
commercially reasonable terms, which shall include the solicitation of
competitive bids (a "DISPOSITION"), and (ii) send written notice to the Investor
Certificateholders describing the provisions of this Section 9.2 and requesting
each Investor Certificateholder to advise the Trustee in writing that it elects
one of the following options: (A) the Investor Certificateholder wishes the
Trustee to instruct the Servicer not to effectuate a Disposition, (B) the
Investor Certificateholder refuses to advise the Trustee as to the specific
action the Trustee shall instruct the Servicer to take or (C) the Investor
Certificateholder wishes the Servicer to effect a disposition of the
Receivables. If after 60 days from the day notice pursuant to clause (i) above
is first published (the "PUBLICATION DATE"), the Trustee shall not have received
the written instruction described in clause (A) above from Holders of Investor
Certificates representing Undivided Interests aggregating in excess of 50% of
the related Invested Amount of each Series (or, in the case of a Series having
more than one Class, each Class of such Series) (for each Series, a "HOLDERS'
MAJORITY"), the Trustee shall instruct the Servicer to effectuate a Disposition,
and the Servicer shall proceed to consummate a Disposition. If, however, with
respect to the portion of the Receivables allocable to any out standing Series,
a Holders' Majority instruct the Trustee not to effectuate a Disposition of the
portion of the Receivables allocable to such Series, the Trust shall be
reconstituted and continue with respect to such Series pursuant to the terms of
this Agreement and the applicable Supplement (as amended in connection with such
reconstitution). The portion of the Receivables allocable to any Series shall be
equal to the sum of (1) the product of (A) the Transferor Percentage, (B) the
aggregate out standing Principal Receivables and (C) a fraction the numerator of
which is the related Investor Percentage of Collections of Finance Charge
Receivables and the denominator of which is the sum of all Investor Percentages
with respect to Collections of Finance Charge Receivables for all Series
outstanding and (2) the Invested Amount of such Series. The Transferor or any of
its Affiliates shall be permitted to bid for the Receivables. In addition, the
Transferor or any of its Affiliates shall have the right to match any bid by a
third person and be granted the right to purchase the Receivables at such
matched bid price. The Trustee may obtain a prior determination from any such
bankruptcy trustee, receiver or liquidator that the terms and manner of any
proposed sale, disposition or liquidation are commercially reasonable. The
provisions of Sections 9.1 and 9.2 shall not be deemed to be mutually exclusive.
-83-
(b) The proceeds from the sale, disposition or liquidation of the
Receivables pursuant to subsection (a) above shall be treated as Collections on
the Receivables and shall be allocated and deposited in accordance with the
provisions of Article IV; PROVIDED, HOWEVER, that the proceeds from the sale of
Receivables with respect to any Series shall be applied solely to make payments
to such Series; PROVIDED FURTHER, that the Trustee shall determine conclusively
in its sole discretion the amount of such proceeds which are allocable to
Finance Charge Collections and the amount of such proceeds which are allocable
to Collections of Principal Receivables.
(c) The Trustee may appoint an agent or agents to assist with its
responsibilities pursuant to this Article IX with respect to competitive bids.
-84-
ARTICLE X
SERVICER DEFAULTS
Section 10.1 SERVICER DEFAULTS. If any one of the following
events (a "SERVICER DEFAULT") shall occur and be continuing:
(a) any failure by the Servicer to make any payment, transfer or
deposit or to give instructions or notice to the Trustee pursuant to Article IV
or to instruct the Trustee to make any required drawing, withdrawal, or payment
under any Enhancement on or before the date occurring two Business Days after
the date such payment, transfer, deposit, withdrawal or drawing or such
instruction or notice is required to be made or given, as the case may be, under
the terms of this Agreement (PROVIDED, that with respect to payments to the
Investor Certificateholders of Invested Amounts, such two Business Day grace
period shall not apply);
(b) failure on the part of the Servicer duly to observe or
perform in any respect any other covenants or agreements of the Servicer set
forth in this Agreement, which has a material adverse effect on the Investor
Certificateholders of any Series and which continues unremedied for a period of
60 days after the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to the Servicer by the Trustee, or to
the Servicer and the Trustee by the Holders of Investor Certificates evidencing
Undivided Interests aggregating not less than 50% of the Invested Amount of any
Series materially adversely affected thereby and continues to materially
adversely affect such Investor Certificateholders for such period; or the
Servicer shall delegate its duties under this Agreement, except as permitted by
Section 8.7;
(c) any representation, warranty or certification made by the
Servicer in this Agreement or in any certificate delivered pursuant to this
Agreement shall prove to have been incorrect when made, which has a material
adverse effect on the Investor Certificateholders of any Series and which
continues to be incorrect in any material respect for a period of 60 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by the Holders of Investor Certificates evidencing
Undivided Interests aggregating not less than 50% of the Invested Amount of any
Series materially adversely affected thereby and continues to materially
adversely affect such Investor Certificateholders for such period; or
(d) the Servicer shall consent to the appointment of a bankruptcy
trustee or receiver or liquidator in any bankruptcy proceeding or any other
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Servicer or of or relating to all or
substantially all of its property; or a decree or order of a court or agency or
supervi sory authority having jurisdiction in the premises for the appointment
of a bankruptcy trustee or receiver or liquidator in any bankruptcy proceeding
or any other insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Servicer, and such decree or order
shall have remained
-85-
in force undischarged or unstayed for a period of 60 days; or the Servicer shall
admit in writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable insolvency or reorganization
statute, make any assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations; then, so long as such Servicer Default shall
not have been remedied, either the Trustee, or the Holders of Investor
Certificates evidencing Undivided Interests aggregating more than 50% of the
Aggregate Invested Amount, by notice then given in writing to the Servicer (and
to the Trustee if given by the Investor Certificateholders) (a "TERMINATION
NOTICE"), may terminate all of the rights and obligations of the Servicer as
Servicer under this Agreement. The Servicer agrees that promptly after it
receives such Termination Notice, the Servicer will at its own expense deliver
to the Trustee or to the bailee of the Trustee a computer file or microfiche
list containing a true and complete list of all Accounts, identified by account
number and setting forth the Outstanding Balance of each Receivable as of the
date of receipt of such Termination Notice. After receipt by the Servicer of
such Termination Notice, and on the date that a Successor Servicer shall have
been appointed by the Trustee pursuant to Section 10.2, all authority and power
of the Servicer under this Agreement shall pass to and be vested in a Successor
Servicer; and, without limitation, the Trustee is hereby authorized and
empowered (upon the failure of the Servicer to cooperate) to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments upon the failure of the Servicer to execute or
deliver such documents or instruments, and to do and accomplish all other acts
or things necessary or appropriate to effect the purposes of such transfer of
servicing rights and obligations. The Servicer agrees to cooperate with the
Trustee and such Successor Servicer in effecting the termination of the
responsibilities and rights of the Servicer to conduct servicing hereunder
including, without limitation, the transfer to such Successor Servicer of all
authority of the Servicer to service the Receivables provided for under this
Agreement, including, without limitation, all authority over all Collections
which shall on the date of transfer be held by the Servicer for deposit, or
which have been deposited by the Servicer, in the Collection Account, the
Equalization Account, the Interest Funding Account or the Principal Account, and
any Series Account, or which shall thereafter be received with respect to the
Receivables. The Servicer shall promptly transfer its electronic records or
electronic copies thereof relating to the Receivables to the Successor Servicer
in such electronic form as the Successor Servicer may reasonably request and
shall promptly transfer to the Successor Servicer all other records,
correspondence and documents necessary for the continued servicing of the
Receivables in the manner and at such times as the Successor Servicer shall
reasonably request. To the extent that compliance with this Section 10.1 shall
require the Servicer to disclose to the Successor Servicer information of any
kind which the Servicer reasonably deems to be confidential, the Successor
Servicer shall be required to enter into such customary licensing and
confidentiality agreements as the Servicer shall deem necessary to protect its
interests. The Servicer shall, on the date of any servicing transfer, transfer
all of its rights and obligations under the Enhancement with respect to any
Series to the Successor Servicer. In connection with any service transfer, all
reasonable costs and expenses (including attorneys, fees) incurred in connection
with transferring the records, correspondence and other documents with respect
to the Receivables and the other Trust Property to the Successor Servicer and
Amending this Agreement to reflect such succession as Successor Servicer
pursuant to this Section 10.1 and Section
-86-
10.2 shall be paid by the Servicer (unless the Trustee is acting as the Servicer
on a temporary basis, in which case the original Servicer shall be responsible
therefor) upon presentation of reasonable documentation of such costs and
expenses.
Notwithstanding the foregoing, a delay in or failure of
performance referred to in subsection 10.1(a) for a period of two Business Days
or under subsection l0.l(b) or (c) for a period of 60 days, shall not constitute
a Servicer Default if such delay or failure could not be prevented by the
exercise of reasonable diligence by the Servicer and such delay or failure was
caused by an act of God or the public enemy, acts of declared or undeclared war,
public disorder, rebellion, riot or sabotage, epidemics, landslides, lightning,
fire, hurricanes, tornadoes, earthquakes, nuclear disasters or meltdowns,
floods, power outages, computer failure or similar causes. The preceding
sentence shall not relieve the Servicer from using its best efforts to perform
its obligations in a timely manner in accordance with the terms of this
Agreement and the Servicer shall provide the Trustee, any Enhancement Provider,
the Transferor and the Holders of Investor Certificates with an Officer's
Certificate giving prompt notice of such failure or delay by it, together with a
description of the cause of such failure or delay and its efforts so to perform
its obligations.
Section 10.2 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR. (a) On and
after the receipt by the Servicer of a Termination Notice pursuant to Section
10.1, the Servicer shall continue to perform all servicing functions under this
Agreement until the date specified in the Termination Notice or as otherwise
specified by the Trustee in writing or, if no such date is specified in such
Termination Notice, or otherwise specified by the Trustee, until a date mutually
agreed upon by the Servicer and Trustee. The Trustee shall notify each Rating
Agency of such removal of the Servicer. The Trustee shall, as promptly as
possible after the giving of a Termination Notice, appoint a successor servicer
(the "SUCCESSOR SERVICER"), and such Successor Servicer shall accept its
appointment by a written assumption in a form acceptable to the Trustee. If such
Successor Servicer is unable to accept such appointment, the Trustee may obtain
bids from any potential successor servicer. If the Trustee is unable to obtain
any bids from any potential successor servicer and the Servicer delivers an
Officer's Certificate to the effect that it cannot in good faith cure the
Servicer Default which gave rise to a transfer of servicing, and if the Trustee
is legally unable to act as Successor Servicer, then the Trustee shall notify
each Enhancement Provider of the proposed sale of the Receivables and shall
provide each such Enhancement Provider an opportunity to bid on the Receivables
and shall offer the Transferor the right of first refusal to purchase the
Receivables on terms equivalent to the best purchase offer as determined by the
Trustee, but in no event less than an amount equal to the Aggregate Invested
Amount on the date of such purchase PLUS all interest accrued but unpaid on all
of the outstanding Investor Certificates at the applicable Certificate Rate
through the date of such purchase; PROVIDED, HOWEVER, that no such purchase by
the Transferor shall occur unless the Transferor shall deliver an opinion of
Counsel reasonably acceptable to the Trustee that such purchase would not
constitute a fraudulent conveyance of the Transferor. The proceeds of such sale
shall be deposited in the Distribution Account or any Series Account, as
provided in the related Supplement, for distribution to the Investor
Certificateholders of each outstanding Series pursuant to Section 12.3 of this
Agreement. In the event that a Successor Servicer has not been appointed and has
not accepted its appointment at the time when the Servicer ceases to act as
-87-
Servicer, the Trustee without further action shall automatically be appointed
the Successor Servicer (but shall have continued authority to appoint another
Person as Successor Servicer). The Trustee may delegate any of its servicing
obligations to an affiliate or agent of the Trustee in accordance with Article
III hereof. Notwithstanding the above, the Trustee shall, if it is legally
unable to act, petition a court of competent jurisdiction to appoint any
established financial institution having, in the case of an entity that is
subject to risk-based capital adequacy requirements, risk-based capital of at
least $50,000,000 or, in the case of an entity that is not subject to risk-based
capital requirements, having a net worth of not less than $50,000,000 and whose
regular business includes the servicing of credit card receivables as the
Successor Servicer hereunder.
(b) Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to the Successor Servicer. Any Successor Servicer, by its
acceptance of its appointment, will automatically agree to be bound by the terms
and provisions of each Enhancement.
(c) In connection with such appointment and assumption, the
Trustee shall be entitled to such compensation, or may make such arrangements
for the compensation of the Successor Servicer out of Collections, as it and
such Successor Servicer shall agree; PROVIDED, HOWEVER, that no such
compensation shall be in excess of the Servicing Fee permitted to the Servicer
pursuant to Section 3.2. The Transferor agrees that if the Servicer is
terminated hereunder, it will agree to deposit a portion of the Collections in
respect of Finance Charge Receivables that it is entitled to receive pursuant to
Article IV to pay its ratable share of the compensation of the Successor
Servicer.
(d) All authority and power granted to the Successor Servicer
under this Agreement shall automatically cease and terminate upon termination of
the Trust pursuant to Section 12.1 and shall pass to and be vested in the
Transferor and, without limitation, the Transferor is hereby authorized and
empowered to execute and deliver, on behalf of the Successor Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of servicing rights. The Successor Servicer agrees to
cooperate with the Transferor in effecting the termination of the
responsibilities and rights of the Successor Servicer to conduct servicing on
the Receivables. The Successor Servicer shall transfer its electronic records
relating to the Receivables to the Transferor in such electronic form as the
Transferor may reasonably request and shall transfer all other records,
correspondence and documents to the Transferor in the manner and at such times
as the Transferor shall reasonably request. To the extent that compliance with
this Section 10.2 shall require the Successor Servicer to disclose to the
Transferor information of any kind which the Successor Servicer deems to be
confidential, the Transferor shall be required to enter into such customary
licensing and confidentiality agreements as the Successor Servicer shall deem
necessary to protect its interests.
-88-
Section 10.3 NOTIFICATION TO CERTIFICATEHOLDERS. Within two
Business Days after the Servicer becomes aware of any Servicer Default, the
Servicer shall give prompt written notice thereof to the Trustee and any
Enhancement Provider and, upon receipt of such written notice, and the Trustee
shall give notice to the Investor Certificateholders at their respective
addresses appearing in the Certificate Register. Upon any termination or
appointment of a Successor Servicer pursuant to this Article X, the Trustee
shall give prompt written notice thereof to Investor Certificateholders at their
respective addresses appearing in the Certificate Register.
Section 10.4 WAIVER OF PAST DEFAULTS. The Holders of Investor
Certificates evidencing Undivided Interests aggregating not less than 66-2/3% of
the Invested Amount of each Series materially adversely affected by any default
by the Servicer or Transferor may, on behalf of all Certificateholders of such
Series, waive any default by the Servicer or Transferor in the perfor mance of
its obligations hereunder and its consequences, except a default in the failure
to make any required deposits or payments of interest or principal relating to
such Series pursuant to Article IV, which default does not result from the
failure of the Paying Agent to perform its obligations to make any required
deposits or payments of interest and principal in accordance with Article IV.
Upon any such waiver of a past default, such default shall cease to exist, and
any default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereon except to the extent
expressly so waived.
-89-
ARTICLE XI
THE TRUSTEE
Section 11.1 DUTIES OF TRUSTEE. (a) The Trustee, prior to the
occurrence of any Servicer Default of which a Responsible Officer of the Trustee
has actual knowledge and after the curing of all Servicer Defaults which may
have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement, and no implied covenants or duties
shall be read into this Agreement against the Trustee. If a Responsible Officer
has received written notice that a Servicer Default has occurred (and such
Servicer Default has not been cured or waived), the Trustee shall exercise such
of the rights and powers vested in it by this Agreement, and use the same degree
of care and skill in its exercise, as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs; PROVIDED,
HOWEVER, that if the Trustee shall assume the duties of the Servicer pursuant to
Section 8.5 or 10.2, the Trustee in performing such duties shall use the degree
of skill and attention customarily exercised by a servicer with respect to
comparable receivables that it services for itself or others.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
substantially conform to the requirements of this Agreement. The Trustee shall
retain all such items for at least one year after receipt and shall make such
items available for inspection by any Investor Certificateholder at the
Corporate Trust Office, such inspection to be made during regular business hours
and upon reasonable prior notice to the Trustee.
(c) Subject to subsection 11.1(a), no provision of this Agreement
shall be construed to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act or its own misconduct; PROVIDED,
HOWEVER, that:
(i) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible Officers of
the Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(ii) the Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Holders of Investor Certificates evidencing
Undivided Interests aggregating more than 50% of the Invested Amount of any
Series relating to the time, method and place of conducting any proceeding for
any remedy available to the Trustee with respect to such Series, or exercising
any trust or power conferred upon the Trustee with respect to such Series, under
this Agreement; and
-90-
(iii) the Trustee shall not be charged with
knowledge of any failure by the Servicer referred to in clauses
(a) and (b) of Section 10.1 or of any breach by the Servicer
contemplated by clause (c) of Section 10.1 or any Pay Out Event
unless a Responsible Officer of the Trustee obtains actual
knowledge of such failure, breach or Pay Out Event or the Trustee
receives written notice of such failure, breach or Pay Out Event
from the Servicer or any Holders of Investor Certificates
evidencing Undivided Interests aggregating not less than 10% of
the Invested Amount of any Series adversely affected thereby.
(d) The Trustee shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer under this Agreement except during such time,
if any, as the Trustee shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Servicer in accordance with the terms of
this Agreement.
(e) Except for actions expressly authorized by this Agreement,
the Trustee shall take no action reasonably likely to impair the interests of
the Trust in any Receivable now existing or hereafter created or to impair the
value of any Receivable now existing or hereafter created.
(f) Except as provided in this Agreement, the Trustee shall have
no power to vary the corpus of the Trust.
(g) If a Responsible Officer of the Trustee has received written
notice that the Paying Agent or the Transfer Agent and Registrar shall fail to
perform any obligation, duty or agreement in the manner or on the day required
to be performed by the Paying Agent or the Transfer Agent and Registrar, as the
case may be, under this Agreement, the Trustee shall be obligated promptly upon
its obtaining knowledge thereof by a Responsible Officer of the Trustee to
perform such obligation, duty or agreement in the manner so required.
(h) If the Transferor has agreed to transfer any of its credit
card receivables (other than the Receivables) to another Person, upon the
written request of the Transferor, the Trustee on behalf of the Trust will enter
into such intercreditor agreements with the transferee of such receivables as
are customary and necessary to identify separately the rights, if any, of the
Trust and such other Person in the Transferor's credit card receivables;
PROVIDED, HOWEVER, that the Trust shall not be required to enter into any
intercreditor agreement which could adversely affect the interests of the
Certificateholders or the Trustee and, upon the request of the Trustee, the
Transferor will deliver an Opinion of Counsel on any matters relating to such
intercreditor agree ment, reasonably requested by the Trustee.
-91-
Section 11.2 CERTAIN MATTERS AFFECTING THE TRUSTEE. Except as
otherwise provided in Section 11.1:
(a) the Trustee may rely on and shall be protected in acting on,
or in refraining from acting in accordance with, any assignment of Receivables
in Supplemental Accounts, the initial report, the Daily Report, the Settlement
Statement, the annual Servicer's certifi cate, the monthly payment instructions
and notification to the Trustee, the monthly Certificateholder's statement, any
resolution, Officer's Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document believed by it to be genuine
and to have been signed or presented to it pursuant to this Agreement by the
proper party or parties;
(b) the Trustee may consult with counsel, and the advice or any
opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such advice or Opinion of Counsel;
(c) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement or any Enhancement, or to
institute, conduct or defend any litigation hereunder or in relation hereto, at
the request, order or direction of any of the Certificateholders or any
Enhancement Provider, pursuant to the provisions of this Agreement, unless such
Certificateholders or Enhancement Provider shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee of the obligations, upon the occurrence of any
Servicer Default (which has not been cured or waived) of which a Responsible
Officer of the Trustee has knowledge, to exercise such of the rights and powers
vested in it by this Agreement and any Enhancement, and to use the same degree
of care and skill in its exercise as a prudent person would exercise or use
under the circumstances in the conduct of his own affairs;
(d) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Agreement;
(e) the Trustee shall not be bound to make any investigation into
the facts of matters stated in any assignment of Receivables in Supplemental
Accounts, the initial report, the Daily Report, the Settlement Statement, the
annual Servicer's certificate, the monthly payment instructions and notification
to the Trustee, the monthly Certificateholders statement, any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond or other paper or document, unless requested in writing so
to do by Holders of Investor Certificates evidencing Undivided Interests
aggregating more than 50% of the Invested Amount of any Series which could be
adversely affected if the Trustee does not perform such acts;
-92-
(f) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys or a custodian, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent, attorney or custodian
appointed with due care by it hereunder;
(g) except as may be required by subsection 11.1(a), the Trustee
shall not be required to make any initial or periodic examination of any
documents or records related to the Receivables or the Accounts for the purpose
of establishing the presence or absence of defects, the compliance by the
Transferor with its representations and warranties or for any other purpose;
(h) whenever in the administration of this Agreement the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officer's Certificate; and
(i) the right of the Trustee to perform any discretionary act
enumerated in this Agreement or any Supplement shall not be construed as a duty,
and the Trustee shall not be answerable for performance of any such act.
Section 11.3 TRUSTEE NOT LIABLE FOR RECITALS IN CERTIFICATES. The
Trustee assumes no responsibility for the correctness of the recitals contained
herein and in the Certificates (other than the certificate of authentication on
the Certificates). Except as set forth in Section 11.15, the Trustee makes no
representations as to the validity or sufficiency of this Agreement or of the
Certificates (other than the certificate of authentication on the Certificates)
or of any Receivable or related document. The Trustee shall not be accountable
for the use or application by the Transferor of any of the Certificates or of
the proceeds of such Certificates, or for the use or application of any funds
paid to the Transferor in respect of the Receivables or deposited in or
withdrawn from the Collection Account, the Equalization Account, the Principal
Account or the Interest Funding Account, or any Series Account or other accounts
now or hereafter established to effectuate the transactions contemplated herein
and in accordance with the terms hereof. The Trustee shall have no
responsibility for filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or Lien granted to it hereunder (unless the Trustee shall have
become the Successor Servicer) or to prepare or file any Securities and Exchange
Commission filing for the Trust or to record this Agreement or any Supplement.
Section 11.4 TRUSTEE MAY OWN CERTIFICATES. The Trustee in its
individual or any other capacity may become the owner or pledgee of Investor
Certificates and may deal with the Transferor, the Servicer or any Enhancement
Provider with the same rights as it would have if it were not the Trustee. The
Trustee in its capacity as Trustee shall exercise its duties and
responsibilities hereunder independent of and without reference to its
investment, if any, in Investor Certificates.
-93-
Section 11.5 THE SERVICER TO PAY TRUSTEE'S FEES AND EXPENSES. The
Servicer covenants and agrees to pay to the Trustee from time to time, and the
Trustee shall be entitled to receive, reasonable compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust) for all services rendered by the Trustee in the execution of
the trust hereby created and in the exercise and performance of any of the
powers and duties hereunder of the Trustee, and, subject to Section 8.4, the
Servicer will pay or reimburse the Trustee (without reimbursement from any
Investor Account, any Series Account or otherwise) upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Agreement (including the
reasonable fees and expenses of its agents and counsel) except any such expense,
disbursement or advance as may arise from its own negligence or bad faith and
except as provided in the following sentence. If the Trustee is appointed
Successor Servicer pursuant to Section 10.2, the provisions of this Section 11.5
shall not apply to expenses, disbursements and advances made or incurred by the
Trustee in its capacity as Successor Servicer (which shall be covered out of the
Servicing Fee).
The obligations of the Servicer under this Section 11.5 shall
survive the termination of the Trust and the resignation or removal of the
Trustee.
Section 11.6 ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee
hereunder shall at all times be a corporation organized and doing business under
the laws of the United States of America or any state thereof authorized under
such laws to exercise corporate trust powers, having a long-term unsecured debt
rating of at least BBB by Standard & Poor's having, in the case of an entity
that is subject to risk-based capital adequacy requirements, risk-based capital
of at least $50,000,000 or, in the case of an entity that is not subject to
risk-based capital adequacy requirements, having a combined capital and surplus
of at least $50,000,000 and subject to supervision or examination by federal or
state authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose of this Section 11.6, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 11.6, the Trustee shall resign
immediately in the manner and with the effect specified in Section 11.7.
Section 11.7 RESIGNATION OR REMOVAL OF TRUSTEE. (a) The Trustee
may at any time resign and be discharged from the Trust hereby created by giving
written notice thereof to the Servicer. Upon receiving such notice of
resignation, the Servicer shall promptly appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor trustee. If no successor trustee
shall have been so appointed and have accepted such appointment within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee.
-94-
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.6 hereof and shall fail to resign
after written request therefor by the Transferor, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
a receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Transferor may, but shall not be required to, remove the Trustee and promptly
appoint a successor trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Trustee so removed and one copy to
the successor trustee.
(c) If at any time the Trust shall be in non-compliance with
Section 2.5(m), the Trustee shall be removed and the Servicer shall (with the
approval of Holders of Investor Certificates aggregating more than 50% of the
Aggregate Invested Amount) promptly appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee.
(d) If (i) the Trustee shall fail to perform any of its
obligations hereunder, (ii) a Certificateholder shall deliver written notice of
such failure to the Trustee, and (iii) the Trustee shall not have corrected such
failure for 60 days thereafter, then the Holders of Investor Certificates
representing more than 50% of the Invested Amount (including related commitments
of holders of Variable Funding Certificates) shall have the right to remove the
Trustee and (with the consent of the Transferor, which shall not be unreasonably
withheld) promptly appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee.
(e) Any resignation or removal of the Trustee and appointment of
a successor trustee pursuant to any of the provisions of this Section 11.7 shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 11.8 hereof and any liability of the Trustee arising
hereunder shall survive such appointment of a successor trustee.
Section 11.8 SUCCESSOR TRUSTEE. (a) Any successor trustee
appointed as provided in Section 11.7 hereof shall execute, acknowledge and
deliver to the Transferor and to its predecessor Trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with the
like effect as if originally named as Trustee herein. The predecessor Trustee
shall deliver to the successor trustee all documents and statements held by it
hereunder, and the Transferor and the predecessor Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for fully and cer tainly vesting and confirming in the successor trustee all
such rights, powers, duties and obligations.
-95-
(b) No successor trustee shall accept appointment as provided in
this Section 11.8 unless at the time of such acceptance such successor trustee
shall be eligible under the provisions of Section 11.6 hereof.
(c) Upon acceptance of appointment by a successor trustee as
provided in this Section 11.8, such successor trustee shall mail notice of such
succession hereunder to all Certificateholders at their addresses as shown in
the Certificate Register.
Section 11.9 MERGER OR CONSOLIDATION OF TRUSTEE. Any Person into
which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
all or substantially all of the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder, provided such corporation shall be
eligible under the provisions of Section 11.6 hereof, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
Section 11.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a)
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust may at the time be located, the Trustee shall have the power and
may execute and deliver all instruments to appoint one or more Persons to act as
a co-trustee or co-trustees, or separate trustee or separate trustees, of all or
any part of the Trust, and to vest in such Person or Persons, in such capacity
and for the benefit of the Certificateholders, such title to the trust, or any
part thereof, and, subject to the other provisions of this Section 11.10, such
powers, duties, obligations, rights and trusts as the Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
11.6 and no notice to Certificateholders of the appointment of any co-trustee or
separate trustee shall be required under Section 11.8 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or
imposed upon and exercised or performed by the Trustee and such
separate trustee or co-trustee jointly (it being understood that
such separate trustee or co-trustee is not authorized to act
separately without the Trustee joining in such act), except to
the extent that under any laws of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Servicer hereunder), the Trustee
shall be incompetent or unqualified to perform such act or acts,
in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee;
-96-
(ii) no trustee hereunder shall be personally
liable by reason of any act or omission of any other trustee
hereunder; and
(iii) the Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article XI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee and a
copy thereof given to the Servicer.
(d) Any separate trustee or co-trustee may at any time constitute
the Trustee as its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect to
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 11.11 TAX RETURNS. Consistent with Section 3.7, the
Trustee shall not file any Federal tax returns on behalf of the Trust; PROVIDED,
HOWEVER, that if a class of Certificates is issued that will be characterized as
interests in a partnership for federal income tax purposes, partnership
information returns shall be prepared and signed by the Transferor, as general
partner, and the Transferor shall be the "tax matter partner" as defined in
subsection 6231(a)(7) of the Internal Revenue Code of 1986, as amended, and any
sucessor statute. In the event the Trust shall be required to file tax returns,
the Servicer shall at its expense prepare or cause to be prepared any tax
returns required to be filed by the Trust and, to the extent possible, shall
remit such returns to the Trustee for signature at least five days before such
returns are due to be filed. The Trustee is hereby authorized to sign any such
return on behalf of the Trust. The Servicer shall prepare or shall cause to be
prepared all tax information required by law to be distributed to
Certificateholders and shall deliver such information to the Trustee at least
five days prior to the date it is required by law to be distributed to
Certificateholders. The Trustee, upon request, will furnish the Servicer with
all such information known to the Trustee as may be reasonably required in
connection with the preparation of all tax returns of the Trust and shall, upon
request, execute such returns. In no event shall the Trustee be liable for any
liabilities, costs or expenses of the Trust, the Investor Certificateholders or
the Certificate Owners arising under any tax law, including without limitation
federal, state, local or foreign income or excise taxes or any other tax imposed
on or measured by
-97-
income (or any interest or penalty or addition with respect thereto or arising
from a failure to comply therewith).
Section 11.12 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
CERTIFICATES. All rights of action and claims under this Agreement or any Series
of Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of any Series of Certificateholders in respect of which such
judgment has been obtained.
Section 11.13 SUITS FOR ENFORCEMENT. If a Servicer Default of
which a Responsible Officer of the Trustee has knowledge shall occur and be
continuing, the Trustee, in its discretion may, subject to the provisions of
Section 10.1, proceed to protect and enforce its rights and the rights of any
Series of Certificateholders under this Agreement by a suit, action or
proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this Agreement or in aid
of the execution of any power granted in this Agreement or for the enforcement
of any other legal, equitable or other remedy as the Trustee, being advised by
counsel, shall deem most effectual to protect and enforce any of the rights of
the Trustee or any Series of Certificateholders.
Section 11.14 RIGHTS OF CERTIFICATEHOLDERS TO DIRECT TRUSTEE.
Holders of Investor Certificates evidencing Undivided Interests aggregating more
than 50% of the Aggregate Invested Amount (or, with respect to any remedy, trust
or power that does not relate to all Series, 50% of the aggregate Invested
Amount of the Investor Certificates of all Series to which such remedy, trust or
power relates) shall have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee; PROVIDED, HOWEVER, that Holders of
Investor Certificates aggregating more than 50% of the aggregate Invested Amount
of any Class may direct the Trustee to exercise its rights under Section 8.6;
PROVIDED, further, that, subject to Section 11.1, the Trustee shall have the
right to decline to follow any such direction if the Trustee being advised by
counsel determines that the action so directed may not lawfully be taken, or if
the Trustee in good faith shall, by a Responsible Officer or Responsible
Officers of the Trustee, determine that the proceedings so directed would be
illegal or involve it in personal liability or be unduly prejudicial to the
rights of Certificateholders not parties to such direction; and PROVIDED FURTHER
that nothing in this Agreement shall impair the right of the Trustee to take any
action deemed proper by the Trustee and which is not inconsistent with such
direction of such Holders of Investor Certificates.
Section 11.15 REPRESENTATIONS AND WARRANTIES OF TRUSTEE. The
Trustee represents and warrants that:
-98-
(i) the Trustee is a corporation organized,
existing and authorized to engage in the business of banking
under the laws of the State of its incorporation;
(ii) the Trustee has full power, authority and
right to execute, deliver and perform this Agreement, and has
taken all necessary action to authorize the execution, delivery
and performance by it of this Agreement; and
(iii) this Agreement has been duly executed and
delivered by the Trustee.
Section 11.16 MAINTENANCE OF OFFICE OR AGENCY. The Trustee will
maintain at its expense an office or offices or agency or agencies, where
notices and demands to or upon the Trustee in respect of the Certificates and
this Agreement may be served. The Trustee initially appoints its Corporate Trust
Office as its office for such purposes. The Trustee will give prompt written
notice to the Servicer and to Certificateholders (or in the case of Holders of
Bearer Certificates, in the manner provided for in the related Supplement) of
any change in the location of the Certificate Register or any such office or
agency.
-99-
ARTICLE XII
TERMINATION
Section 12.1 TERMINATION OF TRUST.
(a) The respective obligations and responsibilities of the
Transferor, the Servicer and the Trustee created hereby (other than the
obligation of the Trustee to make payments to Certificateholders as hereafter
set forth) shall terminate, except with respect to the duties described in
Section 8.4 and 11.5 and subsection 12.3(b), on the Trust Termination Date;
PROVIDED, HOWEVER, that the Trust shall not terminate on the date specified in
clause (i) of the definition of "Trust Termination Date" if each of the Servicer
and the Holder of the Exchangeable Transferor Certificate notify the Trustee in
writing, not later than five Business Days preceding such date, that they desire
that the Trust not terminate on such date, which notice (such notice, a "TRUST
EXTENSION") shall specify the date on which the Trust shall terminate (such
date, the "EXTENDED TRUST TERMINATION DATE"); PROVIDED, HOWEVER, that the
Extended Trust Termination Date shall be not later than the expiration of 21
years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late Ambassador of the United States to the Court of St. James,
living on the date of this Agreement. The Servicer and the Holder of the
Exchangeable Transferor Certificate may, on any date following the Trust
Extension, so long as no Series of Certificates is outstanding, deliver a notice
in writing to the Trustee changing the Extended Trust Termination Date.
(b) In the event that (i) the Trust has not terminated by the
Distribution Date occurring in the second month preceding the Trust Termination
Date, and (ii) the Invested Amount of any Series (after giving effect to all
transfers, withdrawals, deposits and drawings to occur on such date and the
payment of principal on any Series of Certificates to be made on the related
Distribution Date during such month pursuant to Article IV) would be greater
than zero, the Servicer shall sell within 30 days after such Transfer Date all
the Receivables if it can do so in a commercially reasonable manner. The
Servicer shall notify each Enhancement Provider of the proposed sale of the
Receivables and shall provide each Enhancement Provider an opportunity to bid on
the Receivables. The Transferor shall have the right of first refusal to
purchase the Receivables on terms equivalent to the best purchase offer as
determined by the Trustee in its sole discretion. The proceeds of any such sale
shall be treated as Collections on the Receivables and shall be allocated and
deposited in accordance with Article IV; PROVIDED, HOWEVER, that the Trustee
shall determine conclusively in its sole discretion the amount of such proceeds
which are allocable to Finance Charge Collections and the amount of such
proceeds which are allocable to Collections of Principal Receivables. During
such thirty-day period, the Servicer shall continue to collect payments on the
Receivables and allocate and deposit such payments in accordance with the provi
sions of Article IV.
(c) All principal or interest with respect to any Series of
Investor Certificates shall be due and payable no later than the Series
Termination Date with respect to such Series. Unless otherwise provided in a
Supplement, in the event that the Invested Amount of any
-100-
Series of Certificates is greater than zero on its Series Termination Date (the
"AFFECTED SERIES"), after giving effect to all transfers, withdrawals, deposits
and drawings to occur on such date and the payment of principal to be made on
such Series on such date, and the Trustee will sell or cause to be sold, and the
Trustee will pay the proceeds to all Certificateholders of such Series pro rata
in final payment of all principal of and accrued interest on such Series of
Certificates or, if any Class of such Series is subordinated, in order of their
respective seniorities, an amount of Principal Receivables and the related
Finance Charge Receivables (or interests therein) up to 110% of the Invested
Amount of such Series at the close of business on such date (but the amount of
such Principal Receivables not to be more than an amount of Receivables equal to
the sum of (1) the product of (A) the Transferor Percentage, (B) the aggregate
outstanding Principal Receivables and (C) a fraction the numerator of which is
the Invested Amount of such Series on such date and the denominator of which is
the sum of the Invested Amounts of all Series on such Date and (2) the Invested
Amount of such Series). Receivables on which the Obligor has not made the full
minimum payment for the prior months shall be deemed to be in default for
purposes of this Section 12.1(c) to the extent that the cash allocated to any
Class of Transferor Retained Certificates of such Series pursuant to a sale
under Section 12.1(c) is less than the amount that would have been allocated to
the Exchangeable Transferor Certificate and the Transferor Retained Certificates
had the proceeds from such sale been allocated pursuant to Section 4.3. The
Servicer shall notify each Enhancement Provider of the proposed sale of such
Receivables and shall provide each Enhancement Provider an opportunity to bid on
such Receivables. The Transferor shall be permitted to purchase such Receivables
in such case and shall have a right of first refusal with respect thereto to the
extent of a bona fide offer by an unrelated third party or to the extent the
Receivables represent Defaulted Receivables. Any pro ceeds of such sale in
excess of such principal and interest paid shall be paid to the Holder of the
Exchangeable Transferor Certificate. Upon such Series Termination Date with
respect to the applicable Series of Certificates, final payment of all amounts
allocable to any Investor Certificates of such Series shall be made in the
manner provided in Section 12.3.
Section 12.2 OPTIONAL TERMINATION. (a) If so provided in any
Supplement, the Transferor may, but shall not be obligated to, cause a final
distribution to be made in respect of the related Series of Certificates on a
Distribution Date specified in such Supplement by depositing into the
Distribution Account or the applicable Series Account, not later than the
Transfer Date preceding such Distribution Date, for application in accordance
with Section 12.3, the amount specified in such Supplement.
(b) The amount deposited pursuant to subsection 12.2(a) shall be
paid to the Investor Certificateholders of the related Series pursuant to
Section 12.3 on the related Distribution Date following the date of such
deposit. All Certificates of a Series with respect to which a final distribution
has been made pursuant to subsection 12.2(a) shall be delivered by the Holder
to, and be canceled by, the Transfer Agent and Registrar and be disposed of in a
manner satisfactory to the Trustee and the Transferor. The Invested Amount of
each Series with respect to which a final distribution has been made pursuant to
subsection 12.2(a) shall, for the purposes of the definition of "Transferor
Interest," be deemed to be equal to zero on the Distribution Date following
-101-
the making of the deposit, and the Transferor Interest shall thereupon be deemed
to have been increased by the Invested Amount of such Series.
Section 12.3 FINAL PAYMENT WITH RESPECT TO ANY SERIES. (a)
Written notice of any termination, specifying the Distribution Date upon which
the Investor Certificateholders of any Series may surrender their Certificates
for payment of the final distribution with respect to such Series and
cancellation, shall be given (subject to at least four Business Days, prior
notice from the Servicer to the Trustee) by the Trustee to Investor
Certificateholders of such Series mailed not later than the fifth day of the
month of such final distribution (or in the manner provided by the Supplement
relating to such Series) specifying (i) the Distribution Date (which shall be
the Distribution Date in the month (x) in which the deposit is made pursuant to
subsection 2.4(d), 9.2(a), 10.2(a), or 12.2(a) of this Agreement or such other
section as may be specified in the related Supplement, or (y) in which the
related Series Termination Date occurs) upon which final payment of such
Investor Certificates will be made upon presentation and surrender of such
Investor Certificates at the office or offices therein designated (which, in the
case of Bearer Certificates, shall be outside the United States), (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Investor Certificates at the office or
offices therein specified. The Servicer's notice to the Trustee in accordance
with the preceding sentence shall be accompanied by an Officer's Certificate
setting forth the information specified in Article V of this Agreement covering
the period during the then current calendar year through the date of such notice
and setting forth the date of such final distribution. The Trustee shall give
such notice to the Transfer Agent and Registrar and the Paying Agent at the time
such notice is given to such Investor Certificateholders.
(b) Notwithstanding the termination of the Trust pursuant to
subsection 12.1(a) or the occurrence of the Series Termination Date with respect
to any Series, all funds then on deposit in the Equalization Account, the
Interest Funding Account, the Principal Account, the Distribution Account or any
Series Account applicable to the related Series shall continue to be held in
trust for the benefit of the Certificateholders of the related Series and the
Paying Agent or the Trustee shall pay such funds to the Certificateholders of
the related Series upon surrender of their Certificates (which surrenders and
payments, in the case of Bearer Certificates, shall be made only outside the
United States). In the event that all of the Investor Certificateholders of any
Series shall not surrender their Certificates for cancellation within six months
after the date specified in the above-mentioned written notice, the Trustee
shall give a second written notice (or, in the case of Bearer Certificates,
publication notice) to the remaining Investor Certificateholders of such Series
upon receipt of the appropriate records from the Transfer Agent and Registrar to
surrender their Certificates for cancellation and receive the final distribution
with respect thereto. If within one and one half years after the second notice
with respect to a Series, all the Investor Certificates of such Series shall not
have been surrendered for cancellation, the Trustee may take appropriate steps
or may appoint an agent to take appropriate steps, to contact the remaining
Investor Certificateholders of such Series concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds in the
Distribution Account or any Series Account held for the benefit of such Investor
-102-
Certificateholders. The Trustee and the Paying Agent shall pay to the Transferor
upon request any monies held by them for the payment of principal or interest
which remains unclaimed for two years. After payment to the Transferor, Investor
Certificateholders entitled to the money must look to the Transferor for payment
as general creditors unless an applicable abandoned property law designates
another Person.
(c) All Certificates surrendered for payment of the final
distribution with respect to such Certificates and cancellation shall be
canceled by the Transfer Agent and Registrar and be disposed of in a manner
satisfactory to the Trustee and the Transferor.
Section 12.4 TERMINATION RIGHTS OF HOLDER OF EXCHANGEABLE
TRANSFEROR CERTIFICATE. Upon the termination of the Trust pursuant to Section
12.1, and after payment of all amounts due hereunder on or prior to such
termination and the surrender of the Exchangeable Trans feror Certificate, the
Trustee shall execute a written reconveyance substantially in the form of
Exhibit H pursuant to which it shall reconvey to the Holder of the Exchangeable
Transferor Certificate (without recourse, representation or warranty) all right,
title and interest of the Trust in the Receivables, whether then existing or
thereafter created, all moneys due or to become due with respect thereto
(including all accrued interest theretofore posted as Finance Charge
Receivables) allocable to the Trust pursuant to any Supplement, except for
amounts held by the Trustee pursuant to subsection 12.3(b). The Trustee shall
execute and deliver such instruments of transfer and assignment, in each case
prepared by the Transferor and without recourse, representation or warranty as
shall be reasonably requested by the Holder of the Exchangeable Transferor
Certificate to vest in such Holder all right, title and interest which the Trust
had in the Receivables and other Trust Property.
-103-
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 AMENDMENT. (a) This Agreement (including any
Supplement) may be amended from time to time by the Servicer, the Transferor and
the Trustee, without the consent of any of the Certificateholders, (i) to cure
any ambiguity, to revise any exhibits or Schedules (other than Schedule 1), to
correct or supplement any provisions herein or thereon which may be inconsistent
with any other provisions herein or thereon or (ii) to add any other provisions
with respect to matters or questions raised under this Agreement which shall not
be inconsistent with the provisions of this Agreement; PROVIDED, HOWEVER, that
such action shall not, as evidenced by an Opinion of Counsel, adversely affect
in any material respect the interests of any of the Investor Certificateholders.
Additionally, this Agreement may be amended from time to time by the Servicer,
the Transferor and the Trustee, without the consent of any of the
Certificateholders, to add to or change any of the provisions of this Agreement
to provide that Bearer Certificates may be registrable as to principal, to
change or eliminate any restrictions on the payment of principal of (or premium,
if any) or any interest on Bearer Certificates to comply with the Bearer Rules,
to permit Bearer Certificates to be issued in exchange for Registered
Certificates (if then permitted by the Bearer Rules), to permit Bearer
Certificates to be issued in exchange for Bearer Certificates of other
authorized denominations or to permit the issuance of Certificates in
uncertificated form.
This Agreement (including any Supplement) and any schedule or
exhibit thereto may also be amended from time to time by the Servicer, the
Transferor and the Trustee, without the consent of any of the
Certificateholders, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement, or of
modifying in any manner the rights of the Holders of Certificates; PROVIDED,
HOWEVER, that (i) the Servicer shall have provided an Officer's Certificate to
the Trustee to the effect that such amendment will not materially and adversely
affect the interests of the Certificateholders, (ii) such amendment shall not,
as evidenced by an Opinion of Counsel, cause the Trust to be characterized for
Federal income tax purposes as an association taxable as a corporation or
otherwise have any material adverse impact on the Federal income taxation of any
outstanding Series of Investor Certificates or any Certificate Owner and (iii)
the Servicer shall have provided at least ten Business Days prior written notice
to each Rating Agency of such amendment and shall have received written
confirmation from each Rating Agency to the effect that the original rating of
any Series or any class of any Series will not be reduced or withdrawn as a
result of such amendment; PROVIDED, FURTHER, that such amendment shall not
reduce in any manner the amount of, or delay the timing of, distributions which
are required to be made on any Investor Certificate of such Series without the
consent of the related Investor Certificateholder, change the definition of or
the manner of calculating the interest of any Investor Certificateholder of such
Series without the consent of the related Investor Certificateholder or reduce
the percentage pursuant to clause (b) required to consent to any such amendment,
in each case without the consent of all such Investor Certificateholders;
PROVIDED, FURTHER, that the transfer of the Accounts to SRI Credit Card Bank
and/or the appointment of SRI Credit Card Bank as Servicer hereunder in
connection with such transfer and any other transactions related, supplemental
-104-
or incidental thereto shall be deemed not to materially and adversely affect the
interests of the Certificateholders.
(b) This Agreement and any Supplement may also be amended from
time to time by the Servicer, the Transferor and the Trustee with the consent of
the Holders of Investor Certificates evidencing Undivided Interests aggregating
not less than 66-2/3% of the Invested Amount of each and every Series adversely
affected, for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Investor Certificateholders of any Series then issued
and outstanding; PROVIDED, HOWEVER, that no such amendment under this subsection
shall (i) reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any Investor Certificate of such
Series without the consent of the related Investor Certificateholders; (ii)
change the definition of or the manner of calculating the interest of any
Investor Certificateholder of such Series without the consent of the related
Investor Certificateholder or (iii) reduce the aforesaid percentage required to
consent to any such amendment, in each case without the consent of all such
Investor Certificateholders.
(c) Notwithstanding anything in this Section 13.1 to the
contrary, the Supplement with respect to any Series may be amended on the items
and in accordance with the procedures provided in such Supplement.
(d) Promptly after the execution of any such amendment (other
than an amendment pursuant to paragraph (a)), the Trustee shall furnish
notification of the substance of such amendment to each Investor
Certificateholder of each Series adversely affected and ten Business Days prior
to the proposed effective date for such amendment the Servicer shall furnish
notification of the substance of such amendment to each Rating Agency providing
a rating for such Series.
(e) It shall not be necessary to obtain the consent of Investor
Certificateholders under this Section 13.1 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Investor Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
(f) Any Supplement executed and delivered pursuant to Section 6.9
and any amendments regarding the addition to or removal of Receivables from the
Trust as provided in Sections 2.6 or 2.7, executed in accordance with the
provisions hereof, shall not be considered amendments to this Agreement for the
purpose of subsections 13.1(a) and (b).
(g) In connection with any amendment, the Trustee may request an
opinion of Counsel from the Transferor or Servicer to the effect that the
amendment complies with all requirements of this Agreement. The Trustee may, but
shall not be obligated to, enter into any
-105-
amendment which affects the Trustee's rights, duties or immunities under this
Agreement or otherwise.
Section 13.2 PROTECTION OF RIGHT, TITLE AND INTEREST TO TRUST.
(a) The Servicer shall cause this Agreement, all amendments
hereto and/or all financing statements and continuation statements and any other
necessary documents covering the Certificateholders and the Trustee's right,
title and interest to the Trust to be promptly recorded, registered and filed,
and at all times to be kept recorded, registered and filed, all in such manner
and in such places as may be required by law fully to preserve and protect the
right, title and interest of the Certificateholders or the Trustee, as the case
may be, hereunder to all property comprising the Trust. The Servicer shall
deliver to the Trustee file-stamped copies of, or filing receipts for, any
document recorded, registered or filed as provided above, as soon as available
following such recording, registration or filing. The Transferor shall cooperate
fully with the Servicer in connection with the obligations set forth above and
will execute any and all documents reasonably required to fulfill the intent of
this subsection 13.2(a).
(b) Within 30 days after the Transferor makes any change in its
name, identity or corporate structure which would make any financing statement
or continuation statement filed in accordance with paragraph (a) above
materially misleading within the meaning of Section 9-402(7) of the UCC as in
effect in the Relevant UCC State, the Transferor shall give the Trustee written
notice of any such change and shall file such financing statements or amendments
as may be necessary to continue the perfection of the Trust's security interest
in the Receivables and the proceeds thereof.
(c) Each of the Transferor and the Servicer will give the Trustee
prompt written notice of any relocation of any office from which it services
Receivables or keeps records concerning the Receivables or of its principal
executive office and whether, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement and shall file such financing statements or amendments as may be
necessary to continue the perfection of the Trust's security interest in the
Receivables and the proceeds thereof. Each of the Transferor and the Servicer
will at all times maintain each office from which it services Receivables and
its principal executive office within the United States of America.
(d) The Servicer will deliver to the Trustee: (i) upon each date
that any Supplemental Accounts are to be included in the Accounts pursuant to
subsection 2.6(c), an Opinion of Counsel substantially in the form of Exhibit F;
and (ii) on or before March 31 of each year, beginning with March 31, 1994, an
Opinion of Counsel substantially in the form of Exhibit G.
Section 13.3 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. (a) The
death or incapacity of any Investor Certificateholder shall not operate to
terminate this Agreement or the Trust, nor shall such death or incapacity
entitle such Certificateholder's legal representatives or heirs
-106-
to claim an accounting or to take any action or commence any proceeding in any
court for a partition or winding up of the Trust, nor otherwise affect the
rights, obligations and liabilities of the parties hereto or any of them.
(b) No Investor Certificateholder shall have any right to vote
(except as provided in Section 13.1 hereof) or in any manner otherwise control
the operation and management of the Trust, or the obligations of the parties
hereto, nor shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as members of an association; nor shall any Investor Certificateholder
be under any liability to any third person by reason of any action taken by the
parties to this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Certificateholder previously shall have given written notice to the Trustee, and
unless the Holders of Certificates evidencing Undivided Interests aggregating
more than 50% of the Invested Amount of any Series which may be adversely
affected but for the institution of such suit, action or proceeding, shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Certificateholders shall have the right in any manner whatever by
virtue or by availing itself or themselves of any provisions of this Agreement
to affect, disturb or prejudice the rights of the Certificateholders of any
other of the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Certificateholder, or to enforce any right under
this Agreement, except in the manner herein provided and for the equal, ratable
and common benefit of all Certificateholders. For the protection and enforcement
of the provisions of this Section 13.3, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
Section 13.4 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 13.5 NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at, sent by facsimile to, sent by courier at or mailed by
registered mail, return receipt requested, to (a) in the case of the Transferor
to 10201 Main Street, Houston, Texas 77025, Attention: President, with a
-107-
copy to the Servicer as provided below, (b) in the case of the Servicer, to 1020
Willow Creek, Jack sonville, Texas 75766, Attention: Chief Financial Officer and
General Counsel, (c) in the case of the Trustee, to the Corporate Trust Office,
(d) in the case of the Enhancement Provider for a particular Series, the
address, if any, specified in the Supplement relating to such Series and (e) in
the case of the Rating Agency for a particular Series, the address, if any,
specified in the Supplement relating to such Series; or, as to each party, at
such other address as shall be designated by such party in a written notice to
each other party. Unless otherwise provided with respect to any Series in the
related Supplement any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Certificateholder as shown in the Certificate Register, or with
respect to any notice required or permitted to be made to the Holders of Bearer
Certificates, by publication in the manner provided in the related Supplement.
If and so long as any Series or Class is listed on the Luxembourg Stock Exchange
and such Exchange shall so require, any Notice to Investor Certificateholders
shall be published in an authorized newspaper of general circulation in
Luxembourg within the time period prescribed in this Agreement. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.
Section 13.6 SEVERABILITY OF PROVISIONS. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or rights of the Certificateholders thereof.
Section 13.7 ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Section 8.2, this Agreement may not be
assigned by the Servicer without the prior consent of Holders of Investor
Certificates evidencing Undivided Interests aggregating not less than 66 2/3% of
the Invested Amount of each Series on a Series by Series basis.
Section 13.8 CERTIFICATES NON-ASSESSABLE AND FULLY PAID. Except
to the extent otherwise expressly provided in Section 7.4 with respect to the
Transferor, it is the intention of the parties to this Agreement that the
Investor Certificateholders shall not be personally liable for obligations of
the Trust, that the Undivided Interests represented by the Certificates shall be
non-assessable for any losses or expenses of the Trust or for any reason
whatsoever, and that Certificates upon authentication thereof by the Trustee
pursuant to Sections 2.1 and 6.2 are and shall be deemed fully paid.
Section 13.9 FURTHER ASSURANCES. The Transferor and the Servicer
agree to do and perform, from time to time, any and all acts and to execute any
and all further instruments required or reasonably requested by the Trustee more
fully to effect the purposes of this Agreement, including, without limitation,
the execution of any financing statements or continuation statements relating to
the Receivables and the other Trust Property for filing under the provisions of
the UCC of any applicable jurisdiction.
-108-
Section 13.10 NO WAIVER; CUMULATIVE REMEDIES. No failure to
exercise and no delay in exercising, on the part of the Trustee, any Enhancement
Provider or the Investor Certificateholders, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exhaustive of any rights, remedies, powers and privileges
provided by law.
Section 13.11 COUNTERPARTS. This Agreement may be executed in two
or more counterparts (and by different parties on separate counterparts), each
of which shall be an original, but all of which together shall constitute one
and the same instrument.
Section 13.12 THIRD-PARTY BENEFICIARIES. This Agreement will
inure to the benefit of and be binding upon the parties hereto, the
Certificateholders and, to the extent provided in the related Supplement, to the
Enhancement Provider named therein, and their respective successors and
permitted assigns. Except as otherwise provided in this Article XIII, no other
Person will have any right or obligation hereunder.
Section 13.13 ACTIONS BY CERTIFICATEHOLDERS. (a) Wherever in this
Agreement a provision is made that an action may be taken or a notice, demand or
instruction given by Investor Certificateholders, such action, notice or
instruction may be taken or given by any Investor Certificateholder, unless such
provision requires a specific percentage of Investor Certificateholders.
(b) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Certificateholder shall bind such
Certificateholder and every subsequent holder of such Certificate issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done or omitted to be done by the Trustee or the Servicer
in reliance thereon, whether or not notation of such action is made upon such
Certificate.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement or any Supplement to
be given or taken by Certificateholders may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such
Certificateholders in person or by agent duly appointed in writing; and except
as herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee and, when required,
to the Transferor or the Servicer. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any purpose of
this Agreement or any Supplement and conclusive in favor of the Trustee, the
Transferor and the Servicer, if made in the manner provided in this Section.
(d) The fact and date of the execution by any Certificateholder
of any such instrument or writing may be proved in any reasonable manner which
the Trustee deems sufficient.
-109-
Section 13.14 RULE 144A INFORMATION. For so long as any of the
Investor Certificates of any Series or any Class are "restricted securities"
within the meaning of Rule 144A(a)(3) under the Securities Act, each of the
Transferor, the Servicer, the Trustee and the Enhancement Provider for such
Series agree to cooperate with each other to provide to any Investor
Certificateholders of such Series or Class and to any prospective purchaser of
Certificates designated by such an Investor Certificateholder upon the request
of such Investor Certificateholder or prospective purchaser, any information
required to be provided to such holder or prospective purchaser to satisfy the
condition set forth in Rule 144A(d)(4) under the Securities Act.
Section 13.15 MERGER AND INTEGRATION. Except as specifically
stated otherwise herein, this Agreement sets forth the entire understanding of
the parties relating to the subject matter hereof, and all prior understandings,
written or oral (including the Pooling and Servicing Agreement dated as of July
30, 1993, the First Amendment thereto dated as of October 7, 1994 and the Second
Amendment thereto dated as of January 31, 1995), are superseded by this
Agreement. This Agreement may not be modified, amended, waived or supplemented
except as provided herein.
Section 13.16 HEADINGS. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
-110-
IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers as
of the day and year first above written.
SRI RECEIVABLES PURCHASE CO., INC.
Transferor
By: JERRY C. IVIE
Name: Jerry C. Ivie
Title: Senior Vice President,
Secretary and Treasurer
SPECIALTY RETAILERS, INC.
Servicer
By: JERRY C. IVIE
Name: Jerry C. Ivie
Title: Senior Vice President,
Secretary and Treasurer
BANKERS TRUST (DELAWARE)
Trustee
By: M. LISA WILKINS
Name: M. Lisa Wilkins
Title: Assistant Secretary
<PAGE>
EXHIBIT A
FORM OF EXCHANGEABLE TRANSFEROR CERTIFICATE
No. 1 One Unit
SRI RECEIVABLES MASTER TRUST
ASSET BACKED CERTIFICATE
THIS CERTIFICATE WAS ISSUED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY BE SOLD ONLY PURSUANT TO
A REGISTRATION STATEMENT EFFECTIVE UNDER THE ACT OR AN EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE ACT. IN ADDITION, THE TRANSFER OF THIS
CERTIFICATE IS SUBJECT TO RESTRICTIONS SET FORTH IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN. A COPY OF THE POOLING AND SERVICING AGREEMENT WILL
BE FURNISHED TO THE HOLDER OF THIS CERTIFICATE BY THE TRUSTEE UPON WRITTEN
REQUEST.
THIS CERTIFICATE REPRESENTS AN
UNDIVIDED INTEREST IN THE SRI RECEIVABLES MASTER TRUST
Evidencing an undivided interest in a trust, the corpus of which consists of
receivables generated from time to time in the ordinary course of business from
a portfolio of consumer revolving credit card accounts generated or to be
generated by certain subsidiaries of Specialty Retailers, Inc. ("SRI" or the
"SERVICER") and other assets and interests constituting the Trust under the
Pooling and Servicing Agreement described below.
(Not an interest in or a recourse obligation of
SRI Receivables Purchase Co., Inc., Specialty Retailers, Inc. or
any Affiliate of either of them.)
This certifies that SRI RECEIVABLES PURCHASE CO., INC. (the
"HOLDER" or the "TRANSFEROR," as the context requires) is the registered owner
of a fractional undivided interest in the SRI Receivables Master Trust (the
"TRUST") issued pursuant to the Amended and Restated Pooling and Servicing
Agreement dated August 11, 1995, among the Transferor, SRI, as Servicer, and
Bankers Trust (Delaware) as Trustee (the "POOLING AND SERVICING AGREEMENT"; such
term to include any amendment or Supplement thereto). The corpus of the Trust
consists of all of the Transferor's right, title and interest in, to and under
(i) a portfolio of receivables (the "RECEIVABLES") now existing or hereafter
created that are in substantially all of the consumer revolving credit card
accounts existing from time to time (the "ACCOUNTS") as of the Cut-off Date,
including Receivables arising in connection with the accounts that meet the
definition of Automatic Additional Accounts and Supplemental Accounts, all
moneys due or to become due with respect thereto (including all Finance Charge
Receivables), all proceeds of such Receivables, (ii) the Receivables Purchase
A-1
Agreement, and (iii) Recoveries, all monies due or to become due with respect
thereto and all amounts received with respect to the Receivables in existence in
the Accounts on the Cut-off Date or generated thereafter, all monies on deposit
in the Collection Account, the Interest Funding Account, the Principal Account,
the Distribution Account, and the Equalization Account (excluding any investment
earnings on such deposited amounts except for such amounts as are on deposit in
the Equalization Account), and all other assets and interests constituting the
Trust and all proceeds of the foregoing.
To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Pooling and Servicing Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement, as amended from time to time, the Holder by virtue of the
acceptance hereof assents and by which the Holder is bound.
This Certificate has not been registered or qualified under the
Securities Act of 1933, as amended, or any state securities law. No sale,
transfer or other disposition of this Certificate shall be permitted other than
in accordance with the provisions of Section 6.3, 6.9 or 7.2 of the Pooling and
Servicing Agreement.
The Receivables arise generally from amounts charged by Obligors
for goods and services plus the related periodic finance charges, and amounts
charged to the Accounts in respect of late fees, returned check fees and similar
fees and charges.
This Certificate is the Exchangeable Transferor Certificate (the
"CERTIFICATE"), which represents an undivided interest in the Trust, including
the right to receive the Collections and other amounts at the times and in the
amounts specified in the Pooling and Servicing Agreement to be paid to the
Holder of the Certificate. The aggregate interest represented by this
Certificate at any time in the Principal Receivables in the Trust shall not
exceed the Transferor Interest at such time. In addition to this Certificate,
Series of Investor Certificates will be issued to investors pursuant to the
Pooling and Servicing Agreement, each of which will represent an Undivided
Interest in the Trust. This Certificate shall not represent any interest in the
Investor Accounts or any Enhancement, except to the extent provided in the
Pooling and Servicing Agreement. The Transferor Interest on any date of
determination will be an amount equal to the aggregate amount of Principal
Receivables at the end of the day immediately prior to such date of
determination PLUS amounts on deposit in the Equalization Account (but not
including any investment earnings thereon) MINUS the Aggregate Invested Amount
at the end of such day.
The Servicer shall deposit all Collections in the Collection
Account as promptly as possible after the Date of Processing of such
Collections. Unless otherwise stated in any Supplement, throughout the existence
of the Trust, the Servicer shall allocate to the Holder of the Certificate an
amount equal to the product of (A) the Transferor Percentage and (B) the
aggregate amount of such Collections allocated to Principal Receivables and
Finance Charge Receivables, respectively, in respect of each Monthly Period.
Notwithstanding the first sentence of
A-2
this paragraph, the Servicer need not deposit this amount or any other amounts
so allocated to the Certificate pursuant to the Pooling and Servicing Agreement
into the Collection Account and shall pay, or be deemed to pay, such amounts as
collected to the Holder of the Certificate.
SRI or any permitted successor or assignee, as Servicer, is
entitled to receive as servicing compensation a monthly servicing fee. The
portion of the servicing fee which will be allocable to the Holder of the
Certificate pursuant to the Pooling and Servicing Agreement will be payable by
the Holder of the Certificate and neither the Trust nor the Trustee or the
Investor Certifi cateholders will have any obligation to pay such portion of the
servicing fee.
This Certificate does not represent a recourse obligation of, or
any interest in, the Transferor or the Servicer. This Certificate is limited in
right of payment to certain Collections respecting the Receivables, all as more
specifically set forth hereinabove and in the Pooling and Servicing Agreement.
Upon the termination of the Trust pursuant to Section 12.1 of the
Pooling and Servicing Agreement, the Trustee shall assign and convey to the
Holder of the Certificate (without recourse, representation or warranty) all
right, title and interest of the Trust in the Receivables, whether then existing
or thereafter created, and all proceeds relating thereto. The Trustee shall
execute and deliver such instruments of transfer and assignment, in each case
without recourse, as shall be reasonably requested by the Holder of the
Certificate to vest in such Holder all right, title and interest which the
Trustee had in the Receivables.
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this Certificate shall not
be entitled to any benefit under the Pooling and Servicing Agreement, or be
valid for any purpose.
A-3
IN WITNESS WHEREOF, the Transferor has caused this Certificate to be duly
executed.
SRI RECEIVABLES PURCHASE CO., INC.
By: ____________________________________
Name:
Title:
Attested to:
By: ____________________________________
Date:
A-4
CERTIFICATE OF AUTHENTICATION
This is the Exchangeable Transferor Certificate referred to in
the within- mentioned Pooling and Servicing Agreement.
BANKERS TRUST COMPANY, as Authenticating Agent for the Trustee
By: ____________________________________
Authorized Signatory
A-5
EXHIBIT B
FORM OF ASSIGNMENT OF RECEIVABLES IN SUPPLEMENTAL ACCOUNTS (As
required by Subsection 2.6(e)(ii) of the Pooling
and Servicing Agreement)
ASSIGNMENT No. OF RECEIVABLES IN SUPPLEMENTAL AC COUNTS, dated as
of ________ __, ___ by and between SRI RECEIVABLES PURCHASE CO. INC., a
corporation organized under the laws of the State of Delaware (the
"TRANSFEROR"), to BANKERS TRUST (DELAWARE), a banking corporation organized and
existing under the laws of the State of New York as Trustee (in such capacity,
the "TRUSTEE") pursuant to the Pooling and Servicing Agreement referred to
below.
W I T N E S S E T H:
WHEREAS, the Transferor and the Trustee are parties to the
Amended and Restated Pooling and Servicing Agreement, dated as of August 11,
1995 (the "POOLING AND SERVICING AGREEMENT"; such term to include any amendment
or Supplement thereto) among the Transferor, Specialty Retailers, Inc. as
Servicer and the Trustee;
WHEREAS, pursuant to the Pooling and Servicing Agreement, the
Transferor wishes to designate Supplemental Accounts of the Transferor to be
included as Accounts and to convey the Receivables of such Supplemental
Accounts, whether now existing or hereafter created, to the Trust as part of the
corpus of the Trust (as each such term is defined in the Pooling and Servicing
Agreement); and
WHEREAS, the Trustee is willing to accept such designation and
conveyance subject to the terms and conditions hereof;
NOW, THEREFORE, the Transferor and the Trustee hereby agree as
follows:
1. DEFINED TERMS. All terms defined in the Pooling and Servicing
Agreement and used herein shall have such defined meanings when used herein,
unless otherwise defined herein.
"ADDITION DATE" shall mean, with respect to the Supplemental
Accounts designated hereby, __________, ______.
"NOTICE DATE" shall mean, with respect to the Supplemental
Accounts designated hereby, _________, _________ (which shall be a date on or
prior to the fifth Business Day prior to the Addition Date with respect to
additions pursuant to sub-section 2.6(c) of the Pooling and Servicing Agreement
and the twentieth
B-1
Business Day prior to the Addition Date with respect to additions pursuant to
subsection 2.6(d) of the Pooling and Servicing Agreement).
2. DESIGNATION OF ADDITIONAL ACCOUNTS. The Transferor shall
deliver to the Trustee not later than five Business Days after the Addition
Date, a computer file or microfiche list containing a true and complete list of
each consumer revolving credit card account which as of the Addition Date shall
be deemed to be a Supplemental Account, such accounts being identified by
account number and by the amount of Receivables in each such account as of the
close of business on the Addition Date. Such file or list shall be marked as
Schedule 1 to this Assignment and, as of the Addition Date, shall be
incorporated into and made a part of this Assignment.
3. CONVEYANCE OF RECEIVABLES. The Transferor does hereby
transfer, assign, set-over and otherwise convey to the Trust for the benefit of
the Certificateholders, without recourse on and after the Addition Date, all
right, title and interest of the Transferor in and to the Receivables now
existing and hereafter created in the Supplemental Accounts designated hereby,
all monies due or to become due with respect thereto (including all Finance
Charge Receivables) and all proceeds of such Receivables.
(a) In connection with such transfer, the
Transferor agrees to record and file, at its own expense, a
financing statement with respect to the Receivables now existing
and hereafter created in the Supplemental Accounts designated
hereby (which may be a single financing statement with respect to
all such Receivables) for the transfer of accounts as defined in
Section 9-106 of the UCC as in effect in the Relevant UCC State
meeting the requirements of applicable state law in such manner
and such jurisdictions as are necessary to perfect the as
signment of such Receivables to the Trust, and to deliver a
file-stamped copy of such financing statement or other evidence
of such filing (which may, for purposes of this Section 3,
consist of telephone confirmation of such filing) to the Trustee
on or prior to the date of this Assignment.
(b) In connection with such transfer, the
Transferor further agrees, at its own expense, on or prior to the
date of this Assignment to indicate in its computer files that
Receivables created in connection with the Supplemental Accounts
designated hereby have been transferred to the Trust pursuant to
this Assignment for the benefit of the Certificateholders.
4. ACCEPTANCE BY TRUSTEE. The Trustee hereby acknowledges its
acceptance on behalf of the Trust for the benefit of the Certificateholders of
all right, title and interest previously held by the Transferor in and to the
receivables now existing and hereafter created, and declares that it shall
maintain such right, title and interest, upon the trust herein set forth, for
the benefit of all Certificateholders.
B-2
5. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR. The
Transferor hereby represents and warrants to the just as of the Addition Date:
(a) LEGAL VALID AND BINDING OBLIGATION. This
Assignment constitutes a legal, valid and binding obligation of
the Transferor enforceable against the Transferor in accordance
with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the
enforcement of creditors' rights in general and except as such
enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
(b) SELECTION PROCEDURES. No selection procedures
believed by the Transferor to be materially adverse to the
interests of the Investor Certificateholders were utilized in
selecting the Supplemental Accounts designated hereby from the
available Eligible Accounts held by the Trust Portfolio.
(c) INSOLVENCY. The Transferor is not insolvent and
after giving effect to the conveyance set forth in Section 3 of
this Assignment, will not be insolvent.
(d) SECURITY INTEREST. This Assignment constitutes
either (i) a valid transfer and assignment to the Trust of all
right, title and interest of the Transferor in and to Receivables
now existing and hereafter created in the Supplemental Accounts
designated hereby, and all proceeds (as defined in the UCC as in
effect in the Relevant UCC State) of such Receivables, and such
Receivables and any proceeds thereof will be held by the Trust
free and clear of any Lien of any Person claiming through or
under the Transferor or any of its Affiliates except for (x)
Permitted Liens, (y) the interest of the Holder of the
Exchangeable Transferor Certificate and (z) the Transferor's
right to receive interest accruing on, and investment earnings in
respect of, the Interest Funding Account, the Principal Account
and any Series Account as provided in the Pooling and Servicing
Agreement or any Series Supplement; or (ii) it constitutes a
grant of a security interest (as defined in the UCC as in effect
in the Relevant UCC State) in such property to the Trust, which
is enforceable with respect to the existing Receivables of the
Supplemental Accounts designated hereby, the proceeds (as defined
in the UCC as in effect in the Relevant UCC State) thereof upon
the conveyance of such Receivables to the Trust, and which will
be enforceable with respect to the Receivables thereafter created
in respect of Supplemental Accounts designated hereby, the
proceeds (as defined in the UCC as in effect in the Relevant UCC
State) thereof, upon such creation; and (iii) if this Assignment
constitutes the grant of a security interest to the Trust in such
property, upon the filing of a financing statement described in
Section 3 of this Assignment with respect to the Supplemental
Accounts designated hereby and in the case of the Receivables of
such Supplemental
B-3
Accounts thereafter created and the proceeds (as defined in the
UCC as in effect in the Relevant UCC State) thereof, upon such
creation, the Trust shall have a first priority perfected
security interest in such property, except for Permitted Liens.
6. CONDITIONS PRECEDENT. The acceptance by the Trustee set forth
in Section 4 and the amendment of the Pooling and Servicing Agreement set forth
in Section 7 are subject to the satisfaction, on or prior to the Addition Date,
of the following conditions precedent:
(a) OFFICER'S CERTIFICATE. The Transferor shall
have delivered to the Trustee a certificate of a Vice President
or more senior officer substantially in the form of Schedule 2
hereto, certifying that (i) all requirements set forth in Section
2.6 of the Pooling and Servicing Agreement for designating
Supplemental Accounts and conveying the Receivables of such
Accounts, whether now existing or hereafter created, have been
satisfied and (ii) each of the representations and warranties
made by the Transferor in Section 5 is true and correct as of the
Addition Date.
(b) OPINION OF COUNSEL. The Transferor shall have
delivered to the Trustee an Opinion of Counsel with respect to
the Supplemental Accounts designated hereby substantially in the
form of Exhibit F to the Pooling and Servicing Agreement.
(c) ADDITIONAL INFORMATION. The Transferor shall
have delivered to the Trustee such information as was reasonably
requested by the Trustee to satisfy itself as to the accuracy of
the representation and warranty regarding the insolvency of the
Transferor set forth in subsection 5(c) to this Assignment.
7. AMENDMENT OF THE POOLING AND SERVICING AGREEMENT. The Pooling
and Servicing Agreement is hereby amended to provide that all references therein
to the "Pooling and Servicing Agreement," to "this Agreement" and "herein" shall
be deemed from and after the Addition Date to be a dual reference to the Pooling
and Servicing Agreement as supplemented by this Assignment. Except as expressly
amended hereby, all of the representations, warranties, terms, covenants and
conditions of the Pooling and Servicing Agreement shall remain unamended and
shall continue to be, and shall remain, in full force and effect in accordance
with its terms and except as expressly provided herein shall not constitute or
be deemed to constitute a waiver of compliance with or a consent to
noncompliance with any term or provision of the Pooling and Servicing Agreement.
8. COUNTERPARTS. This Assignment may be executed in two or more
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
9. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
B-4
NEW YORK, WITHOUT REGARD TO ITS CONFLICT OF LAW PROVISIONS.
IN WITNESS WHEREOF, the undersigned have caused this Assignment
of Receivables in Supplemental Accounts to be duly executed and delivered by
their respective duly authorized officers on the day and year first above
written.
SRI RECEIVABLES PURCHASE CO., INC.
By: ____________________________________
Name:
Title
BANKERS TRUST (DELAWARE), Trustee
By: ____________________________________
Name:
Title:
B-5
Schedule 1
to Assignment of
Receivables in
SUPPLEMENTAL ACCOUNTS
SUPPLEMENTAL ACCOUNTS
B-6
Schedule 2
to Assignment of
Receivables in
SUPPLEMENTAL ACCOUNTS
SRI Receivables Purchase Co., Inc.
SRI Receivables Master Trust
Officer's Certificate
___________, a duly authorized officer of SRI Receivables
Purchase Co., Inc., a corporation organized and existing under the laws of the
State of Delaware (the "TRANSFEROR"), hereby certifies and acknowledges on
behalf of the Transferor that to the best of his knowledge the following
statements are true on _____, ______, (the "ADDITION DATE"), and further
acknowledges on behalf of the Transferor that this Officer's Certificate will be
relied upon by Bankers Trust (Delaware), as Trustee (the "TRUSTEE") of the SRI
Receivables Master Trust in connection with the Trustee entering into Assignment
No. ___ of Receivables in Supplemental Accounts, dated as of the Addition Date
(the "ASSIGNMENT"), by and between the Transferor and the Trustee, in connection
with the Amended and Restated Pooling and Servicing Agreement, dated as of
August 11, 1995 , (the "POOLING AND SERVICING AGREEMENT"; such term to include
any amendment or supplement thereto), among the Transferor, Specialty Retailers,
Inc., as Servicer, and the Trustee. The undersigned hereby certifies and
acknowledges on behalf of the Transferor that:
(a) On or prior to the Addition Date, the Transferor has
delivered to the Trustee the Assignment (including an acceptance by the Trustee
on behalf of the Trust for the benefit of the Investor Certificateholders) and
the Transferor has indicated in its computer files that the Receivables created
in connection with the Supplemental Accounts have been transferred to the Trust
and within five Business Days after the Addition Date the Transferor shall
deliver to the Trustee or the bailee of the Trustee a computer file or
microfiche list containing a true and complete list of all Supplemental Accounts
identified by account number and the aggregate amount of the Receivables in such
Supplemental Accounts as of the Addition Date, which computer file or microfiche
list shall be, as of the date of such Assignment, incorporated into and made a
part of such Assignment and the Pooling and Servicing Agreement.
(b) LEGAL VALID AND BINDING OBLIGATION. The Assignment
constitutes a legal, valid and binding obligation of the Transferor, enforceable
against the Transferor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors, rights in general and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(c) SELECTION PROCEDURES. No selection procedures believed by the
Transferor to be materially adverse to the interests of the Investor
Certificateholders were utilized
B-7
in selecting the Supplemental Accounts designated hereby from the available
Eligible Accounts in the Federated Portfolio.
(d) INSOLVENCY. The Transferor is not insolvent and, after giving
effect to the conveyance set forth in Section 3 of the Assignment, will not be
insolvent.
(e) SECURITY INTEREST. The Assignment constitutes either (i) a
valid transfer and assignment to the Trust of all right, title and interest of
the Transferor in and to Receivables now existing and hereafter created in the
Supplemental Accounts designated pursuant to the Assignment, and all proceeds
(as defined in the UCC as in effect in the Relevant UCC State) of such
Receivables, and such Receivables and any proceeds thereof will be held by the
Trust free and clear of any Lien of any Person claiming through or under the
Transferor or any of its Affiliates except for (x) Permitted Liens, (y) the
interest of the Transferor as holder of the Exchangeable Transferor Certificate
and (z) the Transferor's right to receive interest accruing on, and investment
earnings in respect of, the Interest Funding Account, the Principal Account or
any Series Account as provided in the Pooling and Servicing Agreement and any
Supplement; or (ii) a grant of a security interest (as defined in the UCC as in
effect in the Relevant UCC State) in such property to the Trust, which is
enforceable with respect to the existing Receivables of the Supplemental
Accounts designated pursuant to the Assignment, the proceeds (as defined in the
UCC as in effect in the State of Relevant UCC State) thereof upon the conveyance
of such Receivables to the Trust, and which will be enforceable with respect to
the Receivables thereafter created in respect of Supplemental Accounts
designated pursuant to the Assignment, and the proceeds (as defined in the UCC
as in effect in the Relevant UCC State) thereof, upon such creation; and (iii)
if the Assignment constitutes the grant of a security interest to the Trust in
such property, upon the filing of a financing statement described in Section 3
of the Assignment with respect to the Additional Accounts designated pursuant to
the Assignment and in the case of the Receivables of such Additional Accounts
thereafter created and the proceeds (as defined in the UCC as in effect in the
Relevant UCC State) thereof, upon such creation, the Trust shall have a first
priority perfected security interest in such property, except for Permitted
Liens.
(f) REQUIREMENTS OF THE POOLING AND SERVICING AGREEMENT. All
requirements set forth in Section 2.6 of the Pooling and Servicing Agreement for
designating Additional Accounts and conveying the Principal Receivables of such
Accounts, whether now exist ing or hereafter created, have been satisfied.
Initially capitalized terms used herein and not otherwise defined
are used as defined in the Pooling and Servicing Agreement.
B-8
IN WITNESS WHEREOF, I have hereunto set my hand this day of
_________ ____.
SRI RECEIVABLES PURCHASE CO., INC.
By: ____________________________________
Name:
Title:
B-9
EXHIBIT C
FORM OF DAILY REPORT
[SEE ATTACHED]
C-1
EXHIBIT D
FORM OF SETTLEMENT STATEMENT
[SEE ATTACHED]
D-1
EXHIBIT E
FORM OF QUARTERLY SERVICER'S CERTIFICATE
SRI RECEIVABLES PURCHASE CO., INC.
--------------------------------------------
SRI RECEIVABLES MASTER TRUST
--------------------------------------------
The undersigned, a duly authorized representative of Specialty
Retailers, Inc. ("SRI"), as Servicer pursuant to the Amended and Restated
Pooling and Servicing Agreement dated as of August 11, 1995 (the "POOLING AND
SERVICING AGREEMENT"; such term to include any amendment or supplement thereto),
by and among SRI Receivables Purchase Co., Inc. (the "TRANSFEROR"), SRI, as
Servicer and Bankers Trust (Delaware), as trustee (the "TRUSTEE") does hereby
certify that:
1. SRI is Servicer under the Pooling and Servicing
Agreement.
2. The undersigned is duly authorized pursuant to
the Pooling and Servicing Agreement to execute and deliver this
Certificate to the Trustee.
3. This Certificate is delivered pursuant to
Section 3.5 of the Pooling and Servicing Agreement.
4. A review of the activities of the Servicer
during (the period from the Closing Date until) (the
approximately twelve month period ended), 19___ was conducted
under our supervision.
5. Based on such review, the Servicer has, to the
best of our knowledge, fully performed all its obligations under
the Pooling and Servicing Agreement throughout such period and no
default in the performance of such obligations has occurred or is
continuing except as set forth in paragraph 6 below.
6. The following is a description of each default
in the performance of the Servicer's obligations under the
provisions of the Pooling and Servicing Agreement, including any
Supplement, known to us to have been made during such period
which sets forth in detail (i) the nature of each such default,
(ii) the action taken by the Servicer, if any, to remedy each
such default and (iii) the current status of each such default:
[If applicable, insert "None."]
E-1
IN WITNESS WHEREOF, the undersigned has duly executed this
certificate this _____ day of __________, ______.
SPECIALTY RETAILERS, INC.,
as Servicer
________________________________________
Name:
Title:
E-2
EXHIBIT F
FORM OF OPINION OF COUNSEL REGARDING SUPPLEMENTAL ACCOUNTS
MATTERS TO BE COVERED IN OPINION OF COUNSEL TO BE
DELIVERED PURSUANT TO SECTION 2.6(E)(VI) OF THE AMENDED
AND RESTATED POOLING AND SERVICING AGREEMENT, DATED
AUGUST 11, 1995
The opinions set forth below may be subject to certain
qualifications, assumptions, limitations and exceptions taken or made in the
opinion of the Transferor's counsel with respect to similar matters delivered on
the Closing Date. Such counsel may rely as to factual matters on certificates of
officers of the Transferor and the Servicer.
(i) The Assignment has been duly authorized, executed and
delivered by the Transferor and constitutes the valid and legally binding
agreement of the Transferor, enforceable against the Transferor in accordance
with its terms except as such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditor's rights
and except as such enforceability may be limited by general equity principles
(whether considered in a suit in law or equity).
(ii) The provisions of the Pooling and Servicing Agreement are
effective to create, in favor of the Trustee for the benefit of the Holders of
the Certificates, a valid security interest in the Receivables and the proceeds
thereof. Such security interest constitutes a first priority perfected security
interest in such Receivables and the proceeds thereof. Except for Permitted
Liens, no other security interest of any creditor of the Transferor is equal or
prior to the security interest of the Trustee in such Receivables.
(iii) No filing or other action, other than the filing of a
Uniform Commercial Code financing statement in the recording offices in the
Relevant UCC State is necessary to perfect or maintain the security interest in
the Receivables and the proceeds thereof, except that (a) appropriate Uniform
Commercial Code continuation statements must be filed within the period of six
months prior to the expiration of five years from the date of the original
filing, (b) if the Transferor changes its name, identity or corporate structure,
appropriate Uniform Commercial Code financing statements must be filed prior to
the expiration of four months after the Transferor changes its name, identity or
corporate structure and (c) if the Transferor changes its chief executive office
or principal place of business to a jurisdiction other than the State of
Delaware, such security interest must be perfected in such jurisdiction within
four months of the date on which the change occurs (or earlier, if perfection
under the laws of such jurisdiction would have otherwise ceased as set forth in
clause (a) above).
F-1
EXHIBIT G
FORM OF ANNUAL OPINION OF COUNSEL
The opinion set forth below, which is to be delivered pursuant to
subsection 13.2(d)(ii) of the Amended and Restated Pooling and Servicing
Agreement, dated August 11, 1995 may be subject to certain qualifications,
assumptions, limitations and exceptions taken or made in the opinion of counsel
delivered on the Initial Closing Date with respect to similar matters.
No filing or other action, other than such filing or action
described in such opinion, is necessary from the date of such opinion through of
the following year to continue the perfected status of the interest of the Trust
in the collateral described in the financing statements referred to in such
opinion.
G-1
EXHIBIT H
FORM OF REASSIGNMENT OF RECEIVABLES
REASSIGNMENT NO. _____ OF RECEIVABLES, dated as of August 11, 1995, by and
between SRI RECEIVABLES PURCHASE CO., INC., a corporation organized and existing
under the laws of the State of Delaware (the "TRANSFEROR"), and BANKERS TRUST
(DELAWARE), a banking corporation organized under the laws of the State of New
York (the "TRUSTEE") pursuant to the Pooling and Servicing Agreement referred to
below.
W I T N E S S E T H:
WHEREAS, the Transferor and the Trustee are parties to the
Amended and Restated Pooling and Servicing Agreement, dated as of August 11,
1995 (hereinafter as such agreement may have been, or may from time to time be,
amended, supplemented or otherwise modified, the "POOLING AND SERVICING
AGREEMENT") by and among the Transferor, Specialty Retailers, Inc. as Servicer,
and the Trustee;
WHEREAS, pursuant to SECTION 2.7 of the Pooling and Servicing
Agreement, the Transferor wishes to remove all Receivables from certain
designated Accounts (collectively, the "REMOVED ACCOUNTS") and to cause the
Trustee to reconvey the Receivables of such Removed Accounts, whether now
existing or hereafter created, from the Trust to the Transferor (as each such
term is defined in the Pooling and Servicing Agreement); and
WHEREAS, the Trustee is willing to accept such designation and to
reconvey the Receivables in the Removed Accounts subject to the terms and
conditions hereof.
NOW THEREFORE, the Transferor and the Trustee hereby agree as
follows:
1. DEFINED TERMS. All terms defined in the Pooling and Servicing
Agreement and used herein shall have such defined meanings when used herein,
unless otherwise defined herein.
"REMOVAL DATE" shall mean, with respect to the
Removed Accounts designated hereby, ___________, _____.
"REMOVAL NOTICE DATE" shall mean, with respect to
the Removed Accounts designated hereby, _________, ______ (which
shall be a date on or prior to the fifth Business Day prior to
the Removal Date).
2. DESIGNATION OF REMOVED ACCOUNTS. The Transferor shall deliver
to the Trustee or the bailee of the Trustee, not later than five Business Days
after the Removal Date, a computer file or microfiche list containing a true and
complete list of each revolving consumer
H-1
credit card account which as of the Removal Date shall be deemed to be a Removed
Account, such accounts being identified by account number and by the aggregate
amount of Receivables in such accounts as of the close of business on the
Removal Date. Such list shall be marked as Schedule 1 to this Reassignment and
shall be incorporated into and made a part of this Reassignment as of the
Removal Date.
3. CONVEYANCE OF RECEIVABLES.
(a) The Trustee does hereby reconvey to the
Transferor, without recourse, representation or warranty, on and
after the Removal Date, all right, title and interest of the
Trust in and to the Receivables now existing and hereafter
created in the Removed Accounts designated hereby, all monies due
or to become due with respect thereto (including all Finance
Charge Receivables) and all proceeds (as defined in Section 9-306
of the UCC as in effect in the Relevant UCC State) of such
Receivables.
(b) In connection with such transfer, the Trustee
agrees to execute and deliver to the Transferor on or prior to
the date of this Reassignment, a termination statement with
respect to the Receivables now existing and hereafter created in
the Removed Accounts designated hereby evidencing the release by
the Trust of its Lien on the Receivables in the Removed Accounts,
and meeting the requirements of applicable state law, in such
manner and such jurisdictions as are necessary to remove such
Lien.
4. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR. The
Transferor hereby represents and warrants to the Trust as of the Removal Date:
(a) LEGAL, VALID AND BINDING OBLIGATION. This
Reassignment constitutes a legal, valid and binding obligation of
the Transferor enforceable against the Transferor in accordance
with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the
enforcement of creditors, rights in general and except as such
enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
(b) SELECTION PROCEDURES. No selection procedures
believed by the Transferor to be materially adverse to the
interests of the Investor Certificateholders were utilized in
selecting the Removed Accounts designated hereby.
5. CONDITIONS PRECEDENT. The amendment of the Pooling and
Servicing Agreement set forth in Section 6 hereof is subject to the
satisfaction, on or prior to the Removal Date, of the following condition
precedent:
H-2
The Transferor shall have delivered to the Trustee an Officer's
Certificate certifying that (i) as of the Removal Date, all requirements set
forth in Section 2.7 of the Pooling and Servicing Agreement for designating
Removed Accounts and reconveying the Receivables of such Removed Accounts,
whether now existing or hereafter created, have been satisfied, and (ii) each of
the representations and warranties made by the Transferor in Section 4 hereof is
true and correct as of the Removal Date. The Trustee may conclusively rely on
such Officer's Certificate, shall have no duty to make inquiries with regard to
the matters set forth therein and shall incur no liability in so relying.
6. AMENDMENT OF THE POOLING AND SERVICING AGREEMENT. The Pooling
and Servicing Agreement is hereby amended to provide that all references therein
to the "Pooling and Servicing Agreement", to "this Agreement" and "herein" shall
be deemed from and after the Removal Date to be a dual reference to the Pooling
and Servicing Agreement as supplemented by this Reassignment. Except as
expressly amended hereby, all of the representations, warranties, terms,
covenants and conditions of the Pooling and Servicing Agreement shall remain
unamended and shall continue to be, and shall remain, in full force and effect
in accordance with its terms and except as expressly provided herein shall not
constitute or be deemed to constitute a waiver of compliance with or a consent
to noncompliance with any term or provision of the Pooling and Ser vicing
Agreement.
7. COUNTERPARTS. This Reassignment may be executed in two or more
counterparts, and by different parties on separate counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
8. Governing Law. THIS REASSIGNMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS.
IN WITNESS WHEREOF, the undersigned have caused this Reassignment
of Receivables to be duly executed and delivered by their respective duly
authorized officers on the day and year first above written.
SRI RECEIVABLES PURCHASE CO., INC.
By: _____________________________________
Name:
Title:
H-3
BANKERS TRUST (DELAWARE), Trustee
By: ____________________________________
Name:
Title:
H-4
Schedule 1
to Reassignment
OF RECEIVABLES
REMOVED ACCOUNTS
EXHIBIT I
FORM OF RECONVEYANCE OF RECEIVABLES
RECONVEYANCE OF RECEIVABLES, dated as of August 11, 1995 by and between SRI
RECEIVABLES PURCHASE CO., INC., a corporation organized and existing under the
laws of the State of Delaware (the "TRANSFEROR"), and BANKERS TRUST (DELAWARE),
a banking corporation organized and existing under the laws of the State of New
York (the "TRUSTEE") pursuant to the Pooling and Servicing Agreement referred to
below.
W I T N E S S E T H:
WHEREAS, the Transferor and the Trustee are parties to the
Amended and Restated Pooling and Servicing Agreement dated as of August 11, 1995
(hereinafter as such agreement may have been, or may from time to time be,
amended, supplemented or otherwise modified, the "POOLING AND SERVICING
AGREEMENT"), by and among the Transferor, Specialty Retailers, Inc. as Servicer,
and the Trustee;
WHEREAS, pursuant to the Pooling and Servicing Agreement, the
Transferor wishes to cause the Trustee to reconvey all of the Receivables and
proceeds thereof, whether now existing or hereafter created, from the Trust to
the Transferor pursuant to the terms of Section 12.4 of the Pooling and
Servicing Agreement upon termination of the Trust pursuant to subsection 12.1(a)
of the Pooling and Servicing Agreement (as each such term is defined in the
Pooling and Servicing Agreement);
WHEREAS, the Trustee is willing to reconvey the Receivables
subject to the terms and conditions hereof;
NOW THEREFORE, the Transferor and the Trustee hereby agree as
follows:
1. DEFINED TERMS. All terms defined in the Pooling and Servicing
Agreement and used herein shall have such defined meanings when used herein,
unless otherwise defined herein.
"RECONVEYANCE DATE" shall mean ________ __, 19__.
2. RETURN OF LISTS OF ACCOUNTS. The Trustee shall deliver to the
Transferor or the bailee of the Transferor, not later than three Business Days
after the Reconveyance Date, each and every computer file or microfiche list of
Accounts delivered to the Trustee pursuant to the terms of the Pooling and
Servicing Agreement.
I-1
3. CONVEYANCE OF RECEIVABLES.
(a) The Trustee does hereby reconvey to the
Transferor, without recourse, representation or warranty, on and
after the Reconveyance Date, all right, title and interest of the
Trust in and to each and every Receivable now existing and
hereafter created in the Accounts, all monies due or to become
due with respect thereto (including all Finance Charge
Receivables), all proceeds (as defined in Section 9-306 of the
UCC as in effect in the Relevant UCC State) of such Receivables,
except for amounts, if any, held by the Trustee pursuant to
subsection 12.3(b) of the Pooling and Servicing Agreement.
(b) In connection with such transfer, the Trustee
agrees to execute and deliver to the Transferor on or prior to
the date of this Reconveyance, such UCC termination statements as
the Transferor may reasonably request, evidencing the release by
the Trust of its lien on the Receivables.
4. COUNTERPARTS. This Reconveyance may be executed in two or more
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
5. GOVERNING LAW. THIS RECONVEYANCE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS.
IN WITNESS WHEREOF, the undersigned have caused this Reconveyance
of Receivables to be duly executed and delivered by their respective duly
authorized officers on the day and year first above written.
SRI RECEIVABLES PURCHASE CO., INC.
By _____________________________________
Name:
Title:
BANKERS TRUST (DELAWARE), Trustee
By _____________________________________
Name:
Title:
I-2
SCHEDULE I
LIST OF ACCOUNTS
(Deemed Incorporated)
I-3
EXHIBIT J
FORM OF AGREED-UPON PROCEDURES
The Servicer and Trustee will engage a firm of nationally recognized independent
public accountants (who may also render other services to the Servicer or any of
its subsidiaries) to perform certain agreed upon procedures substantially
similar to the following:
1) The accountants will obtain the schedules showing the daily roll forward
of accounts receivable activity (hereinafter referred to as the daily
roll forward schedule) for 5% of the days within the period and compare
amounts in excess of $5,000 set forth on the daily roll forward schedule
representing charge sales, returns, cash collections, finance charges,
credit adjustments and daily ending accounts receivable balances with the
corresponding amounts set forth in the accounts receivable subsidiary
ledgers and verify the mathematical accuracy of the daily roll forward.
2) For the 5% of the days within the period, the accountants will compare
the store and mail payments appearing on the daily roll forwards to a
credit entry on the relevant bank statement.
3) The accountants will obtain a listing of new account applications for the
period and select 50 approved accounts from the listing and compare the
account scoring with the minimum account scoring required for approval as
provided by the Servicer.
4) The accountants will obtain a listing of applications denied for 10 days
during the period and select five accounts from the listing for each day
and compare the account scoring set forth on the listing to the minimum
account scoring required for approval as provided by the Servicer.
5) The accountants will report the accounts receivable agings for five cycle
closings during the period and determine the aggregate customer balances
in the "greater than 240 days" and "current delinquent" categories as
reflected on the accounts receivable aging.
6) The accountants will select 20 individual customer statements from the
period and (i) recalculate finance charges appearing on the customer
statement based upon the appropriate APR and (ii) recompute the minimum
payment amount based upon information contained in the standard account
application.
7) For 5% of the days within the period, the accountants will compare
beginning principal receivables, ending principal receivables, principal
collections credit adjustments and finance charge collections, appearing
on the Daily Report with the corresponding amounts appearing in the daily
roll forward schedule.
J-1
8) For 5% of the days within the period, the accountants will recompute the
daily allocation of principal and finance charge collections to each
series based upon information appearing on the Daily Reports.
9) For 5% of the days within the period, the public accountants will agree
the cash transfers indicated on the Daily Reports to entries on the
relevant bank statements.
10) For each settlement statement, the accountants will compare the
information appearing therein to the information appearing in the
corresponding Daily Reports.
11) The public accountants will inquire as to changes in the Transferor's
finance charge and minimum payment requirements.
J-1
<PAGE>
Exhibit 4.27
SRI RECEIVABLES PURCHASE CO., INC.
Transferor
SPECIALTY RETAILERS, INC.
Servicer
and
BANKERS TRUST (DELAWARE)
Trustee
on behalf of the Series 1995-1 Certificateholders
SERIES 1995-1 SUPPLEMENT
Dated as of August 11, 1995
to
AMENDED AND RESTATED
POOLING AND SERVICING AGREEMENT
Dated as of August 11, 1995
$21,700,000 Floating Rate Class A-1
Certificates, Series 1995-1
$1,500,000 Floating Rate Class B-1
Certificates, Series 1995-1
$1,800,000 Floating Rate Class C-1
Certificates, Series 1995-1
$5,120,000 Floating Rate Class D-1
Certificates, Series 1995-1
SRI RECEIVABLES MASTER TRUST
- i -
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. Designation................................................... 1
SECTION 2. Definitions................................................... 1
SECTION 3. Reassignment Terms............................................ 15
SECTION 3A.Conveyance of Interest in Interest Rate Cap; Cap
Proceeds Account....................................................... 15
SECTION 4. Delivery and Payment for the Series 1995-1 Certificates....... 15
SECTION 5. Form of Delivery of Series 1995-1 Certificates................ 16
SECTION 6. Article IV of Agreement....................................... 16
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION
OF COLLECTIONS......................................................... 16
Section 4.4 Rights of Certificateholders.......................... 16
Section 4.5 Collections and Allocation, Payments on Exchangeable
Transferor Certificate............................................... 16
Section 4.6 Determination of Monthly Interest for the Series
1995-1 Certificates.................................................. 17
Section 4.7 Determination of Principal Amounts.................... 19
Section 4.8 [Reserved]............................................ 20
Section 4.9 Application of Funds on Deposit in the Collection
Account for the Certificates.......................................... 21
Section 4.10 Coverage of Negative Carry Amount and Required Amount
for the Series 1995-1 Certificates.................................... 28
Section 4.11 Payment of Certificate Interest....................... 29
Section 4.12 Payment of Certificate Principal...................... 29
Section 4.13 Investor Charge-Offs.................................. 30
Section 4.14 Shared Principal Collections.......................... 31
SECTION 7. Article V of the Agreement................................... 31
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
INVESTOR CERTIFICATEHOLDERS............................................. 32
Section 5.1 Distributions......................................... 32
Section 5.2 Certificateholders' Statement......................... 33
SECTION 8. Series 1995-1 Pay Out Events................................. 34
SECTION 9. Series 1995-1 Termination.................................... 36
SECTION 10. Periodic Finance Charges and Other Fees...................... 36
SECTION 11. Legends; Transfer and Exchange; Restrictions on Transfer
of Series 1995-1 Certificates; Tax Treatment............... 36
SECTION 12. Ratification of Agreement.................................... 37
SECTION 13. Counterparts................................................. 38
SECTION 14. GOVERNING LAW................................................ 38
SECTION 15. The Trustee.................................................. 38
SECTION 16. Instructions in Writing...................................... 38
SECTION 17. Negative Carry Account....................................... 38
SECTION 18. Notices; Credit and Collection Policy Compliance and Changes;
Daily Report................................................ 39
SECTION 19. Ratings Reconfirmations...................................... 39
EXHIBITS
EXHIBIT A-1 Form of Class A Certificate
EXHIBIT A-2 Form of Class B Certificate
EXHIBIT A-3 Form of Class C Certificate
EXHIBIT A-4 Form of Class D Certificate
EXHIBIT B [Reserved]
EXHIBIT C Form of Monthly Certificateholders' Statement
EXHIBIT D Form of 144A Exchange Note and Certification
EXHIBIT E Representation Letter [Non-Rule 144A]
- iii -
<PAGE>
SERIES 1995-1 SUPPLEMENT, dated as of August 11, 1995 (this
"SERIES SUPPLEMENT") by and among SRI RECEIVABLES PURCHASE CO., INC., a
corporation organized and existing under the laws of the State of Delaware, as
Transferor (the "TRANSFEROR"), SPECIALTY RETAILERS, INC., a corporation
organized and existing under the laws of Delaware, as Servicer (the "SERVICER"),
and BANKERS TRUST (DELAWARE), a banking corporation organized and existing under
the laws of the State of Delaware as trustee (together with its successors in
trust thereunder as provided in the Agreement referred to below, the "TRUSTEE")
under the Amended and Restated Pooling and Servicing Agreement dated as of
August 11, 1995 (the "AGREEMENT") among the Transferor, the Servicer and the
Trustee.
Section 6.9 of the Agreement provides, among other things,
that the Transferor and the Trustee may at any time and from time to time enter
into a supplement to the Agreement for the purpose of authorizing the issuance
by the Trustee to the Transferor, for execution and redelivery to the Trustee
for authentication, one or more Series of Certificates.
Pursuant to this Series Supplement, the Transferor and the
Trustee shall create a new Series of Investor Certificates and shall specify the
Principal Terms thereof.
SECTION 1. DESIGNATION. There is hereby created a Series of
Investor Certificates to be issued pursuant to the Agreement and this Series
Supplement to be known generally as the "SERIES 1995-1 CERTIFICATES." The Series
1995-1 Certificates shall be issued in four Classes, which shall be designated
generally as the Class A-1 Certificates, Series 1995-1 (the "CLASS A CERTIFI
CATES"), the Class B-1 Certificates, Series 1995-1 (the "CLASS B CERTIFICATES"),
the Class C-1 Certificates, Series 1995-1 (the "CLASS C CERTIFICATES") and the
Class D-1 Certificates, Series 1995-1 (the "CLASS D CERTIFICATES").
SECTION 2. DEFINITIONS. In the event that any term or
provision contained herein shall conflict with or be inconsistent with any
provision contained in the Agreement, the terms and provisions of this Series
Supplement shall govern with respect to the Series 1995-1 Certificates. All
Article, Section or subsection references herein shall mean Article, Section or
subsections of the Agreement, as amended or supplemented by this Series
Supplement, except as otherwise provided herein. All capitalized terms not
otherwise defined herein are defined in the Agreement. Each capitalized term
defined herein shall relate only to the Series 1995-1 Certificates and no other
Series of Certificates issued by the Trust.
"ADDITIONAL INTEREST" shall mean, at any time of
determination, the sum of Class A Additional Interest, Class B Additional
Interest, Class C Additional Interest and Class D Additional Interest.
"ADJUSTED INVESTED AMOUNT" shall mean the sum of the Class A
Adjusted Invested Amount, the Class B Adjusted Invested Amount, the Class C
Adjusted Invested Amount and the Class D Invested Amount.
"AMORTIZATION PERIOD COMMENCEMENT DATE" shall mean the earlier
of the first day of the December 1999 Monthly Period and the Pay Out
Commencement Date.
- 1 -
"APPLICABLE RESERVE RATIO" shall mean for the November Monthly
Period, the December Monthly Period and the January Monthly Period, 2.0%, and
for each other Monthly Period, zero.
"AVAILABLE SERIES 1995-1 FINANCE CHARGE COLLECTIONS" shall
have the meaning specified in subsection 4.9(a).
"BASE RATE" shall mean the sum of (i) the weighted average of
the Class A Certificate Rate, the Class B Certificate Rate, the Class C
Certificate Rate and the Class D Certificate Rate plus (ii) the Series Servicing
Fee Percentage per annum.
"BUSINESS DAY" shall have the meaning set forth in the
Agreement; PROVIDED that as used in the definition of "LIBOR Rate" and "Rate
Determination Date," "Business Day" shall mean a day for dealings by and between
banks in U.S. dollar deposits in the London interbank eurodollar markets.
"CAP PROCEEDS ACCOUNT" shall have the meaning specified in
subsection 3A(b).
"CARRYOVER CLASS A INTEREST" shall mean on any Business Day in
a Monthly Period (a) any Class A Interest with respect to any Interest Accrual
Period beginning in a prior Monthly Period which has not previously been
deposited in the Interest Funding Account or paid on any previous Distribution
Date PLUS (b) any Class A Additional Interest.
"CARRYOVER CLASS B INTEREST" shall mean on any Business Day in
a Monthly Period (a) any Class B Interest with respect to any Interest Accrual
Period beginning in a prior Monthly Period which has not previously been
deposited in the Interest Funding Account or paid on any previous Distribution
Date PLUS (b) any Class B Additional Interest.
"CARRYOVER CLASS C INTEREST" shall mean on any Business Day in
a Monthly Period (a) any Class C Interest with respect to any Interest Accrual
Period beginning in a prior Monthly Period which has not previously been
deposited in the Interest Funding Account or paid on any previous Distribution
Date PLUS (b) any Class C Additional Interest.
"CLASS A ADDITIONAL INTEREST" shall have the meaning specified
in subsection 4.6(a).
"CLASS A ADJUSTED INVESTED AMOUNT" shall mean, when used with
respect to any Business Day, the Class A Invested Amount MINUS the amount on
deposit in the Principal Account allocated to the Class A Certificates.
"CLASS A CERTIFICATEHOLDER" shall mean the Person in whose
name a Class A Certificate is registered in the Certificate Register.
"CLASS A CERTIFICATEHOLDERS' INTEREST" shall mean the portion
of the Series 1995-1 Certificateholders' Interest evidenced by the Class A
Certificates.
- 2 -
"CLASS A CERTIFICATE RATE" shall mean with respect to the
Class A Certificates, 6.395% per annum with respect to the initial Interest
Accrual Period and, with respect to each subsequent interest Accrual Period a
per annum rate of .52% in excess of LIBOR prevailing on the related Rate
Determination Date, calculated on the basis of the actual number of days elapsed
in such subsequent Interest Accrual Period over a year of 360 days.
"CLASS A CERTIFICATES" shall mean any of the certificates
executed by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-1 hereto.
"CLASS A CONTROLLED DISTRIBUTION AMOUNT" shall mean (i) with
respect to the Distribution Date on which the Class A Invested Amount is reduced
to zero, an amount equal to the sum of (x) $1,700,000 and (y) integral multiples
(including zero) of $2,500,000 in excess thereof not to exceed in the aggregate
the Class A Invested Amount as of such Distribution Date, and (ii) with respect
to any other Distribution Date, an amount equal to $2,500,000 and integral
multiples thereof (in each case prior to giving effect to any distribution in
respect of principal of such Certificates to be made on such Distribution Date).
"CLASS A DAILY PRINCIPAL AMOUNT" shall have the meaning
specified in subsection 4.9(c)(i).
"CLASS A EARLY TERMINATION AMOUNT" shall mean, following the
occurrence of an Early Termination Event and as of the Amortization Period
Commencement Date, the present value of a stream of payments each equal to the
product of the (i) Class A Invested Amount as of the Amortization Period
Commencement Date and (ii) 0.0125% payable monthly in arrears from the
Amortization Period Commencement Date through the January 2001 Distribution Date
and discounted at a rate of 0.50% PLUS the yield on the class of United States
Treasury Notes maturing closest to the January 2001 Date.
"CLASS A FIXED ALLOCATION PERCENTAGE" shall mean for any
Business Day the percentage equivalent of a fraction, the numerator of which is
the Class A Invested Amount at the end of the last day of the Revolving Period
and the denominator of which is the greater of (a) the aggregate amount of
Principal Receivables in the Trust and the amount on deposit in the Equalization
Account as of the end of the last day of the Revolving Period and (b) the sum of
the numerators used to calculate the allocation percentages with respect to
Principal Collection for all Series.
"CLASS A FLOATING ALLOCATION PERCENTAGE" shall mean, with
respect to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class A Adjusted Invested Amount as of the end of the
preceding Business Day and the denominator of which is the greater of (a) the
sum of the amount of Principal Receivables in the Trust and the amounts on
deposit in the Equalization Account at the end of the preceding Business Day and
(b) the sum of the numerators with respect to all Classes of all Series then
outstanding on such Business Day used with respect to Principal Collections, to
calculate the applicable allocation percentage.
- 3 -
"CLASS A INITIAL INVESTED AMOUNT" shall mean the aggregate
initial principal amount of the Class A Certificates, which is $21,700,000.
"CLASS A INTEREST" shall mean the interest distributable in
respect of the Class A Certificates as calculated in accordance with subsection
4.6(a).
"CLASS A INTEREST SHORTFALL" shall have the meaning specified
in subsection 4.6(a).
"CLASS A INVESTED AMOUNT" shall mean, when used with respect
to any Business Day, an amount equal to (a) the Class A Initial Invested Amount,
MINUS (b) the aggregate amount of principal payments made to Class A
Certificateholders prior to such Business Day, MINUS (c) the aggregate amount of
Class A Investor Charge-Offs for all prior Business Days, PLUS (d) the aggregate
amount allocated with respect to Class A Investor Charge-Offs and available on
all prior Business Days pursuant to subsection 4.9(a)(vi), for the purpose of
reinstating amounts reduced pursuant to the foregoing clause (c).
"CLASS A INVESTOR CHARGE-OFFS" shall have the meaning
specified in subsection 4.13(d).
"CLASS A INVESTOR PERCENTAGE" shall mean, for any Business
Day, (a) with respect to Finance Charge Collections and Receivables in Defaulted
Accounts at any time or Principal Collections during the Revolving Period, the
Class A Floating Allocation Percentage and (b) with respect to Principal
Collections during the Amortization Period, the Class A Fixed Allocation
Percentage.
"CLASS A PRINCIPAL" shall mean the principal distributable in
respect of the Class A Certificates as calculated in accordance with subsection
4.7(a).
"CLASS A POOL FACTOR" shall mean, with respect to any Record
Date, a number carried out to seven decimal places representing the ratio of the
Class A Invested Amount as of such Record Date (determined after taking into
account any increases or decreases in the Class A Invested Amount which will
occur on the following Distribution Date) to the Class A Initial Invested
Amount.
"CLASS B ADDITIONAL INTEREST" shall have the meaning specified
in subsection 4.6(b).
"CLASS B ADJUSTED INVESTED AMOUNT" shall mean, when used with
respect to any Business Day, the Class B Invested Amount MINUS the amount on
deposit in the Principal Account allocated to the Class B Certificates.
"CLASS B CERTIFICATEHOLDER" shall mean the Person in whose
name a Class B Certificate is registered in the Certificate Register.
"CLASS B CERTIFICATEHOLDERS' INTEREST" shall mean the portion
of the Series 1995-1 Certificateholders' Interest evidenced by the Class B
Certificates.
- 4 -
"CLASS B CERTIFICATE RATE" shall mean, with respect to the
Class B Certificates, 7.375% per annum with respect to the initial Interest
Accrual Period and, with respect to each subsequent Interest Accrual Period a
per annum rate of 1.50% in excess of LIBOR prevailing on the related Rate
Determination Date, calculated on the basis of the actual number of days elapsed
in such subsequent Interest Accrual Period over a year of 360 days.
"CLASS B CERTIFICATES" shall mean any of the certificates
executed by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-2 hereto.
"CLASS B CONTROLLED DISTRIBUTION AMOUNT" shall mean (i) with
respect to the Distribution Date on which the Class B Invested Amount is reduced
to zero, an amount equal to $300,000 and integral multiples of $100,000 in
excess thereof not to exceed in the aggregate the Class B Invested Amount as of
such Distribution Date, and (ii) with respect to any other Distribution Date, an
amount equal to $100,000 and integral multiples thereof (in each case prior to
giving effect to any distribution in respect of principal of such Certificates
to be made on such Distribution Date).
"CLASS B DAILY PRINCIPAL AMOUNT" shall have the meaning
specified in subsection 4.9(c)(ii).
"CLASS B EARLY TERMINATION AMOUNT" shall mean, following the
occurrence of an Early Termination Event and as of the Amortization Period
Commencement Date, the present value of a stream of payments each equal to the
product of the (i) Class B Invested Amount as of the Amortization Period
Commencement Date and (ii) 0.0125%, payable monthly in arrears from the
Amortization Period Commencement Date through the April 2001 Distribution Date
and discounted at a rate of 0.50% plus the yield on the class of United States
Treasury Notes maturing closest to the April 2001 Distribution Date.
"CLASS B FIXED ALLOCATION PERCENTAGE" shall mean for any
Business Day the percentage equivalent of a fraction, the numerator of which is
the Class B Invested Amount at the end of the last day of the Revolving Period
and the denominator of which is the greater of (a) the aggregate amount of
Principal Receivables in the Trust and the amount on deposit in the Equalization
Account at the end of the last day of the Revolving Period and (b) the sum of
the numerators used to calculate allocation percentages with respect to
Principal Collections for all Series.
"CLASS B FLOATING ALLOCATION PERCENTAGE" shall mean, with
respect to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class B Adjusted Invested Amount as of the end of the
preceding Business Day and the denominator of which is the greater of (a) the
sum of the amount of Principal Receivables in the Trust and the amount on
deposit in the Equalization Account as of the end of the preceding Business Day
and (b) the sum of the numerators with respect to all Classes of all Series then
outstanding on such Business Day used with respect to Principal Collections to
calculate the applicable allocation percentage.
"CLASS B INITIAL INVESTED AMOUNT" shall mean the aggregate
initial principal amount of the Class B Certificates, which is $1,500,000.
- 5 -
"CLASS B INTEREST" shall mean the interest distributable in
respect of the Class B Certificates as calculated in accordance with subsection
4.6(b).
"CLASS B INTEREST SHORTFALL" shall have the meaning specified
in subsection 4.6(b).
"CLASS B INVESTED AMOUNT" shall mean, when used with respect
to any Business Day, an amount equal to (a) the Class B Initial Invested Amount,
MINUS (b) the aggregate amount of principal payments made to Class B
Certificateholders prior to such Business Day, MINUS (c) the aggregate amount of
Class B Investor Charge-offs for all prior Business Days, and PLUS (d) the
aggregate amount allocated with respect to Class B Investor Charge-Offs and
available on all prior Business Days pursuant to subsection 4.9(a)(ix), for the
purpose of reinstating amounts reduced pursuant to the foregoing clause (c).
"CLASS B INVESTOR CHARGE-OFFS" shall have the meaning
specified in subsection 4.13(c).
"CLASS B INVESTOR PERCENTAGE" shall mean, for any Distribution
Date, (a) with respect to Finance Charge Collections and Receivables in
Defaulted Accounts at any time or Principal Collections during the Revolving
Period, the Class B Floating Allocation Percentage and (b) with respect to
Principal Collections during the Amortization Period, the Class B Fixed
Allocation Percentage.
"CLASS B PRINCIPAL" shall mean the principal distributable in
respect of the Class B Certificates as calculated in accordance with subsection
4.7(b).
"CLASS B POOL FACTOR" shall mean, with respect to any Record
Date, a number carried out to seven decimal places representing the ratio of the
Class B Invested Amount as of such Record Date (determined after taking into
account any increases or decreases in the Class B Invested Amount which will
occur on the following Distribution Date) to the Class B Initial Invested
Amount.
"CLASS B PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the
earlier of (a) the Distribution Date in an Amortization Period on which the
Class A Invested Amount is paid in full or, if there are no Principal
Collections allocable to the Series 1995-1 Investor Certificates remaining after
payments have been made to the Class A Certificates on such Distribution Date,
the Distribution Date following the Distribution Date on which the Class A
Invested Amount is paid in full and (b) the Distribution Date following a sale
or repurchase of the Receivables as set forth in Sections 2.4(d), 9.2, 10.2,
12.1 or 12.2 of the Agreement and Section 3 of this Series Supplement.
"CLASS C ADDITIONAL INTEREST" shall have the meaning specified
in subsection 4.6(c).
"CLASS C ADJUSTED INVESTED AMOUNT" shall mean, when used with
respect to any Business Day, the Class C Invested Amount MINUS the amount on
deposit in the Principal Account allocated to the Class C Certificates.
- 6 -
"CLASS C CERTIFICATEHOLDER" shall mean the Person in whose
name a Class C Certificate is registered in the Certificate Register.
"CLASS C CERTIFICATEHOLDERS' INTEREST" shall mean the portion
of the Series 1995-1 Certificateholders' Interest evidenced by the Class C
Certificates.
"CLASS C CERTIFICATE RATE" shall mean, with respect to the
Class C Certificates, 7.375% per annum with respect to the initial Interest
Accrual Period and, with respect to each subsequent Interest Accrual Period a
per annum rate of 1.50% in excess of LIBOR prevailing on the related Rate
Determination Date, calculated on the basis of the actual number of days elapsed
in such subsequent Interest Accrual Period over a year of 360 days.
"CLASS C CERTIFICATES" shall mean any of the certificates
executed by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-3 hereto.
"CLASS C DAILY PRINCIPAL AMOUNT" shall have the meaning
specified in subsection 4.9(c)(iii).
"CLASS C EARLY TERMINATION AMOUNT" shall mean, following the
occurrence of an Early Termination Event and as of the Amortization Period
Commencement Date, the present value of a stream of payments each equal to the
product of the (i) Class C Invested Amount as of the Amortization Period
Commencement Date and (ii) 0.0125%, payable monthly in arrears from the
Amortization Period Commencement Date through the July 2001 Distribution Date
and discounted at a rate of 0.50% plus the yield on the class of United States
Treasury Notes maturing closest to the July 2001 Distribution Date.
"CLASS C FIXED ALLOCATION PERCENTAGE" shall mean for any
Business Day the percentage equivalent of a fraction, the numerator of which is
the Class C Invested Amount at the end of the last day of the Revolving Period
and the denominator of which is the greater of (a) the aggregate amount of
Principal Receivables in the Trust and the amount on deposit in the Equalization
Account as of the end of the last day of the Revolving Period and (b) the sum of
the numerators used to calculate allocation percentages with respect to
Principal Collections for all Series.
"CLASS C FLOATING ALLOCATION PERCENTAGE" shall mean with
respect to any Business Day, the percentage equivalent of a fraction, the
numerator of which is the Class C Adjusted Invested Amount as of the end of the
preceding Business Day and the denominator of which is the greater of (a) the
sum of the amount of Principal Receivables in the Trust and the amount on
deposit in the Equalization Account at the end of the preceding Business Day and
(b) the sum of the numerators with respect to all Classes of all Series then
outstanding on such Business Day used with respect to Principal Collections to
calculate the applicable allocation percentage.
"CLASS C INITIAL INVESTED AMOUNT" shall mean the aggregate
initial principal amount of the Class C Certificates, which is $1,800,000.
- 7 -
"CLASS C INTEREST" shall mean the interest distributable in
respect of the Class C Certificates as calculated in accordance with subsection
4.6(c).
"CLASS C INTEREST SHORTFALL" shall have the meaning specified
in subsection 4.6(c).
"CLASS C INVESTED AMOUNT" shall mean, when used with respect
to any Business Day, an amount equal to (a) the Class C Initial Invested Amount,
MINUS (b) the aggregate amount of principal payments made to Class C
Certificateholders prior to such Business Day, MINUS (c) the aggregate amount of
Class C Investor Charge-Offs for all prior Business Days, and PLUS (d) the
aggregate amount allocated with respect to Class C Investor Charge-Offs and
available on all prior Business Days pursuant to subsection 4.9(a)(x), for the
purpose of reinstating amounts reduced pursuant to the foregoing clause (c).
"CLASS C INVESTOR CHARGE-OFFS" shall have the meaning
specified in subsection 4.13(b).
"CLASS C INVESTOR PERCENTAGE" shall mean, for any Distribution
Date, (a) with respect to Finance Charge Collections and Receivables in
Defaulted Accounts at any time or Principal Collections during the Revolving
Period, the Class C Floating Allocation Percentage and (b) with respect to
Principal Collections during the Amortization Period, the Class C Fixed
Allocation Percentage.
"CLASS C PRINCIPAL" shall mean the principal distributable in
respect of the Class C Certificates as calculated in accordance with subsection
4.7(c).
"CLASS C POOL FACTOR" shall mean, with respect to any Record
Date, a number carried out to seven decimal places representing the ratio of the
Class C Invested Amount as of such Record Date (determined after taking into
account any increases or decreases in the Class C Invested Amount which will
occur on the following Distribution Date) to the Class C Initial Invested
Amount.
"CLASS C PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the
earlier of (a) the Distribution Date in an Amortization Period on which the
Class B Invested Amount is paid in full or, if there are no Principal
Collections allocable to the Series 1995-1 Investor Certificates remaining after
payments have been made to the Class B Certificates on such Distribution Date,
the Distribution Date following the Distribution Date on which the Class B
Invested Amount is paid in full and (b) the Distribution Date following a sale
or repurchase of the Receivables as set forth in Sections 2.4(d), 9.2, 10.2,
12.1 or 12.2 of the Agreement and Section 3 of this Series Supplement.
"CLASS D CERTIFICATEHOLDER" shall mean the Person in whose
name a Class D Certificate is registered in the Certificate Register.
"CLASS D CERTIFICATEHOLDERS' INTEREST" shall mean the portion
of the Series 1995-1 Certificateholders' Interest evidenced by the Class D
Certificates.
- 8 -
"CLASS D CERTIFICATE RATE" shall mean 0% per annum.
"CLASS D CERTIFICATES" shall mean any of the certificates
executed by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-4 hereto.
"CLASS D DAILY PRINCIPAL AMOUNT" shall have the meaning
specified in subsection 4.9(c)(iv).
"CLASS D FIXED ALLOCATION PERCENTAGE" shall mean for any
Business Day the percentage equivalent of a fraction, the numerator of which is
the Class D Invested Amount at the end of the last day of the Revolving Period
and the denominator of which is the greater of (a) the sum of the amount of
Principal Receivables in the Trust and the amount on deposit in the Equalization
Account at the end of the last day of the Revolving Period and (b) the sum of
the numerators used to calculate allocation percentages with respect to
Principal Collections for all Series.
"CLASS D FLOATING ALLOCATION PERCENTAGE" shall mean with
respect to any Business Day the percentage equivalent of a fraction, the
numerator of which is the Class D Invested Amount as of the end of the preceding
Business Day and the denominator of which is the greater of (a) the sum of the
amount of Principal Receivables in the Trust and the amount on deposit in the
Equalization Account at the end of the preceding Business Day and (b) the sum of
the numerators with respect to all Classes of all Series then outstanding on
such Business Day used with respect to Principal Collections to calculate the
applicable allocation percentage.
"CLASS D INITIAL INVESTED AMOUNT" shall mean the aggregate
initial principal amount of the Class D Certificates, which is $5,120,000.
"CLASS D INVESTED AMOUNT" shall mean, when used with respect
to any Business Day, an amount equal to (a) the Class D Initial Invested Amount,
MINUS (b) the aggregate amount of principal payments made to Class D
Certificateholders prior to such Business Day, MINUS (c) the amount deposited in
the Negative Carry Account, if any, pursuant to subsection 4.7(a), MINUS (d) the
aggregate amount of Class D Investor Charge-offs for all prior Business Days,
PLUS (e) the aggregate amount allocated with respect to Class D Investor
Charge-Offs and available on all prior Business Days pursuant to subsection
4.9(a)(xii), for the purpose of reinstating amounts reduced pursuant to the
foregoing clause (d) and PLUS (f) on the Class D Principal Payment Commencement
Date, an amount equal to the amount on deposit in the Negative Carry Account.
"CLASS D INVESTOR CHARGE-OFFS" shall have the meaning
specified in subsection 4.13(a).
"CLASS D INVESTOR PERCENTAGE" shall mean, for any Business
Day, (a) with respect to Finance Charge Collections and Receivables in Defaulted
Accounts at any time or Principal Collections during the Revolving Period, the
Class D Floating Allocation Percentage and (b) with respect to Principal
Collections during the Amortization Period, the Class D Fixed Allocation
Percentage.
- 9 -
"CLASS D PRINCIPAL" shall mean the principal distributable in
respect of the Class D Certificates as calculated in accordance with subsection
4.7(d).
"CLASS D POOL FACTOR" shall mean, with respect to any Record
Date, a number carried out to seven decimal places representing the ratio of the
Class D Invested Amount as of such Record Date (determined after taking into
account any increases or decreases in the Class D Invested Amount which will
occur on the following Distribution Date) to the Class D Initial Invested
Amount.
"CLASS D PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the
earlier of (a) the Distribution Date on which the Class C Invested Amount is
paid in full or, if there are no Principal Collections allocable to the Series
1995-1 Investor Certificates remaining after payments have been made to the
Class C Certificates on such Distribution Date, the Distribution Date following
the Distribution Date on which the Class C Invested Amount is paid in full and
(b) the Distribution Date following a sale or repurchase of the Receivables as
set forth in Sections 2.4(a), 9.2, 10.21, 12.1 and 12.2 of the Agreement and
Section 3 of this Series Supplement.
"CONTROLLED AMORTIZATION PERIOD" shall mean, with respect to
the Series 1995-1 Certificates, unless a Pay Out Event shall have occurred with
respect to such Series prior thereto, the period commencing on the Amortization
Period Commencement Date and ending upon the earliest to occur of (x) the
payment in full to the Investor Certificateholders of the Invested Amount, and
(y) the Series 1995-1 Termination Date.
"DAILY CAP PROCEEDS AMOUNT" shall mean, with respect to any
Business Day, an amount on deposit in the Cap Proceeds Account equal to the
lesser of (A) the amount determined to be deposited in the Interest Funding
Account pursuant to clause (y) of subsections 4.9(a)(i), (ii) and (iii), and (B)
the sum of (a) the product of (x) the quotient of (I) the amount deposited in
the Cap Proceeds Account on the immediately preceding payment date for the
Interest Rate Caps DIVIDED BY (II) the number of days from payment date to
payment date for such Interest Rate Caps times (y) the number of days elapsed
since the preceding Business Day and (b) the aggregate amount not transferred
prior to such day during the period since the preceding payment date pursuant to
this subclause (B).
"DISTRIBUTION DATE" shall mean September 20, 1995 and the
third Wednesday of each March, June, September and December thereafter, or if
such day is not a Business Day, the next succeeding Business Day.
"EARLY AMORTIZATION PERIOD" shall mean the period commencing
on the Pay Out Commencement Date and ending on the earlier to occur of (i) the
date of termination of the Trust pursuant to Section 12.1 of the Agreement or
(ii) the Series 1995-1 Termination Date.
"EARLY TERMINATION EVENT" shall have the meaning specified in
Section 8.
"ENHANCEMENT" shall mean, with respect to the Class A
Certificates, the subordination of the Class B Invested Amount, the Class C
Invested Amount, and the Class D Invested Amount,
- 10 -
with respect to the Class B Certificates, the subordination of the Class C
Invested Amount and the Class D Invested Amount, and with respect to the Class C
Certificates, the subordination of the Class D Invested Amount.
"EXCESS FINANCE CHARGE COLLECTIONS" shall mean, with respect
to any Business Day, as the context requires, either (x) the amount described in
subsection 4.9(a)(xvii) allocated to the Series 1995-1 Certificates but
available to cover shortfalls in amounts paid from Finance Charge Collections
for other Series, if any or (y) the aggregate amount of Finance Charge
Collections allocable to other Series in excess of the amounts necessary to make
required payments with respect to such Series, if any, and available to cover
shortfalls with respect to the Series 1995-1 Certificates.
"FIXED ALLOCATION PERCENTAGE" shall mean for any Distribution
Date the percentage equivalent of a fraction, the numerator of which is the
Invested Amount at the end of the last day of the Revolving Period and the
denominator of which is the greater of (a) the sum of the aggregate amount of
Principal Receivables in the Trust and the amount on deposit in the Equalization
Account as of the end of the last day of the Revolving Period and (b) the sum of
the numerators used to calcu late allocation percentages with respect to
Principal Collections for all Series.
"FLOATING ALLOCATION PERCENTAGE" shall mean for any Business
Day the sum of the applicable Class A Floating Allocation Percentage, Class B
Floating Allocation Percentage, Class C Floating Allocation Percentage, and
Class D Floating Allocation Percentage for such Business Day.
"INITIAL INVESTED AMOUNT" shall mean the aggregate initial
principal amount of the Investor Certificates of Series 1995-1, which is
$30,120,000.
"INTEREST ACCRUAL PERIOD" shall mean, with respect to a
Distribution Date, the period from and including the preceding Distribution Date
to and excluding such Distribution Date; PROVIDED, HOWEVER, that the initial
Interest Accrual Period will run from the Series 1995-1 Closing Date to and
excluding the initial Distribution Date.
"INTEREST RATE CAP AGREEMENT" shall mean an interest rate cap
agreement in form and substance satisfactory to the Trustee and the Rating
Agency between the Transferor and an obligor pursuant to which the obligor will
be paid its entire consideration by the Transferor on the date of execution
thereof and which obligor will be obligated for a term ending not earlier than
the Scheduled Series 1995-1 Termination Date to make payments to the Trustee
quarterly with respect to each set quarterly period specified therein in an
amount (if positive) equal to the product of (i) the remainder of (A) an index
rate which shall be equal to LIBOR (or a similar three-month offered rate quoted
in the London interbank eurodollar market) (as if the Interest Accrual Period
referenced in the definition thereof was the applicable set quarterly period)
MINUS (B) 12%, MULTIPLIED BY (ii) a notional amount specified therein,
multiplied by (iii) the ratio of the actual number of days in such set quarterly
period to 360; PROVIDED, HOWEVER, that the interest rate cap agreement can
deviate from the terms described herein if the Transferor receives prior written
approval with respect to any such deviations from (i) the Rating Agency and (ii)
Holders of Investor Certificates representing more than 50% of the aggregate
Undivided Interests.
- 11 -
"INTEREST RATE CAPS" shall mean the interest rate cap or caps
provided pursuant to Interest Rate Cap Agreements by one or more obligors, each
of which shall be acceptable to the Rating Agency and shall have a long-term
unsecured debt rating of not less than AAA and a short term unsecured debt
rating of A-l+ by Standard & Poor's Corporation (the "REQUISITE CAP RATING") and
shall contain an arrangement for the replacement of such obligor or the
substitution of alternative credit enhancement provisions (any of which shall
have the Requisite Cap Ratings) in the event that such then-current interest
rate cap shall be downgraded below the Requisite Cap Ratings.
"INVESTED AMOUNT" shall mean, when used with respect to any
Business Day, an amount equal to the sum of (a) the Class A Invested Amount as
of such Business Day, (b) the Class B Invested Amount as of such Business Day,
(c) the Class C Invested Amount as of such Business Day and (d) the Class D
Invested Amount as of such Business Day.
"INVESTOR CERTIFICATEHOLDER" shall mean the Holder of record
of an Investor Certificate of Series 1995-1.
"INVESTOR CERTIFICATES" shall mean the Class A Certificates,
the Class B Certificates, the Class C Certificates and the Class D Certificates.
"INVESTOR CHARGE-OFFS" shall mean the sum of Class A Investor
Charge-Offs, Class B Investor Charge-Offs, Class C Investor Charge-Offs and
Class D Investor Charge-Offs.
"INVESTOR DEFAULT AMOUNT" shall mean, with respect to each
Business Day, an amount equal to the product of the Default Amount for such
Business Day and the Floating Allocation Percentage applicable for such Business
Day.
"INVESTOR PERCENTAGE" shall mean for any Business Day, (a)
with respect to Finance Charge Receivables and Receivables in Defaulted Accounts
at any time or Principal Receivables during the Revolving Period, the Floating
Allocation Percentage and (b) with respect to Principal Receivables during the
Amortization Period, the Fixed Allocation Percentage.
"ISSUANCE DATE" shall mean the Series 1995-1 Closing Date.
"LIBOR" shall mean, with respect to any Interest Accrual
Period, the rate obtained by dividing (x) the three-month rate described on the
Dow Jones Telerate System, page 3750, as of 11:00 a.m. London time on the Rate
Determination Date divided by (y) a percentage equal to one minus the stated
maximum rate (stated as a decimal) of all reserves required to be maintained
against "Eurocurrency Liabilities" as specified in Regulation D (or against any
other category of liabilities which includes deposits by reference to which the
interest rate on LIBOR is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any bank to
United States residents); provided, however, with respect to clause (x) above,
in the event such rate shall not be provided, "LIBOR" shall mean (a) the
arithmetic average (rounded upwards to the nearest 1/16th of l%) of the rates at
which deposits in United States dollars are offered to four reference banks
selected by BT Securities Corp. in the interbank eurodollar market
- 12 -
at approximately 11:00 a.m. (London time) divided by (b) the percentage
specified in clause (y) above.
"MINIMUM RETAINED PERCENTAGE" shall mean 3.5%.
"MINIMUM TRANSFEROR PERCENTAGE" shall mean the Applicable
Reserve Ratio.
"MONTHLY PERIOD" shall have the meaning specified in the
Agreement, except that the first Monthly Period with respect to the Series
1995-1 Certificates shall begin on and include the Series 1995-1 Closing Date
and shall end on and include September 1, 1995.
"NEGATIVE CARRY ACCOUNT" shall have the meaning specified in
subsection 17(a).
"NEGATIVE CARRY AMOUNT" shall have the meaning specified in
subsection 4.10(a).
"NEGATIVE CARRY FILL-UP DATE" shall have the meaning specified
in subsection 17(b).
"PAY OUT COMMENCEMENT DATE" shall mean the date on which a
Trust Pay Out Event is deemed to occur pursuant to Section 9.1 of the Agreement
or a Series 1995-1 Pay Out Event is deemed to occur pursuant to Section 8 of
this Series Supplement.
"PORTFOLIO YIELD" shall mean for the Series 1995-1
Certificates, with respect to any Monthly Period, the annualized percentage
equivalent of a fraction, the numerator of which is an amount equal to the sum
of the aggregate amount of Available Series 1995-1 Finance Charge Collections
and the aggregate Daily Cap Proceeds Amount for such Monthly Period, calculated
on a cash basis, MINUS the aggregate Investor Default Amount for such Monthly
Period, and the denominator of which is the average daily Invested Amount during
the preceding Monthly Period.
"PRINCIPAL SHORTFALLS" shall mean on any Business Day (x) for
Series 1995-1 the Invested Amount of the class then receiving principal payments
after the application of Principal Collections on such Business Day or (y) for
any other Series the amounts specified as such in the Supplement for such other
Series.
"RATE DETERMINATION DATE" shall mean, with respect to any
Interest Accrual Period, the second Business Day before the first day of such
Interest Accrual Period.
"RATING AGENCY" shall mean Standard & Poor's Ratings Group and
Duff & Phelps Credit Rating Co.
"REQUIRED AMOUNT" shall have the meaning specified in Section
4.10.
"REVOLVING PERIOD" shall mean the period from and including
the Series 1995-1 Closing Date to, but not including, the Amortization Period
Commencement Date.
- 13 -
"SCHEDULED SERIES 1995-1 TERMINATION DATE" shall mean the
January 2003 Distribution Date.
"SERIES 1995-1" shall mean the Series of the SRI Receivables
Master Trust represented by the Series 1995-1 Certificates.
"SERIES 1995-1 CERTIFICATEHOLDER" shall mean the holder of
record of any Series 1995-1 Investor Certificate.
"SERIES 1995-1 CERTIFICATEHOLDERS' INTEREST" shall have the
meaning specified in Section 4.4.
"SERIES 1995-1 CLOSING DATE" shall mean August 11, 1995.
"SERIES 1995-1 PAY OUT EVENT" shall have the meaning specified
in Section 8.
"SERIES 1995-1 TERMINATION DATE" shall mean the earlier to
occur of (i) the day after the Distribution Date on which the Series 1995-1
Certificates are paid in full, or (ii) the Scheduled Series 1995-1 Termination
Date.
"SERIES SERVICING FEE PERCENTAGE" shall mean 2.0%.
"SERVICING FEE" shall mean for any Monthly Period, an amount
equal to the product of (i) one-twelfth, (ii) the Series Servicing Fee
Percentage and (iii) the Adjusted Invested Amount as of the preceding Record
Date, or, in the case of the first Distribution Date, the Initial Invested
Amount.
"SHARED PRINCIPAL COLLECTIONS" shall mean, as the context
requires, either (a) the amount allocated to the Series 1995-1 Investor
Certificates which, in accordance with subsections 4.9(b) and 4.9(c)(iv), may be
applied in accordance with Section 4.3(e) of the Agreement or (b) the amounts
allocated to the investor certificates (other than Transferor Retained
Certificates) of other Series which the applicable Supplements for such Series
specify are to be treated as "Shared Principal Collections" and which may be
applied to cover Principal Shortfalls with respect to the Series 1995-1 Investor
Certificates.
"TERMINATION PAYMENT DATE" shall mean the earlier of the first
Distribution Date following the liquidation or sale of the Receivables as a
result of an Insolvency Event and the occurrence of the Scheduled Series 1995-1
Termination Date.
"TRANSFEROR FINANCE CHARGE COLLECTIONS" shall mean on any
Business Day the product of (a) the Finance Charge Collections for such Business
Day, (b) the Transferor Percentage and (c) the Floating Allocation Percentage.
- 14 -
"TRANSFEROR RETAINED CERTIFICATES" shall mean investor
certificates of any Series, including the Class D Certificates, which the
Transferor is required to retain, but only for so long as the Transferor is the
Holder of such Certificates.
SECTION 3. REASSIGNMENT TERMS. The Series 1995-1 Certificates
shall be subject to termination by the Transferor at its option, in accordance
with the terms specified in subsection 12.2(a) of the Agreement, on any
Distribution Date on or after the Distribution Date on which the sum of the
Class A Invested Amount, the Class B Invested Amount and the Class C Invested
Amount is reduced to an amount less than or equal to 10% of the sum of the Class
A Initial Invested Amount, the Class B Initial Invested Amount and the Class C
Initial Invested Amount. The deposit required in connection with any such
termination and final distribution shall be equal to the sum of the Class A
Invested Amount, the Class B Invested Amount and the Class C Invested Amount
PLUS accrued and unpaid interest on the Series 1995-1 Certificates through the
day prior to the Distribution Date on which the final distribution occurs.
SECTION 3A. CONVEYANCE OF INTEREST IN INTEREST RATE CAP; CAP
PROCEEDS ACCOUNT. (a) The Transferor hereby covenants and agrees that, on or
prior to the Series 1995-1 Closing Date, it shall obtain Interest Rate Caps by
entering into one or more Interest Rate Cap Agreements such that the aggregate
notional amount under all such agreements shall, at any time, be at least equal
to the Invested Amount at such time. The Transferor hereby assigns, sets-over,
conveys, pledges and grants a security interest and lien (free and clear of all
other Liens) to the Trustee for the benefit of the Series 1995-1
Certificateholders, in all of the Transferor's right, title and interest now
existing or hereafter arising in and to the Interest Rate Cap Agreements and the
Interest Rate Caps arising thereunder, together with the Cap Proceeds Amount and
all other proceeds thereof, as collateral security for the benefit of the Series
1995-1 Certificateholders. The Transferor hereby further agrees to execute all
such instruments, documents and financing statements and take all such further
action requested by the Trustee to evidence and perfect the assignment of the
Interest Rate Cap Agreements and the Interest Rate Caps pursuant to this Section
3A.
(b) The Trustee, for the benefit of the Series 1995-1
Certificateholders, shall establish and maintain with a Qualified Institution in
the name of the Trust, a certain segregated trust account (the "CAP PROCEEDS
ACCOUNT"). All amounts received by the Trustee pursuant to the Interest Rate
Caps on the settlement date for any Interest Rate Cap (a "CAP SETTLEMENT DATE")
shall be deposited in the Cap Proceeds Account. Funds in the Cap Proceeds
Account shall be invested at the direction of the Servicer, in Cash Equivalents
with maturities not later than the next succeeding Business Day. Any earnings on
such invested funds shall be deposited and held in the Cap Proceeds Account and
applied in the same manner and priority as payments pursuant to the Interest
Rate Caps.
SECTION 4. DELIVERY AND PAYMENT FOR THE SERIES 1995-1
CERTIFICATES. The Transferor shall execute and deliver the Series 1995-1
Certificates to the Trustee for authentication in accordance with Section 6.1 of
the Agreement. The Trustee shall deliver the Series 1995-1 Certificates to or
upon the order of the Transferor when authenticated in accordance with Section
6.2 of the Agreement.
- 15 -
SECTION 5. FORM OF DELIVERY OF SERIES 1995-1 CERTIFICATES. The
Class A Certificates, the Class B Certificates, the Class C Certificates and the
Class D Certificates, shall be delivered as Registered Certificates as provided
in Section 6.1 of the Agreement.
SECTION 6. ARTICLE IV OF AGREEMENT. Sections 4.l, 4.2 and 4.3
of the Agreement shall read in their entirety as provided in the Agreement.
Article IV of the Agreement (except for Sections 4.1, 4.2 and 4.3 thereof) shall
read in its entirety as follows and shall be applicable only to the Series
1995-1 Certificates:
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.4 RIGHTS OF CERTIFICATEHOLDERS. The Series 1995-1
Certificates shall represent undivided interests in the Trust, consisting of the
right to receive, to the extent necessary to make the required payments with
respect to such Series 1995-1 Certificates at the times and in the amounts
specified in this Agreement, (a) the Floating Allocation Percentage and Fixed
Allocation Percentage (as applicable from time to time) of Collections available
in the Collection Account, (b) funds allocable to the Series 1995-1 Certificates
on deposit in the Equalization Account and (c) funds on deposit in the Interest
Funding Account, the Principal Account, the Cap Proceeds Account and the
Distribution Account (for such Series, the "SERIES 1995-1 CERTIFICATEHOLDERS'
INTEREST"). The Class B Invested Amount, the Class C Invested Amount and the
Class D Invested Amount shall be subordinated to the Class A Certificates, the
Class C Invested Amount and the Class D Invested Amount shall be subordinated to
the Class B Certificates, and the Class D Invested Amount shall be subordinated
to the Class C Certificates, in each case to the extent provided in this Article
IV. The Class B Certificates will not have the right to receive payments of
principal until the Class A Invested Amount has been paid in full. The Class C
Certificates will not have the right to receive payments of principal until the
Class A Invested Amount and the Class B Invested Amount have been paid in full.
The Class D Certificates will not have the right to receive payments of
principal until the Class A Invested Amount, the Class B Invested Amount and the
Class C Invested Amount have been paid in full.
Section 4.5 COLLECTIONS AND ALLOCATION, PAYMENTS ON
EXCHANGEABLE TRANSFEROR CERTIFICATE.
(a) COLLECTIONS. The Servicer will apply or will instruct the
Trustee to apply all funds on deposit in the Collection Account and the
Equalization Account allocable to the Series 1995-1 Certificates, and all funds
on deposit in the Interest Funding Account, the Principal Account and the
Distribution Account maintained for this Series, as described in this Article
IV.
(b) [Reserved]
- 16 -
(c) PAYMENTS TO THE HOLDER OF THE EXCHANGEABLE TRANSFEROR
CERTIFICATE. On each Business Day, the Servicer shall
determine whether a Pay Out Event is deemed to have
occurred with respect to the Series 1995-1 Certificates,
and the Servicer shall allocate and pay Collections in
accordance with the Daily Report with respect to such
Business Day to the Holder of the Exchangeable Transferor
Certificate as follows:
(i) For each Business Day with respect to the Revolving
Period, in addition to amounts allocated and paid to the
Holder of the Exchangeable Transferor Certificate pursuant
to subsection 4.3(b) of the Agreement, an amount equal to
the product of the Class D Floating Allocation Percentage
and the amount of Principal Collections on such Business
Day.
(ii) For each Business Day with respect to the
Amortization Period prior to the Business Day on which an
amount equal to the Class C Invested Amount has been
deposited in the Principal Account to be applied to the
payment of Class C Principal, in addition to amounts
allocated and paid to the Holder of the Exchangeable
Transferor Certificate pursuant to subsection 4.3(b) of the
Agreement, an amount equal to the product of the Class D
Fixed Allocation Percentage and the amount of Principal
Collections on such Business Day.
(iii) For each Business Day on and after the day on
which Principal Collections are being deposited in the
Principal Account pursuant to Section 4.9(c)(iv), the amount
of payments made to the Holder of the Exchangeable
Transferor Certificate shall be determined only as provided
in subsection 4.3(b) of the Agreement.
Notwithstanding the foregoing, amounts payable to the Holders
of the Exchangeable Transferor Certificate pursuant to subsection 4.5(c)(i) or
(ii) shall instead be deposited in the Equalization Account to the extent
necessary to prevent the Transferor Interest from being less than the Minimum
Transferor Interest.
The allocations to be made pursuant to this subsection 4.5(c)
also apply to deposits into the Collection Account that are treated as
Collections, including Adjustment Payments, payment of the reassignment price
pursuant to Section 2.4(d) of the Agreement and proceeds from the sale,
disposition or liquidation of the Receivables pursuant to Section 9.2, 10.2,
12.1 or 12.2 of the Agreement and Section 3 of this Series Supplement. Such
deposits to be treated as Collections will be allocated as Finance Charge
Receivables or Principal Receivables as provided in the Agreement.
Section 4.6 DETERMINATION OF MONTHLY INTEREST FOR THE SERIES
1995-1 CERTIFICATES. (a) The amount of monthly interest (for the Series 1995-1
Certificates, the "CLASS A INTEREST") allocable to the Class A Certificates of
the Series 1995-1 Certificates with respect to any Monthly Period shall be an
amount equal to one-third of the product of (i) the Class A Certificate Rate and
(ii) the principal balance of the Class A Certificates as of the close of
business on the last day of the Monthly Period immediately preceding the related
interest accrual period.
- 17 -
On the Determination Date preceding each Distribution Date,
the Servicer shall determine an amount (the "CLASS A INTEREST SHORTFALL") equal
to the excess, if any, of (x) the aggregate Class A Interest for the Interest
Accrual Period applicable to the Distribution Date over (y) the amount available
to be paid to the Class A Certificateholders in respect of interest on such
Distribution Date. If there is a Class A Interest Shortfall with respect to any
Distribution Date, an additional amount ("CLASS A ADDITIONAL INTEREST") shall be
payable as provided herein with respect to the Class A Certificates on each
Distribution Date following such Distribution Date, to and including the
Distribution Date on which such Class A Interest Shortfall is paid to Class A
Certificateholders, equal to the product of (i) the Class A Certificate Rate and
(ii) such Class A Interest Shortfall remaining unpaid calculated on the basis of
the actual number of days in the related Interest Accrual Period over a year of
360 days. Notwithstanding anything to the contrary herein, Class A Additional
Interest shall be payable or distributed to Class A Certificateholders only to
the extent permitted by applicable law.
(b) The amount of monthly interest (for the Series
1995-1 Certificates, the "CLASS B INTEREST") allocable to the Class B
Certificates of the Series 1995-1 Certificates with respect to any Monthly
Period shall be an amount equal to one-third of the product of (i) the Class B
Certificate Rate and (ii) the Class B Invested Amount as of the close of
business on the last day of the Monthly Period immediately preceding the related
Interest Accrual Period.
On the Determination Date preceding each Distribution Date,
the Servicer shall determine an amount (the "CLASS B INTEREST SHORTFALL") equal
to the excess, if any, of (x) the aggregate Class B Interest for the Interest
Accrual Period applicable to the Distribution Date OVER (y) the amount available
to be paid to the Class B Certificateholders in respect of interest on such
Distribution Date. If there is a Class B Interest Shortfall with respect to any
Distribution Date, an additional amount ("CLASS B ADDITIONAL INTEREST") shall be
payable as provided herein with respect to the Class B Certificates on each
Distribution Date following such Distribution Date, to and including the
Distribution Date on which such Class B Interest Shortfall is paid to Class B
Certificateholders, equal to the product of (i) the Class B Certificate Rate and
(ii) such Class B Interest Shortfall remaining unpaid calculated on the basis of
the actual number of days in the related Interest Accrual Period over a year of
360 days. Notwithstanding anything to the contrary herein, Class B Additional
Interest shall be payable or distributed to Class B Certificateholders only to
the extent permitted by applicable law.
(c) The amount of monthly interest (for the Series
1995-1 Certificates, the "CLASS C INTEREST") allocable to the Class C
Certificates of the Series 1995-1 Certificates with respect to any Monthly
Period shall be an amount equal to one-third of the product of (i) the Class C
Certificate Rate and (ii) the Class C Invested Amount as of the close of
business on the last day of the preceding Monthly Period immediately preceding
the related Interest Accrual Period.
On the Determination Date preceding each Distribution Date,
the Servicer shall determine an amount (the "CLASS C INTEREST SHORTFALL") equal
to the excess, if any, of (x) the aggregate Class C Interest for the Interest
Accrual Period applicable to the Distribution Date OVER (y) the amount available
to be paid to the Class C Certificateholders in respect of interest on such
Distribution Date. If there is a Class C Interest Shortfall with respect to any
Distribution Date, an
- 18 -
additional amount ("CLASS C ADDITIONAL INTEREST") shall be payable as provided
herein with respect to the Class C Certificates on each Distribution Date
following such Distribution Date, to and including the Distribution Date on
which such Class C interest Shortfall is paid to Class C Certificateholders,
equal to the product of (i) the Class C Certificate Rate and (ii) such Class C
Interest Shortfall remaining unpaid calculated on the basis of the actual number
of days in the related Interest Accrual Period over a year of 360 days.
Notwithstanding anything to the contrary herein, Class C Additional Interest
shall be payable or distributed to Class C Certificateholders only to the extent
permitted by applicable law.
Section 4.7 DETERMINATION OF PRINCIPAL AMOUNTS. (a) The amount
of principal (for the Series 1995-1 Certificates, the "CLASS A PRINCIPAL")
distributable from the Distribution Account with respect to the Class A
Certificates on each Distribution Date with respect to the Amortization Period
shall be equal to the largest Class A Controlled Distribution Amount which does
not exceed an amount calculated as follows: the sum of (i) an amount equal to
the product of the Class A Fixed Allocation Percentage and the aggregate amount
of Principal Collections with respect to the three preceding Monthly Periods
(or, in the case of the first Distribution Date following the Negative Carry
Fill-up Date, the Class A Fixed Allocation Percentage of Principal Collections
received after the Negative Carry Fill-up Date and the Class A Fixed Allocation
Percentage of any Principal Collection received on the Negative Carry Fill-up
Date to the extent not needed for deposit in the Negative Carry Account), (ii)
any amount on deposit in the Equalization Account allocated to the Class A
Certificates pursuant to subsection 4.9(d) with respect to the three preceding
Monthly Periods, (iii) the amount, if any, allocated to the Class A Certificates
pursuant to subsections 4.9(a)(v), (vi), (ix), (x) and (xii) and (iv) the amount
of Shared Principal Collections allocated to the Series 1995-1 Certificates with
respect to the three preceding Monthly Periods pursuant to Section 4.3(e) of the
Agreement; PROVIDED, FURTHER, that with respect to any Distribution Date, Class
A Principal may not exceed the Class A Invested Amount; PROVIDED, FURTHER, that
with respect to the Scheduled Series 1995-1 Termination Date, the Class A
Principal shall be an amount equal to the Class A Invested Amount; PROVIDED,
FURTHER, that no distribution of Class A Principal shall be made which would
reduce the Class A Invested Amount to an amount less than $1,700,000 except for
a payment in full of the Class A Invested Amount.
(b) The amount of principal (for the Series 1995-1
Certificates, the "CLASS B PRINCIPAL") distributable from the Distribution
Account with respect to the Class B Certificates on each Distribution Date,
beginning with the Class B Principal Payment Commencement Date, shall be an
amount equal to the largest Class B Controlled Distribution Amount which does
not exceed an amount calculated as follows: the sum of (i) an amount equal to
the product of the Class B Fixed Allocation Percentage and the aggregate amount
of Principal Collections with respect to the three preceding Monthly Periods
(or, in the case of the first Distri bution Date following the date on which an
amount equal to the Class A Invested Amount is deposited in the Principal
Account to be applied to the payment of Class A Principal, the Class B Fixed
Allocation Percentage of Principal Collections from the date on which such
deposit is made), (ii) any amount on deposit in the Equalization Account
allocated to the Class B Certificates pursuant to subsection 4.9(d) with respect
to the three preceding Monthly Periods, (iii) the amount, if any, allocated to
the Class B Certificates pursuant to subsections 4.9(a)(v), (ix), (x) and (xii)
with respect to such Distribution Date and (iv) the amount of Shared Principal
Collections allocated to the Series
- 19 -
1995-1 Certificates with respect to the three preceding Monthly Periods pursuant
to Section 4.3(e) on and after the Class B Principal Payment Commencement Date;
PROVIDED, HOWEVER, that, with respect to any Distribution Date Class B Principal
shall not be distributable on any Distribution Date in an amount less than the
Class B Invested Amount; PROVIDED, FURTHER, that with respect to any
Distribution Date, Class B Principal may not exceed the Class B Invested Amount;
PROVIDED, FURTHER, that with respect to the Scheduled Series 1995-1 Termination
Date, the Class B Principal shall be an amount equal to the Class B Invested
Amount; PROVIDED, FURTHER, that no distribution of Class A Principal shall be
made which would reduce the Class B Invested Amount to an amount less than
$300,000 except for a payment in full of the Class B Invested Amount.
(c) The amount of principal (for the Series 1995-1
Certificates, the "CLASS C PRINCIPAL") distributable from the Distribution
Account with respect to the Class C Certificates on each Distribution Date,
beginning with the Class C Principal Payment Commencement Date, shall be an
amount equal to and calculated as follows: the sum of (i) an amount equal to the
product of the Class C Fixed Allocation Percentage and the aggregate amount of
Principal Collections with respect to the three preceding Monthly Periods (or,
in the case of the first Distribution Date following the date on which an amount
equal to the Class B Invested Amount is deposited in the Principal Account to be
applied to the payment of Class B Principal, the Class C Fixed Allocation
Percentage of Principal Collections from the date on which such deposit is
made), (ii) any amounts on deposit in the Equalization Account allocated to the
Class C Certificates pur suant to subsection 4.9(d) with respect to the three
preceding Monthly Periods, (iii) the amount, if any, allocated to the Class C
Certificates pursuant to subsections 4.9(a)(v), (x) and (xii) with respect to
such Distribution Date and (iv) the amount of Shared Principal Collections
allocated to the Series 1995-1 Certificates with respect to the three preceding
Monthly Periods pursuant to Section 4.3(e) of the Agreement on and after the
Class C Principal Payment Commencement Date; PROVIDED that with respect to any
Distribution Date, Class C Principal may not exceed the Class C Invested Amount;
PROVIDED, FURTHER, that with respect to the Scheduled Series 1995-1 Termination
Date, the Class C Principal shall be an amount equal to the Class C Invested
Amount.
(d) The amount of principal (for the Series 1995-1
Certificates, the "CLASS D PRINCIPAL") distributable from the Distribution
Account with respect to the Class D Certificates on each Distribution Date,
beginning with the Class D Principal Payment Commencement Date, shall be an
amount equal to and calculated as follows: the sum of (i) an amount equal to the
product of the Class D Fixed Allocation Percentage of Principal Collections with
respect to the related Period (or, in the case of the first Distribution Date
following the date on which an amount equal to the Class C Invested Amount is
deposited in the Principal Account to be applied to the payment of Class C
Principal, the Class D Fixed Allocation Percentage of Principal Collections from
the date on which such deposit is made), (ii) any amount on deposit in the
Equalization Account allocated to the Class D Certificates pursuant to
subsection 4.9(d) with respect to the three preceding Monthly Periods, and (iii)
the amount, if any, allocated to the Class D Certificates pursuant to
subsections 4.9(a)(v) and (xii) with respect to such Distribution Date;
PROVIDED, HOWEVER, that with respect to the Scheduled Series 1995-1 Termination
Date, the Class D Principal shall be an amount equal to the Class D Invested
Amount.
Section 4.8 [Reserved]
- 20 -
Section 4.9 APPLICATION OF FUNDS ON DEPOSIT IN THE COLLECTION
ACCOUNT FOR THE CERTIFICATES. (a) On each Business Day, the Servicer shall
deliver to the Trustee a Daily Report in which it shall instruct the Trustee to
withdraw, and the Trustee, acting in accordance with such instructions, shall
withdraw, to the extent of (x) the sum of (i) the Floating Allocation Percentage
of Finance Charge Collections available in the Collection Account and (ii)
investment earnings on amounts on deposit in the Principal Account (the
"AVAILABLE SERIES 1995-1 FINANCE CHARGE COLLECTIONS") plus (y) the Daily Cap
Proceeds Amount, if any, the amounts required to be withdrawn from the
Collection Account and the Cap Proceeds Account pursuant to subsections
4.9(a)(i) through 4.9(a)(xvii).
(i) CLASS A INTEREST. On each Business Day
during a Monthly Period, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw first from the Cap
Proceeds Account, to the extent of the Daily Cap Proceeds Amount for
such Business Day, and then from the Collection Account and deposit
into the Interest Funding Account for distribution on the next
Distribution Date to the Class A Certificateholders, to the extent of
the Available Series 1995-1 Finance Charge Collections for such
Business Day, an amount equal to the lesser of (x) the Available Series
1995-1 Finance Charge Collections and (y) the excess of (1) the sum of
Class A Interest and Carryover Class A Interest OVER (2) any amounts
with respect thereto previously deposited into the Interest Funding
Account on any prior Business Day during such Monthly Period.
Notwithstanding anything to the contrary herein, Carryover Class A
Interest shall be payable or distributable to Class A Cer
tificateholders only to the extent permitted by applicable law.
(ii) CLASS B INTEREST. On each Business Day during a
Monthly Period, the Trustee, acting in accordance with instructions
from the Servicer, shall withdraw first from the Cap Proceeds Account,
to the extent of the Daily Cap Proceeds Amount for such Business Day
(after giving effect to withdrawals pursuant to subsection 4.9(a)(i)),
and then from the Collection Account and deposit into the Interest
Funding Account for distribution on the next Distribution Date to the
Class B Certificateholders, to the extent of any Available Series
1995-1 Finance Charge Collections remaining after giving effect to the
withdrawal pursuant to subsection 4.9(a)(i), an amount equal to the
lesser of (x) any such remaining Available Series 1995-1 Finance Charge
Collections and (y) the excess of (1) the sum of Class B Interest and
Carryover Class B Interest OVER (2) any amounts with respect thereto
previously deposited into the Interest Funding Account on any prior
Business Day during such Monthly Period. Notwithstanding anything to
the contrary herein, Carryover Class B Interest shall be payable or
distributable to Class B Certificateholders only to the extent
permitted by applicable law.
(iii) CLASS C INTEREST. On each Business Day during a
Monthly Period, the Trustee, acting in accordance with instructions
from the Servicer, shall withdraw first from the Cap Proceeds Account,
to the extent of the Daily Cap Proceeds Amount for such Business Day
(after giving effect to withdrawals pursuant to subsection 4.9(a)(i)
and (ii) of the Agreement), and then from the Collection Account and
deposit into the Interest Funding Account for distribution on the next
Distribution Date to the Class C Certificateholders, to the extent of
any Available Series 1995-1 Finance Charge Collections remaining after
giving
- 21 -
effect to the withdrawal pursuant to subsections 4.9(a)(i) and (ii), an
amount equal to the lesser of (x) any such remaining Available Series
1995-1 Finance Charge Collections and (y) the excess of (1) the sum of
Class C Interest and Carryover Class C Interest OVER (2) any amounts
with respect thereto previously deposited into the Interest Funding
Account on any prior Business Day during such Monthly Period.
Notwithstanding anything to the contrary herein, Carryover Class C
Monthly Interest shall be payable or distributable to Class C
Certificateholders only to the extent permitted by applicable law.
(iv) INVESTOR SERVICING FEE. On each Business Day on
which SRI or an Affiliate of SRI is not the Servicer, the Trustee,
acting in accordance with instructions from the Servicer, shall
withdraw from the Collection Account and distribute to the Servicer, to
the extent of any Available Series 1995-1 Finance Charge Collections
remaining after giving effect to the withdrawals pursuant to
subsections 4.9(a)(i) through (iii), an amount equal to the lesser of
(x) any such remaining Available Series 1995-1 Finance Charge
Collections and (y) the excess of (i) the Servicing Fee for such
Monthly Period plus any unpaid Servicing Fees from prior Monthly
Periods over (ii) any amounts with respect thereto previously
distributed to the Servicer during such Monthly Period.
(v) INVESTOR DEFAULT AMOUNT. On each Business
Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account, to the extent of
any Available Series 1995-1 Finance Charge Collections remaining after
giving effect to the withdrawals pursuant to subsections 4.9(a)(i)
through (iv), an amount equal to the lesser of (x) any such remaining
Available Series 1995-1 Finance Charge Collections and (y) the sum of
(1) the aggregate Investor Default Amount for such Business Day PLUS
(2) the unpaid Investor Default Amount for any previous Business Day
during such Monthly Period, such amount to be (A) treated as Shared
Principal Collections during the Revolving Period, (B) during the
Amortization Period on and prior to the day on which an amount equal to
the Class A Invested Amount is deposited in the Principal Account,
deposited in the Principal Account for distribution to the Class A
Certificateholders on the next Distribution Date, (C) during the
Amortization Period, on and after the day on which such deposit to the
Principal Account with respect to the Class A Invested Amount has been
made and on and prior to the day on which an amount equal to the Class
B Invested Amount is deposited in the Principal Account, deposited in
the Principal Account for payment to the Class B Certificateholders on
the next Distribution Date, (D) during the Amortization Period, on and
after the day on which such deposit to the Principal Account with
respect to the Class B Invested Amount has been made and on and prior
to the day on which an amount equal to the Class C Invested Amount is
deposited in the Principal Account, deposited in the Principal Account
for payment to the Class C Certificateholders on the next Distribution
Date, and (E) on and after such deposit to the Principal Account with
respect to the Class C Invested Amount has been made, paid to the Class
D Certificateholders.
(vi) REIMBURSEMENT OF CLASS A INVESTOR CHARGE-OFFS.
On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection
Account, to the extent of any Available Series 1995-1 Finance Charge
- 22 -
Collections remaining after giving effect to the withdrawals pursuant
to subsections 4.9(a)(i) through (v), an amount equal to the lesser of
(x) any such remaining Available Series 1995-1 Finance Charge
Collections and (y) the unreimbursed Class A Investor Charge-Offs, such
amount during the Revolving Period to be treated as Shared Principal
Collections, and during the Amortization Period on and prior to the day
on which an amount equal to the Class A Invested Amount is deposited in
the Principal Account to be deposited in the Principal Account for
distribution to the Class A Certificateholders on the next Distribution
Date.
(vii) UNPAID CLASS B INTEREST. On each Business Day,
the Trustee, acting in accordance with the instructions from the
Servicer, shall withdraw from the Collection Account and deposit in the
Interest Funding Account for distribution to the Class B
Certificateholders on the next Distribution Date, to the extent of any
Available Series 1995-1 Finance Charge Collections remaining after
giving effect to the withdrawals pursuant to subsections 4.9(a)(i)
through (vi), an amount equal to the lesser of (x) any such remaining
Available Series 1995-1 Finance Charge Collections and (y) the sum of
(1) the amount of interest which has accrued with respect to the
outstanding aggregate principal amount of the Class B Certificates at
the Class B Certificate Rate but which has not been deposited into the
Interest Funding Account or paid to the Class B Certificateholders and
(2) any additional interest at the Class B Certificate Rate for
interest that has accrued on interest that was due during a prior
Monthly Period pursuant to this subsection but was not deposited in the
Interest Funding Account or paid to the Class B Certificateholders.
(viii) UNPAID CLASS C INTEREST. On each Business Day,
the Trustee, acting in accordance with the instructions from the
Servicer, shall withdraw from the Collection Account and deposit in the
Interest Funding Account for distribution to the Class C
Certificateholders on the next Distribution Date, to the extent of any
Available Series 1995-1 Finance Charge Collections remaining after
giving effect to the withdrawals pursuant to subsections 4.9(a)(i)
through (vii), an amount equal to the lesser of (x) any such remaining
Available Series 1995-1 Finance Charge Collections and (y) the sum of
(1) the amount of interest which has accrued with respect to the
outstanding aggregate principal amount of the Class C Certificates at
the Class C Certificate Rate but which has not been deposited into the
Interest Funding Account or paid to the Class C Certificateholders and
(2) any additional interest at the Class C Certificate Rate for
interest that has accrued on interest that was due during a prior
Monthly Period pursuant to this subsection but was not deposited in the
Interest Funding Account or paid to the Class C Certificateholders.
(ix) REIMBURSEMENT OF CLASS B INVESTOR CHARGE-OFFS.
On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection
Account, to the extent of any Available Series 1995-1 Finance Charge
Collections remaining after giving effect to the withdrawals pursuant
to subsections 4.9(a)(i) through (viii), an amount equal to the lesser
of (x) any such remaining Available Series 1995-1 Finance Charge
Collections and (y) the unreimbursed Class B Investor Charge-Offs, such
amount, (i) during the Revolving Period, to be treated as Shared
Principal Collections, (ii) during the Amortization Period, on and
prior to the day on which an amount equal to the
- 23 -
Class A Invested Amount is deposited in the Principal Account to be
deposited in the Principal Account for distribution to the Class A
Certificateholders on the next Distribution Date, and (iii) during the
Amortization Period, on and after the day on which such deposit has
been made, to be deposited in the Principal Account for payment to the
Class B Certificate-holders on the next Distribution Date.
(x) REIMBURSEMENT OF CLASS C INVESTOR
CHARGE-OFFS. On each Business Day, the Trustee, acting in accordance
with instructions from the Servicer, shall withdraw from the Collection
Account, to the extent of any Available Series 1995-1 Finance Charge
Collections remaining after giving effect to the withdrawals pursuant
to subsections 4.9(a)(i) through (ix), an amount equal to the lesser of
(x) any such remaining Available Series 1995-1 Finance Charge
Collections and (y) the unreimbursed Class C Investor Charge-Offs, such
amount, (i) during the Revolving Period, to be treated as Shared
Principal Collections, (ii) during the Amortization Period, on and
prior to the day on which an amount equal to the Class A Invested
Amount is deposited in the Principal Account, to be deposited in the
Principal Account for distribution to the Class A Certificateholders on
the next Distribution Date, and (iii) during the Amortization Period,
on and after the day on which such deposit has been made and on and
prior to the day on which an amount equal to the Class B Invested
Amount is deposited in the Principal Account, to be deposited in the
Principal Account for payment to the Class C Certificateholders on the
next Distribution Date.
(xi) CLASS D INTEREST. On each Business Day, the
Trustee, acting in accordance with instructions from the Servicer,
shall withdraw from the Collection Account and pay to the Class D
Certificateholders, to the extent of any Available Series 1995-1
Finance Charge Collections remaining after giving effect to the
withdrawals pursuant to subsections 4.9(a)(i) through (x), an amount
equal to the lesser of (x) any such remaining Available Series 1995-1
Finance Charge Collections and (y) the sum of (1) the amount of
interest which has accrued with respect to the outstanding aggregate
principal amount of the Class D Certificates at the Class D Certificate
Rate but which has not been paid to the Class D Certificateholders and
(2) any additional interest at the Class D Certificate Rate for
interest that has accrued on interest that was due during a prior
Monthly Period pursuant to this subsection but not paid to the Class D
Certificateholders.
(xii) REIMBURSEMENT OF CLASS D INVESTOR CHARGE-OFFS.
On each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection
Account, to the extent of any Available Series 1995-1 Finance Charge
Collections remaining after giving effect to the withdrawals pursuant
to subsections 4.9(a)(i) through (xi), an amount equal to the lesser of
(x) any such remaining Available Series 1995-1 Finance Charge
Collections and (y) the unreimbursed Class D Investor Charge-Offs, such
amount, (i) during the Revolving Period, to be treated as Shared
Principal Collections, (ii) during the Amortization Period on and prior
to the day on which an amount equal to the Class A Invested Amount is
deposited in the Principal Account to be deposited in the Principal
Account for distribution to the Class A Certificateholders on the next
Distribution Date, (iii) during the Amortization Period, on and after
the day on which such deposit to the Principal Account with respect to
the Class A Invested Amount has been made and on and
- 24 -
prior to the day on which an amount equal to the Class B Invested
Amount is deposited in the Principal Account, deposited in the
Principal Account for payment to the Class B Certif icateholders on the
next Distribution Date, (iv) during the Amortization Period on and
after the day on which such deposit to the Principal Account with
respect to the Class B Invested Amount has been made on and prior to
the day on which an amount equal to the Class C Invested Amount is
deposited in the Principal Account, deposited in the Principal Account
for payment to the Class C Certificateholders on the next Distribution
Date and (v) on and after the day such deposit to the Principal Account
with respect to Class C Invested Amount has been made, paid to the
Class D Certificateholders.
(xiii) INVESTOR SERVICING FEE. On each Business Day,
if SRI or an Affiliate of SRI is the Servicer, the Trustee, acting in
accordance with instructions from the Servicer, shall withdraw from the
Collection Account and distribute to the Servicer, to the extent of
Available Series 1995-1 Finance Charge Collections for such Business
Day (after giving effect to the withdrawals pursuant to subsections
4.9(a)(i) through (xii)), the Investor Servicing Fee accrued since the
preceding Business Day PLUS any Investor Servicing Fee due with respect
to any prior Business Day but not distributed to the Servicer.
(xiv) CLASS A EARLY TERMINATION AMOUNT. On each
Business Day following an Early Termination Event, the Trustee, acting
in accordance with instructions from the Servicer, shall withdraw from
the Collection Account and deposit in the Interest Funding Account for
distribution to the Class A Certificateholders on the next Distribution
Date, to the extent of any Available Series 1995-1 Finance Charge
Collections remaining after giving effect to the withdrawals pursuant
to subsections 4.9(a)(i) through (xiii), an amount equal to the lesser
of (A) any such remaining Available Series 1995-1 Finance Charge
Collections and (B) the unpaid Class A Early Termination Amount.
(xv) CLASS B EARLY TERMINATION AMOUNT. On each
Business Day following an Early Termination Event, the Trustee, acting
in accordance with instructions from the Servicer, shall withdraw from
the Collection Account and deposit in the Interest Funding Account for
distribution to the Class B Certificateholders on the next Distribution
Date, to the extent of any Available Series 1995-1 Finance Charge
Collections remaining after giving effect to the withdrawals pursuant
to subsections 4.9(a)(i) through (xiv), an amount equal to the lesser
of (A) any such remaining Available Series 1995-1 Finance Charge
Collections and (B) the unpaid Class B Early Termination Amount.
(xvi) CLASS C EARLY TERMINATION AMOUNT. On each
Business Day following an Early Termination Event, the Trustee, acting
in accordance with instructions from the Servicer, shall withdraw from
the Collection Account and deposit in the Interest Funding Account for
distribution to the Class C Certificateholders on the next Distribution
Date, to the extent of any Available Series 1995-1 Finance Charge
Collections remaining after giving effect to the withdrawals pursuant
to subsections 4.9(a)(i) through (xv), an amount equal to the lesser of
(A) any such remaining Available Series 1995-1 Finance Charge
Collections and (B) the unpaid Class C Early Termination Amount.
- 25 -
(xvii) EXCESS FINANCE CHARGE COLLECTIONS. Any amounts
remaining in the Collection Account to the extent of any Available
Series 1995-1 Finance Charge Collections remaining after giving effect
to the withdrawals pursuant to subsection 4.9(a)(i) through (xiii),
shall be treated as Excess Finance Charge Collections, and the Servicer
shall direct the Trustee in writing on each Business Day to withdraw
such amounts from the Collection Account and to first make such amounts
available to pay to Certificateholders of other Series to the extent of
shortfalls, if any, in amounts payable to such Certificateholders from
Finance Charge Collections allocated to such other Series, then to pay
any unpaid commercially reasonable costs and expenses of a Successor
Servicer, if any, and then pay any remaining Excess Finance Charge
Collections to the Transferor; PROVIDED, HOWEVER, that on any Business
Day during any Early Amortization Period, the Trustee shall deposit any
Available Series 1995-1 Finance Charge Collections remaining after
giving effect to the withdrawals pursuant to subsections 4.9(a)(i)
through (a)(xvi), into the Interest Funding Account and shall add such
funds to the Available Series 1995-1 Finance Charge Collections on each
subsequent Business Day in such Monthly Period until the last Business
Day of the related Monthly Period, when the aggregate amount of such
remaining Available Series 1995-1 Finance Charge Collections shall be
distributed as Excess Finance Charge Collections in accordance with
this subsection 4.9(a)(xvii) (without giving effect to this proviso).
(b) For each Business Day with respect to the Revolving
Period, the funds on deposit in the Collection Account to the extent of the
product of (i) the sum of the Class A Floating Allocation Percentage, the Class
B Floating Allocation Percentage and the Class C Floating Allocation Percentage
and (ii) Principal Collections with respect to such Business Day will be treated
as Shared Principal Collections and applied, pursuant to the written direction
of the Servicer in the Daily Report for such Business Day, as provided in
subsection 4.3(e) of the Agreement.
(c) For each Business Day on and after the Amortization
Period Commencement Date, the amount of funds on deposit in the Collection
Account as described below will be distributed, pursuant to the written
direction of the Servicer in the Daily Report for such Business Day in the
following priority:
(i) on and prior to the day on which an amount
equal to the Class A Invested Amount has been deposited in the
Principal Account to be applied to the payment of Class A Principal, an
amount (not in excess of the Class A Invested Amount) equal to the sum
of (w) the product of the Class A Fixed Allocation Percentage and
Principal Collections in the Collection Account at the end of the
preceding Business Day, (x) any amount on deposit in the Equalization
Account allocated to the Class A Certificates on such Business Day
pursuant to subsection 4.9(d), (y) amounts to be paid pursuant to
subsections 4.9(a)(v), (vi), (ix), (x) and (xii) on such Business Day
and (z) the amount of Shared Principal Collections allocated to the
Series 1995-1 Certificates in accordance with Section 4.14 on such
Business Day (such sum, the "CLASS A DAILY PRINCIPAL AMOUNT"), will be
deposited into the Principal Account;
(ii) on and after the day on which an amount equal
to the Class A Invested Amount has been deposited in the Principal
Account to be applied to the payment of Class A
- 26 -
Principal, an amount (not in excess of the Class B Invested Amount)
equal to the sum of (w) an amount equal to the product of the Class B
Fixed Allocation Percentage and Principal Collections in the Collection
Account at the end of the preceding Business Day, (x) any amount on
deposit in the Equalization Account allocated to the Class B
Certificates on such Business Day pursuant to subsection 4.9(d), (y)
the amount, if any, allocated to be paid to the Class B Certificates
pursuant to subsections 4.9(a)(v), (ix), (x) and (xii) with respect to
such Business Day and (z) the amount of Shared Principal Collections
allocated to the Series 1995-1 Certificates in accordance with Section
4.14 on such Business Day (such sum, the "CLASS B DAILY PRINCIPAL
AMOUNT") will be deposited into the Principal Account;
(iii) on and after the day on which an amount equal
to the Class B Invested Amount has been deposited in the Principal
Account to be applied to the payment of Class B Principal, an amount
(not in excess of the Class C Invested Amount) equal to the sum of (w)
an amount equal to the product of the Class C Fixed Allocation
Percentage and Principal Collections in the Collection Account at the
end of the preceding Business Day, (x) any amount on deposit in the
Equalization Account allocated to the Class C Certificates on such
Business Day pursuant to subsection 4.9(d), (y) the amount, if any,
allocated to be paid to the Class C Certificates pursuant to
subsections 4.9(a)(v), (x) and (xii) with respect to such Business Day
and (z) the amount of Shared Principal Collections allocated to the
Series 1995-1 Certificates in accordance with Section 4.14 on such
Business Day (such sum, the "CLASS C DAILY PRINCIPAL AMOUNT") will be
deposited into the Principal Account;
(iv) on and after the day on which an amount equal to
the Class C Invested Amount has been deposited in the Principal Account
to be applied to the payment of Class C Principal, an amount equal to
the sum of (v) the amount on deposit in the Negative Carry Account at
the end of the preceding Business Day, (w) an amount equal to the
product of the Class D Fixed Allocation Percentage and Principal
Collections in the Collection Account at the end of the preceding
Business Day, (x) any amount on deposit in the Equalization Account
allocated to the Class D Certificates on such Business Day pursuant to
subsection 4.9(d), (y) the amount, if any, allocated to be paid to the
Class D Certificates pursuant to subsections 4.9(a)(v) and (xii) with
respect to such Business Day and (z) the amount of Shared Principal
Collections allocated to the Series 1995-1 Certificates in accordance
with Section 4.14 on such Business Day (such sum, the "CLASS D DAILY
PRINCIPAL AMOUNT") will be distributed to the Class D
Certificateholders; and
(v) an amount equal to the excess, if any, of
(A) the product of (x) the sum of the Class A Fixed Allocation
Percentage, the Class B Fixed Allocation Percentage and the Class C
Fixed Allocation Percentage and (y) Principal Collections in the
Collection Account at the end of the preceding Business Day over (B)
the sum of the amounts deposited in the Principal Account pursuant to
clauses (i)(w), (ii)(w) and (iii)(w) above will be treated as Shared
Principal Collections and applied as provided in subsection 4.3(e) of
the Agreement.
(d) On the first Business Day of the Amortization Period funds
on deposit in the Equalization Account will be deposited in the
Principal Account to the extent of the lesser of (x) the
- 27 -
Invested Amount and (y) the product of (i) the product of (A) 100% minus the
Transferor Percentage minus the fixed allocation percentage represented by any
Transferor Retained Certificates and (B) the amount on deposit in the
Equalization Account at the beginning of the Amortization Period and (ii) a
fraction, the numerator of which is equal to the sum of the Class A Invested
Amount, the Class B Invested Amount and the Class C Invested Amount and the
denominator of which is equal to the sum of the invested amounts of all Series
in amortization periods on such day (less any amounts on deposit in principal
accounts for such Series and less the invested amount of any class of Transferor
Retained Certificates). Any funds retained in the Equalization Account pursuant
to the preceding sentence will be allocated to the Class A Certificates, the
Class B Certificates and the Class C Certificates, to the extent that Default
Amounts allocated to the Transferor Interest or adjustments as described in
Section 3.8 of the Agreement would cause the Transferor Interest to be less than
the Minimum Transferor Interest and, with respect to any credit adjustment, the
Transferor has not made an Adjustment Payment to the Equalization Account, in an
amount equal to the product of (i) the amount of such reduction below the
Transferor Interest and (ii) a fraction the numerator of which is equal to the
sum of the Class A Invested Amount, the Class B Invested Amount and the Class C
Invested Amount and the denominator of which is equal to the sum of the invested
amounts of all Series in amortization periods on such day (less any amounts on
deposit in principal accounts for such Series). Such amounts will be allocated
in the following order of priority (i) to the Class A Certificates in an amount
not to exceed the Class A Invested Amount after subtracting therefrom any
amounts to be deposited in the Principal Account with respect thereto pursuant
to subsections 4.9(c)(i)(w) and (y), (ii) to the Class B Certificates in an
amount not to exceed the Class B Invested Amount after subtracting therefrom any
amounts to be deposited in the Principal Account with respect thereto pursuant
to subsections 4.9(c)(ii)(w) and (y), and (iii) to the Class C Certificates in
an amount not to exceed the Class C Invested Amount after subtracting therefrom
any amounts to be deposited in the Principal Account with respect thereto
pursuant to subsections 4.9(c)(iii)(w) and (y). On and after the Class D
Principal Payment Commencement Date any amounts remaining on deposit in the
Equalization Account and allocated to the Series 1995-1 Certificates will be
deposited in the Principal Account in an amount not to exceed the Class D
Invested Amount after subtracting therefrom any amounts to be deposited in the
Principal Account with respect thereto pursuant to subsections 4.9(c)(iv)(w) and
(y).
Section 4.10 COVERAGE OF NEGATIVE CARRY AMOUNT AND REQUIRED
AMOUNT FOR THE SERIES 1995-1 CERTIFICATES. (a) To the extent that any amounts
are on deposit in the Principal Account or the Equalization Account on any
Business Day, the Servicer shall apply Transferor Finance Charge Collections in
an amount equal to the excess of (x) the product of (a) the Base Rate, (b) the
amounts on deposit in the Principal Account and the Equalization Account and (c)
the number of days elapsed since the previous Business Day DIVIDED by the actual
number of days in such year over (y) the aggregate amount of all earnings since
the previous Business Day available from the Cash Equivalents in which funds on
deposit in the Equalization Account are invested (the "NEGATIVE CARRY AMOUNT")
in the manner specified for application of Available Series 1995-1 Finance
Charge Collections in subsections 4.9(a)(i) through (xiii). On each Business Day
on and after the Negative Carry Fill-up Date but prior to the day on which an
amount equal to the Class C Invested Amount has been deposited in the Principal
Account to be applied to payment of Class C Principal, to the extent of any
Negative Carry Amount remaining after application of Transferor Finance Charge
Collections, the Servicer shall apply all or a portion of the amount on deposit
in the
- 28 -
Negative Carry Account to the extent of such remaining Negative Carry Amount in
the manner specified for application of Available Series 1995-1 Finance Charge
Collections in subsections 4.9(a)(i) through (xiii).
(b) To the extent that on any Business Day payments are
being made pursuant to any of subsections 4.9(a)(i) through (xiii),
respectively, and the full amount to be paid pursuant to any such subsection
receiving payments on such Business Day is not paid in full on such Business
Day, the Servicer shall apply all or a portion of the Excess Finance Charge
Collections from other Series with respect to such Business Day allocable to the
Series 1995-1 Certificates in an amount (the "REQUIRED AMOUNT") equal to the
excess of the full amount to be allocated or paid pursuant to the applicable
subsection over the amount applied with respect thereto from Available Series
1995-1 Finance Charge Collections, Transferor Finance Charge Collections and
amounts on deposit in the Negative Carry Account on such Business Day. Excess
Finance Collections allocated to the Series 1995-1 Certificates for any Business
Day shall mean an amount equal to the product of (x) Excess Finance Charge
Collections available from all other Series for such Business Day and (y) a
fraction, the numerator of which is the Required Amount for such Business Day
and the denominator of which is the aggregate amount of shortfalls in required
amounts or other amounts to be paid from Finance Charge Collections for all
Series for such Business Day.
Section 4.11 PAYMENT OF CERTIFICATE INTEREST. On each Transfer
Date, the Trustee, acting in accordance with instructions from the Servicer set
forth in the Daily Report for such day, shall withdraw the amount on deposit in
the Interest Funding Account with respect to the three prior Monthly Periods
allocable to the Series 1995-1 Certificates and deposit such amount in the Dis
tribution Account. On each Distribution Date, the Paying Agent shall pay in
accordance with Section 5.1 of the Agreement to (x) the Class A
Certificateholders from the Distribution Account such amount deposited into the
Distribution Account on the related Transfer Date allocable thereto pursuant to
subsection 4.9(a)(i), (y) the Class B Certificateholders from the Distribution
Account the amount deposited into the Distribution Account allocable thereto
pursuant to subsections 4.9(a)(ii) and (vii) and (z) the Class C
Certificateholders from the Distribution Account the amount deposited into the
Distribution Account allocable thereto pursuant to subsections 4.9(a)(iii) and
(viii).
Section 4.12 PAYMENT OF CERTIFICATE PRINCIPAL. (a) On the
Transfer Date preceding each Distribution Date with respect to the Amortization
Period, the Trustee, acting in accordance with instructions from the Servicer
set forth in the Daily Report for such day, shall withdraw from the Principal
Account and deposit in the Distribution Account an amount equal to but not less
than the Class A Principal for such Distribution Date. On each Distribution Date
with respect to the Amortization Period, the Paying Agent shall pay in
accordance with Section 5.1 to the Class A Certificateholders from the
Distribution Account such amount deposited into the Distribution Account on the
related Transfer Date.
(b) On the Transfer Date preceding the Class B
Principal Payment Commencement Date and each Distribution Date thereafter, the
Trustee, acting in accordance with instructions from the Servicer set forth in
the Daily Report for such day, shall withdraw from the Principal Account and
deposit in the Distribution Account an amount equal to but not less than the
- 29 -
Class B Principal for such Distribution Date. On the Class B Principal Payment
Commencement Date, after the payment of any principal amounts to the Class A
Certificates on such day, and on each Distribution Date thereafter until the
Class B Invested Amount is paid in full, the Paying Agent shall pay in
accordance with Section 5.1 to the Class B Certificateholders from the
Distribution Account such amount deposited into the Distribution Account on the
related Transfer Date.
(c) On the Transfer Date preceding the Class C
Principal Payment Commencement Date and each Distribution Date thereafter, the
Trustee, acting in accordance with instructions from the Servicer set forth in
the Daily Report for such day, shall withdraw from the Principal Account and
deposit in the Distribution Account an amount equal to the lesser of the Class C
Invested Amount and the amount on deposit in the Principal Account allocable to
the Series 1995-1 Certificates (after giving effect to transfers pursuant to
subsection 4.12(a) and (b)). On the Class C Principal Payment Commencement Date,
after the payment of any principal amounts to the Class B Certificates on such
day, and on each Distribution Date thereafter until the Class C Invested Amount
is paid in full, the Paying Agent shall pay in accordance with Section 5.1 to
the Class C Certificateholders from the Distribution Account such amount
deposited into the Distribution Account on the related Transfer Date.
(d) On the Transfer Date preceding the Class D
Principal Payment Commencement Date and each Business Day thereafter, the
Trustee, acting in accordance with in structions from the Servicer set forth in
the Daily Report for such day, shall make payments of principal to the Class D
Certificateholder in accordance with subsection 4.9(c)(v).
Any amounts remaining in the Principal Account and allocable
to the Series 1995-1 Certificates, after the Class D Invested Amount has been
paid in full, will be treated as Shared Principal Collections and applied in
accordance with Section 4.3(e) of the Agreement.
Section 4.13 INVESTOR CHARGE-OFFS. (a) If, on any
Determination Date, the aggregate Investor Default Amount, if any, for each
Business Day in the preceding Monthly Period exceeded the Available Series
1995-1 Finance Charge Collections applied to the payment thereof pursuant to
subsection 4.9(a)(v) and the amount of Transferor Finance Charge Collections and
Excess Finance Charge Collections allocated thereto pursuant to subsection 4.10,
the Class D Invested Amount will be reduced by the amount by which such
aggregate Investor Default Amount exceeds the amount applied with respect
thereto during such preceding Monthly Period (the "CLASS D INVESTOR CHARGE-
OFFS").
(b) In the event that any such reduction of the Class D
Invested Amount would cause the Class D Invested Amount to be a negative number,
the Class D Invested Amount will be reduced to zero, and the Class C Invested
Amount will be reduced by the amount by which the Class D Invested Amount would
have been reduced below zero, but not more than the aggregate Investor Default
Amount for such Monthly Period (the "CLASS C INVESTOR CHARGE-OFFS").
(c) In the event that any such reduction of the Class C
Invested Amount would cause the Class C Invested Amount to be a negative number,
the Class C Invested Amount will be reduced to zero, and the Class B Invested
Amount will be reduced by the amount by which the
- 30 -
Class C Invested Amount would have been reduced below zero, but not more than
the aggregate Investor Default Amount for such Monthly Period (the "CLASS B
INVESTOR CHARGE-OFFS").
(d) In the event that any such reduction of the Class B
Invested Amount would cause the Class B Invested Amount to be a negative number,
the Class B Invested Amount will be reduced to zero, and the Class A Invested
Amount will be reduced by the amount by which the Class B Invested Amount would
have been reduced below zero, but not more than the aggregate Investor Default
Amount for such Monthly Period (a "CLASS A INVESTOR CHARGE-OFF"). To the extent
that on any subsequent Business Day there is a positive balance of Available
Series 1995-1 Finance Charge Collections after giving effect to subsections
4.9(a)(i) through (v), the Servicer will apply such excess Finance Charge
Collections as provided in subsection 4.9(a)(vi) to reimburse the aggre gate
amount of Class A Investor Charge-Offs not previously reimbursed, up to the
amount so available.
(e) To the extent that on any Determination Date there
is a positive balance of the Available Series 1995-1 Finance Charge Collections
after giving effect to allocations and distri butions pursuant to subsections
4.9(a)(i) through (viii), the Servicer will apply such excess Finance Charge
Collections as provided in subsection 4.9(a)(ix) to reimburse the aggregate
amount of Class B Investor Charge-Offs not previously reimbursed, up to the
amount so available.
(f) To the extent that on any Determination Date there
is a positive balance of the Available Series 1995-1 Finance Charge Collections
after giving effect to allocations and dis tributions pursuant to subsections
4.9(a)(i) through (ix), the Servicer will apply such excess Finance Charge
Collections as provided in subsection 4.9(a)(x) to reimburse the aggregate
amount of Class C Investor Charge-Offs not previously reimbursed, up to the
amount so available.
(g) To the extent that on any Determination Date there
is a positive balance of the Available Series 1995-1 Finance Charge Collections
after giving effect to allocations and dis tributions pursuant to subsections
4.9(a)(i) through (xi), the Servicer will apply such excess Finance Charge
Collections as provided in subsection 4.9(a)(xii) to reimburse the aggregate
amount of Class D Investor Charge-Offs not previously reimbursed, up to the
amount so available.
Section 4.14 SHARED PRINCIPAL COLLECTIONS. Shared Principal
Collections allocated to the Series 1995-1 Certificates and to be applied
pursuant to subsections 4.9(c)(i)(z), 4.9(c)(ii)(z), 4.9(c)(iii)(z) and
4.9(c)(iv)(z) for any Business Day with respect to the Amortization Period shall
mean an amount equal to the product of (x) Shared Principal Collections for all
Series for such Business Day and (y) a fraction, the numerator of which is the
Principal Shortfall for the Series 1995-1 Certificates for such Business Day and
the denominator of which is the aggregate amount of Principal Shortfalls for all
Series for such Business Day. For any Business Day with respect to the Revolving
Period, Shared Principal Collections allocated to the Series 1995-1 Certificates
shall be zero.
SECTION 7. ARTICLE V OF THE AGREEMENT. Article V of the
Agreement shall read in its entirety as follows and shall be applicable only to
the Series 1995-1 Certificates:
- 31 -
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
CERTIFICATEHOLDERS
Section 5.1 DISTRIBUTIONS. (a) on each Distribution
Date, the Paying Agent shall distribute (in accordance with the Settlement
Statement delivered by the Servicer to the Trustee and the Paying Agent pursuant
to subsection 3.4(c) of the Agreement) to each Class A Certificateholder of
record on the preceding Record Date (other than as provided in subsection 2.4(d)
or in Section 12.3 of the Agreement respecting a final distribution) such
Certificateholder's PRO RATA share (based on the aggregate Undivided Interests
represented by Class A Certificates held by such Certificate holder) of amounts
on deposit in the Distribution Account as are payable to the Class A
Certificateholders pursuant to Sections 4.11 and 4.12 hereof by wire transfer to
each Class A Certificateholder to an account or accounts designated by such
Class A Certificateholder by written notice given to the Paying Agent not less
than five days prior to the related Distribution Date; PROVIDED, HOWEVER, that
the final payment in retirement of the Class A Certificates will be made only
upon presentation and surrender of the Class A Certificates at the office or
offices specified in the notice of such final distribution delivered by the
Trustee pursuant to Section 12.3 of the Agreement.
(b) On each Distribution Date, the Paying Agent shall
distribute (in accordance with the Settlement Statement delivered by the
Servicer to the Trustee and the Paying Agent pursuant to subsection 3.4(c) of
the Agreement) to each Class B Certificateholder of record on the preceding
Record Date (other than as provided in subsection 2.4(d) or in Section 12.3 of
the Agreement respecting a final distribution) such Certificateholder's PRO RATA
share (based on the aggregate Undivided interests represented by Class B
Certificates held by such Certificateholder) of amounts on deposit in the
Distribution Account as are payable to the Class B Certificateholders pursuant
to Section 4.11 and 4.12 hereof by wire transfer to each Class B
Certificateholder to an account or accounts designated by such Class B
Certificateholder by written notice given to the Paying Agent not less than five
days prior to the related Distribution Date; PROVIDED, HOWEVER, that the final
payment in retirement of the Class B Certificates will be made only upon
presentation and surrender of the Class B Certificates at the office or offices
specified in the notice of such final distribution delivered by the Trustee
pursuant to Section 12.3.
(c) On each Distribution Date, the Paying Agent shall
distribute (in accordance with the Settlement Statement delivered by the
Servicer to the Trustee and the Paying Agent pursuant to subsection 3.4(c) of
the Agreement) to each Class C Certificateholder of record on the preceding
Record Date (other than as provided in subsection 2.4(d) or in Section 12.3 of
the Agreement respecting a final distribution) such Certificateholder's PRO RATA
share (based on the aggregate Undivided interests represented by Class C
Certificates held by such Certificateholder) of amounts on deposit in the
Distribution Account as are payable to the Class C Certificateholders pursuant
to Section 4.11 and 4.12 hereof by wire transfer to each Class C
Certificateholder to an account or accounts designated by such Class C
Certificateholder by written notice given to the Paying Agent not less than five
days prior to the related Distribution Date; PROVIDED, HOWEVER, that the final
payment in retirement of the Class C Certificates will be made only upon
presentation and
- 32 -
surrender of the Class C Certificates at the office or offices specified in the
notice of such final distribution delivered by the Trustee pursuant to Section
12.3 of the Agreement.
Section 5.2 CERTIFICATEHOLDERS' STATEMENT. (a) On the 15th day
of each calendar month (or if such day is not a Business Day the next succeeding
Business Day), the Paying Agent shall forward to each Certificateholder and the
Rating Agency a statement substantially in the form of Exhibit C prepared by the
Servicer and delivered to the Trustee and the Paying Agent on the preceding
Determination Date setting forth the following information (which, in the case
of (i), (ii) and (iii) below, shall be stated on the basis of an original
principal amount of $1,000 per Certificate and, in the case of (ix) and (x),
shall be stated on an aggregate basis and on the basis of an original principal
amount of $1,000 per Certificate):
(i) the total amount distributed;
(ii) the amount of such distribution allocable to
Certificate Principal;
(iii) the amount of such distribution allocable to
Certificate Interest;
(iv) the amount of Principal Collections received in
the Collection Account during the preceding Monthly Period
and the three preceding Monthly Periods and allocated in
respect of the Class A Certificates, the Class B
Certificates, the Class C Certificates and the Class D
Certificates, respectively;
(v) the amount of Finance Charge Collections processed
during the three preceding Monthly Periods and allocated in
respect of the Class A Certificates, the Class B
Certificates, the Class C Certificates and the Class D
Certificates, respectively;
(vi) the aggregate amount of Principal Receivables, the
Invested Amount, the Class A Invested Amount, the Class B
Invested Amount, the Class C Invested Amount, the Class D
Invested Amount, the Floating Allocation Percentage and,
during the Amortization Period, the Class A Fixed Allocation
Percentage, Class B Fixed Allocation Percentage, or Class C
Fixed Allocation Percentage as applicable, with respect to
the Principal Receivables in the Trust as of the end of the
day on the Record Date;
(vii) the aggregate outstanding balance of Accounts
which are current, current/delinquent, 30, 60, 90, 120, 150
and 180 days delinquent as of the end of the day on the
Record Date;
(viii) the aggregate Investor Default Amount and the
Default Amount for the preceding Monthly Period and the
three preceding Monthly Periods;
(ix) the aggregate amount of Class A Investor
Charge-Offs, Class B Investor Charge-Offs, Class C Investor
Charge-Offs and Class D Investor Charge-Offs for the three
preceding Monthly Periods;
- 33 -
(x) the aggregate amount of the Servicing Fees for the
three preceding Monthly Periods;
(xi) the Class A Pool Factor, the Class B Pool Factor,
the Class C Pool Factor and the Class D Pool Factor as of
the end of the last day of the Monthly Period immediately
preceding the Determination Date;
(xii) the amount paid on the Interest Rate Cap;
(xiii) the current rating from the Rating Agency for
each class of Investor Certificates;
(xiv) the aggregate amount of funds in the Equalization
Account as of the last day of the Monthly Period immediately
preceding the Distribution Date;
(xv) the Class A Certificate Rate, the Class B
Certificate Rate, the Class C Certificate Rate and the Class
D Certificate Rate; and
(xvi) the Applicable Reserve Ratio for the current
Monthly Period.
(b) ANNUAL CERTIFICATEHOLDERS' TAX STATEMENT. On or
before January 31 of each calendar year, beginning with calendar year 1996, the
Trustee shall distribute to each Person who at any time during the preceding
calendar year was a Series 1995-1 Certificateholder, a statement prepared by the
Servicer containing the information required to be contained in the regular
report to Series 1995-1 Certificateholders, as set forth in subclauses (i), (ii)
and (iii) above, aggregated for such calendar year or the applicable portion
thereof during which such Person was a Series 1995-1 Certificateholder, together
with such other customary information (consistent with the treatment of the
Certificates as debt) as the Trustee or the Servicer deems necessary or
desirable to enable the Series 1995-1 Certificateholders to prepare their tax
returns. Such obligations of the Trustee shall be deemed to have been satisfied
to the extent that substantially comparable information shall be provided by the
Trustee pursuant to any requirements of the Internal Revenue Code as from time
to time in effect.
SECTION 8. SERIES 1995-1 PAY OUT EVENTS. If any one of the
following events shall occur with respect to the Series 1995-1 Certificates:
(a) failure on the part of the Transferor (i) to make any
payment or deposit required to be made by the Transferor by the terms of (A) the
Agreement or (B) this Series Supplement, on or before the date occurring five
Business Days after the date such payment or deposit is required to be made
herein or (ii) duly to observe or perform in any material respect any covenants
or agreements of the Transferor set forth in the Agreement or this Series
Supplement, which failure has a material adverse effect on the Series 1995-1
Certificateholders and which con tinues unremedied for a period of 60 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Transferor by the Trustee, or to the
Transferor and the Trustee by the Holders of Series 1995-1 Certificates
evidencing Undivided
- 34 -
Interests aggregating not less than 50% of the Invested Amount of this Series
1995-1, and continues to affect materially and adversely the interests of the
Series 1995-1 Certificateholders for such period;
(b) any representation or warranty made by the Transferor in
the Agreement or this Series Supplement, or any information contained in a
computer file or microfiche list required to be delivered by the Transferor
pursuant to Section 2.1 or 2.6 of the Agreement, (i) shall prove to have been
incorrect in any material respect when made or when delivered, which continues
to be incorrect in any material respect for a period of 60 days after the date
on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Trans feror by the Trustee, or to the Transferor
and the Trustee by the Holders of the Series 1995-1 Certificates evidencing
Undivided Interests aggregating more than 50% of the Invested Amount of this
Series 1995-1, and (ii) as a result of which the interests of the Series 1995-1
Certificateholders are materially and adversely affected and continue to be
materially and adversely affected for such period; PROVIDED, HOWEVER, that a
Series 1995-1 Pay Out Event pursuant to this subsection 8(b) shall not be deemed
to have occurred hereunder if the Transferor has accepted reassignment of the
related Receivable, or all of such Receivables, if applicable, during such
period in accordance with the provisions of the Agreement;
(c) the average of the Portfolio Yields for any three
consecutive Monthly Periods is reduced to a rate which is less than the weighted
average of the Base Rates for such three consecutive Monthly Periods;
(d) (i) the Transferor Interest shall be less than the Minimum
Transferor Interest, (ii) the Retained Interest is less than the Minimum
Retained Interest or (iii) the amount of Principal Receivables in the Trust and
the amount on deposit in the Equalization Account shall be less than the Minimum
Aggregate Principal Receivables, in each case for 15 consecutive days;
(e) any Servicer Default shall occur which would have a
material adverse effect on the Series 1995-1 Certificateholders;
then, in the case of any event described in subparagraph (a),
(b) or (e), after the applicable grace period, if any, set forth in such
subparagraphs, the Holders of Series 1995-1 Certificates evidencing Undivided
Interests aggregating more than 50% of the Invested Amount of any class of this
Series 1995-1 by notice then given in writing to the Trustee, the Transferor and
the Servicer may declare that a pay out event (a "SERIES 1995-1 PAY OUT EVENT")
has occurred as of the date of such notice, and in the case of any event
described in subparagraphs (c) or (d), a Series 1995-1 Pay Out Event shall occur
without any notice or other action on the part of the Trustee or the Series
1995-1 Certificateholders immediately upon the occurrence of such event.
Furthermore, if a Series 1995-1 Pay Out Event shall be deemed to have occurred
in regards to any event described in subparagraph (a) above and such event shall
have been willful on the part of the Transferor or a Trust Pay Out Event shall
be deemed to have occurred in regard to an event de scribed in subparagraph (c)
of Section 9.1 of the Agreement (either such event, an "EARLY TERMI NATION
EVENT") and either such event shall have occurred on or before August 11, 1996,
then the Holders of the Class A Certificates shall receive the Class A Early
Termination Amount to the extent
- 35 -
of amounts allocated with respect thereto pursuant to subsection 4.9(a)(xiv),
the Holders of the Class B Certificates shall receive the Class B Early
Termination Amount to the extent of amounts allocated with respect thereto
pursuant to subsection 4.9(a)(xv) and the Holders of the Class C Certificates
shall receive the Class C Early Termination Amount to the extent of amounts
allocated with respect thereto pursuant to subsection 4.9(a)(xvi) in addition to
payments of principal and accrued interest otherwise payable to the Holders of
the Class A Certificates, the Class B Certificates and the Class C Certificates
pursuant to the provisions hereof.
SECTION 9. SERIES 1995-1 TERMINATION. The right of the Series
1995-1 Certificateholders to receive payments from the Trust will terminate on
the first Business Day following the Series 1995-1 Termination Date unless such
Series is an Affected Series as specified in Section 12.1(c) of the Agreement
and the sale contemplated therein has not occurred by such date, in which event
the Series 1995-1 Certificateholders shall remain entitled to receive proceeds
of such sale when such sale occurs.
SECTION 10. PERIODIC FINANCE CHARGES AND OTHER FEES. The
Transferor hereby agrees that, except as otherwise required by any Requirement
of Law, or as is deemed by the Transferor to be necessary in order for the
Transferor to maintain its credit card business, based upon a good faith
assessment by the Transferor, in its sole discretion, of the nature of the
competition in the credit card business, it shall not at any time reduce the
Periodic Finance Charges assessed on any Receivable or other fees on any Account
if, as a result of such reduction, the Transferor's reasonable expectation of
the Portfolio Yield as of such date would be less than the Base Rate.
SECTION 11. LEGENDS; TRANSFER AND EXCHANGE; RESTRICTIONS ON
TRANSFER OF SERIES 1995-1 CERTIFICATES; TAX TREATMENT.
(a) Each Series 1995-1 Certificate will bear a legend
substantially in the following form:
THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES
LAW OF ANY STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAW.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF SRI
RECEIVABLES PURCHASE CO., INC. THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS
SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
- 36 -
AMENDED, OR (III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS
BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY.
(b) Upon surrender for registration of transfer of any
Series 1995-1 Certificate at the office of the Transfer Agent and Registrar,
accompanied by a certification by the Series 1995-1 Certificateholder
substantially in the form attached as Exhibit D if the new purchaser is a
"qualified institutional buyer" as defined in Rule 144A under the Securities Act
of 1933, or in the form attached as Exhibit E if the new purchaser is not a
"qualified institutional buyer," and by a written instrument of transfer in the
form approved by the Transferor and the Trustee (it being understood that, until
notice to the contrary is given to Series 1995-1 Certificateholders, the
Transferor and the Trustee shall each be deemed to have approved the form of
instrument of transfer, if any printed on any definitive Series 1995-1
Certificate), executed by the registered owner, in person or by such Series
1995-1 Certificateholder's attorney thereunto duly authorized in writing, such
Series 1995-1 Certificate shall be transferred upon the register, and the
Transferor shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferees one or more new registered Series 1995-1
Certificate of any authorized denominations and of a like aggregate principal
amount and tenor. Transfers and exchanges of Series 1995-1 Certificates shall be
subject to such restrictions as shall be set forth in the text of the Series
1995-1 Certificates and such reasonable regulations as may be prescribed by the
Transferor. Successive registrations and registrations of transfers as aforesaid
may be made from time to time as desired, and each such registration shall be
noted on the register.
(c) In no event shall the Class D Certificates or any
interest therein be transferred, sold, exchanged, pledged, participated or
otherwise assigned hereunder, in whole or in part.
(d) Each Certificateholder, by accepting and holding
such Certificate or interest therein, will be deemed to have represented and
warranted that it is not (i) an employee benefit plan (as defined in Section
3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a
plan described in Section 4975(e)(1) of the Code, or (iii) any entity whose
underlying assets include plan assets by reason of a plan's investment in the
entity.
(e) The Class C Certificateholders shall comply with
their obligations under Section 3.7 of the Agreement with respect to the tax
treatment of the Class C Certificates, except to the extent that a relevant
taxing authority has disallowed such treatment. In addition, the Transferor and
the Trustee shall not be required to recognize any transfer of an interest in a
Class C Certificate unless the transferor of such interest shall deliver to the
Transferor and the Trustee an Opinion of Counsel in form and substance
satisfactory to the Transferor and the Trustee to the effect that such transfer
will not cause the Trust to be treated as a "publicly traded partnership"
taxable as a corporation under Section 7704 of the Code.
SECTION 12. RATIFICATION OF AGREEMENT. As supplemented by this
Series Supplement, the Agreement is in all respects ratified and confirmed and
the Agreement as so supple mented by this Series Supplement shall be read,
taken, and construed as one and the same instru ment.
- 37 -
SECTION 13. COUNTERPARTS. This Series Supplement may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all of such counterparts shall together constitute
but one and the same instrument.
SECTION 14. GOVERNING LAW. THIS SERIES SUPPLEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 15. THE TRUSTEE. The Trustee shall not be responsible
in any manner whatsoever for or in respect of the sufficiency of this Series
Supplement or for or in respect of the Preliminary Statement contained herein,
all of which recitals are made solely by the Transferor.
SECTION 16. INSTRUCTIONS IN WRITING. All instructions or other
communications given by the Servicer or any other person to the Trustee pursuant
to this Series Supplement shall be in writing, and, with respect to the
Servicer, may be included in a Daily Report or Settlement Statement.
SECTION 17. NEGATIVE CARRY ACCOUNT. (a) The Trustee, for the
benefit of the Series 1995-1 Certificateholders, shall establish and maintain
with a Qualified Institution, in the name of the Trust, a certain segregated
trust account (the "NEGATIVE CARRY ACCOUNT"). The Transferor does hereby
transfer, assign, set-over, and otherwise convey to the Trust for the benefit of
the Certificateholders, without recourse, all of its right, title and interest
in, to and under:
(i) the Negative Carry Account, all funds, and all
certificates and instruments, if any, from time to time
representing or evidencing or held in the Negative Carry
Account;
(ii) all eligible investments of amounts on deposit in
the Negative Carry Account from time to time and all
certificates and instruments, if any, from time to time
representing or evidencing such eligible investments;
(iii) all notes, certificates of deposit and other
instruments from time to time hereafter delivered to or
otherwise possessed by the Trustee for and on behalf of the
Transferor in substitution for or in addition to any of the
then existing Negative Carry Account property;
(iv) all interest, dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any
and all of the existing Negative Carry Account property; and
(v) all additional property that may from time to time
hereafter be assigned or pledged to the Trustee for the
benefit of the Certificateholders hereunder by the
Transferor or by any Person on the Transferor's behalf.
- 38 -
(b) Beginning on the Amortization Period Commencement
Date and continuing until the date (the "NEGATIVE CARRY FILL-UP DATE") on which
$87,000 has been deposited in the Negative Carry Account, the Servicer shall
instruct the Trustee to withdraw the following funds and deposit them into the
Negative Carry Account: (i) on the Amortization Period Commencement Date only,
notwithstanding the reference to the Principal Account in the fifth sentence of
subsection 4.3(f) of the Agreement, the amount described in such sentence; (ii)
the Fixed Allocation Percentage of Principal Collections; and (iii) any amounts
allocated to subsections 4.9(a)(v), (vi), (ix), (x), (xii) and (xiii). Amounts
on deposit in the Negative Carry Account shall be allocable to the Series 1995-1
Certificates in payment of Negative Carry Amounts, in accordance with subsection
4.10(a). Funds in the Negative Carry Account shall be invested at the direction
of the Servicer, in Cash Equivalents with maturities not later than the next
succeeding Business Day. Any earnings on such invested funds shall be deposited
and held in the Negative Carry Account and applied in the same manner and
priority as other amounts therein.
SECTION 18. NOTICES; CREDIT AND COLLECTION POLICY COMPLIANCE
AND CHANGES; DAILY REPORTS. (a) A copy of each notice, demand, direction,
report, officer's Certificate or other certif icate, election or opinion
required to be sent or delivered to the Rating Agency or the Trustee pursuant to
Sections 2.6(c), 2.6(d), 2.6(e)(i), 3.5, 3.6(a) and 6.9(b) of the Agreement
shall also be sent or delivered to each Investor Certificateholder.
(b) The Transferor shall provide each Class A and each Class B
Certificateholder at least 12 days prior written notice of the amount of Class A
Principal or Class B Principal, respectively, to be paid on each Distribution
Date during the Amortization Period.
(c) The Transferor shall cause the Originators to comply with
and perform their obligations under the Credit and Collection Policy except
insofar as any failure to comply or perform would not materially and adversely
affect the rights of the Trust or the Certificateholders hereunder and the
Transferor shall not cause, suffer or permit an originator to make a change to
the Credit and Collection Policy that would result in a violation of the
Transferor's obligations under Section 2.5(c) of the Agreement (regardless of
any failure by such originator to notify the Transferor of such action or to
obtain the Transferor's consent thereto). In addition, the Transferor shall
provide notice to the Certificateholders hereunder of any material change in the
Credit and Collection Policy.
(d) Upon written request by an Investor
Certificateholder, the Servicer shall furnish a copy of each Daily Report to
such Investor Certificateholder.
SECTION 19. RATINGS RECONFIRMATIONS. The Transferor shall not
be permitted to remove Accounts pursuant to Section 2.7(b) of the Agreement, to
exchange the Exchangeable Transferor Interest for a new issue of Investor
Certificates pursuant to Section 6.9(b) of the Agreement, engage in a merger,
consolidation, conveyance or transfer pursuant to Section 7.2 of the Agreement
or add Automatic Additional Accounts pursuant to clause (b) of the definition
thereof unless, in connection with such events, the Rating Agencies shall
deliver a written confirmation of their original ratings on the Investor
Certificates, to the Trustee.
- 39 -
SECTION 20. AMENDMENTS TO THE POOLING AND SERVICING AGREEMENT
AND SERIES 1995-1 SUPPLEMENT. Neither the Agreement nor this Supplement shall be
amended in reliance on the second paragraph of Section 13.1(a) of the Agreement
(but not including the second proviso thereto) without the consent of the
holders of Class A Certificates evidencing Undivided Interests aggregating not
less than a majority of the Class A Invested Amount. The Transferor shall
provide the Class A Certificateholders with written notice of any proposed
amendment not less than 25 Business Days prior to the proposed date of
effectiveness (the "PROPOSED EFFECTIVENESS DATE") of such proposed amendment
(which date may be extended by notice of the Transferor to the Class A
Certificateholders).
SECTION 21. REPURCHASE OF CERTIFICATES UPON FAILURE TO OBTAIN CONSENT.
In the event that, by the Proposed Effectiveness Date with respect to a proposed
amendment subject to Section 20 hereof, (i) the Transferor shall have satisfied
all of the conditions specified in the second paragraph of Section 13.1(a) of
the Agreement but (ii) the requisite consent of Class A Certificateholders shall
not have been obtained, then the Transferor shall have the option, but not the
obligation, to repurchase Class A Certificates held by any holder who did not
consent to such proposed amendment. Notice that the Transferor intends to
exercise such option must be given to the Class A Certificateholders from whom
such repurchase will be effected within five Business Days after the Proposed
Effectiveness Date. Such repurchase shall occur on the first Distribution Date
that is more than 30 days after the date on which such notice is given. The
purchase price for such repurchase shall be the Invested Amount of the
Certificates to be repurchased, plus accrued and unpaid interest thereon through
such Distribution Date, and shall be paid for in immediately available funds on
such Distribution Date.
- 40 -
IN WITNESS WHEREOF, the Transferor, the Servicer and the
Trustee have caused this Series 1995-1 Supplement to be duly executed by their
respective officers as of the day and year first above written.
SRI RECEIVABLES PURCHASE CO., INC.
Transferor
By: JERRY C. IVIE
Name: Jerry C. Ivie
Title: Senior Vice President,
Secretary and Treasurer
SPECIALTY RETAILERS, INC.
Servicer
By: JERRY C. IVIE
Name: Jerry C. Ivie
Title: Senior Vice President
Secretary and Treasurer
BANKERS TRUST (DELAWARE)
Trustee
By: M. LISA WILKINS
Name: M. Lisa Wilkins
Title: Assistant Secretary
IN WITNESS WHEREOF, the Transferor, the Servicer and the
Trustee have caused this Series 1995-1 Supplement to be duly executed by their
respective officers as of the day and year first above written.
SRI RECEIVABLES PURCHASE CO., INC.
Transferor
By: JERRY C. IVIE
Name: Jerry C. Ivie
Title: Senior Vice President,
Secretary and Treasurer
SPECIALTY RETAILERS, INC.
Servicer
By: JERRY C. IVIE
Name: Jerry C. Ivie
Title: Senior Vice President,
Secretary and Treasurer
BANKERS TRUST (DELAWARE)
Trustee
By: M. LISA WILKINS
Name: M. Lisa Wilkins
Title: Assistant Secretary
Exhibit A-1
[FORM OF CLASS A INVESTOR CERTIFICATE]
THIS CERTIFICATE WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS
REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT AND ANY OTHER APPLICABLE SECURITIES LAW.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF SRI
RECEIVABLES PURCHASE CO., INC. THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS
SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR
(III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON
OF A PLAN'S INVESTMENT IN THE ENTITY.
No. ___ $________
SRI RECEIVABLES MASTER TRUST
FLOATING RATE CLASS A-1 CERTIFICATE,
SERIES 1995-1
Evidencing an undivided interest in a trust, the corpus of which consists of
receivables generated from time to time in the ordinary course of business from
a portfolio of consumer revolving credit card accounts generated or to be
generated by certain subsidiaries (collectively, the "SRI SUBSIDIARIES") of
Specialty Retailers, Inc. ("SRI" or the "SERVICER") and other assets and
interests constituting the Trust under the Agreement described below.
(Not an interest in or a recourse obligation of SRI
Receivables Purchase Co., Inc., SRI or any affiliate of either of them.)
This certifies that ________ (the "CERTIFICATEHOLDER") is the
registered owner of a fractional undivided interest in the SRI Receivables
Master Trust (the "TRUST") issued pursuant to the Amended and Restated Pooling
and Servicing Agreement, dated as of August 11, 1995 (the "POOLING AND SERVICING
AGREEMENT"; such term to include any amendment thereto) by and between SRI
Receivables Purchase Co., Inc., as Transferor (the "TRANSFEROR"), SRI as the
Servicer, and Bankers Trust (Delaware), as Trustee (the "TRUSTEE"), and the
Series 1995-1 Supplement, dated as
A-1-1
of August 11, 1995 (the "SERIES 1995-1 SUPPLEMENT"), among the Transferor, SRI
as Servicer and the Trustee. The Pooling and Servicing Agreement, as
supplemented by the Series 1995-1 Supplement, is herein referred to as the
"AGREEMENT"). The corpus of the Trust consists of all of the Transferor's right,
title and interest in, to and under (i) ____________ the Trust Property (as
defined in the Agreement) and _____________ (ii) the property described in
Sections 3A and 17 of the Series 1995-1 Supplement.
This Certificate does not purport to summarize the Agreement
and reference is made to that Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee. To the extent not defined
herein, the capitalized terms used herein have the meanings ascribed to them in
the Agreement. This Certificate is one of a Series of Certificates entitled "SRI
Receivables Master Trust Floating Rate Class A-1 Certificates, Series 1995-1"
(the "CLASS A CERTIFICATES"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement, as amended from
time to time, the Certificateholder by virtue of the acceptance hereof assents
and by which the Certificateholder is bound.
The Transferor has structured the Agreement, the Class A
Certificates, the SRI Receivables Master Trust Floating Rate Class B-1
Certificates, Series 1995-1 (the "CLASS B CER TIFICATES") and the SRI
Receivables Master Trust Floating Rate Class C-1 Certificates, Series 1995-1
(the "CLASS C CERTIFICATES," and collectively with the Class A Certificates and
the Class B Certificates, the "OFFERED CERTIFICATES") with the intention that
the Offered Certificates will qualify under applicable tax law as indebtedness,
and both the Transferor and each holder of a Class A Certificate (a "CLASS A
CERTIFICATEHOLDER") or any interest therein by acceptance of its Certificate or
any interest therein, agrees to treat the Class A Certificates as indebtedness
for purposes of federal, state and local income or franchise taxes and any other
tax imposed on or measured by income.
No principal will be payable to the Class A Certificateholders
until the first Distribution Date in the Amortization Period. No principal will
be payable to the Class B Certifi cateholders, Class C Certificateholders or
Class D Certificateholders until all principal payments have been made to the
Class A Certificateholders.
Interest will accrue on the unpaid principal amount of the
Class A Certificates at a per annum rate equal to 5.875% per annum with respect
to the initial Interest Accrual Period and, with respect to each subsequent
Interest Accrual Period at a per annum rate of 0.52% in excess of LIBOR
prevailing on the related Rate Determination Date, calculated on the basis of
the actual number of days elapsed in such Subsequent Interest Accrual Period
over a year of 360 days (the "CLASS A CERTIFICATE RATE") and, except as
otherwise provided in the Agreement, will be distributed to Certificateholders
on the third Wednesday of each March, June, September and December (or, if such
day is not a Business Day, on the next succeeding Business Day) (each a
"DISTRIBUTION DATE"), commencing September 20, 1995. On the earlier of the
December 1999 Distribution Date or the first Distribution Date following the
occurrence of a Pay Out Event interest and principal will be distributed to the
Class A Certificateholders quarterly on each Distribution Date prior to the
Series Termination Date. Interest for any Distribution Date will include accrued
interest at the
A-1-2
Class A Certificate Rate from and including the preceding Distribution Date or,
in the case of the first Distribution Date from and including the Series 1995-1
Closing Date, to but excluding such Distribution Date. Interest for any
Distribution Date due but not paid on any Distribution Date will be due on the
next succeeding Distribution Date together with, to the extent permitted by
applicable law, additional interest on such amount at the Class A Certificate
Rate.
Subject to the Agreement, payments of principal are limited to
the unpaid Class A Invested Amount of the Class A Certificates, which may be
less than the unpaid balance of the Class A Certificates pursuant to the terms
of the Agreement. All principal of and interest on the Class A Certificates is
due and payable no later than the January 2003 Distribution Date (or if such day
is not a Business Day, the next succeeding Business Day) (the "SERIES
TERMINATION DATE"). After the series Termination Date neither the Trust nor the
Transferor will have any further obligation to distribute principal or interest
on the Class A Certificates. in the event that the Class A Invested Amount is
greater than zero on the Series Termination Date, the Trustee will sell or cause
to be sold, to the extent necessary, an amount of interests in the Receivables
or certain of the Receivables up to 110% of the Class A Invested Amount, the
Class B Invested Amount, the Class C Invested Amount and the Class D Invested
Amount at the close of business on such date (but not more than the total amount
of Receivables allocable to the Investor Certificates), and shall pay the
proceeds to the Class A Certificateholders pro rata in final payment of the
Class A Certificates, then to the Class B Certificateholders pro rata in final
payment of the Class B Certificates, then to the Class C Certificateholders pro
rata in final payment of the Class C Certificates and finally to the Class D
Certificateholders pro rata in final payment of the Class D Certificates.
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement, or be valid for any
purpose.
A-1-3
IN WITNESS WHEREOF, the Transferor has caused this Certificate
to be duly executed under its official seal.
SRI RECEIVABLES PURCHASE CO., INC.
By: JERRY C. IVIE
Name: Jerry C. Ivie
Title: Senior Vice President,
Secretary and Treasurer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-1 Certificates referred to in the
within-mentioned Pooling and Servicing Agreement.
BANKERS TRUST (DELAWARE),
as Trustee
By: BANKERS TRUST COMPANY
as Authenticating Agent
By: M. LISA WILKINS
Authorized Signatory
A-1-4
Exhibit A-2
[FORM OF CLASS B INVESTOR CERTIFICATE]
THIS CERTIFICATE WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE
"SECURITIES ACT"). THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS
REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT AND ANY OTHER APPLICABLE SECURITIES LAW.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF SRI
RECEIVABLES PURCHASE CO., INC. THAT SUCH PURCHASER IS NOT (1) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS
SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR
(III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON
OF A PLAN'S INVESTMENT IN THE ENTITY.
No.___ $_________
SRI RECEIVABLES MASTER TRUST
FLOATING RATE CLASS B-1 CERTIFICATE, SERIES 1995-1
Evidencing an undivided interest in a trust, the corpus of
which consists of receivables generated from time to time in the ordinary course
of business from a portfolio of consumer revolving credit card accounts
generated or to be generated by certain subsidiaries (collectively, the "SRI
SUBSIDIARIES") of Specialty Retailers, Inc. ("SRI" or the "SERVICER") and other
assets and interests constituting the Trust under the Agreement described below.
(Not an interest in or a recourse obligation of SRI
Receivables Purchase Co, Inc., SRI or any affiliate of either of them.)
This certifies that ________ (the "CERTIFICATEHOLDER") is the
registered owner of a fractional undivided interest in the SRI Receivables
Master Trust (the "TRUST") issued pursuant to the Amended and Restated Pooling
and Servicing Agreement, dated as of August 11, 1995 (the "POOLING AND SERVICING
AGREEMENT"; such term to include any amendment thereto) by and between SRI
Receivables Purchase Co., Inc., as Transferor (the "TRANSFEROR"), SRI as the
Servicer, and Bankers Trust (Delaware), as Trustee (the "TRUSTEE"), and the
Series 1995-1 Supplement, dated as of August 11, 1995 (the "SERIES 1995-1
SUPPLEMENT"), among the Transferor, SRI as Servicer and
A-2-1
the Trustee. The Pooling and Servicing Agreement, as supplemented by the Series
1995-1 Supplement, is herein referred to as the "AGREEMENT". The corpus of the
Trust consists of all of the Transferor's right, title and interest in, to and
under (i) the Trust Property (as defined in the Agreement) and (ii) the property
described in Sections 3A and 17 of the Series 1995-1 Supplement.
This Certificate does not purport to summarize the Agreement
and reference is made to that Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee. To the extent not defined
herein, the capitalized terms used herein have the meanings ascribed to them in
the Agreement. This Certificate is one of a Series of Certificates entitled "SRI
Receivables Master Trust Floating Rate Class B-1 Certificates, Series 1995-1"
(the "CLASS B CERTIFICATES"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement, as amended from
time to time, the Certificateholder by virtue of the acceptance hereof assents
and by which the Certificate holder is bound.
The Transferor has structured the Agreement, the Class B
Certificates, the SRI Receivables Master Trust Floating Rate Class A-1
Certificates, Series 1995-1 (the "CLASS A CER TIFICATES") and the SRI
Receivables Master Trust Floating Rate Class C-1 Certificates, Series 1995-1
(the "CLASS C CERTIFICATES," and collectively with the Class A Certificates and
the Class B Certificates, the "OFFERED CERTIFICATES") with the intention that
the Offered Certificates will qualify under applicable tax law as indebtedness,
and both the Transferor and each holder of a Class B Certificate (a "CLASS B
CERTIFICATEHOLDER") or any interest therein by acceptance of its Certificate or
any interest therein, agrees to treat the Class B Certificates as indebtedness
for purposes of federal, state and local income or franchise taxes and any other
tax imposed on or measured by income.
No principal will be payable to the Class B Certificateholders
until the Class B Payment Commencement Date, which is the Distribution Date
either on or following the Distribution Date, on which the Class A Invested
Amount had been paid in full. No principal will be payable to the Class B
Certificateholders until all principal payments have been made to the Class A
Certificateholders. No principal payments will be made to the Class C
Certificateholder until the Distribution Date either on or following the
Distribution Date on which the Class B invested Amount has been paid in full.
Interest will accrue on the unpaid principal amount of the
Class B Certificates at a per annum rate equal to 7.375% per annum with respect
to the initial Interest Accrual Period and, with respect to each subsequent
Interest Accrual Period a per annum rate of 1.50% in excess of LIBOR prevailing
on the related Rate Determination Date, calculated on the basis of the actual
num ber of days elapsed in such subsequent Interest Accrual Period over a year
of 360 days (the "CLASS B CERTIFICATE RATE"), and, except as otherwise provided
in the Agreement, will be distributed quarterly to Certificateholders on the
third Wednesday of each March, June, September and December (or, if such day is
not a Business Day, on the next succeeding Business Day) (each a "DISTRIBUTION
DATE"), commencing September 20, 1995 until such time as the Class B Invested
Amount is paid in full. Interest for any Distribution Date will include accrued
interest at the Class B Certificate Rate from and including the preceding
Distribution Date or, in the case of the first Distribution Date from
A-2-2
and including the Series 1995-1 Closing Date, to but excluding such Distribution
Date. Interest for any Distribution Date due but not paid on any Distribution
Date will be due on the next succeeding Distribution Date together with, to the
extent permitted by applicable law, additional interest on such amount at the
Class B Certificate Rate.
Subject to the Agreement, payments of principal are limited to
the unpaid Class B Invested Amount of the Class B Certificates, which may be
less than the unpaid balance of the Class B Certificates pursuant to the terms
of the Agreement. All principal of and interest on the Class B Certificates is
due and payable no later than the January 2003 Distribution Date (or if such day
is not a Business Day, the next succeeding Business Day) (the "SERIES
TERMINATION DATE"). After the Series Termination Date neither the Trust nor the
Transferor will have any further obligation to distribute principal or interest
on the Class B Certificates. In the event that the Class B Invested Amount is
greater than zero on the Series Termination Date, the Trustee will sell or cause
to be sold, to the extent necessary, an amount of interests in the Receivables
or certain of the Receivables up to 110% of the Class A Invested Amount, the
Class B Invested Amount, the Class C Invested Amount and the Class D Invested
Amount at the close of business on such date (but not more than the total amount
of Receivables allocable to the Investor Certificates), and shall pay the
proceeds to the Class A Certificateholders pro rata in final payment of the
Class A Certificates, then to the Class B Certificateholders pro rata in final
payment of the Class B Certificates, then to the Class C Certificateholders pro
rata in final payment of the Class C Certificates and finally to the Class D
Certificateholders pro rata in final payment of the Class D Certificates.
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement, or be valid for any
purpose.
A-2-3
IN WITNESS WHEREOF, the Transferor has caused this Certificate
to be duly executed under its official seal.
SRI RECEIVABLES PURCHASE CO., INC.
By: JERRY C. IVIE
Name: Jerry C. Ivie
Title: Senior Vice President,
Secretary and Treasurer
CERTIFICATE OF AUTHENTICATION
This is one of the Class B-1 Certificates referred to in the
within-mentioned Pooling and Servicing Agreement.
BANKERS TRUST (DELAWARE),
as Trustee
By: BANKERS TRUST COMPANY
as Authenticating Agent
By: M. LISA WILKINS
Authorized Signatory
A-2-4
Exhibit A-3
[FORM OF CLASS C INVESTOR CERTIFICATE]
THIS CERTIFICATE WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS
REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT AND ANY OTHER APPLICABLE SECURITIES LAW AND THE ADDITIONAL
CONDITIONS TO TRANSFER SPECIFIED IN THE AGREEMENT REFERRED TO BELOW
SHALL HAVE BEEN SATISFIED.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF SRI
RECEIVABLES PURCHASE CO., INC. THAT SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS
SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR
(III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON
OF A PLAN'S INVESTMENT IN THE ENTITY.
No.___ $________
SRI RECEIVABLES MASTER TRUST
FLOATING RATE CLASS C-1 CERTIFICATE, SERIES 1995-1
Evidencing an undivided interest in a trust, the corpus of
which consists of receivables generated from time to time in the ordinary course
of business from a portfolio of consumer revolving credit card accounts
generated or to be generated by certain subsidiaries (collectively, the "SRI
SUBSIDIARIES") of Specialty Retailers, Inc. ("SRI" or the "SERVICER") and other
assets and interests constituting the Trust under the Agreement described below.
(Not an interest in or a recourse obligation of SRI
Receivables Purchase Co., Inc., SRI or any affiliate of either of them.)
This certifies that ___________ (the "CERTIFICATEHOLDER") is
the registered owner of a fractional undivided interest in the SRI Receivables
Master Trust (the "TRUST") issued pursuant to the Amended and Restated Pooling
and Servicing Agreement, dated as of August 11, 1995 (the "POOLING AND SERVICING
AGREEMENT"; such term to include any amendment thereto) by and between SRI
Receivables Purchase Co., Inc., as Transferor (the "TRANSFEROR"), SRI as the
Servicer, and Bankers Trust (Delaware), as Trustee (the "TRUSTEE"), and the
Series 1995-1 Supplement, dated as
A-3-1
of August 11, 1995 (the "SERIES 1995-1 SUPPLEMENT"), among the Transferor, SRI
as Servicer and the Trustee. The Pooling and Servicing Agreement, as
supplemented by the Series 1995-1 Supplement, is herein referred to as the
"AGREEMENT." The corpus of the Trust consists of all of the Transferor's right,
title and interest in, to and under (i) the Trust Property (as defined in the
Agree ment) and (ii) the property described in Sections 3A and 17 of the Series
1995-1 Supplement.
This Certificate does not purport to summarize the Agreement
and reference is made to that Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee. To the extent not defined
herein, the capitalized terms used herein have the meanings ascribed to them in
the Agreement. This Certificate is one of a Series of Certificates entitled "SRI
Receivables Master Trust Floating Rate Class C-1 Certificates, Series 1995-1"
(the "CLASS C CERTIFICATES"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement, as amended from
time to time, the Certificateholder by virtue of the acceptance hereof assents
and by which the Certificate holder is bound.
The Transferor has structured the Agreement, the Class C
Certificates, the SRI Receivables Master Trust Floating Rate Class A-1
Certificates, Series 1995-1 (the "CLASS A CERTIFI CATES") and the SRI
Receivables Master Trust Floating Rate Class B-1 Certificates, Series 1995-1
(the "CLASS B CERTIFICATES", and collectively with the Class A Certificates and
the Class B Certificates, the "OFFERED CERTIFICATES") with the intention that
the offered Certificates will qualify under applicable tax law as indebtedness,
and both the Transferor and each holder of a Class C Certificate (a "CLASS C
CERTIFICATEHOLDER") or any interest therein by acceptance of its Certificate or
any interest therein, agrees to treat the Class C Certificates for purposes of
federal, state and local income or franchise taxes and any other tax imposed on
or measured by income, as indebtedness.
No principal will be payable to the Class C Certificateholders
until the Class C Payment Commencement Date, which is the Distribution Date
either on or following the Distribution Date, on which the Class A Invested
Amount and the Class B Invested Amount have been paid in full. No principal
payments will be payable to the Class C Certificateholder until the Distribution
Date either on or following the Distribution Date on which the Class B Invested
Amount has been paid in full.
Interest will accrue on the unpaid principal amount of the
Class C Certificates at a per annum rate equal to 7.375% per annum with respect
to the initial Interest Accrual Period and, with respect to each subsequent
Interest Accrual Period a per annum rate of 1.50% in excess of LIBOR prevailing
on the related Rate Determination Date, calculated on the basis of the actual
number of days elapsed in such subsequent Interest Accrual Period over a year of
360 days (the "CLASS C CERTIFICATE RATE"), and, except as otherwise provided in
the Agreement, will be distributed to Certificateholders quarterly on the third
Wednesday of each March, June, September and December (or, if such day is not a
Business Day, on the next succeeding Business Day) (each a "DIS TRIBUTION
DATE"), commencing September 20, 1995 until such time as the Class C Invested
Amount is paid in full. Interest for any Distribution Date will include accrued
interest at the Class C Certificate Rate from and including the preceding
Distribution Date or, in the case of the first
A-3-2
Distribution Date from and including the Closing Date, to but excluding such
Distribution Date. Interest for any Distribution Date due but not paid on any
Distribution Date will be due on the next succeeding Distribution Date together
with, to the extent permitted by applicable law, additional interest on such
amount at the Class C Certificate Rate.
In addition, the Transferor and the Trustee shall not be
required to recognize any transfer of an interest in a Class C Certificate
unless the transferor of such interest shall deliver to the Transferor and the
Trustee an Opinion of Counsel in form and substance satisfactory to the
Transferor and the Trustee to the effect that such transfer will not cause the
Trust to be treated as a "publicly traded partnership" taxable as a corporation
under Section 7704 of the Code.
Subject to the Agreement, payments of principal are limited to
the unpaid Class C Invested Amount of the Class C Certificates, which may be
less than the unpaid balance of the Class C Certificates pursuant to the terms
of the Agreement. All principal of and interest on the Class C Certificates is
due and payable no later than the January 2003 Distribution Date (or if such day
is not a Business Day, the next succeeding Business Day) (the "SERIES
TERMINATION DATE"). After the Series Termination Date neither the Trust nor the
Transferor will have any further obligation to distribute principal or interest
on the Class C Certificates. In the event that the Class C Invested Amount is
greater than zero on the Series Termination Date, the Trustee will sell or cause
to be sold, to the extent necessary, an amount of interests in the Receivables
or certain of the Receivables up to 110% of the Class A Invested Amount, the
Class B Invested Amount, the Class C Invested Amount and the Class D Invested
Amount at the close of business on such date (but not more than the total amount
of Receivables allocable to the investor Certificates), and shall pay the
proceeds to the Class A Certificateholders pro rata in final payment of the
Class A Certificates, then to the Class B Certificateholders pro rata in final
payment of the Class B Certificates, then to the Class C Certificateholders pro
rata in final payment of the Class C Certificates and finally to the Class D
Certificateholders pro rata in final payment of the Class D Certificates.
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement, or be valid for any
purpose.
A-3-3
IN WITNESS WHEREOF, the Transferor has caused this Certificate
to be duly executed under its official seal.
SRI RECEIVABLES PURCHASE CO., INC.
By: JERRY C. IVIE
Name: Jerry C. Ivie
Title: Senior Vice President,
Secretary and Treasurer
CERTIFICATE OF AUTHENTICATION
This is one of the Class C-1 Certificates referred to in the
within-mentioned Pooling and Servicing Agreement.
BANKERS TRUST (DELAWARE),
as Trustee
By: BANKERS TRUST COMPANY
as Authenticating Agent
By: M. LISA WILKINS
Authorized Signatory
A-3-4
Exhibit A-4
[FORM OF CLASS D INVESTOR CERTIFICATE]
THIS CERTIFICATE WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS
REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT AND ANY OTHER APPLICABLE SECURITIES LAW. THE TRANSFER OF THIS
CERTIFICATE IS PROHIBITED BY THE TERMS OF THE AGREEMENT REFERRED TO
BELOW.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF SRI
RECEIVABLES PURCHASE CO., INC. THAT SUCH PURCHASER IS NOT (1) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS
SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN
SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986 AS AMENDED, OR
(III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON
OF A PLAN'S INVESTMENT IN THE ENTITY.
NO RESALE OR TRANSFER OF THIS CERTIFICATE MAY BE MADE.
No.___ $________
SRI RECEIVABLES MASTER TRUST
FLOATING RATE CLASS D-1 CERTIFICATE, SERIES 1995-1
Evidencing an undivided interest in a trust, the corpus of
which consists of receivables generated from time to time in the ordinary course
of business from a portfolio of consumer revolving credit card accounts
generated or to be generated by certain subsidiaries (collectively, the "SRI
SUBSIDIARIES") of Specialty Retailers, Inc. ("SRI" or the "SERVICER") and other
assets and interests constituting the Trust under the Agreement described below.
(Not an interest in or a recourse obligation of SRI
Receivables Purchase Co., Inc., SRI or any affiliate of either of them.)
This certifies that SRI Receivables Purchase Co., Inc. (the
"CERTIFICATEHOLDER") is the registered owner of a fractional undivided interest
in the SRI Receivables Master Trust (the "TRUST") issued pursuant to the Amended
and Restated Pooling and Servicing Agreement, dated as of August 11, 1995 (the
"POOLING AND SERVICING AGREEMENT"; such term to include any amendment or
A-4-1
Supplement thereto) by and between SRI Receivables Purchase Co., Inc., as
Transferor (the "TRANSFEROR"), SRI as the Servicer, and Bankers Trust
(Delaware), as Trustee (the "TRUSTEE"), and the Series 1995-1 Supplement, dated
as of August 11, 1995 (the "SERIES 1995-1 SUPPLEMENT"), among the Transferor,
SRI as Servicer and the Trustee. The Pooling and Servicing Agreement, as
supplemented by the Series 1995-1 Supplement, is herein referred to as the
"AGREEMENT." The corpus of the Trust consists of all of the Transferor's right,
title and interest in, to and under (i) the Trust Property (as defined in the
Agreement) and (ii) the property described in Sections 3A and 17 of the Series
1995-1 Supplement.
This Certificate does not purport to summarize the Agreement
and reference is made to that Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee. To the extent not defined
herein, the capitalized terms used herein have the meanings ascribed to them in
the Agreement. This Certificate is one of a Series of Certificates entitled "SRI
Receivables Master Trust Floating Rate Class D-1 Certificates, Series 1995-1"
(the "CLASS D CERTIFICATES"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement, as amended from
time to time, the Certificateholder by virtue of the acceptance hereof assents
and by which the Certificateholder is bound.
By acceptance of this Certificate or any interest herein, each
Class D Certificateholder agrees that it will in no event permit the Class D
Certificates or any interest therein to be transferred, sold, exchanged,
pledged, participated or otherwise assigned hereunder, in whole or in part.
No principal will be payable to the Class D Certificateholders
until the Class D Payment Commencement Date, which is the Distribution Date
either on or following the Distribution Date on which the Class C Invested
Amount had been paid in full. No principal will be payable to the Class D
Certificateholders until all principal payments have first been made to the
Class A Certificateholders and then on and after the Class B Principal Payment
Commencement Date, after all principal payments have been made to the Class B
Certificateholders and then on and after the Class C Principal Payment
Commencement Date, after all payments have been made to the Class C
Certificateholders.
Interest will accrue on the unpaid principal amount of the
Class D Certificates at a per annum rate equal to 0% per annum (the "CLASS D
CERTIFICATE RATE").
Subject to the Agreement, payments of principal are limited to
the unpaid Class D Invested Amount of the Class D Certificates, which may be
less than the unpaid balance of the Class D Certificates pursuant to the terms
of the Agreement. All principal of and interest on the Class D Certificates is
due and payable no later than the January 2003 Distribution Date (or if such day
is not a Business Day, the next succeeding Business Day) (the "SERIES
TERMINATION DATE"). After the Series Termination Date neither the Trust nor the
Transferor will have any further obligation to distribute principal or interest
on the Class C Certificates. in the event that the Class C Invested Amount is
greater than zero on the Series Termination Date, the Trustee will sell or cause
A-4-2
to be sold, to the extent necessary, an amount of interests in the Receivables
or certain of the Receivables up to 110% of the Class A Invested Amount, the
Class B Invested Amount, the Class C Invested Amount and the Class D Invested
Amount at the close of business on such date (but not more than the total amount
of Receivables allocable to the Investor Certificates), and shall pay the
proceeds to the Class A Certificateholders pro rata in final payment of the
Class A Certificates, then to the Class B Certificateholders pro rata in final
payment of the Class B Certificates, then to the Class C Certificateholders pro
rata in final payment of the Class C Certificates and finally to the Class D
Certificateholders pro rata in final payment of the Class D Certificates.
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement, or be valid for any
purpose.
A-4-3
IN WITNESS WHEREOF, the Transferor has caused this Certificate
to be duly executed under its official seal.
SRI RECEIVABLES PURCHASE CO., INC.
By: JERRY C. IVIE
Name: Jerry C. Ivie
Title: Senior Vice President,
Secretary and Treasurer
CERTIFICATE OF AUTHENTICATION
This is one of the Class D-1 Certificates referred to in the
within-mentioned Pooling and Servicing Agreement.
BANKERS TRUST (DELAWARE),
as Trustee
By: M. LISA WILKINS
Authorized Signatory
A-4-4
Exhibit D
[Form of 144A Exchange Notice and Certification]
__________________, 199__
SRI Receivables Purchase Co., Inc.
10201 Main Street
Houston, TX 77025
Attention: ______________________
Bankers Trust (Delaware)
1001 Jefferson Street
Wilmington, Delaware 19801
Attention: Corporate Trust and Agency Group
Ladies and Gentlemen:
This is to notify you as to the transfer of $_________ of
Series 1995-1, Class [A] [B] [C] Certificates (the "CERTIFICATES") of SRI
Receivables Master Trust (the "COMPANY").
The undersigned is the holder of the Certificates and with
this notice hereby deposits with the Trustee $__________ principal amount of
Certificates and requests that Certificates in the same principal amount be
issued and executed by the Company and authenticated by the Trustee and
registered to the purchaser on _______________ 19__, as specified in the Pooling
and Servicing Agreement, as supplemented by the Series 1995-1 Supplement
thereto, as follows:
Name:
Address:
Taxpayer I.D. No.:
Denominations:
The undersigned represents and warrants that the undersigned
(i) reasonably believes the purchaser is a "qualified institutional buyer," as
defined in Rule 144A under the Securities Act of 1933 (the "ACT"), (ii) such
purchaser has acquired the Certificates in a transaction effected in accordance
with the exemption from the registration requirements of the Act provided by
Rule 144A and, (iii) if the purchaser has purchased the Certificates for one or
more accounts for which it is acting as fiduciary or agent, (A) each such
account is a qualified institutional buyer and (B) each such account is
acquiring Notes for its own account or for one or more institutional accounts
for
- 1 -
which it is acting as fiduciary or agent in a minimum amount equivalent to not
less than U.S. $250,000 for each such account.
Very truly yours,
[NAME OF HOLDER OF CERTIFICATE]
By:
[Name], [Chief Financial
or other Executive Officer]
- 2 -
Exhibit E
REPRESENTATION LETTER
(Non-Rule 144A)
Bankers Trust (Delaware)
1001 Jefferson Street
Wilmington, Delaware 19801
Attention: Corporate Trust and Agency Group
SRI Receivables Purchase Co., Inc.
10201 Main Street
Houston, TX 77025
Attention: Treasurer
BT Securities Corporation
130 Liberty Street
New York, New York 10004
Re: SRI Receivables Master Trust
Series 1995-1 Asset Backed Certificates
The undersigned purchaser ("PURCHASER") understands that the
purchase of the above-referenced notes (the "NOTES") may be made only by
institutions which are "Accredited Investors" under Regulation D, as promulgated
under the Securities Act of 1933, as amended (the "1933 ACT"), which includes
banks, savings and loan associations, registered brokers and dealers, insurance
companies, investment companies, and organizations described in Section
501(c)(3) of the Internal Revenue Code, corporations, business trusts and
partnerships, or formed for the specific purpose of acquiring the Notes offered,
with total assets in excess of $5,000,000. The undersigned represents on behalf
of the Purchaser that the Purchaser is an "Accredited Investor" within the
meaning of such definition. Purchaser has reviewed carefully the responses,
representations and warranties it is making herein.
REPRESENTATIONS AND WARRANTIES
Purchaser makes the following representations and warranties
in connection with Section 11(b) of the Series 1995-1 Supplement.
1. _______ The Purchaser understands that the Series 1995-1
Certificates have not been and will not be registered under the 1933 Act and may
be resold (which resale is not currently con templated) only if registered
pursuant to the provisions of the 1933 Act or if an exemption from registration
is available, that SRI Receivables Purchase Co., Inc. is not required to
register the Series 1995-1 Certificates and that any transfer must comply with
Section 11(b) of the Series 1995-1 Supplement relating to the Series 1995-1
Certificates.
2. _______ The Purchaser will comply with all applicable
federal and state securities laws in connection with any subsequent resale of
the Series 1995-1 Certificates.
3. _______ The Purchaser is a sophisticated institutional
investor and has knowledge and experience in financial and business matters and
is capable of evaluating the merits and risks of its investment in the Notes and
is able to bear the economic risk of such investment. The Purchaser has been
given such information concerning the Series 1995-1 Certificates, the underlying
receivables and the SRI Receivables Master Trust as it has requested.
4. _______ The Purchaser is acquiring the Series 1995-1
Certificates for its own account (or for the account of one or more other
institutional investors for which it is acting as duly authorized fiduciary or
agent) for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof, subject nevertheless to any
requirement of law that the disposition of the Purchaser's property shall at all
times be and remain within its control.
5. _______ The Purchaser represents that either (a) it does
not qualify as (i) an employee benefit plan (as defined in section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), whether
or not it is subject to the provisions of Title 1 of ERISA, (ii) a plan
described in section 4975(e)(1) of the Internal Revenue Code of 1986, or (iii)
an entity whose under lying assets are deemed to be assets of a plan described
in (i) or (ii) above by reason of such plan's investment in the entity (as
determined under Department of Labor Regulations, 29 C.F.R. 2510.3-101 (1990))
(any such entity described in clauses (i) through (iii), a "BENEFIT PLAN
ENTITY") or (b) if the Purchaser is an entity described in clause (a), Purchaser
represents the following:
(i) the Purchaser is not a Benefit Plan Entity with
respect to an employee benefit plan sponsored by the
Transferor, the Placement Agent, the Trustee, or the
Servicer or any affiliate thereof (all as defined in the
Private Placement Memorandum); and
(ii) the person who has discretionary authority or
renders investment advice to the Purchaser with respect to
the investment of plan assets in the Series 1995-1
Certificates is not an obligor with respect to the
Receivables (as defined in the Private Placement
Memorandum).
6. _______ The Purchaser understands that such Series 1995-1
Certificates will bear a legend substantially as set forth in the form of Series
1995-1 Certificates included in the Series 1995-1 Supplement.
7. _______ The Purchaser agrees that it will obtain from any
subsequent purchaser of the Notes substantially the same representations,
warranties and agreements contained in the foregoing paragraphs 1 through 6 and
in this paragraph 7.
- 1 -
Very truly yours,
Dated:
By:
Name:
Title:
Number of Beneficial Holders: _________
- 2 -
Exhibit 4.28
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
Dated as of August 11, 1995
among
SRI RECEIVABLES PURCHASE CO., INC.
as Purchaser
and
THE ORIGINATORS PARTIES HERETO
- 1 -
<PAGE>
TABLE OF CONTENTS
PAGE
----
I DEFINITIONS............................................................. 2
1.01 Certain Defined Terms.......................................... 2
1.02 Accounting and UCC Terms....................................... 12
II AMOUNTS AND TERMS OF THE PURCHASES...................................... 13
2.01 The Purchases.................................................. 13
2.02 Delivery of Receivables........................................ 14
2.03 Payments and Computations...................................... 14
2.04 Ineligible Receivables; Repurchase of Receivables.............. 16
2.05 Customer Service Adjustments................................... 17
2.06 Addition of Originators; Merger of Originators................. 18
2.07 Addition of Accounts........................................... 18
2.08 Removal of Accounts............................................ 19
III CONDITIONS TO PURCHASES................................................. 20
3.01 Conditions Precedent to Purchaser's Initial Purchase........... 20
3.02 Conditions Precedent to Each Originator's Sale................. 20
IV REPRESENTATIONS AND WARRANTIES.......................................... 22
4.01 Representations and Warranties of the Purchaser................ 22
4.02 Representations and Warranties of Each of the Originators...... 22
(a) Organization and Good Standing........................ 23
- i -
(b) Due Qualification..................................... 23
(c) Due Authorization..................................... 23
(d) No Conflicts.......................................... 23
(e) Taxes................................................. 23
(f) No Violation.......................................... 24
(g) No Proceedings........................................ 24
(h) All Consents Required................................. 24
(i) Bona Fide Receivables................................. 24
(j) Place of Business..................................... 24
(k) Use of Proceeds....................................... 24
(l) Purchase Termination Event............................ 25
(m) Not an "Investment Company"........................... 25
(n) Software.............................................. 25
(o) Tradenames............................................ 25
(p) ERISA Liens........................................... 25
(q) ERISA and the Code.................................... 25
4.03 Representations and Warranties of Each Originator Relating
to this Agreement and the Receivables................................... 25
(a) Binding Obligation; Valid Sale and Assignment......... 25
(b) Notice of Breach...................................... 27
V GENERAL COVENANTS....................................................... 28
Section 5.01 Covenants of Each Originator.......................... 28
- ii -
(a) Receivables to be Accounts or General Intangibles..... 28
(b) Security Interests.................................... 28
(c) Charge Account Agreements and Credit and Collection
Policies ........................................... 28
(d) Delivery of Collections............................... 29
(e) Conveyance of Accounts................................ 29
(f) Notice of Liens....................................... 29
(g) Compliance with Laws, Etc............................. 29
(h) Preservation of Corporate Existence................... 29
(i) Visitation Rights..................................... 29
(j) Keeping of Records and Books of Account............... 29
(k) Performance and Compliance with Receivables and Charge
Account Agreements............................................. 30
(l) Location of Records................................... 30
(m) Furnishing Copies, Etc................................ 30
(n) Obligation to Record and Report....................... 30
(o) Continuing Compliance with the UCC.................... 30
(p) In-Store Payments..................................... 31
(q) Payments.............................................. 31
(r) Further Action Evidencing Purchases................... 31
(s) Change in Business.................................... 31
5.02 Mergers........................................................ 32
5.03 Transfer of Account Relationships.............................. 32
- iii -
5.04 Purchaser Covenant Regarding Sale Treatment.................... 32
5.05 Tradename License.............................................. 32
VI PURCHASE TERMINATION EVENTS............................................. 33
6.01 Purchase Termination Events.................................... 33
VII INDEMNIFICATION......................................................... 35
7.01 Indemnities by the Originators................................. 35
7.02 Indemnities by the Purchaser................................... 36
VIII MISCELLANEOUS........................................................... 37
8.01 Amendment...................................................... 37
8.02 Notices, Etc................................................... 37
8.03 No Waiver: Remedies............................................ 37
8.04 Binding Effect................................................. 37
8.05 Governing Law.................................................. 37
8.06 Costs, Expenses and Taxes...................................... 38
8.07 Acknowledgment of Assignments.................................. 38
8.08 No Petition in Bankruptcy...................................... 38
EXIHIBT A Form of Additional Originator Agreement................... A-1
- iv -
<PAGE>
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
This AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT
dated as of August 11, 1995 ("THIS AGREEMENT"), is among those Originators set
forth on SCHEDULE I (each an "ORIGINATOR" and, together with any Originator
permitted to be added as an Originator under the terms of this Agreement, the
"ORIGINATORS") and SRI RECEIVABLES PURCHASE CO., INC., a Delaware corporation
(the "PURCHASER").
W I T N E S S E T H:
WHEREAS, each of the Originators intends to sell Receivables
to the Purchaser on the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, this Agreement was originally executed on, and dated
as of, July 30, 1993;
WHEREAS, the Originators under this Agreement as of July 30,
1993 (the "INITIAL ORIGINATORS") were Palais Royal, Inc., a Texas corporation
("PALAIS"), 3 Beall Brothers 3, Inc., a Texas corporation ("BEALLS") and Fashion
Bar, Inc., a Colorado corporation ("FASHION BAR");
WHEREAS, Bealls and Fashion Bar have each merged with and into
Palais effective as of August 2, 1993, rendering Palais the sole Originator
under the Agreement on the date hereof;
WHEREAS, this Agreement has been amended by the First
Amendment to Receivables Purchase Agreement dated October 7, 1994, and the
Second Amendment to Receivables Purchase Agreement dated as of January 31, 1995,
and is being amended and restated on the date hereof; and
WHEREAS, the Purchaser desires to purchase Receivables from
each Originator on the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1
ARTICLE I
DEFINITIONS
Section 1.01 CERTAIN DEFINED TERMS. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
"ACCOUNT" shall mean (a) each credit card account established
pursuant to a Charge Account Agreement between an Originator and any Person, the
Receivables from which are designated for sale by an Originator to the
Purchaser, which is identified by (i) an account number, (ii) the amount of
Receivables outstanding in such Account as of the Cut-Off Date and (iii) the
amount of Principal Receivables in such Account as of its Cut-Off Date, in each
case in the computer file or microfiche list delivered to the Purchaser pursuant
to this Agreement, (b) each Automatic Additional Account, and (c) each
Supplemental Account identified in each file or list delivered to the Purchaser.
The definition of Account shall include each Transferred Account but shall not
include any Purged Accounts. The term "Account" shall be deemed to refer to a
Supplemental Account only from and after the Addition Date with respect thereto,
and the term "Account" shall be deemed to refer to any Removed Account only
prior to the Removal Date with respect thereto.
"ACCOUNT PROPERTY" has the meaning specified in SECTION 2.01.
"ADDITION DATE" shall mean each date as of which Receivables
under Supplemental Accounts are designated for sale to the Purchaser pursuant to
SECTION 2.07.
"ADDITIONAL ORIGINATOR" has the meaning specified in SECTION
2.06.
"ADDITIONAL ORIGINATOR AGREEMENT" has the meaning specified in
Section 2.06.
"AFFILIATE" means, with respect to a particular Person, (a)
any Person that, directly or indirectly, is in control of, is controlled by, or
is under common control with, such Person, or (b) any Person who is a director
or officer or general partner (i) of such Person, (ii) of any subsidiary of such
Person, or (iii) of any Person described in clause (a) above. For purposes of
this definition, control of a Person shall mean the power, direct or indirect,
(i) to vote 5% or more of the securities having ordinary voting power to elect
the directors of such Person, or (ii) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"AUTHORIZED OFFICERS" means those officers of the Persons
designated in SCHEDULE II hereto (or in such other Schedule as may be delivered
to the parties hereto from time to time) as duly authorized to execute and
deliver this Agreement and any instruments or documents in connection herewith
on behalf of such Persons and to take, from time to time, all other actions on
behalf of the Originators in connection herewith.
2
"AUTOMATIC ADDITIONAL ACCOUNT" shall mean
(a) a consumer revolving credit card account (or any successor
credit card account designations used by an Originator) coming into existence
after the applicable Cut-Off Date:
(i) which is originated by an Originator during the normal
operation of such Originator's credit card business and is not acquired
by such Originator from another credit card issuer;
(ii) which was in existence and owned by such Originator on
the date on which Receivables generated in such account are to be first
sold to the Purchaser and is in existence at the close of business on
the date it is to be first sold to the Purchaser;
(iii) which is payable in Dollars; and
(iv) the Receivables in which have not been charged off prior
to the date of their designation for sale to the Purchaser; or
(b) any other consumer revolving credit card account,
Receivables from which the Purchaser permits to be automatically sold to the
Purchaser.
"BUSINESS DAY" means any day other than (a) a Saturday or a
Sunday, (b) another day on which an Originator is closed, as set forth on a list
furnished to the Purchaser on or before December 1 of the year preceding the
year to which such list relates or (c) another day on which banking institutions
in New York, New York (or such other city(ies) designated by the Purchaser) are
authorized or obligated by law or executive order to be closed; PROVIDED,
HOWEVER, that Originators shall not designate, in the aggregate, more than 8
days in each year (excluding Saturdays and Sundays) under clause (b) as
non-Business Days, of which no more than four (inclusive of Saturdays and
Sundays) shall be consecutive.
"CHARGE ACCOUNT AGREEMENT" means the agreement, which may
consist of more than one document, pursuant to which a Person is obligated to
pay for purchased merchandise or services under a credit plan that permits such
Person to purchase merchandise and services on credit, together with any finance
charges and other charges related thereto, as such agreement may be amended,
modified or supplemented from time to time; PROVIDED, that only agreements
between such Person and (i) an Originator or (ii) the creditor of an account
designated as an Automatic Additional Account or Supplemental Account under this
Agreement shall be considered a Charge Account Agreement hereunder.
"CLOSING DATE," with respect to Receivables originated by an
Originator, means the date of the initial purchase of such Receivables under
this Agreement.
3
"COLLECTIONS" shall mean all payments received by the
Originator in respect of the Receivables, in the form of cash, checks or any
other form of payment in accordance with the Charge Account Agreement in effect
from time to time on any Receivables.
"CREDIT AND COLLECTION POLICY" means the credit, collection,
customer relations and service policies that apply to an Eligible Account, as
such policies currently exist and as such policies may be amended, modified or
supplemented from time to time subject to SECTION 5.01(C).
"CUT-OFF DATE" shall mean, for Receivables in Accounts owned
by each Initial Originator, July 30, 1993, and for Receivables in Accounts owned
by each Additional Originator, the date specified as such in the Additional
Originator Agreement.
"DATE OF PROCESSING" shall mean, with respect to any
transaction, the date on which such transaction is first recorded on an
Originator's or the Purchaser's computer master file of consumer revolving
credit card accounts (without regard to the effective date of such recordation).
"DEFAULTED ACCOUNT" shall mean each Account with respect to
which, in accordance with the Credit and Collection Policy of the applicable
Originator, such Originator has charged off the Receivables in such Account as
uncollectible; an Account shall become a Defaulted Account on the day on which
such Receivables are recorded as charged off as uncollectible on the
Originator's computer master file of consumer credit card revolving accounts.
Notwithstanding any other provision hereof, any Receivables in a Defaulted
Account that are Ineligible Receivables shall be treated as Ineligible
Receivables rather than Receivables in Defaulted Accounts.
"DEFAULTED RECEIVABLE" means a Receivable in a Defaulted
Account.
"DEFAULTED RECEIVABLE RECEIPTS" has the meaning specified in
the definition of "Recoveries."
"DEFAULTED RECEIVABLE REPURCHASE AMOUNT" has the meaning
specified in subsection 2.04(c)(ii).
"DISCOUNT FACTOR" means the discount factor determined in
accordance with SCHEDULE V hereto.
"DISTRIBUTION DATE" shall mean the fifteenth day of each month
or, if such fifteenth day is not a Business Day, the next succeeding Business
Day.
"DOLLARS", "$", or "U.S. $" shall mean United States dollars.
"ELIGIBLE ACCOUNT" shall mean, as of the Closing Date (or,
with respect to Supplemental Accounts as of each Addition Date and with respect
to Automatic Additional
4
Accounts, as of the date the Receivables arising in such Accounts are designated
for sale to the Purchaser), each Account owned by an Originator:
(a) which is payable in Dollars;
(b) which has not been identified by such Originator
in its computer files as an account as to which such
Originator has any confirmed record of any fraudrelated
activity by the Obligor;
(c) which has not been sold or pledged to any other
party and which does not have Receivables which have been sold
or pledged to any other party;
(d) which was created in accordance with the Credit
and Collection Policy of such Originator at the time of
creation of such account or the Receivables of which the
Purchaser permits to be sold automatically to the Purchaser;
(e) the Receivables in which such Originator has not
charged off (or required to be charged off) in its customary
and usual manner for charging off Receivables in such Accounts
as of the Closing Date (or, with respect to Supplemental
Accounts as of the Addition Date and with respect to Automatic
Additional Accounts, as of the date the Receivables of such
Accounts are first designated for sale to the Purchaser)
unless such Account is subsequently reinstated; and
(f) which is not an Automatic Additional Account
which the Purchaser and any Originator have elected to exclude
from sale under this Agreement.
"ELIGIBLE RECEIVABLE" means a Receivable that satisfies each
of the following criteria:
(a) it arises under an Eligible Account;
(b) it constitutes an "account" or a "general
intangible" as defined in Article 9 of the UCC as then in
effect in the Relevant UCC State;
(c) it is, at the time of its transfer to the
Purchaser, the legal, valid and binding obligation of a Person
or is guaranteed by a Person who (i) is living, (ii) is not a
minor under the laws of his/her state of residence and (iii)
is competent to enter into a contract and incur debt (or with
respect to obligations from Persons who do not qualify under
clauses (ii) or (iii), is so guaranteed by a Person who
qualifies under clauses (i), (ii) and (iii)); PROVIDED,
HOWEVER that (1) no more than 10% of all Eligible Receivables
shall be from Obligors which are (x) non-U.S. Persons or (y)
the United States, a state of any instrumentality thereof and
(2) no such Receivables shall be obligations of any Affiliate
(other than directors, officers and employees) of
5
the Transferor; and PROVIDED, FURTHER, that no more than 6% of
all Eligible Receivables shall be from Obligors which are
non-U.S. Persons, unless the Rating Agency provides its
written consent to an increase in such percentage;
(d) it and the underlying Charge Account Agreement do
not contravene in any material respect any laws, rules or
regulations applicable thereto (including, without limitation,
rules and regulations relating to truth in lending, fair
credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) that
could reasonably be expected to have an adverse impact on the
amount of Collections thereunder, and the Originator of such
Receivable is not in violation of any such laws, rules or
regulations in any respect material to such Charge Account
Agreement;
(e) all material consents, licenses, or
authorizations of, or registrations with, any governmental
authority required to be obtained or given in connection with
the creation of such Receivable or the execution, delivery,
creation and performance of the underlying Charge Account
Agreement have been duly obtained or given and are in full
force and effect as of the date of the creation of such
Receivable;
(f) at the time of its sale to the Purchaser, the
Purchaser will have good and marketable title free and clear
of all Liens and security interests arising under or through
the Purchaser (other than Permitted Liens);
(g) it is not a Defaulted Receivable or a Receivable
owing from a bankrupt Obligor; and
(h) it arises under a Charge Account Agreement that
has been duly authorized by the applicable Originator and
which, together with such Receivable, is in full force and
effect and constitutes the legal, valid and binding obligation
of the Obligor of such Receivable enforceable against such
Obligor in accordance with its terms and is not subject at the
time of transfer to the Purchaser to any dispute, offset,
counterclaim or defense whatsoever.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended from time to time.
"ERISA AFFILIATE" shall mean any trade or business (whether or
not incorporated) that is a member of a group of which any Originator is a
member and which is treated as a single employer under Section 414 of the Code
and the regulations promulgated and rules issued thereunder.
6
"EXCESS CASH" means all cash and cash equivalents held by the
Purchaser in excess of any other due and owing obligations of the Purchaser and
any reserves against future obligations which the Purchaser deems reasonably
necessary or prudent to establish and maintain.
"FINANCE CHARGE COLLECTIONS" shall mean with respect to any
Business Day Collections received with respect to each Finance Charge
Receivable.
"FINANCE CHARGE RECEIVABLES" shall mean all amounts billed
from time to time to the Obligors on any Account in respect of (i) Periodic
Finance Charges, (ii) over limit fees, (iii) late charges, (iv) returned check
fees, (v) annual membership fees and annual service charges, if any, (vi)
transaction charges, (vii) all other fees and charges, and (viii) Recoveries.
"GOVERNMENTAL AUTHORITY" means the United States of America,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"INCIPIENT PURCHASE TERMINATION EVENT" means any condition,
act or event specified in SECTION 6.01 that, with the giving of notice or the
lapse of time, or both, would become a Purchase Termination Event.
"INELIGIBLE RECEIVABLES" has the meaning specified in SECTION
2.04(A).
"INITIAL ORIGINATORS" has the meaning specified in the
recitals.
"INITIAL OUTSTANDING BALANCE" of a Receivable means the
Outstanding Balance of such Receivable on the Initiation Date of such
Receivable.
"INITIATION DATE" means, with respect to any Receivable, the
Business Day following the Date of Processing of such Receivable.
"IN-STORE PAYMENT" means any payment made by an Obligor with
respect to a Receivable by delivery of cash, a check or money order, or any
other form of payment to a cashier or other employee of any SRI Store.
"LIBOR" shall mean the rate obtained by dividing (x) the
three-month rate described on the Dow Jones Telerate System, p. 3750, as of
11:00 a.m. London time divided by (y) a percentage equal to one minus the stated
maximum rate (stated as a decimal) of all reserves required to be maintained
against "Eurocurrency Liabilities" as specified in Regulation D (or against any
other category of liabilities which includes deposits by reference to which the
interest rate on LIBOR is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any bank to
United States residents); PROVIDED, HOWEVER, with respect to clause (x) above,
in the event such rate shall not be provided, "LIBOR" shall mean (a) the
arithmetic average (rounded upwards to the nearest 1/16th of 1%) of the rates at
which deposits in
7
United States dollars are offered to four reference banks selected by BT
Securities Corp. in the interbank Eurodollar market at approximately 11:00 a.m.
(London time) divided by (b) the percentages profiled in clause (y) above.
"LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment, participation or equity interest, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever, including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing and the filing of any financing statement under
the UCC (other than any such financing statement filed for informational
purposes only) or comparable law of any jurisdiction to evidence any of the
foregoing.
"LOCK BOXES" has the meaning specified in SECTION 2.01.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan as
defined in Section 4001(a)(3) of ERISA to which any Originator or any ERISA
Affiliate (other than one considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Section 414 of the Code) is making or accruing an
obligation to make contributions, or has within any of the preceding five plan
years made or accrued an obligation to make contributions.
"MONTHLY PERIOD" shall mean the period from and including the
first day of each fiscal month of the Originators to and including the last day
of each such fiscal month.
"NET OWNERSHIP INTEREST" means, with respect to any
Receivable, an amount equal to the aggregate Initial Outstanding Balance of such
Receivable, plus interest or finance charges accrued on such Receivable to such
time less the cumulative amount of Collections with respect to such Receivable
actually received by the Purchaser or the applicable Originator prior to such
time as such Net Ownership Interest may be adjusted from time to time pursuant
to Section 2.05.
"OBLIGOR" means a Person obligated to make payments with
respect to a Receivable arising under an Account pursuant to a Charge Account
Agreement.
"ORIGINATOR" has the meaning specified in the preamble.
"OUTSTANDING BALANCE" means, with respect to a Receivable on
any day, the aggregate amount owed by the Obligor thereunder as of the close of
business on the prior Business Day (net of returns and adjustments).
"PERIODIC FINANCE CHARGES" shall have, with respect to any
Account, the meaning specified in the Charge Account Agreement applicable to
such Account for finance charges (due to periodic rate) or any similar term.
8
"PERMITTED LIEN" shall mean with respect to the Receivables:
(i) Liens in favor of the Purchaser created pursuant to this Agreement; (ii)
Liens in favor of any transferee of the Purchaser; and (iii) Liens which secure
the payment of taxes, assessments and governmental charges or levies, if such
taxes are either (a) not delinquent or (b) being contested in good faith by
appropriate legal or administrative proceedings and as to which adequate
reserves in accordance with generally accepted accounting principles shall have
been established, but only so long as such proceedings could not subject the
Purchaser or any transferee of the Purchases to any civil or criminal penalty or
liability or involve any risk of loss, sale or forfeiture of any property,
rights or interests covered by this Agreement.
"PERSON" means any legal person, including an individual,
corporation, partnership, association, joint venture, joint-stock company,
trust, unincorporated organization, governmental entity or other entity of a
similar nature.
"POOLING AGREEMENT" shall mean the Pooling and Servicing
Agreement dated as of July 30, 1993 by and among the Bankers Trust (Delaware),
as Trustee, the Purchaser, as Transferor and Specialty Retailers, Inc., as
Servicer, as amended, supplemented and modified from time to time.
"PRINCIPAL COLLECTIONS" shall mean with respect to any
Business Day the Collections received with respect to each Principal Receivable.
"PRINCIPAL RECEIVABLES" shall mean amounts shown on the
Purchaser's records as amounts payable by Obligors with respect to Eligible
Receivables on any Account other than such amounts that are Finance Charge
Receivables or Receivables in Defaulted Accounts and shall include, without
limitation, amounts payable for purchases of goods or services. A Receivable
shall be deemed to have been created at the end of the day on the Date of
Processing of such Receivable. In calculating the aggregate amount of Principal
Receivables on any day, the amount of Principal Receivables shall be reduced by
the aggregate amount of credit balances in the Accounts on such day.
"PURCHASE CONSIDERATION" means, with respect to each purchase
of newly created Receivables from an Originator on the Initiation Date of such
Receivables, the aggregate consideration payable by the Purchaser to such
Originator equal to the Purchase Price of such Receivables, which shall be paid
pursuant to SECTION 2.03, either in cash, an increase in the principal amount of
the Revolving Note, or a combination thereof.
"PURCHASE DATE" has the meaning specified in SECTION 2.01(A).
"PURCHASE PRICE" means the product of (i) the Outstanding
Balance of such Receivable tendered to the Purchaser pursuant to SECTION 2.02(A)
and (ii) a percentage equal to 100% minus the Discount Factor for the Purchase
of such Receivable.
9
"PURCHASE TERMINATION DATE" means the date on which the
Purchaser's obligation to purchase Receivables shall terminate pursuant to
SECTION 6.01.
"PURCHASE TERMINATION EVENT" has the meaning specified in
SECTION 6.01.
"PURCHASER" has the meaning specified in the preamble.
"PURCHASES" has the meaning specified in SECTION 2.01(A).
"PURGED ACCOUNT" shall mean an Account that has an Outstanding
Balance of zero and has been terminated pursuant to the applicable Credit and
Collection Policy due to an extended period of inactivity.
"RECEIVABLE" means, with respect to any Obligor, any account
or general intangible representing the indebtedness of such Obligor under a
Charge Account Agreement arising in an Account from a sale of merchandise or
services, and includes the right to payment of any interest or finance charges
and other obligations of such Obligor with respect thereto. Each Receivable
includes, without limitation, all rights of the Originator under the applicable
Charge Account Agreement. Each increase in the Outstanding Balance of any
Receivable (other than any such increase resulting from the accrual of interest
or finance charges or other fees with respect to such Receivable) shall, for
purposes of ARTICLE II, constitute a separate Principal Receivable.
"RECEIVABLES STATEMENT" has the meaning specified in SECTION
2.02(A).
"RECOVERIES," with respect to any period, shall mean the
PRODUCT of (i) any amounts received during such period ("DEFAULTED RECEIVABLE
RECEIPTS") with respect to Receivables in Accounts which previously became
Defaulted Accounts and (ii) the fraction resulting from (A) one MINUS (B) a
fraction, the numerator of which is the cumulative aggregate Defaulted
Receivable Repurchase Amount paid by the Originators during the preceding six
full Monthly Periods pursuant to Section 2.04(c), and the denominator of which
is the total principal amount of Receivables which become Defaulted Receivables
during such six Calculation Periods.
"RELEVANT UCC STATE" means each jurisdiction in which the
filing of a UCC financing statement is necessary or desirable to evidence the
Purchases.
"REMOVAL DATE" shall mean the date mutually designated by an
Originator and the Purchaser for removal of a Removed Account.
"REMOVED ACCOUNTS" shall have the meaning specified in Section
2.08(a).
"REPURCHASE AMOUNT" shall have the meaning specified in
SECTION 2.04(B).
"REPURCHASE DIVIDEND AMOUNT" has the meaning set forth in
SECTION 2.04(C)(IV).
10
"REQUIREMENTS OF LAW" for any Person shall mean the
certificate of incorporation or articles of association and by-laws or other
organizational or governing documents of such Person, and any law, treaty, rule
or regulation, or determination of an arbitrator or Governmental Authority in
each case applicable to or binding upon such Person or to which such Person is
subject, whether federal, state or local, including, without limitation, usury
laws, the federal Truth in Lending Act and Regulation Z and Regulation B of the
Board of Governors of the Federal Reserve System.
"REVOLVING NOTE" shall mean a note in the form of EXHIBIT A
hereto issued to an Originator, SRI or any Affiliate of SRI, which shall contain
the terms set forth in SECTION 2.03.
"SETTLEMENT DATE" means the date upon which the Purchaser and
any Originator shall reconcile any amounts owed to each other, except amounts
payable in respect of Purchases of Receivables, which date shall occur at least
once each fiscal month.
"SETTLEMENT PERIOD" means a period from and including a
Settlement Date to but excluding the next following Settlement Date.
"SETTLEMENT STATEMENT" means a statement, dated the last day
of each Settlement Period, reflecting the adjustments and credits pursuant to
SECTION 2.05 for such Settlement Period and for any Receivables being sold or
repurchased by the Originator on the date thereof, substantially in the form of
EXHIBIT A hereto, signed by an Authorized Officer of an Originator.
"SRI" shall mean Specialty Retailers, Inc., a corporation
organized under the laws of the State of Delaware.
"SRI CREDIT CARD BANK" means a bank that is an Affiliate of
SRI and which qualifies as a bank under federal or state banking law.
"SRI STORE" means any merchant which sells merchandise or
services on credit pursuant to a Charge Account Agreement.
"SRI SUB" means SRI Receivables, Inc., a Delaware corporation.
"SUPPLEMENTAL ACCOUNTS" shall have the meaning specified in
SECTION 2.07(B).
"TRANSFERRED ACCOUNT" shall mean an Account with respect to
which a new credit account number has been issued by the Originator under
circumstances resulting from a lost or stolen credit card and not requiring
standard application and credit evaluation procedures under the Credit and
Collection Policy, and which can be traced or identified by reference to or by
way of the computer files or microfiche lists delivered to the Purchaser
pursuant to this Agreement or as an account into which an Account has been
transferred.
11
"UCC" means the Uniform Commercial Code, as amended from time
to time, as in effect in the applicable jurisdiction.
Section 1.02. ACCOUNTING AND UCC TERMS. All accounting terms
not specifically defined herein shall be construed in accordance with United
States generally accepted accounting principles ("U.S. GAAP"); and all terms
used in Article 9 of the UCC that are used but not specifically defined herein
are used herein as defined therein.
12
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
Section 2.01. THE PURCHASES. (a) Each Originator does hereby
sell, transfer, assign, and otherwise convey to the Purchaser, without recourse,
all of its right, title and interest in, to and under (collectively, the
"PURCHASES"):
(i) all right, title and interest of such Originator
in and to the Receivables existing on the Cut-Off Date for
such Originator and thereafter created and arising in
connection with the Accounts and any accounts that meet the
definition of Automatic Additional Accounts, including,
without limitation, all accounts, contract rights, chattel
paper, instruments, general intangibles and other obligations
of any Obligor with respect to any such Receivables, then or
thereafter existing, whether or not arising out of or in
connection with the sale or lease of goods or the rendering of
services, including without limitation, the right to payment
of any interest, Finance Charge Receivables, returned check
fees or late charges and other obligations of an Obligor with
respect to any such Receivables, and all rights in and to all
security agreements, and other contracts securing or otherwise
relating to any such accounts, contract rights, chattel paper,
instruments, general intangibles or obligations (any and all
such security agreements and other contracts being the
"RELATED CONTRACTS");
(ii) all guarantees, insurance and other agreements
or arrangements of whatever character from time to time
supporting or securing payment of any Receivables;
(iii) all payment and enforcement rights (but not any
obligations) to, in and under the Related Contracts;
(iv) the following:
(A) any lock box account relating to the
Receivables (the "LOCK BOXES") and all funds, and all
certificates and instruments, if any, from time to
time representing or evidencing or held in the Lock
Boxes (the "ACCOUNT PROPERTY");
(B) all notes, certificates of deposit and
other instruments from time to time hereafter
delivered to or otherwise possessed by an Originator
for and on behalf of the Purchaser in substitution
for or in addition to any of the then existing
Account Property; and
(C) all interest, dividends, cash,
instruments and other property from time to time
received, receivable or otherwise distributed in
respect of or in exchange for any and all of the
existing Account Property;
13
(v) proceeds of any and all of the Purchases
described in subparagraphs (i) through (iv) above (including,
without limitation, Recoveries and proceeds that constitute
property of the types described in clauses (i) through (iv)
above) and, to the extent not otherwise included, all payments
under insurance (whether or not the Trustee is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any
of such foregoing Purchases;
from each Originator on the Closing Date and on the Initiation Date of any such
subsequently created Receivable during the period from the Closing Date with
respect to such Originator until the Purchase Termination Date with respect to
such Originator (each such date, including each such Closing Date, being a
"PURCHASE DATE").
(b) The parties to this Agreement intend that the transactions
contemplated hereby shall be, and shall be treated as, a purchase by the
Purchaser and a sale by the applicable Originator of the Receivables and not as
a lending transaction. The sale of Receivables by any Originator hereunder shall
be without recourse to, or representation or warranty of any kind (express or
implied) by, such Originator or any other Originator, except as otherwise
specifically provided herein. If, notwithstanding the express intent of the
parties hereto, it is determined that this Agreement does not constitute a valid
sale, transfer and assignment by the Originators to the Purchaser of the
Purchases, each Originator shall be deemed to have granted to the Purchaser a
"security interest" (as defined in the UCC as in effect in the Relevant UCC
State) in such property of the Originators which comprises the Purchases
described herein, and this Agreement shall be deemed to constitute a security
agreement under the UCC in effect in the Relevant UCC State.
Section 2.02. DELIVERY OF RECEIVABLES. (a) On each Business
Day prior to the Purchase Termination Date, each Originator shall deliver, or
shall cause to be delivered, all of its Receivables to the Purchaser by
delivering to the Purchaser a statement or report (a "RECEIVABLES STATEMENT")
specifying to the Purchaser the aggregate outstanding principal balance of such
Receivables.
(b) Upon the fulfillment of the conditions set forth in
ARTICLE III, the delivery to the Purchaser of the Receivables Statement and
payment of the Purchase consideration as provided in Section 2.03, all such
Originator's right, title and interest in and to such Receivables shall have
been sold, assigned, transferred, conveyed and set over to the Purchaser.
Section 2.03. PAYMENTS AND COMPUTATIONS. (a) Subject to
Section 2.03(b), the Purchase Price for Receivables purchased from an Originator
pursuant to Section 2.01 shall be paid or provided for on the Purchase Date of
such Receivables (i) first by payment in cash in immediately available funds (to
the extent of Excess Cash, after such application to pay other Originators
pursuant to this Section 2.03 as Purchaser has elected to make) and (ii) then by
increasing the principal amount of the Revolving Note issued to such Originator
by the amount of the Purchase Price that is not paid pursuant to clause (i)
(such increase to be made by notation thereon). The
14
failure of an Originator to note the increase of the principal amount of the
Revolving Note thereon shall not relieve the Purchaser from its obligations to
such Originator.
(b) $35,177,048.02 of the Receivables sold by Palais Royal,
Inc. to the Purchaser on the Closing Date are to be conveyed by Palais to the
Purchaser as a capital contribution in exchange for 999 shares of common stock
of the Purchaser which, together with the 1 share of common stock purchased by
Palais Royal, Inc. on July 30, 1993, represent all of the outstanding common
stock of the Purchaser. All Ineligible Receivables sold by Palais Royal, Inc. to
the Purchaser shall be deemed to be a capital contribution to the Purchaser.
(c) The Purchaser shall pay all amounts to be paid in cash
with respect to the Purchases to the Originator (or such other person as is
designated by such Originator) on the date of the Purchase thereof and shall pay
all amounts in respect of principal of and interest on any Revolving Note in
accordance with the terms thereof. Each Revolving Note shall contain the
following terms:
(i) interest shall accrue on the outstanding principal amount
of each Revolving Note at a per annum rate of interest (calculated on
the basis of a 360-day year of twelve 30- day months) equal to LIBOR +
1%;
(ii) the outstanding principal of and accrued interest on each
Revolving Note shall be payable out of Excess Cash;
(iii) all amounts paid with respect to an outstanding
Revolving Note shall be allocated first to accrued interest until all
such interest is paid, and then to outstanding principal;
(iv) an Originator shall only be permitted to look to Excess
Cash for payment of the Revolving Note and to the extent that such
amounts are insufficient, such Originator shall not have any claim
against the Purchaser or additional recourse against the Purchaser
(other than with respect to Excess Cash available in the future) and
such Revolving Note shall be fully subordinated to the rights of any
other creditors of the Purchaser;
(v) no Revolving Note may be sold or otherwise transferred;
PROVIDED that nothing shall prevent the Revolving Note from being
pledged to any creditor of the Originators or SRI or such creditor from
exercising its rights under such pledge;
(vi) the Purchaser may offset any amount due and owing by the
applicable Originator against any amount due and owing by the Purchaser
to such Originator under the terms of the Revolving Note;
(vii) the Purchaser, at its option, may repay all or any
portion of the accrued interest on and principal of any Revolving Note
at any time; and
15
(viii) no draw shall be made on a Revolving Note issued to an
Originator if, as a result of such draw, the outstanding principal
balance thereof shall exceed 15 per cent of the outstanding balance of
Receivables at such time.
(d) All payments hereunder to an Originator shall be made not
later than the close of business (New York City time) on the date specified
therefor in lawful money of the United States of America in same day funds to
the bank account designated in writing by such Originator to the Purchaser from
time to time.
(e) Whenever any payment to be made hereunder shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.
Section 2.04. INELIGIBLE RECEIVABLES; REPURCHASE OF
RECEIVABLES. (a) In the event of a breach of any representations and warranties
set forth in Section 4.02(i) or Sections 4.03(a)(iii) through (xii) with respect
to a Receivable sold by an Originator, or in the event that a Receivable is not
an Eligible Receivable as a result of the failure to satisfy the conditions set
forth in the definition of Eligible Receivable, each such Receivable which is
the subject of such breach or is not an Eligible Receivable shall be designated
an "INELIGIBLE RECEIVABLE" and the applicable Originator shall pay the
Outstanding Balance (including any Finance Charge Receivables) of such
Ineligible Receivable to the Purchaser either, at the option of the Purchaser,
in the form of cash or a reduction of the Revolving Note, and such Originator
shall either be deemed to have made a contribution of equity, or shall be issued
stock, equal in value to such cash or reduction; PROVIDED, HOWEVER, that if such
representations and warranties with respect to such Receivable shall
subsequently be true and correct in all material respects as if such Receivable
had been created on such day or such Receivable shall subsequently satisfy the
conditions set forth in the definition of Eligible Receivable, such Receivable
shall be designated an Eligible Receivable, and the principal amount of the
Revolving Note shall increase by the principal amount of such Receivable
(determined in accordance with the procedures set forth in the definition of
Principal Receivable).
(b) In the event of a breach of any of the representations and
warranties set forth in Sections 4.02(a), (b) and (c) and 4.03(a)(i) and (ii),
the Purchaser may direct the Originators to repurchase an amount of Receivables
as designated by the Purchaser, and the Originators shall be obligated to
repurchase such Receivables on a date specified by the Purchaser (such date, the
"REPURCHASE DATE") occurring within such applicable period on the terms and
conditions set forth below; PROVIDED, HOWEVER, that no such reassignment shall
be required to be made if, at any time during such applicable period, the
representations and warranties contained in Sections 4.02(a), (b) and (c) and
Sections 4.03(a)(i) and (ii) shall then be true and correct in all material
respects. The Originators shall, on the Business Day (in next day funds)
preceding the Repurchase Date, deposit an amount equal to the principal amount
of such Receivables as are designated by the Purchaser (the "REPURCHASE
AMOUNT"). On the Distribution Date following the Transfer Date on which such
amount has been paid in full to the Purchaser, the Receivables and all monies
due or to become due with respect thereto and all proceeds of the Receivables
allocated to the Receivables for which the Repurchase Amount has been paid shall
be released to the Originators after payment of all amounts
16
otherwise due hereunder on or prior to such dates and the Purchaser shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, representation or warranty, as shall be prepared by and as are
reasonably requested by the Originators to vest in the Originators or its
designee or assignee, all right, title and interest of the Purchaser in and to
such Receivables, all monies due or to become due with respect thereto and all
proceeds of such Receivables. If the Purchaser gives notice directing the
Originators to accept reassignment as provided above, the obligation of the
Originators to accept reassignment of the applicable Receivables and pay the
Repurchase Amount pursuant to this Section 2.04(b) shall constitute the sole
remedy respecting a breach of the representations and warranties contained in
Sections 4.02(a), (b) and (c) and 4.03(a)(i) and (ii) available to the
Purchaser.
(c) (i) On each Distribution Date with respect to a Monthly
Period during each fiscal year of an Originator, Originator shall
repurchase from the Purchaser all Defaulted Receivables purchased by
the Purchaser from such Originator pursuant to Section 2.4(f) of the
Pooling Agreement and Section 5 of the First Amendment to the Pooling
Agreement on such Distribution Date.
(ii) Such Originator shall, on the Transfer Date (in next day
funds) preceding each Distribution Date, deposit an amount equal to the
principal amount of such Defaulted Receivables (the "DEFAULTED
RECEIVABLE REPURCHASE AMOUNT") into the Collection Account. On such
Distribution Date, such repurchased Defaulted Receivables and all
monies due or to become due with respect thereto and all proceeds of
such repurchased Defaulted Receivables allocated to such repurchased
Defaulted Receivables for which the Defaulted Receivable Repurchase
Amount has been paid shall be released to such Originator after payment
of all amounts otherwise due hereunder on or prior to such dates and
such Originator shall execute and deliver such instruments of transfer
or assignment, in each case without recourse, representation or
warranty, as shall be prepared by and as are reasonably requested by
such Originator to vest in such Originator or its designees or assigns,
all right, title and interest of the Purchaser in and to such
repurchased Defaulted Receivables, all monies due or to become due with
respect thereto and all proceeds of such repurchased Defaulted
Receivables. Thereafter, such Defaulted Receivables shall not be
considered Receivables for any purpose hereunder.
(iii) In consideration for such Originator's obligation to
repurchase Defaulted Receivables as set forth in this subsection (c),
so long as such Originator complies with such obligation, such
Originator shall retain any amounts which do not constitute Recoveries
received by such Originator with respect to Defaulted Receivables.
(iv) On each Distribution Date on which any Originator is
obligated to repurchase Defaulted Receivables in accordance with clause
(i) of the Section 2.04(c), such obligation shall be expressly subject
to the condition precedent that the Purchaser shall have declared a
dividend to all holders of its common stock in an aggregate amount
equal to
17
principal amount of Defaulted Receivables repurchased by all
Originators on such Distribution Date (the "REPURCHASE DIVIDEND
AMOUNT").
Section 2.05 CUSTOMER SERVICE ADJUSTMENTS. Any Originator may
accept a return of goods for full or partial credit or make a daily adjustment
in the principal amount or finance or other charges accrued or payable with
respect to the account of a customer who has purchased merchandise or services
on credit under a Charge Account Agreement; PROVIDED, that such adjustment is
permitted under such Originator's applicable Credit and Collection Policy. The
aggregate amount of all such adjustments made by such Originator during any
Settlement Period shall be payable to the Purchaser by such Originator and shall
be due no later than the Settlement Date that occurs at the end of such
Settlement Period. Such payments shall, at the option of the Purchaser, be made
in cash or pursuant to a decrease in the principal amount of the Revolving Note.
Section 2.06. ADDITION OF ORIGINATORS; MERGER OF ORIGINATORS.
Notwithstanding anything to the contrary in this Agreement, any direct or
indirect wholly-owned subsidiary of SRI (whether now in existence or acquired or
created after the date hereof) may at any time become an Originator hereunder,
whether in addition to or in substitution for one or more then-existing
Originators (each such additional or substitute Originator, an "ADDITIONAL
ORIGINATOR"); PROVIDED, that, (i) at the time such direct or indirect
wholly-owned subsidiary becomes an Additional Originator, such direct or
indirect wholly-owned subsidiary shall execute an agreement (an "ADDITIONAL
ORIGINATOR AGREEMENT") in which such Additional Originator (a) agrees to sell
Receivables to the Purchaser on the terms and subject to the conditions set
forth in this Agreement, and becomes a party to this Agreement, (b) complies
with the conditions set forth in SECTION 3.01, (c) makes the representations and
warranties set forth in SECTION 4.02 and 4.03 and (d) agrees to comply with the
covenants set forth in ARTICLE V and (ii) the Purchaser shall have consented in
writing to the inclusion of the Additional Originator pursuant to this SECTION
2.06. An agreement substantially in the form attached hereto as EXHIBIT A shall
be an acceptable Additional Originator Agreement. Following the addition or
substitution of any Additional Originator, the term "Originator" as used in this
Agreement shall include for all purposes such Additional Originator. Nothing
herein shall prevent one or more Originators from merging with and into a direct
or indirect wholly-owned subsidiary of SRI (whether or not such direct or
indirect wholly-owned subsidiary is a then-existing Originator) and, in the
event of such merger, such surviving corporation shall be deemed an "Originator"
for purposes of this Agreement; PROVIDED that any such surviving corporation
must (a) agree in writing to sell Receivables to the Purchaser on the terms and
subject to the conditions set forth in this Agreement and become a party to this
Agreement, (b) comply with the conditions set forth in SECTION 3.01, (c) make
the representations and warranties set forth in SECTION 4.02 and 4.03 and (d)
agree in writing to comply with the covenants set forth in ARTICLE V; PROVIDED
FURTHER that in the event of any merger of Originators which are then a party to
this Agreement, the conditions set forth in (a), (b) and (c) shall be deemed
satisfied.
Section 2.07. ADDITION OF ACCOUNTS. (a) Unless the Purchaser
or any Originator otherwise elects (which either can do at its option, subject
to Section 2.07(b)), all Accounts which meet the definition of Automatic
Additional Accounts shall be included as Accounts from and after
18
the date upon which such Automatic Additional Accounts are created and all
Receivables in such Automatic Additional Accounts, whether such Receivables are
then existing or thereafter created, shall be sold automatically to the
Purchaser. For all purposes of this Agreement, all receivables of such Automatic
Additional Accounts shall be treated as Receivables upon their creation and
shall be subject to the eligibility criteria specified in the definitions of
"Eligible Receivable" and "Eligible Account."
(b) Notwithstanding an Originator's election to
terminate or suspend the inclusion of Automatic Additional Accounts, the
Purchaser may require such Originator to designate additional credit card
accounts or any successor credit card account designation accounts
("SUPPLEMENTAL ACCOUNTS") to be included as Accounts in such amount as
designated by the Purchaser.
Section 2.08. REMOVAL OF ACCOUNTS. The Purchaser and any
Originator may from time to time mutually designate Accounts which will no
longer be subject to this Agreement and, following such designation, no
Receivables created under such Accounts will be sold to the Purchaser hereunder
(the "REMOVED ACCOUNTS").
19
ARTICLE III
CONDITIONS TO PURCHASES
Section 3.01. CONDITIONS PRECEDENT TO PURCHASER'S INITIAL
PURCHASE. The obligation of the Purchaser to purchase Receivables hereunder on
the occasion of the initial Purchase from any Originator is subject to the
conditions precedent that the Purchaser shall have received on or before the
date of such Purchase the following, each (unless otherwise indicated) dated the
day of such initial sale and in form and substance satisfactory to the
Purchaser:
(i) a copy of duly adopted resolutions of the Board of
Directors of such Originator authorizing this Agreement, the documents
to be delivered by such Originator hereunder and the transactions
contemplated hereby, certified by the Secretary or Assistant Secretary
of such Originator;
(ii) a duly executed certificate of the Secretary or an
Assistant Secretary of such Originator certifying the names and true
signatures of the Authorized Officers authorized on behalf of such
Originator to sign this Agreement or any instruments or documents in
connection with this Agreement;
(iii) (A) executed UCC-1 financing statements with respect to
the Receivables, naming such Originator as seller and the Purchaser as
purchaser, in proper form for filing in such jurisdiction in which the
Purchaser deems it necessary or desirable to perfect the Purchaser's
ownership thereof under the UCC or comparable law of such jurisdiction
and (B) evidence that all other actions necessary or, in the opinion of
the Purchaser, desirable or required to perfect the Purchaser's
ownership of the Receivables sold hereunder have been duly taken; and
(iv) a letter signed by such Originator or such other of its
Affiliates which is a party to any then current Lock-Box Agreements,
which Agreements are listed on SCHEDULE IV, in form and substance
satisfactory to the Purchaser, which letter shall be acknowledged by
the lock-box bank.
Section 3.02. CONDITIONS PRECEDENT TO EACH ORIGINATOR'S SALE.
The obligation of each Originator to make its initial sale of Receivables
hereunder is subject to the condition precedent that such Originator shall have
received on or before the date of such sale the following, each (unless
otherwise indicated) dated the day of such initial sale and in form and
substance satisfactory to such Originator:
(a) a copy of duly adopted resolutions of the Board of
Directors of the Purchaser authorizing this Agreement, the documents to
be delivered by the Purchaser hereunder and the transactions
contemplated hereby, certified by the Secretary or Assistant Secretary
of the Purchaser; and
20
(b) a duly executed certificate of the Secretary or
Assistant Secretary of the Purchaser certifying the names and true
signatures of the officers authorized on its behalf to sign this
Agreement and the other documents to be delivered by it hereunder.
21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants as to itself as follows:
(a) It (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and is duly qualified as a foreign corporation and is in
good standing in each jurisdiction in which the failure to so qualify
would have a material adverse effect on its condition (financial or
otherwise), operations, properties or prospects, (ii) has the requisite
corporate power and authority to effect the transactions contemplated
hereby, and (iii) has all requisite corporate power and authority and
the legal right to own, pledge, mortgage and operate its properties,
and to conduct its business as now or currently proposed to be
conducted.
(b) The execution, delivery and performance by it of
this Agreement and all instruments and documents to be delivered
hereunder by it, and the transactions contemplated hereby and thereby,
(i) are within its corporate powers, have been duly authorized by all
necessary corporate action, including the consent of shareholders where
required, and do not (A) contravene its charter or by-laws, (B) violate
any law or regulation or any order or decree of any court or
governmental instrumentality, (C) conflict with or result in the breach
of, or constitute a default under, any indenture, mortgage or deed of
trust or any material lease, agreement or other instrument binding on
or affecting it or any of its respective subsidiaries or any of its
properties or (D) result in or require the creation or imposition of
any Lien except as created or imposed hereunder, and no transaction
contemplated hereby requires compliance on its part with any bulk sales
act or similar law, and (ii) do not require the consent, authorization
by or approval of or notice to or filing or registration with, any
governmental body, agency, authority, regulatory body or any other
Person other than those which have been obtained except for the filing
of the financing statements referred to in SECTION 3.01 hereof. This
Agreement has been duly executed and delivered by the Purchaser and
constitutes the legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms.
(c) There is no pending or, to its knowledge after due
inquiry, threatened action or proceeding affecting the Purchaser before
any court, governmental agency or arbitrator that may reasonably be
expected to materially and adversely affect its condition (financial or
otherwise), operations, properties or prospects, or that purports to
affect the legality, validity or enforceability of this Agreement, and
none of the transactions contemplated hereby is or, to its knowledge is
threatened to be, restrained or enjoined (temporarily, preliminarily or
permanently).
Section 4.02. REPRESENTATIONS AND WARRANTIES OF EACH OF THE
ORIGINATORS. Each Originator hereby severally represents and warrants to the
Purchaser that, as of the Closing Date
22
with respect to such Originator and as to matters involving (x) Supplemental
Accounts, as of the applicable Addition Date and (y) Automatic Additional
Accounts, as of the date the Receivables of such Accounts are designated for
sale to the Purchaser:
(a) ORGANIZATION AND GOOD STANDING. Such Originator is
a corporation duly organized and validly existing in good standing
under the laws of the jurisdiction of its incorporation and has full
corporate power, authority and legal right to own its properties and
conduct its business as such properties are presently owned and such
business is presently conducted, and to execute, deliver and perform
its obligations under this Agreement.
(b) DUE QUALIFICATION. Such Originator is duly
qualified to do business and is in good standing (or is exempt from
such requirement) in any state required in order to conduct business,
and has obtained all necessary licenses and approvals with respect to
such Originator required under federal and applicable state law.
(c) DUE AUTHORIZATION. The execution and delivery of
this Agreement and the consummation of the transactions provided for in
this Agreement have been duly authorized by such Originator by all
necessary corporate action on its part and this Agreement will remain,
from the time of its execution, an official record of such Originator.
This Agreement has been duly executed and delivered such Originator and
constitutes the legal, valid and binding obligation of such Originator,
enforceable against such Originator in accordance with its terms.
(d) NO CONFLICTS. The execution, delivery and
performance of this Agreement, the performance of the transactions
contemplated by this Agreement, and the fulfillment of the terms hereof
by such Originator, do not (i) contravene its charter or by-laws, (ii)
violate any provision of, or require any filing (except for the filings
under the UCC required by this Agreement, each of which has been duly
made and is in full force and effect), registration, consent or
approval under, any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to such Originator, except for such filings,
registrations, consents or approvals as have already been obtained and
are in full force and effect, (iii) result in a breach of or constitute
a default or require any consent under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which such
Originator is a party or by which it or its properties may be bound or
affected except those as to which a consent or waiver has been obtained
and is in full force and effect and an executed copy of which has been
delivered to the Purchaser, or (iv) result in, or require, the creation
or imposition of any lien upon or with respect to any of the properties
now owned or hereafter acquired by such Originator other than as
specifically contemplated by this Agreement.
(e) TAXES. Such Originator has filed all tax returns (federal,
state and local) required to be filed and has paid or made adequate
provision for the payment of all taxes,
23
assessments and other governmental charges due from such Originator or
is contesting any such tax assessment or other governmental charge in
good faith through appropriate proceedings. Such Originator knows of no
basis for any material additional tax assessment for any fiscal year
for which adequate reserves have not been established.
(f) NO VIOLATION. The execution and delivery of this
Agreement, the performance of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof will not conflict
with or violate any Requirements of Law applicable to such Originator.
(g) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the knowledge of such Originator, threatened against
such Originator before any court, regulatory body, administrative
agency, or other tribunal or governmental instrumentality (i) asserting
the invalidity of this Agreement, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement,
(iii) seeking any determination or ruling that, in the reasonable
judgment of such Originator, would materially and adversely affect the
performance by such Originator of its obligations under this Agreement
or (iv) seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement.
(h) ALL CONSENTS REQUIRED. All approvals, authorizations,
consents, orders or other actions of any Person or of any governmental
body or official relating to such Originator and required in connection
with the execution and delivery of this Agreement, the performance of
the transactions contemplated by this Agreement and the fulfillment of
the terms hereof, have been obtained.
(i) BONA FIDE RECEIVABLES. Each Receivable sold hereunder by
such Originator is or will be an account receivable arising out of such
Originator's performance (or, in the case of an Account that is an
Automatic Additional Account pursuant to clause (b) of the definition
of Automatic Additional Account, the performance of the owner of such
Account at the time such Receivable was originated) in accordance with
the terms of the Charge Account Agreement giving rise to such
Receivable. Such Originator has no knowledge at the time of the sale of
such Receivable to the Purchaser hereunder of any fact which should
have led it to expect that such Eligible Receivable would not be
enforceable against the Obligor when due.
(j) PLACE OF BUSINESS. The principal place of business of such
Originator is as indicated for such Originator on SCHEDULE I hereto,
and the offices where such Originator keeps its records concerning the
Receivables and related contracts are as indicated for such Originator
on SCHEDULE III hereto.
(k) USE OF PROCEEDS. As of the Closing Date, no proceeds of
the sale of any Receivables will be used by such Originator to purchase
or carry any margin security.
24
(l) PURCHASE TERMINATION EVENT. No Purchase Termination Event
or Incipient Purchase Termination Event has occurred and is continuing
for such Originator.
(m) NOT AN "INVESTMENT COMPANY". Such Originator is not an
"investment company" or "controlled" by an "investment company" within
the meaning of the Investment Company Act, or is exempt from all
provisions of such Act.
(n) SOFTWARE. All of the computer hardware and software
necessary to collect the Receivables is described on SCHEDULE VI.
(o) TRADENAMES. SCHEDULE VII lists all of the tradenames of
each Originator for the six-year period preceding the date such
Originator became a party to this Agreement.
(p) ERISA LIENS. Such Originator owns the Receivables free and
clear of any liens, claims (including but not limited to claims of
ownership) or encumbrances, including but not limited to federal ERISA
liens and claims arising pursuant to 31 U.S.C. Section 3713.
(q) ERISA AND THE CODE. The execution and delivery of this
Agreement and the transactions contemplated hereby do not and will not
involve any transaction by any Originator that is prohibited under
Section 406(a) of ERISA or in connection with which an excise tax could
be imposed pursuant to Section 4975(a) or (b) of the Internal Revenue
Code of 1986, as amended (the "CODE"), by reason of the prohibited
transactions described in Section 4975(c)(1) (A), (B), (C) or (D) of
the Code.
The representations and warranties set forth in this Section
4.02 shall survive the sale and assignment of the respective Receivables to the
Purchaser pursuant to this Agreement. Each Originator shall be deemed each time
that it delivers or causes to be delivered a Receivables Statement to severally
represent and warrant to the Purchaser, as of the related Purchase Date, that
the representations and warranties of such Originator set forth in Section 4,02,
are true and correct as of such date. Upon discovery by such Originator or the
Purchaser of a breach of any of the foregoing representations and warranties,
the party discovering such breach shall give prompt written notice to the other.
Section 4.03. REPRESENTATIONS AND WARRANTIES OF EACH
ORIGINATOR RELATING TO THIS AGREEMENT AND THE RECEIVABLES.
(a) BINDING OBLIGATION; VALID SALE AND ASSIGNMENT. Each
Originator hereby severally represents and warrants to the Purchaser that as of
the date each Receivable is sold hereunder:
(i) This Agreement constitutes the legal, valid and
binding obligation of such Originator, enforceable against such
Originator in accordance with its terms, except (A) as
25
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in
general, and (B) as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in
equity).
(ii) This Agreement constitutes a valid sale, transfer,
assignment, set-over and conveyance to the Purchaser of all right,
title and interest of such Originator in and to the Receivables now
existing or hereafter created and arising in connection with the
Accounts, all monies due or to become due with respect thereto
(including all Finance Charge Receivables), all other proceeds of such
Receivables, and such Receivables and all proceeds thereof will be held
by the Purchaser free and clear of any Lien of any Person claiming
through or under such Originator or any of its Affiliates except for
Permitted Liens.
(iii) Such Originator is not insolvent and has adequate
capital to conduct its business as it is presently being conducted.
(iv) Such Originator is the legal and beneficial owner of all
right, title and interest in and to each Receivable conveyed to the
Purchaser by such Originator and each such Receivable has been or will
be sold to the Purchaser free and clear of any Lien other than
Permitted Liens.
(v) All consents, licenses, approvals or authorizations
of or registrations or declarations with any Governmental Authority
required to be obtained, effected or given by such Originator in
connection with the sale of such Originator's Receivables to the
Purchaser have been duly obtained, effected or given and are in full
force and effect.
(vi) Such Originator has clearly and unambiguously marked its
primary computer records and its primary microfiche storage files
regarding such Originator's Receivables as the property of the
Purchaser and shall maintain such records in a manner that will
properly reflect the Purchaser's interest in such Receivables.
(vii) Each Account classified as an "Eligible Account" by such
Originator in any document or report delivered hereunder will satisfy
the requirements contained in the definition of Eligible Account at the
time of such delivery and each Receivable classified as an "Eligible
Receivable" by such Originator in any document or report delivered
hereunder will satisfy the requirements contained in the definition of
Eligible Receivable at the time of such delivery.
(viii) All information with respect to the Accounts and the
Receivables provided to the Purchaser by such Originator was true and
correct in all material respects as of the Closing Date with respect to
such Originator, or with respect to Supplemental Accounts as of each
Addition Date and with respect to Automatic Additional Accounts, as of
the day
26
Receivables arising under each such Account are designated for sale to
the Purchaser, as the case may be.
(ix) Each of such Originator's Receivables has been conveyed
to the Purchaser free and clear of any Lien of any Person claiming
through or under such Originator or any of its Affiliates (other than
Permitted Liens) and in compliance in all material respects with all
Requirements of Law applicable to such Originator.
(x) With respect to each of such Originator's
Receivables then existing, all consents, licenses, approvals or
authorizations of or registrations or declarations with any
Governmental Authority required to be obtained, effected or given by
such Originator in connection with the conveyance of such Receivable to
the Purchaser have been duly obtained, effected or given and are in
full force and effect.
(xi) Each Receivable sold to the Purchaser on such day has
been conveyed to the Purchaser by the applicable Originator in
compliance, in all material respects, with all Requirements of Law
applicable to such Originator and, with respect to each such
Receivable, all consents, licenses, approvals or authorizations of or
registrations or declarations with, any Governmental Authority required
to be obtained, effected or given by such Originator in connection with
the conveyance of such Receivable to the Purchaser have been duly
obtained, effected or given and are in full force and effect.
(b) NOTICE OF BREACH. The representations and
warranties set forth in this SECTION 4.03 shall survive the sale and assignment
of the respective Receivables to the Purchaser. Upon discovery by the applicable
Originator or the Purchaser of a breach of any of the representations and
warranties set forth in this SECTION 4.03, the party discovering such breach
shall give prompt written notice to the other party mentioned above. Such
Originator agrees to cooperate with the Purchaser or any agent of the Purchaser
in attempting to cure any such breach.
27
ARTICLE V
GENERAL COVENANTS
Section 5.01. COVENANTS OF EACH ORIGINATOR. So long as the
Purchaser shall have any Net Ownership Interest in any Receivables sold by any
Originator or until the Purchase Termination Date shall have occurred with
respect to all the Originators, whichever is later, each Originator covenants
that:
(a) RECEIVABLES TO BE ACCOUNTS OR GENERAL INTANGIBLES.
Such Originator will take no action to cause any Receivable to be
evidenced by any instrument (as defined in the UCC as in effect in the
Relevant UCC State). Such Originator will take no action to cause any
Receivable to be anything other than an "account" or "general
intangible" (each as defined in the UCC as in effect in the Relevant
UCC State).
(b) SECURITY INTERESTS. Except for the conveyances
hereunder, such Originator will not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to exist
any Lien on any Receivable, whether now existing or hereafter created,
or any interest therein; such Originator will immediately notify the
Purchaser of the existence of any Lien on any Receivable; and such
Originator shall defend the right, title and interest of the Purchaser
in, to and under the Receivables, whether now existing or hereafter
created, against all claims of third parties claiming through or under
such Originator; PROVIDED, HOWEVER, that nothing in this SECTION
5.01(B) shall prevent or be deemed to prohibit such Originator from
suffering to exist upon any of the Receivables any Permitted Lien.
(c) CHARGE ACCOUNT AGREEMENTS AND CREDIT AND COLLECTION
POLICIES. Such Originator shall comply with and perform its obligations
under any Charge Account Agreement to which such Originator is a party
that relates to the Accounts and the Credit and Collection Policy
except insofar as any failure to comply or perform would not materially
and adversely affect the rights of the Purchaser. Such Originator may
change the terms and provisions of such Charge Account Agreements or
the Credit and Collection Policy in any respect (including, without
limitation, the reduction of the required minimum monthly payment, the
calculation of the amount, or the timing, of chargeoffs and the
Periodic Finance Charges and other fees to be assessed thereon) only
(i) (A) if it owns a comparable segment of charge card accounts, such
change is made applicable to the comparable segment of the revolving
credit card accounts owned by such Originator, if any, which have
characteristics the same as, or substantially similar to, the Accounts
that are the subject of such change and (B) if it does not own such a
comparable segment, it will not make any such change with the intent to
materially benefit such Originator over the Purchaser, except as
otherwise restricted by an endorsement, sponsorship, or other agreement
between such Originator and an unrelated third party or by the terms of
the Charge Account Agreements and (ii) if such change is permitted by
the Purchaser.
28
(d) DELIVERY OF COLLECTIONS. In the event that such
Originator receives Collections, such Originator agrees to pay to the
Purchaser or such other Person designated by the Purchaser all payments
received by such Originator in respect of the Receivables as soon as
practicable after receipt thereof by such Originator (but no event
later than the second Business Day following the date of receipt).
(e) CONVEYANCE OF ACCOUNTS. Such Originator covenants
and agrees that it will not, without the consent of the Purchaser or
unless such Account is a Removed Account, convey, assign, exchange or
otherwise transfer any Account to any Person other than Purchaser prior
to the termination of this Agreement.
(f) NOTICE OF LIENS. Such Originator shall notify the
Purchaser promptly after becoming aware of any Lien on any Receivable
other than Permitted Liens.
(g) COMPLIANCE WITH LAWS, ETC. Such Originator shall
comply in all material respects with all applicable laws, rules,
regulations and orders applicable to the Receivables, including,
without limitation, rules and regulations relating to truth in lending,
fair credit billing, fair credit reporting, equal credit opportunity,
fair debt collection practices and privacy, where failure to so comply
could reasonably be expected to have an adverse impact on the amount of
Collections thereunder.
(h) PRESERVATION OF CORPORATE EXISTENCE. Except as
contemplated by Section 2.06, each Originator shall, to the extent it
remains a party to this Agreement, preserve and maintain in all
material respects its corporate existence, corporate rights (charter
and statutory) and corporate franchises.
(i) VISITATION RIGHTS. At any reasonable time during
normal business hours and from time to time, such Originator shall
permit (i) the Purchaser, or any Person designated by the Purchaser, to
examine and make copies of and abstracts from the records, books of
account and documents (including, without limitation, computer tapes
and disks) of such Originator relating to Receivables owned or to be
purchased by the Purchaser hereunder and to the underlying Charge
Account Agreements and (ii) the Purchaser, or Person designated by the
Purchaser (upon the giving of appropriate notice to the Purchaser) to
visit the properties of such Originator for the purpose of examining
such records, books of account and documents, and to discuss the
affairs, finances and accounts of such Originator relating to the
Receivables or to such Originator's performance hereunder with any of
its officers or directors and with its independent certified public
accountants.
(j) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Such
Originator shall maintain and implement, or cause to be maintained or
implemented, administrative and operating procedures reasonably
necessary or advisable for the collection of all such Receivables, and,
until the delivery to the Purchaser, keep and maintain, or cause to be
kept and maintained,
29
all documents, books, records and other information reasonably
necessary or advisable for the collection of all such Receivables.
(k) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND
CHARGE ACCOUNT AGREEMENTS. Such Originator shall at its expense take
all actions on its part reasonably necessary to maintain in full force
and effect its rights under all Charge Account Agreements to which such
Originator is a party.
(l) LOCATION OF RECORDS. Such Originator shall keep its
chief place of business and chief executive office, and the offices
where it keeps the records concerning the Receivables and all
underlying Charge Account Agreements (and all original documents
relating thereto), at the address or addresses of such Originator
specified in SCHEDULE III hereto or upon written notice to the
Purchaser, at such other locations in a jurisdiction where all action
required by SECTION 5.01(O) shall have been taken and completed and be
in full force and effect.
(m) FURNISHING COPIES, ETC. Such Originator shall
furnish to the Purchaser (i) upon the Purchaser's request, a
certificate of an Authorized Officer of such Originator certifying, as
of the date thereof, that no Purchase Termination Event has occurred
and is continuing and setting forth the computations used such
Authorized Officer of such Originator in making such determination;
(ii) as soon as possible and in any event within five days after the
occurrence of any Purchase Termination Event or Incipient Purchase
Termination Event, a statement of an Authorized Officer of such
Originator setting forth details of such Purchase Termination Event or
Incipient Purchase Termination Event and the action that such
Originator proposes to take or has taken with respect thereto; (iii)
promptly after obtaining knowledge that a Receivable was, at the time
of the Purchaser's purchase thereof, not an Eligible Receivable, notice
thereof; (iv) on the Business Day following the request, a computer
file or microfiche list containing a true and correct list of all
Accounts, identified by account numbers and the outstanding balance of
the Receivable in such Account; and (v) promptly following the
Purchaser's request therefor, such other information, documents,
records or reports with respect to the Receivables or the underlying
Charge Account Agreements or the conditions or operations, financial or
otherwise, of such Originator, as the Purchaser may from time to time
reasonably request.
(n) OBLIGATION TO RECORD AND REPORT. Such Originator
shall record each Purchase as a sale on its books and records, reflect
each Purchase in its financial statements, tax returns and other
applicable documents as a sale and recognize gain or loss, as the case
may be, on each Purchase.
(o) CONTINUING COMPLIANCE WITH THE UCC. Each Originator
shall, without limiting the requirements of SECTION 5.01(S), at its
expense, preserve, continue, and maintain or cause to be preserved,
continued, and maintained the Purchaser's valid and properly protected
title to each Receivable purchased hereunder, including, without
limitation, filing
30
or recording UCC financing statements in each relevant jurisdiction
prior to or substantially contemporaneously with any Purchases.
(p) IN-STORE PAYMENTS. In the event that such
Originator or any SRI Store receives any amounts in respect of
Collections of Receivables, including, without limitation, all In-Store
Payments, such Originator or SRI Store shall deposit or otherwise
credit, or cause to be deposited or otherwise credited, as soon as
reasonably practicable but in any event not later than the close of
business on the second Business Day following the date of processing of
such Collections, to an account designated by the Purchaser, an amount
equal to the amount so received and hold such amount in trust for the
Purchaser pending such remittance.
(q) PAYMENTS. Each Originator shall instruct Obligors
to deliver payments to such Originator's Lock Box (if any), the
Purchaser or such other Person who may be servicing the Receivables;
PROVIDED this section shall not apply to In-Store Payments.
(r) FURTHER ACTION EVIDENCING PURCHASES. (i) Such
Originator agrees that from time to time, at its expense, it will
promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable or that the
Purchaser may reasonably request, to protect or more fully evidence the
Purchaser's ownership, right, title and interest in the Receivables
sold by such Originator and its rights under the Charge Account
Agreements with respect thereto, or to enable the Purchaser to exercise
or enforce any such rights. Without limiting the generality of the
foregoing, each Originator will upon the request of the Purchaser (A)
execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be
necessary or, in the opinion of the Purchaser, desirable, (B) indicate
on its books and records that Receivables have been sold and assigned
to the Purchaser, and provide to the Purchaser, upon request, copies of
any such records and (C) contact customers to confirm and verify
Receivables.
(ii) Such Originator hereby irrevocably authorizes the
Purchaser to file one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the Receivables sold
by such Originator, or the underlying Charge Account Agreements with
respect thereto, without the signature of such Originator where
permitted by law.
(iii) If such Originator fails to perform any of its
agreements or obligations under this Agreement, the Purchaser may (but
shall not be required to) perform, or cause performance of, such
agreements or obligations, and the expenses of the Purchaser incurred
in connection therewith shall be payable by such Originator as provided
in SECTION 8.05.
(s) CHANGE IN BUSINESS. Such Originator shall (i) not make any
change in the nature of its business as conducted on the date hereof
that could reasonably be expected to
31
have a material adverse effect on the value or collectability of the
Receivables and (ii) promptly notify the Purchaser of any change of
name or new trade names of such Originator.
Section 5.02. MERGERS. None of the Originators will merge into
another entity unless permitted pursuant to Section 2.06.
Section 5.03. TRANSFER OF ACCOUNT RELATIONSHIPS. Nothing in
this Agreement shall prohibit the transfer of any account relationship
(including, without limitation, any Charge Account Agreement and any related
books and records) by any Originator to any other Originator or to any
Additional Originator, whether by assignment and assumption of such accounts or
by such Originator's or Additional Originator's initiation of replacement
accounts and the termination of existing accounts as balances thereunder are
paid; PROVIDED that prior to such transfer the Originator transferring the
account relationship will deliver to the Purchaser an opinion of counsel,
reasonably acceptable to the Purchaser, to the effect that the Purchaser's
ownership interest in such account relationship will not be adversely affected
by such transfer.
Section 5.04. PURCHASER COVENANT REGARDING SALE TREATMENT. The
Purchaser shall record each Purchase as a purchase on its books and records and
reflect each Purchase in its financial statements, tax returns and other
applicable documents as a purchase.
Section 5.05. TRADENAME LICENSE. Each Originator hereby grants
to the Purchaser a non-exclusive and, except to the extent provided below,
non-transferable license to use the various tradenames (the "LICENSED NAMES")
listed in SCHEDULE VII with respect to such Originator and any other tradenames
used by such Originator on or after the date hereof. This license and the rights
of use hereunder are only for use in connection with the billing and collection
of Receivables sold under this Agreement. This license and the right of use of
the Licensed Name hereunder may be transferred by the Purchaser to the extent
necessary to collect the Receivables in a commercially reasonable manner. The
rights of use granted under this license are limited to such uses of the
Licensed Names as are reasonably necessary to the collection by the Purchaser in
a commercially reasonable manner of the Receivables and are further subject to
maintaining the then current standards of quality of the business of the
Originators. The license is limited to actions taken in accordance with the
terms of this Agreement and shall expire on the expiration of a reasonable time
for the collection of all Receivables. Notwithstanding any other provisions to
the contrary in this Agreement or in any other agreement between the parties, no
other uses or display of the Licensed Names shall be made by Purchaser except as
granted in this paragraph.
32
ARTICLE VI
PURCHASE TERMINATION EVENTS
Section 6.01. PURCHASE TERMINATION EVENTS. If any of the
following events (each a "PURCHASE TERMINATION EVENT") shall occur and be
continuing:
(i) Any Originator or the Purchaser shall consent to
the appointment of a bankruptcy trustee or receiver or liquidator in
any bankruptcy proceeding or any other insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of
or relating to all or substantially all of its Accounts or a decree or
order of a court or agency or supervisory authority having jurisdiction
in the premises for the appointment of a bankruptcy trustee or receiver
or liquidator in any bankruptcy proceeding or any other insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceeding, or for the winding up or liquidation of its affairs, shall
have been entered against such Originator or Purchaser, or such
Originator or Purchaser shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage
of any applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations; or such Originator shall become unable for
any reason to sell Receivables to the Purchaser in accordance with the
provisions of this Agreement; or the Purchaser shall become unable for
any reason to purchase Receivables from the Originators in accordance
with the provisions of this Agreement;
(ii) the Internal Revenue Service shall file notice of a lien
pursuant to Section 6321 of the Code with regard to any of the assets
of any Originator, or the Pension Benefit Guaranty Corporation shall,
or shall indicate its intention to, file notice of a lien pursuant to
Section 4068 of ERISA with regard to any of the assets of any
Originator, and (in either case) the aggregate amount secured or to be
secured, by such lien exceeds $500,000, and such lien shall not be
released within 30 days following the filing date for such lien; or
(iii) any Originator or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of
Title IV of ERISA, if solely as a result of such reorganization or
termination the aggregate annual contributions of any Originator or its
respective ERISA Affiliates to all Multiemployer Plans that are then in
reorganization or have been or are being terminated have been or will
be increased over the amounts required to be contributed to such
Multiemployer Plans by such Originator or such ERISA Affiliates for the
plan year immediately preceding the plan year in which such
notification is received by an amount exceeding $500,000, and any Lien
arising therefrom is not released within 30 days following the filing
date for such lien;
33
then the Purchaser's obligation to purchase Receivables from such
Originator as to which such Purchase Termination Event relates or, if
such Purchase Termination Event relates to the Purchaser, from all
Originators shall automatically be terminated upon the happening of
such event.
34
ARTICLE VII
INDEMNIFICATION
Section 7.01. INDEMNITIES BY THE ORIGINATORS. Without limiting
any other rights that the Purchaser may have hereunder or under applicable law,
each Originator hereby agrees to indemnify the Purchaser from and against any
and all claims, losses and liabilities (including reasonable attorneys' fees)
(all the foregoing being collectively referred to as "INDEMNIFIED AMOUNTS")
arising out of or resulting from this Agreement or in respect of any Receivable
or any Charge Account Agreement, excluding, however, Indemnified Amounts to the
extent resulting from gross negligence or willful misconduct on the part of the
Purchaser; PROVIDED, HOWEVER, that except as expressly provided in Section 2.04
and in this Section 7.01 below, in no event will any Originator have any
indemnity or other obligation hereunder or otherwise with respect to any loss
suffered in respect of any Eligible Receivable sold to the Purchaser in
accordance with this Agreement, the parties hereby acknowledging that such sales
are to be without recourse. Without limiting or being limited by the foregoing,
but subject to the proviso in the immediately preceding sentence, each
Originator shall pay on demand to the Purchaser any and all amounts necessary to
indemnify the Purchaser from and against any and all Indemnified Amounts
relating to or resulting from:
(a) reliance on any representation or warranty or statement
made or deemed made by such Originator (or any of its officers) under
or in connection with this Agreement or in any certificate delivered
pursuant hereto that, in either case, shall have been false or
incorrect in any material respect when made or deemed made;
(b) the failure by such Originator to comply with any
applicable law, rule or regulation of any Governmental Authority with
respect to any Receivable or the related Charge Account Agreement of
such Originator, or the nonconformity of any Receivable or the related
Charge Account Agreement of such Originator with any such applicable
law, rule or regulation;
(c) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws with
respect to any Receivables of such Originator;
(d) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable of such Originator (including, without limitation, a
defense based on such Receivable or the related Charge Account
Agreement not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any
other
35
claim resulting from the sale of the merchandise or services related to
any such Receivable or the furnishing or failure to furnish such
merchandise or services;
(e) any failure of such Originator to perform its duties or
obligations under this Agreement or the applicable Charge Account
Agreement;
(f) any products liability claim arising out of or in
connection with merchandise, insurance or services that are the subject
of any charge pursuant to any Charge Account Agreement of such
Originator;
(g) the commingling of Collections of Receivables at any time
with other funds of such Originator;
(h) any set-off by any creditor of an Originator (other than
any Obligor) against Collections; or
(i) any investigation, litigation or proceeding related to
this Agreement or in respect of any Receivable or any Charge Account
Agreement of such Originator.
Notwithstanding the foregoing, no Originator shall under any
circumstances be required to indemnify the Purchaser for any Indemnified Amounts
that result from any delay in the collection of any Receivables or any default
by an Obligor with respect to any Receivables.
Section 7.02. INDEMNITIES BY THE PURCHASER. Without limiting
any other rights that any Originator may have hereunder or under applicable law,
the Purchaser hereby agrees to indemnify such Originator from and against any
and all claims, losses and liabilities (including reasonable attorneys' fees)
arising out of or resulting from such Originator's reliance on any
representation or warranty made by the Purchaser in this Agreement or in any
certificate delivered pursuant hereto that, in either case, shall have been
false or incorrect in any material respect when made or deemed made.
36
ARTICLE VIII
MISCELLANEOUS
Section 8.01. AMENDMENT. This Agreement and the rights and
obligations of the parties hereunder may not be changed orally, but only by an
instrument in writing signed by the Purchaser and the Originator affected
thereby.
Section 8.02. NOTICES, ETC. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic, telex, facsimile or cable communication) and mailed, telegraphed,
telexed, transmitted, cabled or delivered, if to any Originator, at its address
set forth in SCHEDULE I hereto; and if to the Purchaser, at its address at 10201
Main Street, Houston, Texas 77025, Attention: President (with copies to such
Persons as may be designated by the Purchaser from time to time). All such
notices and communications shall when mailed, telegraphed, telexed, transmitted
or cabled be effective when deposited in the mails, delivered to the telegraph
company, confirmed by telex answerback, transmitted by telecopier or delivered
to the cable company, respectively, except that notices to the Purchaser
pursuant to ARTICLE II shall not be effective until received by the Purchaser.
Section 8.03. NO WAIVER: REMEDIES. No failure on the part of
the Purchaser to exercise, and no delay in exercising, any right under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Section 8.04. BINDING EFFECT. This Agreement shall be binding
upon and inure to the benefit of each Originator and the Purchaser and their
respective successors and assigns, except that no Originator shall have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Purchaser. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms, and
shall remain in full force and effect as between the Purchaser and each
Originator until such time, after the Purchase Termination Date applicable to
such Originator, as the Purchaser shall not have any Net Ownership Interest in
any Receivables; PROVIDED, HOWEVER, that the indemnification provisions of
ARTICLE VIII shall be continuing and shall survive any termination of this
Agreement.
Section 8.05. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT
THAT THE VALIDITY OR
37
PROTECTION OF THE PURCHASER'S OWNERSHIP OF THE PURCHASED RECEIVABLES, OR
REMEDIES HEREUNDER IN RESPECT THEREOF MAY BE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Section 8.06. COSTS, EXPENSES AND TAXES. In addition to the
limited rights of indemnification granted to the Purchaser under ARTICLE VII
hereof, the Originators jointly and severally agree to pay on demand all costs
and expenses of the Purchaser in connection with the preparation, execution and
delivery of this Agreement and the documents to be delivered hereunder,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Purchaser with respect thereto and with respect to advising the
Purchaser as to its rights and remedies under this Agreement, and all costs and
expenses (including, without limitation, reasonable counsel fees and expenses),
in connection with the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Agreement and the documents to be delivered
hereunder. In addition, the Originators jointly and severally agree to pay any
and all stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Agreement
or the other documents to be delivered hereunder, and agree to hold the
Purchaser harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omitting to pay such taxes and fees.
Section 8.07. ACKNOWLEDGMENT OF ASSIGNMENTS. This Agreement
(i) may not be assigned by any Originator and (ii) may not be assigned by the
Purchaser, except in each case in connection with a sale of substantially all of
the Receivables or by operation of law.
Section 8.08. NO PETITION IN BANKRUPTCY. Each Originator
severally covenants and agrees that prior to the date which is three years after
the Purchase Termination Date for the last Originator which is a party to this
Agreement, it will not institute against or join any other Person in instituting
against the Purchaser any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceeding under the laws of the United
States or any State of the United States. Each Originator shall not be
permitted, and hereby waives all rights, to set-off amounts owed to such
Originator by the Purchaser against amounts owed by any Originator hereunder to
the Purchaser.
[End of Article VIII]
38
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
THE ORIGINATOR:
PALAIS ROYAL, INC.
JERRY C. IVIE
By: Jerry C. Ivie
Its: Senior Vice President,
Secretary and Treasurer
THE PURCHASER:
SRI RECEIVABLES PURCHASE
CO., INC.
JERRY C. IVIE
By: Jerry C. Ivie
Its: Senior Vice President,
Secretary and Treasurer
39
Schedule I to the
Receivables Purchase Agreement
LIST OF ORIGINATORS
CHIEF PLACE OF BUSINESS,
JURISDICTION OF CHIEF EXECUTIVE OFFICE AND
NAME OF ORIGINATOR INCORPORATION MAILING ADDRESS
10201 Main Street
Palais Royal, Inc. Texas Houston, TX 77025
Schedule II to the
Receivables Purchase Agreement
LIST OF AUTHORIZED OFFICERS
SELLER NAME TITLE
- ------ ---- -----
Palais Royal, Inc. Carl Tooker President
Jerry C. Ivie SVP, Secretary &
Treasurer
Ron Sells Vice President &
Controller
Adam Kirsch Vice President
Joe Pretlow Assistant Secretary
Schedule III to the
Receivables Purchase Agreement
LOCATION OF RECORDS
Palais Royal, Inc.
Location of
Physical Records: 10201 Main Street
Houston, TX 77025
Location of
Related Account
Contracts: 1020 Willow Creek
Jacksonville, TX 75766
Schedule IV to the
Receivables Purchase Agreement
LOCK-BOX BANKS
Palais Royal, Inc.
Lock-Box
Account Number: 101-8190029
Address of
Lock-Box Bank: Norwest Bank of Denver
1700 Lincoln
Denver, CO 80274
Mailing Address of
Lock-Box Bank: Norwest Bank of Denver
P.0, Box 1265
Denver, CO 80201
Schedule V to the
Receivables Purchase Agreement
DISCOUNT FACTOR
With respect to any Settlement Period, the "DISCOUNT
FACTOR" is equal to the greater of (i) zero or (ii) the result
of the following equation:
(A+B-C) x D
WHERE:
A = LIBOR as of the second Business Day
preceding the commencement of such
Settlement Period, expressed on an
annualized basis
B = 3%
C = Portfolio Yield
D = Portfolio Turnover Factor
"PORTFOLIO YIELD" shall mean, with respect to any
Settlement Period, the percentage equivalent of a fraction,
(a) the numerator of which is the product of (i) the Finance
Charge Collections on the Receivables during the preceding
Settlement Period and (ii) a fraction (A) the numerator of
which is the number of days in such preceding Settlement
Period and (B) the denominator of which is the number of days
in the fiscal year in which such preceding Settlement Period
occurs, and (b) the denominator of which is the average daily
Outstanding Balance of Receivables during the preceding
Settlement Period.
"PORTFOLIO TURNOVER FACTOR" means, at any time, (a)
the average of the Outstanding Balance of Receivables on the
last day of each Monthly Period during the immediately
preceding fiscal year DIVIDED BY (b) the aggregate charge
sales recorded by the Originators during such fiscal year.
Notwithstanding the foregoing, the Discount Factor
shall not in any event reduce the Purchase Price of the
Receivables below 95% of the book value of the Receivables
sold.
Schedule VI to the
Receivables Purchase Agreement
SOFTWARE & HARDWARE
At point of sale, NCR 2152 registers and Symbol UPC
scanners are used to enter sales which are captured by an Innovative
Electronics in-store-processor [ISP] and sent on dedicated circuits to
the IBM 9221 model 191 mainframe for credit authorizations and posting
each night. STC 4480 model 20 and 22 cassette tape drives are used to
produce the off-site backups. All of the A/R software was developed
in-house. The register and ISP software is from NCR and Innovative
Electronics respectively. Store payments are processed in the same way.
Mail payments are processed by an NCR 7770-3801
Remittance Processing System running NCR software. A tape is
transmitted to the mainframe each day.
New accounts which were mailed in are processed for
scoring on a Fair-Isaac packaged system called the Micro-ASAP 6000
System. A tape is transmitted to the mainframe each day. Speedy
applications are sent real time to Trans-Union for approval, scoring
and to set account limits.
Accounts in collections are called on a Davox
packaged system. Tapes are transmitted back and forth with the
mainframe. The collection system is in-house developed software. Bad
checks are processed by a PC using software written by a contractor.
The billing system was also developed in-house, but
uses Group 1 software for mail optimization.
Schedule VII to the
Receivables Purchase Agreement
TRADENAMES
Palais Royal, Inc. "Palais Royal"
"Fashion Bar"
"Stage"
"Hannah"
"FB Petite"
"FB Careers"
"FB Ltd"
"Bealls"
Exhibit 4.29
FIRST AMENDMENT TO THE SERIES 1993-2 SUPPLEMENT
AND REVOLVING CERTIFICATE PURCHASE AGREEMENT
THIS FIRST AMENDMENT to (i) the Series 1993-2 Supplement to
the Amended and Restated Pooling and Servicing Agreement (the "SUPPLEMENT")
dated as of July 30, 1993, by and among Specialty Retailers, Inc., a Delaware
corporation (the "SERVICER"), SRI Receivables Purchase Corp., Inc., a Delaware
corporation (the "TRANSFEROR") and Bankers Trust (Delaware), a Delaware banking
corporation (the "TRUSTEE"), as trustee for the SRI Receivables Master Trust
(the "TRUST") (the SUPPLEMENT AMENDMENT"), and (ii) to the Revolving Certificate
Purchase Agreement (the "PURCHASE AGREEMENT") dated as of July 30, 1993, by and
among the Transferor, the financial institutions parties thereto (the "REVOLVING
PURCHASERS") and National Westminister Bank Plc, New York branch (the "FACILITY
AGENT") (the "PURCHASE AGREEMENT AMENDMENT" and together with the Supplement
Amendment, the "AMENDMENTS"), is made and entered into as of August 11, 1995 by
and among the Servicer, the Transferor, the Trustee on behalf of the Trust, the
Revolving Purchasers and the Facility Agent.
WHEREAS, the Servicer, the Trustee on behalf of the Trust and
the Transferor desire to modify and amend certain terms of the Supplement in the
manner more particularly described herein below;
WHEREAS, the Transferor, the Revolving Purchasers and the
Facility Agent desire to modify and amend certain terms of the Purchase
Agreement in the manner more particularly described herein below;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged:
SUPPLEMENT AMENDMENT
The Servicer, the Trustee on behalf of the Trust and the Transferor
hereby agree as follows:
1. DEFINITIONS. Capitalized terms used herein but not
otherwise defined shall have the meanings set forth in the Supplement, as
amended by this Supplement Amendment. The definitions of "Applicable Margin" and
"Amortization Period Commencement Date" in the Supplement are hereby amended and
restated in their entirety to read as follows:
"APPLICABLE MARGIN" shall mean a percentage per annum
initially equal to (a) with respect to Alternate Base Rate Tranches,
0%; (b) with respect to One Month LIBOR Rate Tranches, <1> 0.50%; (c)
with respect to Two Month LIBOR Rate Tranches, <2> 0.50%; and (d) with
respect to Three Month LIBOR Rate Tranches, <3> 0.50%; provided that at
any time after the earlier of the occurrence of a Pay Out Event or the
eighth Monthly Distribution Date following the Amortization Period
Commencement Date, the Applicable Margin shall be 2.0%.
"AMORTIZATION PERIOD COMMENCEMENT DATE" shall mean the earlier
of the first day of the December 1999 Monthly Period and the Pay Out
Commencement Date and following an Extension occurring after August 20,
1995, the earlier of the date specified as such in the Extension Notice
and the Pay Out Commencement Date.
2. REPLACEMENT OF INTEREST RATE CAP AGREEMENT. THE TRANSFEROR
ASSIGNS, SETS OVER, CONVEYS, PLEDGES AND GRANTS A SECURITY INTEREST AND LIEN
(FREE AND CLEAR OF ALL OTHER LIENS) TO THE TRUSTEE FOR THE BENEFIT OF THE SERIES
1993-2 CERTIFICATEHOLDERS IN ALL OF THE TRANSFEROR'S RIGHT, TITLE AND INTEREST
NOW EXISTING OR HEREAFTER ARISING IN AND TO THE INTEREST RATE CAP AGREEMENT
EVIDENCED BY THE CONFIRMATION DATED AUGUST 15, 1995 BETWEEN [DEUTSCHE BANK] AND
THE TRANSFEROR FOR A RATE CAP TRANSACTION HAVING A NOTIONAL AMOUNT OF
$40,000,000 AND HAVING THE OTHER TERMS SET FORTH IN SUCH CONFIRMATION (THE "1995
CAP"). THE FACILITY AGENT AND THE SERIES 1993-2 CERTIFICATEHOLDERS HEREBY
CONSENT TO THE REPLACEMENT OF THE EXISTING INTEREST RATE CAP AGREEMENT DATED
JULY 30, 1993 (THE "1993 CAP") WITH THE 1995 CAP, AND HEREBY AUTHORIZE AND
DIRECT THE TRUSTEE TO RELEASE AND CONVEY BACK TO THE TRANSFEROR ITS INTEREST IN
THE 1993 CAP.
PURCHASE AGREEMENT AMENDMENT
The Transferor, the Revolving Purchasers and the Facility Agent hereby
agree as follows:
2. NON-USAGE FEE. The first sentence of subsection 15(a) of the
Purchase Agreement is amended in its entirety to read as
follows: As holders of Certificates, the Revolving Purchasers
shall be entitled to receive from payments made from Finance
Charge Collections allocated to the Certificates pursuant to
subsections 4.6(a) (v), 4.6(b) (v) and 4.6(c) (v) of the
Certificate Agreement and paid pursuant to Section 4.8 of the
Certificate Agreement a non-usage fee (the "Non-Usage Fee")
for the period from and including the Closing Date until the
Termination Date, equal to 0.25% per annum times the daily
average of the excess, if any, of (A) the Commitment Amount
over (b) the Funded Revolver Amount, such fee to be computed
on the basis of the actual number of days elapsed (including
the first but excluding the day of payment) over a year of 360
days.
GENERAL
The Servicer, the Transferor, the Trustee on behalf of the Trust, the
Revolving Purchasers and the Facility Agent hereby agree as follows:
3. EFFECT OF AMENDMENTS. The parties hereto expressly
acknowledge that the effectiveness of the Amendments is conditioned upon (a) the
execution, delivery and effectiveness of the Amended and Restated Pooling and
Servicing Agreement dated as of the date hereof (the "POOLING AGREEMENT") by and
among the Servicer, the Transferor and the Trustee, (b) the satisfaction of all
conditions set forth in the second paragraph of Section 13.1(a) of the Pooling
Agreement including the receipt of the Opinion of Counsel and the written
confirmation of each Rating Agency described therein, (c) the satisfaction of
all the conditions set forth in Section 6.16 of the Supplement including the
delivery of the Extension Notice and the receipt of all Election Notices from
Certificate Owners and (d) payment by wire transfer to the Facility Agent of
$40,000. Except as expressly set forth above, all terms of the Supplement and
the Purchase Agreement shall be and remain in full force and effect and shall
constitute the legal, valid and binding and enforceable obligations of the
parties thereto. To the extent any terms and conditions in the Supplement or
Purchase Agreement shall contradict or be in conflict with any provisions of the
Amendments, the provisions of the Amendments shall govern.
4. EXPENSES. The Servicer hereby agrees to pay all reasonable
attorneys' fees incurred by National Westminster Bank Plc (New York Branch and
Nassau Branch) in connection with the Purchase Agreement Amendment.
5. GOVERNING LAW. THESE AMENDMENTS AND THE SUPPLEMENT AND
PURCHASE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, EXCEPT AS
REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PROTECTION OF THE PURCHASER'S OWNERSHIP OF THE PURCHASED
RECEIVABLES, OR REMEDIES HEREUNDER IN RESPECT THEREOF, MAY BE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
6. COUNTERPARTS. These Amendments may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
7. ACKNOWLEDGEMENTS. By its execution and delivery of these
Amendments in the space provided below, each of the Trustee and the holder of
the Series <4> 1993-2 Certificates acknowledges and consents to the terms of
these Amendments.
IN WITNESS WHEREOF, the parties hereto have executed these
Amendments on the day and year first above written.
SPECIALTY RETAILERS, INC., Servicer
By: JERRY C. IVIE
Its: Senior Vice President,
Secretary and Treasurer
SRI RECEIVABLES PURCHASE CO., INC.,
Transferor
By: JERRY C. IVIE
Its: Senior Vice President,
Secretary and Treasurer
BANKERS TRUST (DELAWARE), Trustee
By: M. LISA WILKINS
Its: Assistant Secretary
NATIONAL WESTMINSTER BANK, Plc,
New York Branch
By: GARY W. GREENDALE
Its: Vice President
Additionally, pursuant to Section 28 of the Supplement, National
Westminster Bank, Plc, New York Branch acknowledges and agrees to the Supplement
Amendment as well as to the amendments effected as of the date hereof to the
Pooling Agreement.
NATIONAL WESTMINSTER BANK, Plc.
New York Branch
By: GARY W. GREENDALE
Its: Vice President
1
<1> 0.35%
<2> 0.35%
<3> 0.35%
<4> 1994
<5> SS93AMDT.FNL
Exhibit 4.30
FIRST AMENDMENT TO THE SERIES 1993-2 SUPPLEMENT
AND REVOLVING CERTIFICATE PURCHASE AGREEMENT
THIS FIRST AMENDMENT to (i) the Series 1993-2 Supplement to
the Amended and Restated Pooling and Servicing Agreement (the "SUPPLEMENT")
dated as of July 30, 1993, by and among Specialty Retailers, Inc., a Delaware
corporation (the "SERVICER"), SRI Receivables Purchase Corp., Inc., a Delaware
corporation (the "TRANSFEROR") and Bankers Trust (Delaware), a Delaware banking
corporation (the "TRUSTEE"), as trustee for the SRI Receivables Master Trust
(the "TRUST") (the SUPPLEMENT AMENDMENT"), and (ii) to the Revolving Certificate
Purchase Agreement (the "PURCHASE AGREEMENT") dated as of July 30, 1993, by and
among the Transferor, the financial institutions parties thereto (the "REVOLVING
PURCHASERS") and National Westminister Bank Plc, New York branch (the "FACILITY
AGENT") (the "PURCHASE AGREEMENT AMENDMENT" and together with the Supplement
Amendment, the "AMENDMENTS"), is made and entered into as of August 11, 1995 by
and among the Servicer, the Transferor, the Trustee on behalf of the Trust, the
Revolving Purchasers and the Facility Agent.
WHEREAS, the Servicer, the Trustee on behalf of the Trust and
the Transferor desire to modify and amend certain terms of the Supplement in the
manner more particularly described herein below;
WHEREAS, the Transferor, the Revolving Purchasers and the
Facility Agent desire to modify and amend certain terms of the Purchase
Agreement in the manner more particularly described herein below;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged:
SUPPLEMENT AMENDMENT
The Servicer, the Trustee on behalf of the Trust and the Transferor
hereby agree as follows:
1. DEFINITIONS. Capitalized terms used herein but not
otherwise defined shall have the meanings set forth in the Supplement, as
amended by this Supplement Amendment. The definitions of "Applicable Margin" and
"Amortization Period Commencement Date" in the Supplement are hereby amended and
restated in their entirety to read as follows:
"APPLICABLE MARGIN" shall mean a percentage per annum
initially equal to (a) with respect to Alternate Base Rate Tranches,
0%; (b) with respect to One Month LIBOR Rate Tranches, <1> 0.50%; (c)
with respect to Two Month LIBOR Rate Tranches, <2> 0.50%; and (d) with
respect to Three Month LIBOR Rate Tranches, <3> 0.50%; provided that at
any time after the earlier of the occurrence of a Pay Out Event or the
eighth Monthly Distribution Date following the Amortization Period
Commencement Date, the Applicable Margin shall be 2.0%.
"AMORTIZATION PERIOD COMMENCEMENT DATE" shall mean the earlier
of the first day of the December 1999 Monthly Period and the Pay Out
Commencement Date and following an Extension occurring after August 20,
1995, the earlier of the date specified as such in the Extension Notice
and the Pay Out Commencement Date.
2. REPLACEMENT OF INTEREST RATE CAP AGREEMENT. THE TRANSFEROR
ASSIGNS, SETS OVER, CONVEYS, PLEDGES AND GRANTS A SECURITY INTEREST AND LIEN
(FREE AND CLEAR OF ALL OTHER LIENS) TO THE TRUSTEE FOR THE BENEFIT OF THE SERIES
1993-2 CERTIFICATEHOLDERS IN ALL OF THE TRANSFEROR'S RIGHT, TITLE AND INTEREST
NOW EXISTING OR HEREAFTER ARISING IN AND TO THE INTEREST RATE CAP AGREEMENT
EVIDENCED BY THE CONFIRMATION DATED AUGUST 15, 1995 BETWEEN [DEUTSCHE BANK] AND
THE TRANSFEROR FOR A RATE CAP TRANSACTION HAVING A NOTIONAL AMOUNT OF
$40,000,000 AND HAVING THE OTHER TERMS SET FORTH IN SUCH CONFIRMATION (THE "1995
CAP"). THE FACILITY AGENT AND THE SERIES 1993-2 CERTIFICATEHOLDERS HEREBY
CONSENT TO THE REPLACEMENT OF THE EXISTING INTEREST RATE CAP AGREEMENT DATED
JULY 30, 1993 (THE "1993 CAP") WITH THE 1995 CAP, AND HEREBY AUTHORIZE AND
DIRECT THE TRUSTEE TO RELEASE AND CONVEY BACK TO THE TRANSFEROR ITS INTEREST IN
THE 1993 CAP.
PURCHASE AGREEMENT AMENDMENT
The Transferor, the Revolving Purchasers and the Facility Agent hereby
agree as follows:
2. NON-USAGE FEE. The first sentence of subsection 15(a) of the
Purchase Agreement is amended in its entirety to read as
follows: As holders of Certificates, the Revolving Purchasers
shall be entitled to receive from payments made from Finance
Charge Collections allocated to the Certificates pursuant to
subsections 4.6(a) (v), 4.6(b) (v) and 4.6(c) (v) of the
Certificate Agreement and paid pursuant to Section 4.8 of the
Certificate Agreement a non-usage fee (the "Non-Usage Fee")
for the period from and including the Closing Date until the
Termination Date, equal to 0.25% per annum times the daily
average of the excess, if any, of (A) the Commitment Amount
over (b) the Funded Revolver Amount, such fee to be computed
on the basis of the actual number of days elapsed (including
the first but excluding the day of payment) over a year of 360
days.
GENERAL
The Servicer, the Transferor, the Trustee on behalf of the Trust, the
Revolving Purchasers and the Facility Agent hereby agree as follows:
3. EFFECT OF AMENDMENTS. The parties hereto expressly
acknowledge that the effectiveness of the Amendments is conditioned upon (a) the
execution, delivery and effectiveness of the Amended and Restated Pooling and
Servicing Agreement dated as of the date hereof (the "POOLING AGREEMENT") by and
among the Servicer, the Transferor and the Trustee, (b) the satisfaction of all
conditions set forth in the second paragraph of Section 13.1(a) of the Pooling
Agreement including the receipt of the Opinion of Counsel and the written
confirmation of each Rating Agency described therein, (c) the satisfaction of
all the conditions set forth in Section 6.16 of the Supplement including the
delivery of the Extension Notice and the receipt of all Election Notices from
Certificate Owners and (d) payment by wire transfer to the Facility Agent of
$40,000. Except as expressly set forth above, all terms of the Supplement and
the Purchase Agreement shall be and remain in full force and effect and shall
constitute the legal, valid and binding and enforceable obligations of the
parties thereto. To the extent any terms and conditions in the Supplement or
Purchase Agreement shall contradict or be in conflict with any provisions of the
Amendments, the provisions of the Amendments shall govern.
4. EXPENSES. The Servicer hereby agrees to pay all reasonable
attorneys' fees incurred by National Westminster Bank Plc (New York Branch and
Nassau Branch) in connection with the Purchase Agreement Amendment.
5. GOVERNING LAW. THESE AMENDMENTS AND THE SUPPLEMENT AND
PURCHASE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, EXCEPT AS
REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PROTECTION OF THE PURCHASER'S OWNERSHIP OF THE PURCHASED
RECEIVABLES, OR REMEDIES HEREUNDER IN RESPECT THEREOF, MAY BE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
6. COUNTERPARTS. These Amendments may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
7. ACKNOWLEDGEMENTS. By its execution and delivery of these
Amendments in the space provided below, each of the Trustee and the holder of
the Series <4> 1993-2 Certificates acknowledges and consents to the terms of
these Amendments.
IN WITNESS WHEREOF, the parties hereto have executed these
Amendments on the day and year first above written.
SPECIALTY RETAILERS, INC., Servicer
By: JERRY C. IVIE
Its: Senior Vice President,
Secretary and Treasurer
SRI RECEIVABLES PURCHASE CO., INC.,
Transferor
By: JERRY C. IVIE
Its: Senior Vice President,
Secretary and Treasurer
BANKERS TRUST (DELAWARE), Trustee
By: M. LISA WILKINS
Its: Assistant Secretary
NATIONAL WESTMINSTER BANK, Plc,
New York Branch
By: GARY W. GREENDALE
Its: Vice President
Additionally, pursuant to Section 28 of the Supplement, National
Westminster Bank, Plc, New York Branch acknowledges and agrees to the Supplement
Amendment as well as to the amendments effected as of the date hereof to the
Pooling Agreement.
NATIONAL WESTMINSTER BANK, Plc.
New York Branch
By: GARY W. GREENDALE
Its: Vice President
1
<1> 0.35%
<2> 0.35%
<3> 0.35%
<4> 1994
<5> SS93AMDT.FNL
Exhibit 5.1
KIRKLAND & ELLIS
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
DRAFT
Citicorp Center
153 East 53rd Street
New York, NY 10022-4675
To Call Writer Direct: Facsimile:
212 446-4800 212 446-4900
August __, 1995
Specialty Retailers, Inc.
10201 Main Street
Houston, TX 77025
Re: 11% Series D Senior Subordinated Notes due 2003
Gentlemen:
We have acted as counsel to Specialty Retailers, Inc., a
Delaware Corporation (the "Company"), in connection with the proposed
registration under the Securities Act of 1933, as amended (the "Securities
Act"), of $18,250,000 in aggregate principal amount of 11% Series D Senior
Subordinated Notes due 2003 (the "New Securities") for the purpose of effecting
an exchange offer (the "Exchange Offer") for the Company's 11% Series C Senior
Subordinated Notes due 2003 (the "Old Securities").
In connection therewith, we have examined and relied upon the
original, or copies certified or otherwise identified to our satisfaction, of:
(i) the Restated Certificate of Incorporation and By-Laws of the Company; (ii)
minutes and records of the corporate proceedings of the Company with respect to
the issuance and sale of the New Securities; (iii) the Registration Statement
and exhibits thereto relating to the issuance of the New Securities (the
"Registration Statement"); (iv) the form of indenture entered into between the
Company and The First National Bank of Boston (the "Trustee") relating to the
Old and New Securities (the "Indenture"); and (v) such other documents,
corporate records and other instruments as we have deemed necessary for the
expression of the opinions contained herein.
For purposes of this opinion, we have assumed the
authenticity of all documents submitted to us as originals, the
<PAGE>
Specialty Retailers, Inc.
August __, 1995
Page 2
conformity to the originals of all documents submitted to us as copies, and the
authenticity of the originals of all documents submitted to us as copies. We
have also assumed the genuineness of the signatures of persons signing all
documents in connection with which this opinion is rendered, the authority of
such persons signing on behalf of the parties thereto other than the Company,
and the due authorization, execution and delivery of all documents by the
parties thereto other than the Company.
It is our opinion that when, as and if (i) the Registration
Statement shall have become effective pursuant to the provisions of the
Securities Act, (ii) the Indenture shall have been qualified pursuant to the
provisions of the Trust Indenture Act of 1939, as amended, (iii) the Old
Securities shall have been validly tendered to the Company and (iv) the New
Securities shall have been issued in the form and containing the terms described
in the Registration Statement, the Indenture, the resolutions of the Company's
Board of Directors (and any authorized committee thereof) authorizing the
foregoing and any legally required consents, approvals, authorizations and other
order of the Commission and any other regulatory authorities to be obtained, the
New Securities, when issued pursuant to the Exchange Offer, will be legally
issued, fully paid and nonassessable and will constitute binding obligations of
the Company.
Our opinions as herein expressed are subject to the following
qualifications:
(a) our opinions are subject to the effect of applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or
transfer or other laws of general applicability relating to or affecting the
enforcement of creditors' rights from time to time in effect and to general
principles of equity;
(b) provisions in the Indenture and the New Securities deemed
to impose the payment of interest on interest may be unenforceable, void or
voidable under applicable law;
(c) requirements in the Indenture and the New Securities
specifying that the provisions thereof may only be waived in writing may not be
valid, binding or enforceable to the extent that
<PAGE>
Specialty Retailers, Inc.
August __, 1995
Page 3
an oral or implied agreement by trade practice or course of conduct
has been created modifying any provision of such documents;
(d) we express no opinion as to the enforceability of the
indemnification provisions of the Indenture and the Old Securities insofar as
said provisions might require indemnification with respect to any litigation
against the Company determined adversely to the Trustee, or any loss, cost or
expense arising out of the Trustee's gross negligence or willful misconduct or
any violation by such trustee of statutory duties, general principles or equity
or public policy; and
(e) we express no opinion with respect to indemnification or
contribution obligations which contravene public policy including, without
limitation, indemnification or contribution obligations which arise out of
failure to comply with applicable state or federal securities law.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to this firm under the
section titled "Legal Matters" in the Registration Statement.
We do not find it necessary for the purposes of this opinion,
and accordingly we do not purport to cover herein, the application of the
securities or "Blue Sky" laws of the various states to the issuance of the New
Securities.
We are admitted to practice law in the State of New York, and
we express no opinions as to matters under or involving any laws other than the
laws of the State of New York, the federal laws of the United States of America
and the General Corporation Law of the State of Delaware.
This opinion is furnished to you in connection with the filing
of the Registration Statement, and is not to be used, circulated, quoted or
otherwise relied upon for any other purposes.
Very truly yours,
KIRKLAND & ELLIS
<PAGE>
Exhibit 10.1
EXECUTION COPY
SPECIALTY RETAILERS, INC.
$18,353,000 11% Series C Senior Subordinated Notes due 2003
PURCHASE AGREEMENT
July 20, 1995
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
140 Broadway
New York, New York 10005
Ladies & Gentlemen:
Specialty Retailers, Inc., a Delaware corporation (the "COMPANY"), and
its subsidiary, Palais Royal, Inc., a Texas corporation (the "GUARANTOR"), agree
with you as follows:
1. ISSUANCE OF SERIES C SENIOR SUBORDINATED NOTES. The Company proposes
to issue and sell to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
an aggregate of $18,353,000 principal amount of the Company's 11% Series C
Senior Subordinated Notes due 2003 (the "SERIES C SENIOR SUBORDINATED NOTES").
The Series C Senior Subordinated Notes and the 11% Series D Senior Subordinated
Notes due 2003 (the "SERIES D SENIOR SUBORDINATED NOTES" and, together with the
Series C Senior Subordinated Notes, the "SECURITIES") are to be issued pursuant
to an indenture (the "INDENTURE") by the Company and The First National Bank of
Boston, a national banking association, as trustee. On the Closing Date (as
defined below), the Company shall issue the Master Senior Subordinated Note (as
defined below) and the Individual Senior Subordinated Notes (as defined below)
representing the Series C Senior Subordinated Notes to be purchased hereunder,
which will be dated as of the Closing Date, will bear interest from the Closing
Date and will otherwise be in the form of Exhibit A to the Indenture.
The Series C Senior Subordinated Notes will be offered and sold to you
pursuant to an exemption from the registration requirements under the Securities
Act of 1933, as amended (the "ACT"). The Company has prepared an offering
circular, dated July 19, 1995 and a final offering circular dated July 20, 1995
(collectively, the "OFFERING CIRCULAR"), relating to the Company and the Series
C Senior Subordinated Notes.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Series C
Senior Subordinated Notes shall bear the following legend:
"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 (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
1
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED
STATES 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, IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144, OR 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), (b) TO THE
COMPANY, (c) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR (d)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, AND (2) 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."
You have advised the Company that you will make offers (the "EXEMPT
RESALES") of the Series C Senior Subordinated Notes purchased by you hereunder
on the terms set forth in the Offering Circular, as amended or supplemented,
solely to (i) persons whom you reasonably believe to be "qualified institutional
buyers" as defined in Rule 144A under the Act ("QIBS") and (ii) a limited number
of other institutional "accredited investors," as defined in Rule 501(a) (1),
(2), (3) and (7) under the Act, that make certain representations to and
agreements with the Company (each, an "ACCREDITED INSTITUTION") (such persons
specified in clauses (i) and (ii) being referred to herein as the "ELIGIBLE
PURCHASERS"). You will offer the Series C Senior Subordinated Notes to Eligible
Purchasers initially at a price equal to 90.180% of the principal amount
thereof. Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Series C Senior
Subordinated Notes will have the registration rights set forth in the
registration rights agreement relating thereto (the "REGISTRATION RIGHTS
AGREEMENT"), to be dated the Closing Date, in substantially the form of Exhibit
B hereto, for so long as such Series C Senior Subordinated Notes constitute
"Transfer Restricted Securities" (as defined in the Senior Subordinated Note
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Company will agree to file with the Securities and Exchange Commission (the
"COMMISSION"), under the circumstances set forth therein, (i) a registration
statement under the Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating
to the Company's 11% Series D Senior Subordinated Notes due 2003 (the "SERIES D
SECURITIES") to be offered in exchange for the Series C Senior Subordinated
Notes (the "EXCHANGE OFFER"), and (ii) under certain circumstances, a shelf
registration statement pursuant to Rule 415 under the Act (the "SHELF
REGISTRATION STATEMENT") relating to the resale by certain holders of the Series
C Senior Subordinated Notes, and to use its best efforts to cause such
Registration Statement to be declared effective. This Agreement, the Securities,
the Indenture and the Registration Rights Agreement are hereinafter referred to
collectively as the "OPERATIVE DOCUMENTS."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the representations
and warranties contained in this Agreement, and subject to its terms and
conditions, the Company agrees to issue and sell to you, and you agree to
purchase from the Company, all of Series C Senior Subordinated Notes. The
purchase price for the Series C Senior Subordinated Notes shall be equal to
87.475% of their principal amount.
2
3. DELIVERY AND PAYMENT. Delivery to you of and payment for the Series C
Senior Subordinated Notes shall be made at 9:00 a.m., New York City time, on
July 27, 1995 (the "CLOSING DATE") at the offices of Latham & Watkins, 885 Third
Avenue, New York, New York 10022, or such other time or place as you and the
Company shall designate.
One or more of the Series C Senior Subordinated Notes each in definitive
form, registered in the name of Cede & Co., as nominee of The Depository Trust
Company ("DTC"), or such other names as you may request upon at least two
business day's notice to the Company, having an aggregate principal amount
corresponding to the aggregate principal amount of the Series C Senior
Subordinated Notes sold pursuant to Exempt Resales to QIBs (the "MASTER NOTES"),
and one or more of the Series C Senior Subordinated Notes in definitive form,
registered in such names and denominations as you may so request, having an
aggregate principal amount corresponding to the aggregate principal amount of
the Series C Senior Subordinated Notes sold pursuant to Exempt Resales to
Accredited Institutions (the "INDIVIDUAL NOTES") shall be delivered by the
Company to you, against payment by you of the purchase price thereof by
certified or official bank check or checks payable in next day funds (prior
payment or deposit of which you shall bear no responsibility for) to the order
of the Company or as the Company may direct. The Master Notes and the Individual
Notes in definitive form shall be made available to you for inspection not later
than 9:30 a.m. on the business day immediately preceding the Closing Date.
4. AGREEMENTS OF THE COMPANY AND THE GUARANTOR. The Company and the
Guarantor, jointly and severally, agree with you as follows:
(a) To advise you promptly and, if requested by any of you,
confirm such advice in writing, (i) of the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of any of the Series C Senior Subordinated
Notes for offering or sale in any jurisdiction, or the initiation of any
proceeding for such purpose by any state securities commission or other
regulatory authority, and (ii) of the happening of any event that makes
any statement of a material fact made in the Offering Circular untrue or
that requires the making of any additions to or changes in the Offering
Circular in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The Company
shall use its best efforts to prevent the issuance of any stop order or
order suspending the qualification or exemption of any of the Series C
Senior Subordinated Notes under any state securities or Blue Sky laws,
and if at any time any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption
of any of the Series C Senior Subordinated Notes under any state
securities or Blue Sky laws, the Company shall use every reasonable
effort to obtain the withdrawal or lifting of such order at the earliest
possible time.
(b) To furnish you, without charge, as many copies of the
Offering Circular, and any amendments or supplements thereto, as you may
reasonably request. The Company and the Guarantor consent to the use of
the Offering Circular, and any amendments and supplements thereto, by
you in connection with Exempt Resales until the earlier of (i) the time
at which the Exchange Offer Registration Statement is declared effective
and (ii) the time at which the Shelf Registration Statement is declared
effective.
(c) Not to amend or supplement the Offering Circular prior to the
Closing Date unless you shall previously have been advised thereof and
shall not have reasonably objected thereto after being furnished a copy
thereof. The Company and the Guarantor shall promptly
3
prepare, upon your request, any amendment or supplement to the Offering
Circular that may be reasonably necessary or advisable in connection
with Exempt Resales.
(d) If, after the date hereof and prior to consummation of any
Exempt Resales, any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of your counsel, it
becomes necessary to amend or supplement the Offering Circular in order
to make the statements therein, in the light of the circumstances when
the Offering Circular is delivered to a prospective Eligible Purchaser,
not misleading, or if it is necessary to amend or supplement the
Offering Circular to comply with applicable law, forthwith to prepare an
appropriate amendment or supplement to the Offering Circular so that the
statements therein as so amended or supplemented will not, in the light
of the circumstances when it is so delivered, be misleading, or so that
the Offering Circular will comply with applicable law.
(e) To cooperate with you and your counsel in connection with the
qualification of the Series C Senior Subordinated Notes under the
securities or Blue Sky laws of such jurisdictions as you may reasonably
request and to continue such qualification in effect so long as
reasonably required for the Exempt Resales; PROVIDED, HOWEVER that the
Company shall not be required in connection therewith to qualify as a
foreign corporation or execute a general consent to service of process
in any jurisdiction.
(f) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement becomes effective or is
terminated, to pay all costs, expenses, fees and taxes incident to and
in connection with: (i) the preparation, printing, filing and
distribution of the Offering Circular (including, without limitation,
financial statements and exhibits) and all amendments and supplements
thereto, (ii) the preparation (including, without limitation, word
processing and duplication costs) and delivery of this Agreement, the
Indenture, the Registration Rights Agreement, all preliminary and final
Blue Sky memoranda and all other agreements, memoranda, correspondence
and other documents prepared and delivered in connection herewith and
with the Exempt Resales, (iii) the issuance and delivery by the Company
of the Securities, (iv) the qualification of the Securities for offer
and sale under the securities or Blue Sky laws of the several states
(including, without limitation, the reasonable fees and disbursements of
your counsel relating to such registration or qualification), (v)
furnishing such copies of the Offering Circular, and all amendments and
supplements thereto, as may be reasonably requested for use in
connection with Exempt Resales, (vi) the preparation of certificates for
the Securities (including, without limitation, printing and engraving
thereof), (vii) the fees, disbursements and expenses of the Company's
counsel and accountants, (viii) all expenses and listing fees in
connection with the application for quotation of the Series C Senior
Subordinated Notes in the National Association of Securities Dealers,
Inc. ("NASD") Automated Quotation System PORTAL ("PORTAL"), (ix) all
fees and expenses (including fees and expenses of counsel) of the
Company in connection with approval of the Securities by DTC for
"book-entry" transfer and (x) the performance by the Company and the
Guarantor of their other obligations under this Agreement.
(g) To use the proceeds from the sale of the Series C Senior
Subordinated Notes in the manner described in the Offering Circular
under the caption "Use of Proceeds."
(h) Not to voluntarily claim, and to resist actively any attempts
to claim, the benefit of any usury laws against the holders of any
Series C Senior Subordinated Notes.
4
(i) To use their best efforts to do and perform all things
required to be done and performed under this Agreement by them prior to
or after the Closing Date and to satisfy all conditions precedent on
their part to the delivery of the Series C Senior Subordinated Notes.
(j) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Series C Senior
Subordinated Notes in a manner that would require the registration under
the Act of the sale to you or Eligible Purchasers of the Series C Senior
Subordinated Notes.
(k) For so long as any Series C Senior Subordinated Notes remain
outstanding and during any period in which the Company is not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), to make available to any Eligible Purchaser or
beneficial owner of Series C Senior Subordinated Notes in connection
with any sale thereof and any prospective purchaser of such Series C
Senior Subordinated Notes from such Eligible Purchaser or beneficial
owner, the information required by Rule 144A(d)(4) under the Act.
(l) To comply with all of its agreements set forth in the
representation letters of the Company to DTC relating to the approval of
the Securities by DTC for "book-entry" transfer.
(m) To use their best efforts to effect the inclusion of the
Series C Senior Subordinated Notes in PORTAL.
(n) During a period of five years following the date of this
Agreement, to deliver to you promptly upon their becoming available,
copies of all current, regular and periodic reports filed by the Company
with the Commission or any securities exchange.
5. REPRESENTATIONS AND WARRANTIES. (a) The Company and the Guarantor,
jointly and severally, represent and warrant to you that:
(i) The Offering Circular as of its date does not and as of the
Closing Date will not, and any supplement or amendment thereto will not,
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
except that the representations and warranties contained in this
paragraph (i) shall not apply to statements in or omissions from the
Offering Circular (or any supplement or amendment thereto) made in
reliance upon and in conformity with information relating to you (as set
forth in Section 11 hereof) furnished to the Company in writing by you
expressly for use therein.
(ii) When the Series C Senior Subordinated Notes are issued and
delivered pursuant to this Agreement, none of the Series C Senior
Subordinated Notes will be of the same class (within the meaning of Rule
144A under the Act) as securities of the Company or the Guarantor that
are listed on a national securities exchange registered under Section 6
of the Exchange Act or that are quoted in a United States automated
inter-dealer quotation system.
(iii) The Company and each of its subsidiaries (each, a
"SUBSIDIARY" and, collectively, the "SUBSIDIARIES") has been duly
organized, is validly existing as a corporation in good standing under
the laws of its jurisdiction of organization and has the requisite
corporate power and authority to carry on its business as it is
currently being conducted and to own, lease and operate
5
its properties, and each is duly qualified and is in good standing as a
foreign corporation authorized to do business in each jurisdiction where
the operation, ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the properties,
business, results of operations, condition (financial or other), affairs
or prospects of the Company and the Subsidiaries, taken as a whole (a
"MATERIAL ADVERSE EFFECT").
(iv) All of the issued and outstanding shares of capital stock
of, or other ownership interests in, each Subsidiary have been duly and
validly authorized and issued and are owned, directly or through other
Subsidiaries, by the Company. All such shares of capital stock are fully
paid and nonassessable, and are owned free and clear of any security
interest, mortgage, pledge, claim, lien or encumbrance (each, a "LIEN"),
except for Permitted Liens (as defined in the Indenture). There are no
outstanding subscriptions, rights, warrants, options, calls, convertible
securities or commitments of sale related to or entitling any person to
purchase or otherwise to acquire any shares of the capital stock of, or
other ownership interest in, any Subsidiary.
(v) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement,
the Indenture and the Registration Rights Agreement and to consummate
the transactions contemplated hereby and thereby, including, without
limitation, the authorization, issuance and sale of the Securities as
provided herein and therein. The Guarantor has all requisite corporate
power and authority to execute, deliver and perform its obligation under
this Agreement.
(vi) This Agreement has been duly authorized, executed and
delivered by each of the Company and the Guarantor and constitutes a
valid and legally binding agreement of each of the Company and the
Guarantor, enforceable against each of them in accordance with its
terms.
(vii) The Indenture has been duly authorized by the Company and,
when duly executed and delivered in accordance with its terms, will be a
legally valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
(viii) The Registration Rights Agreement has been duly authorized
by the Company, and when duly executed and delivered in accordance with
its terms, will be a legally valid and binding obligation of the
Company, enforceable against it in accordance with its terms.
(ix) The Series C Senior Subordinated Notes have been duly
authorized by the Company and, when issued, authenticated and delivered
in accordance with the Indenture and paid for in accordance with the
terms of this Agreement, will constitute legally valid and binding
obligations of the Company, enforceable against it in accordance with
their terms and entitled to the benefits of the Indenture.
(x) The Series D Senior Subordinated Notes have been duly
authorized by the Company and, when issued, authenticated and delivered
in accordance with the Indenture and the Registration Rights Agreement,
will constitute legally valid and binding obligations of the Company,
enforceable against it in accordance with their terms and entitled to
the benefits of the Indenture.
(xi) Neither the Company nor any of the Subsidiaries is (A) in
violation of its respective charter or bylaws or (B) in default in the
performance of any bond, debenture, note
6
or any other evidence of indebtedness or any indenture, mortgage, deed
of trust or other contract, lease or other instrument to which the
Company or any of the Subsidiaries is a party or by which any of them is
bound, or to which any of the property or assets of the Company or any
of the Subsidiaries is subject, in each case set forth in this clause
(B), which would, singly or in the aggregate, have a Material Adverse
Effect.
(xii) The execution, delivery and performance of this Agreement
and the other Operative Documents, compliance by the Company and the
Guarantor, as applicable, with all of the provisions hereof and thereof,
and the consummation of the transactions contemplated hereby and thereby
will not (A) conflict with or result in a breach or violation of the
charter or bylaws of the Company or any of the Subsidiaries, (B)
conflict with or result in a breach or violation of the terms or
provisions of, or constitute a default or cause an acceleration of any
obligation under or result in the imposition or creation of (or the
obligation to create or impose) a Lien with respect to, any bond, note,
debenture or other evidence of indebtedness or any indenture, mortgage,
deed of trust or other agreement or instrument to which the Company or
any of the Subsidiaries is a party or by which it or any of them is
bound, or to which any properties of the Company or any of the
Subsidiaries is or may be subject, (C) contravene any order of any court
or governmental agency or body having jurisdiction over the Company or
any of the Subsidiaries or any of their properties, or (D) violate or
conflict with any statute, rule or regulation or administrative or court
decree applicable to the Company or any of the Subsidiaries, or any of
their respective properties, in the case of clauses (B), (C) and (D),
which conflict, breach, violation, default or contravention, singly or
in the aggregate with each other such conflict, breach, violation,
default or contravention, would have a Material Adverse Effect or would
materially and adversely affect the consummation of this Agreement, the
Indenture or the Registration Rights Agreement or the transactions
contemplated hereby or thereby; except that the Company and Guarantor
are required to obtain an amendment and waiver under their $25 million
working capital facility and related $10 million loan with The First
National Bank of Boston (the "BANK WAIVER"), which amendment and waiver
the Company expects to receive prior to the Closing Date. The execution,
delivery and performance of this Agreement and the other Operative
Documents by the Company and the Guarantor, as applicable, and
consummation of the transactions contemplated thereby will not violate
the Indenture of Apparel Retailers, Inc. relating to its 12 3/4% Series
A and Series B Senior Discount Debentures (the "Apparel Retailers
Indenture").
(xiii) There is no action, suit, proceeding or investigation
before or by any court or governmental agency or body, domestic or
foreign, pending against or affecting the Company or any of the
Subsidiaries, or any of their respective properties, which would, singly
or in the aggregate, have a Material Adverse Effect or materially and
adversely affect the consummation of this Agreement, the Indenture or
the Registration Rights Agreement or the transactions contemplated
hereby or thereby, and to the best of the Company's knowledge, no such
proceedings are contemplated or threatened.
(xiv) No action has been taken and no statute, rule or regulation
or order has been enacted, adopted or issued by any governmental agency
or body which prevents the issuance of any of the Securities, or
suspends the sale of any of the Securities in any jurisdiction referred
to in Section 4(e) hereof; no injunction, restraining order or order of
any nature by a federal or state court of competent jurisdiction has
been issued with respect to the Company or any of the Subsidiaries which
would prevent or suspend the issuance or sale of any of the Securities
in any jurisdiction referred to in Section 4(e) hereof; no action, suit
or proceeding is pending against or,
7
to the best of the Company's knowledge, threatened against or affecting
the Company or any of the Subsidiaries before any court or arbitrator or
any governmental body, agency or official, domestic or foreign, which,
if adversely determined, would materially interfere with or adversely
affect the issuance of any of the Securities or in any manner draw into
question the validity of any of the Operative Documents; and every
request of any securities authority or agency of any jurisdiction for
additional information has been complied with in all material respects.
(xv) Neither the Company nor any of the Subsidiaries has violated
any environmental, safety or similar law or regulation applicable to its
business relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), lacks any permits, licenses or
other approvals required of them under applicable Environmental Laws or
is violating any terms and conditions of any such permit, license or
approval, nor has the Company or any of the Subsidiaries violated any
federal, state or local law relating to discrimination in the hiring,
promotion or pay of employees nor any applicable wage or hour laws, nor
any provisions of the Employee Retirement Income Security Act of 1974
("ERISA") or the rules and regulations promulgated thereunder, nor has
the Company or any of the Subsidiaries engaged in any unfair labor
practice, which in each case would result, singly or in the aggregate,
in a Material Adverse Effect. There is (A) no significant unfair labor
practice complaint pending against the Company or any of the
Subsidiaries or, to the best knowledge of the Company, threatened
against any of them, before the National Labor Relations Board or any
state or local labor relations board, and no significant grievance or
significant arbitration proceeding arising out of or under any
collective bargaining agreement is so pending against the Company or any
of the Subsidiaries or, to the best knowledge of the Company, threatened
against any of them, (B) no significant strike, labor dispute, slowdown
or stoppage pending against the Company or any of the Subsidiaries or,
to the best knowledge of the Company, threatened against the Company or
any of the Subsidiaries and (C) to the best knowledge of the Company, no
union representation question existing with respect to the employees of
the Company or any of the Subsidiaries and no union organizing
activities are taking place, except, with respect to any matter
specified in clause (A), (B) or (C) above, singly or in the aggregate,
such as could not have a Material Adverse Effect.
(xvi) Except as would not result, singly or in the aggregate, in
a Material Adverse Effect, the Company and the Subsidiaries have good
and marketable title, free and clear of all Liens (except (A) Liens for
taxes not yet due and payable, (B) Permitted Liens and (C) Liens in
connection with the Accounts Receivable Program), to all property and
assets reflected in the Company's audited consolidated financial
statements for the fiscal year ended January 30, 1995.
(xvii) All tax returns required to be filed by the Company or any
of the Subsidiaries in any jurisdiction have been filed, other than
those filings being contested in good faith, and all material taxes,
including withholding taxes, penalties and interest, assessments, fees
and other charges due or claimed to be due from such entities have been
paid, other than those being contested in good faith and for which
adequate reserves have been provided or those currently payable without
penalty or interest.
(xviii)No authorization, approval, consent or order of, or filing
with, any court or governmental body or agency is required for the
consummation by the Company and the Guarantor, as applicable, of the
transactions contemplated by this Agreement and the other Operative
Documents, except such as have been obtained or made (or, in the case of
the Registration Rights Agreement, will be obtained or made) under the
Act, the Trust Indenture Act
8
of 1939, as amended (the "TIA"), state securities or Blue Sky laws or
regulations or such as may be required by the NASD. Neither the Company,
the Subsidiaries nor any of their affiliates is presently doing business
with the government of Cuba or with any person located in Cuba.
(xix) (A) Each of the Company and the Subsidiaries has all
material certificates, consents, exemptions, orders, permits, licenses,
authorizations, or other approvals (each, an "AUTHORIZATION") of and
from, and has made all declarations and filings with, all federal,
state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, necessary or required
to own, lease, license and use its properties and assets and to conduct
its business in the manner described in the Offering Circular, (B) all
such Authorizations are valid and in full force and effect and (C) each
of the Company and the Subsidiaries is in compliance in all material
respects with the terms and conditions of all such Authorizations and
with the rules and regulations of the regulatory authorities and
governing bodies having jurisdiction with respect thereto.
(xx) Neither the Company nor any of the Subsidiaries is (A) an
"investment company" within the meaning of the Investment Company Act of
1940, as amended, or (B) a "holding company" or a "subsidiary company"
of a holding company, or an "affiliate" thereof within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
(xxi) No holder of any security of the Company has or will have
any right to require the registration of such security by virtue of any
transaction contemplated by this Agreement or the other Operative
Documents, which right will not have been waived prior to the Closing
Date.
(xxii) The Company and the Subsidiaries own, possess or currently
have the right to use the patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names (collectively,
"INTELLECTUAL PROPERTY") presently employed by them in connection with
the businesses now operated by them, and neither the Company nor any of
the Subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to the foregoing. The use of
such Intellectual Property in connection with the business and
operations of the Company and the Subsidiaries does not, to the
Company's knowledge, infringe on the rights of any person.
(xxiii) Each certificate signed by any officer of the Company or
the Guarantor and delivered to you or your counsel shall be deemed to be
a representation and warranty by the Company and the Guarantor to you as
to the matters covered thereby.
(xxiv) The Company and each of the Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable
assurance that (A) transactions are executed in accordance with
management's general or specific authorizations, (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability, (C) access to assets is permitted only in
accordance with management's general or specific authorization and (D)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xxv) The Company has not (A) taken, directly or indirectly, any
action designed to cause or to result in, or that has constituted or
which might reasonably be expected to constitute,
9
the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities or (B)
since the date of the Offering Circular, except as disclosed therein,
(1) sold, bid for, purchased, or paid anyone any compensation for
soliciting purchases of, any of the Securities or (2) paid or agreed to
pay to any person any compensation for soliciting another to purchase
any other securities of the Company or any of the Subsidiaries.
(xxvi) The Company and each Subsidiary maintains insurance
covering their properties, operations, personnel and businesses. Such
insurance insures against such losses and risks as are adequate in
accordance with customary industry practice to protect the Company and
the Subsidiaries and their businesses. Neither the Company nor any
Subsidiary has received notice from any insurer or agent of such insurer
that substantial capital improvements or other expenditures will have to
be made in order to continue such insurance. All such insurance is
outstanding and duly in force on the date hereof and will be outstanding
and duly in force on the Closing Date.
(xxvii) No registration under the Act of any of the Series C
Senior Subordinated Notes is required for the sale of the Series C
Senior Subordinated Notes to you as contemplated hereby or for the
Exempt Resales assuming (i) that the Eligible Purchasers who buy the
Series C Senior Subordinated Notes in the Exempt Resales are QIBs or
Accredited Institutions, (ii) the accuracy of your representations and
those of the Company and the Guarantor regarding the absence of general
solicitation in connection with the sale of Series C Senior Subordinated
Notes to you and the Exempt Resales contained herein and (iii) the
accuracy of the representations made by each Accredited Institution who
purchases Series C Senior Subordinated Notes pursuant to an Exempt
Resale as set forth in the letters of representation executed by such
Accredited Institutions in the form included in the Offering Circular.
No form of general solicitation or general advertising was used by the
Company or any of its representatives in connection with the offer and
sale of any of the Series C Senior Subordinated Notes or in connection
with Exempt Resales, including, but not limited to, articles, notices or
other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising. No securities of the same class as any of the Series C
Senior Subordinated Notes have been issued and sold by the Company
within the six-month period immediately prior to the date hereof.
(xxviii) The execution and delivery of this Agreement, the other
Operative Documents and the sale of the Series C Senior Subordinated
Notes to be purchased by the Eligible Purchasers will not involve any
non-exempt prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986. The
representation made by the Company in the preceding sentence is made in
reliance upon and subject to the accuracy of, and compliance with, the
representations and covenants made or deemed made by the Eligible
Purchasers as set forth in the Offering Circular under the Section
entitled "Notice to Investors."
(xxix) The Offering Circular, as of its date, and each amendment
or supplement thereto, as of its date, contains all the information
specified in, and meets the requirements of, Rule 144A(d)(4) under the
Act.
(xxx) Since the date of the Offering Circular, except as
disclosed therein, (A) neither the Company nor any of the Subsidiaries
has incurred any liabilities or obligations outside the ordinary course
of business, direct or contingent, that are material to the Company and
the
10
Subsidiaries, taken as a whole, (B) neither the Company nor any of the
Subsidiaries has entered into any material transactions outside of the
ordinary course of business and (C) there has not been any material
adverse change in the business, condition (financial or other), results
of operations, properties or prospects of the Company and the
Subsidiaries, taken as a whole (a "MATERIAL ADVERSE CHANGE").
(xxxi) Neither the Company, the Guarantor nor any agent thereof
acting on behalf of either of them has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale
of the Securities to violate Regulation G (12 C.F.R Part 207),
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the
Federal Reserve System, in each case as in effect now or as the same may
hereafter be in effect on the Closing Date.
The Company and the Guarantor acknowledge that, for purposes of
the opinions to be delivered to you pursuant to Section 7 hereof,
counsel to the Company and your counsel will rely upon the accuracy and
truth of the foregoing representations and you hereby consent to such
reliance.
(b) You represent and warrant to the Company and the Guarantor and agree
that:
(i) You are either a QIB or an Accredited Institution, in either
case with such knowledge and experience in financial and business
matters as are necessary in order to evaluate the merits and risks of an
investment in the Series C Senior Subordinated Notes.
(ii) You (A) are not acquiring the Series C Senior Subordinated
Notes with a view to any distribution thereof that would violate the Act
or the securities laws of any state of the United States or any other
applicable jurisdiction and (B) will be reoffering and reselling the
Series C Senior Subordinated Notes only to QIBs in reliance on the
exemption from the registration requirements of the Act provided by Rule
144A and to a limited number of Accredited Institutions that execute and
deliver a letter containing certain representations and agreements in
the form attached to the Offering Circular.
(iii) No form of general solicitation or general advertising has
been or will be used by you or any of your representatives in connection
with the offer and sale of any of the Series C Senior Subordinated
Notes, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium
or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
(iv) You agree that, in connection with the Exempt Resales, you
will solicit offers to buy the Series C Senior Subordinated Notes only
from, and will offer to sell the Series C Senior Subordinated Notes only
to, Eligible Purchasers. You further agree that you will offer to sell
the Series C Senior Subordinated Notes only to, and will solicit offers
to buy the Series C Senior Subordinated Notes only from, persons who in
purchasing such Series C Senior Subordinated Notes will be deemed to
have represented and agreed (A) if such Eligible Purchasers are QIBs,
that they are purchasing the Series C Senior Subordinated Notes for
their own accounts or accounts with respect to which they exercise sole
investment discretion and that they or such accounts are QIBs, (B) that
such Series C Senior Subordinated Notes will not have been registered
under the Act and may be resold, pledged or otherwise transferred only
(1) inside the
11
United States to a person who the seller reasonably believes is a QIB in
a transaction meeting the requirements of Rule 144A, in a transaction
meeting the requirements of Rule 144, or in accordance with another
exemption from the registration requirements of the Act, (2) to the
Company, (3) pursuant to an effective registration statement, (4)
outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Act and, in each case, in
accordance with any applicable securities laws of any state of the
United States or any other applicable jurisdiction and (C) that the
holder will, and each subsequent holder is required to, notify any
purchaser from it of the security evidenced thereby of the resale
restrictions set forth in (B) above.
(v) You are not a pension or welfare plan (as defined in Section
3 of ERISA) and you are not acquiring the Series C Senior Subordinated
Notes on behalf of a pension or welfare plan.
(vi) You also understand that, for purposes of the opinions to be
delivered to you pursuant to Section 7 hereof, counsel to the Company
and your counsel will rely upon the accuracy and truth of the foregoing
representations and you hereby consent to such reliance.
6. INDEMNIFICATION.
(a) The Company and the Guarantor, jointly and severally, agree
to indemnify and hold harmless (i) you and (ii) each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) you (any of the persons referred to in this clause
(ii) being hereinafter referred to as a "controlling person"), and (iii)
your respective officers, directors, partners, employees,
representatives and agents or any controlling person (any person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to
as an "INDEMNIFIED PERSON") to the fullest extent lawful, from and
against any and all losses, claims, damages, liabilities, judgments,
actions and expenses (including without limitation and as incurred,
reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
including the reasonable fees and expenses of counsel to any Indemnified
Person) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged
untrue statement of a material fact contained in the Offering Circular
(or any amendment or supplement thereto), or any omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except insofar
as such losses, claims, damages, liabilities or expenses are caused by
an untrue statement or omission or alleged untrue statement or omission
that is made in reliance upon and in conformity with information
relating to you (as set forth in Section 11 hereof) furnished in writing
to the Company by you expressly for use therein. The Company shall
notify you promptly of the institution, threat or assertion of any
claim, proceeding (including any governmental investigation) or
litigation of which the Company is aware in connection with the matters
addressed by this Agreement which involves the Company or an Indemnified
Person.
(b) In case any action or proceeding (including any governmental
or regulatory investigation or proceeding) shall be brought or asserted
against any of the Indemnified Persons with respect to which indemnity
may be sought against the Company or the Guarantor, you (or any person
controlling you) shall promptly notify the Company and the Guarantor in
writing (PROVIDED, that the failure to give such notice shall not
relieve the Company or the Guarantor of its obligations pursuant to this
Agreement, except to the extent that the Company or the
12
Guarantor, as the case may be, is prejudiced thereby). Such Indemnified
Person shall have the right to employ its own counsel in any such action
and the fees and expenses of such counsel shall be paid, as incurred, by
the Company and the Guarantor (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder). The Company and the Guarantor shall not, in connection with
any one such action or proceeding or separate but substantially similar
or related actions or proceedings 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
(in addition to any local counsel) at any time for such Indemnified
Persons, which firm shall be designated by you. The Company and the
Guarantor shall be liable for any settlement of any such action or
proceeding effected with the Company's prior written consent, which
consent will not be unreasonably withheld, and the Company and the
Guarantor agree to indemnify and hold harmless any Indemnified Person
from and against any loss, claim, damage, liability or expense by reason
of any settlement of any action effected with the written consent of the
Company. Neither the Company nor the Guarantor shall, without your prior
written consent, settle or compromise or consent to the entry of
judgment in or otherwise seek to terminate any pending or threatened
action, claim, litigation or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not
any Indemnified Person is a party thereto), unless such settlement,
compromise, consent or termination includes an unconditional release of
each Indemnified Person from all liability arising out of such action,
claim, litigation or proceeding.
(c) You agree to indemnify and hold harmless the Company and the
Guarantor, and their respective directors, officers and any person
controlling (within the meaning of Section 15 of the Act or Section 20
of the Exchange Act) the Company or the Guarantor, and the respective
officers, directors, partners, employees, representatives and agents of
each such person, to the same extent as the foregoing indemnity from the
Company and the Guarantor to each of the Indemnified Persons, but only
with respect to claims and actions based on information relating to you
(as set forth in Section 11 hereof) furnished in writing by you
expressly for use in the Offering Circular.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party (other than by reason of the
exceptions provided in this Section 6) in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities and expenses
(i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the
indemnified party on the other hand from the offering of the Series C
Senior Subordinated 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 indemnifying parties
and the indemnified party, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Guarantor, on the one hand, and you, on the other hand, shall be deemed
to be in the same proportion as the total proceeds from the sale of the
Series C Senior Subordinated Notes (net of discounts and commissions but
before deducting expenses) received by the Company and the total
discounts and commissions received by you, bear to the total price of
the Series C Senior Subordinated Notes paid in the Exempt Resales, in
each case as set forth in the table on the cover page of the Offering
Circular. The relative fault of the Company and the Guarantor on the one
hand and you on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission or
13
alleged omission to state a material fact related to information
supplied by the Company or the Guarantor on the one hand or you on the
other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The indemnity and contribution obligations of the Company and
the Guarantor set forth herein shall be in addition to any liability or
obligation the Company or the Guarantor may otherwise have to any
Indemnified Person.
The Company, the Guarantor and you agree that it would not be
just and equitable if contribution pursuant to this Section 6(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages,
liabilities or expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, 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 6, you
(and your related Indemnified Persons) shall be required to contribute,
in the aggregate, any amount in excess of the amount by which the total
discounts and commissions received by you with respect to the Series C
Senior Subordinated Notes exceeds the amount of any damages which you
has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
7. CONDITIONS OF YOUR OBLIGATIONS. The several of your obligations under
this Agreement are subject to the satisfaction of each of the following
conditions:
(a) All of the representations and warranties of the Company and
the Guarantor contained in this Agreement shall be true and correct on
the Closing Date with the same force and effect as if made on and as of
the Closing Date (except for those representations and warranties made
as of a specified date). The Company and the Guarantor shall have
performed or complied with all of their obligations and agreements
herein contained and required to be performed or complied with by them
at or prior to the Closing Date.
(b) The Offering Circular shall have been distributed to you not
later than 10:00 a.m., New York City time, on the date that is two days
after the date of this Agreement or at such later date and time as to
which you may agree, and no stop order suspending the qualification or
exemption from qualification of any of the Series C Senior Subordinated
Notes in any jurisdiction referred to in Section 4(e) shall have been
issued and no proceeding for that purpose shall have been commenced or
shall be pending or threatened.
(c) 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, prevent the
issuance of any of the Series C Senior Subordinated Notes; and no
injunction, restraining order or order of any nature by a federal or
state court of competent jurisdiction shall have been issued as of the
Closing Date that would prevent the issuance of any of the Series C
Senior Subordinated Notes.
(d) Since the date as of which information is given in the
Offering Circular, (i) there shall not have been any Material Adverse
Change and (ii) except as contemplated by the Offering
14
Circular, (A) there shall not have been any material change in the
capital stock or long-term debt, or material increase in short-term
debt, of the Company or any of the Subsidiaries and (B) neither the
Company nor any Subsidiary shall have incurred any liability or
obligation, direct or contingent, that, singly or in the aggregate, is
material to the Company and the Subsidiaries, taken as a whole, and is
required to be disclosed on a balance sheet in accordance with generally
accepted accounting principals and is not disclosed on the latest
balance sheet included in the Offering Circular.
(e) You shall have received certificates, dated the Closing Date,
signed by (i) the President or any Vice President and (ii) a principal
financial or accounting officer of each of the Company and the Guarantor
confirming, as of the Closing Date, the matters set forth in paragraphs
(a), (b), (c) and (d) of this Section 7 and certifying as to the
solvency of the Company and the Guarantor and as to the attached
charter, bylaws and board resolutions and the incumbency of the relevant
officers.
(f) On the Closing Date, you shall have received opinions
(satisfactory to you and your counsel), dated the Closing Date, of
Kirkland & Ellis, counsel for the Company, to the effect that:
(i) the Company and each of the Subsidiaries has been duly
incorporated, is validly existing as a corporation in good
standing under the laws of its jurisdiction of organization and
has the requisite corporate power and authority to carry on its
business as it is currently being conducted and to own, lease and
operate its properties;
(ii) when the Series C Senior Subordinated Notes are
issued and delivered pursuant to this Agreement, none of the
Series C Senior Subordinated Notes will be of the same class
(within the meaning of Rule 144A under the Act) as securities of
the Company that are listed on a national securities exchange
registered under Section 6 of the Exchange Act or that are quoted
in a United States automated inter-dealer quotation system;
(iii) no registration under the Act of any of the Series C
Senior Subordinated Notes is required for the sale of the Series
C Senior Subordinated Notes to you as contemplated hereby or for
the Exempt Resales assuming (i) that the Eligible Purchasers who
buy the Series C Senior Subordinated Notes in the Exempt Resales
are QIBs or Accredited Institutions, (ii) the accuracy of your
representations and those of the Company regarding the absence of
general solicitation in connection with the sale of the Series C
Senior Subordinated Notes to you and the Exempt Resales contained
herein and (iii) the accuracy of the representations made by each
Accredited Institution who purchases Series C Senior Subordinated
Notes pursuant to an Exempt Resale as set forth in the letters of
representation executed by such Accredited Institutions in the
form included in the Offering Circular;
(iv) the Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under
this Agreement; this Agreement has been duly authorized, executed
and delivered by each of the Company and the Guarantor;
(v) the Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under
the Indenture; the Indenture has been duly
15
authorized, executed and delivered by the Company and is a
legally valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by (A) bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in
effect relating to creditors' rights and remedies generally and
(B) general equitable principles, whether asserted in an action
at law or in equity, and that such enforceability may be subject
to the discretion of the court before which any proceedings
therefor may be brought;
(vi) the Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under
the Registration Rights Agreement; the Registration Rights
Agreement has been duly authorized, executed and delivered by the
Company and is a legally valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by (A)
bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect relating to creditors' rights and
remedies generally and (B) general equitable principles, whether
asserted in an action at law or in equity, and that such
enforceability may be subject to the discretion of the court
before which any proceedings therefor may be brought;
(vii) the Company has all requisite corporate power and
authority to authorize, issue and sell the Series C Senior
Subordinated Notes to be sold by it hereunder; each of the Series
C Senior Subordinated Notes have been duly authorized, executed
and delivered by the Company and (assuming the due authentication
thereof by the Trustee and payment therefor in accordance with
the terms of this Agreement) are the legally valid and binding
obligations of the Company, enforceable against it in accordance
with their terms and entitled to the benefits of the Indenture,
except as such enforceability may be limited by (A) bankruptcy,
insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights and remedies
generally and (B) general equitable principles, whether asserted
in an action at law or in equity, and that such enforceability
may be subject to the discretion of the court before which any
proceedings therefor may be brought;
(viii) the Company has all requisite corporate power and
authority to authorize and issue the Series D Securities; the
Series D Senior Subordinated Notes have been duly authorized by
the Company and, when issued, authenticated and delivered in
accordance with the Indenture and the Registration Rights
Agreement, will constitute legally valid and binding obligations
of the Company, enforceable against it in accordance with their
terms and entitled to the benefits of the applicable Indenture,
except as such enforceability may be limited by (A) bankruptcy,
insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights and remedies
generally and (B) general equitable principles, whether asserted
in an action at law or in equity, and that such enforceability
may be subject to the discretion of the court before which any
proceedings therefor may be brought;
(ix) each of the Series C Senior Subordinated Notes, the
Registration Rights Agreement, the Indenture and this Agreement
are contained in the Offering Circular;
(x) all of the issued and outstanding shares of capital
stock of, or other ownership interests in, each Subsidiary have
been duly and validly authorized and issued
16
and are owned, directly or through other Subsidiaries, by the
Company free and clear of any Lien, except for such Liens as will
be released on or about the Closing Date in connection with the
Refinancing and Permitted Liens, and are fully paid and
nonassessable;
(xi) there are no outstanding subscriptions, rights,
warrants, options, calls, convertible securities or commitments
of sale related to or entitling any person to purchase or
otherwise to acquire any shares of the capital stock of, or other
ownership interest in, any Subsidiary, other than in connection
with the Accounts Receivable Program;
(xii) neither the Company nor any of the Subsidiaries is
(A) an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or (B) a "holding company" or a
"subsidiary company" of a holding company, or an "affiliate"
thereof within the meaning of the Public Utility Holding Company
Act of 1935, as amended;
(xiii) prior to the consummation of the Exchange Offer or
the effectiveness of the Shelf Registration Statement, the
Indenture is not required to be qualified under the TIA;
(xiv) neither the Company nor any of the Subsidiaries is
(A) in violation of its respective charter or bylaws or (B) in
default in the performance of any bond, debenture, note or any
other evidence of indebtedness or any indenture, mortgage, deed
of trust or other contract, lease or other instrument to which
the Company or any of the Subsidiaries is a party or by which any
of them is bound, or to which any of the property or assets of
the Company or any of the Subsidiaries is subject, which default
would have a Material Adverse Effect;
(xv) to the knowledge of such counsel, no authorization,
approval, consent or order of, or filing with, any court or
governmental body or agency is required for the consummation by
the Company of the transactions contemplated by this Agreement
and the other Operative Documents, except such as have been
obtained or made (or, in the case of the Registration Rights
Agreement, will be obtained or made) under the Act, the TIA,
state securities or Blue Sky laws or regulations or such as may
be required by the NASD; the execution, delivery and performance
of this Agreement and the other Operative Documents, compliance
by the Company with all of the provisions hereof and thereof, and
the consummation of the transactions contemplated hereby and
thereby will not (A) conflict with or result in a breach or
violation of the charter or bylaws of the Company or any of the
Subsidiaries, (B) to the knowledge of such counsel, conflict with
or result in a breach or violation of the terms or provisions of,
or constitute a default or cause an acceleration of any
obligation under or result in the imposition or creation of (or
the obligation to create or impose) a Lien with respect to, any
material bond, note, debenture or other evidence of indebtedness
or any material indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which it or any of them is bound,
or to which any properties of the Company or any of the
Subsidiaries is or may be subject, (C) to the knowledge of such
counsel, contravene any order of any court or governmental agency
or body having jurisdiction over the Company or any of the
Subsidiaries or any of their
17
properties, or (D) violate or conflict with any statute, rule or
regulation or administrative or court decree applicable to the
Company or any of the Subsidiaries, or any of their respective
properties, in the case of clauses (B), (C) and (D), which
conflict, breach, violation, default or contravention, singly or
in the aggregate with each other such conflict, breach,
violation, default or contravention, would have a Material
Adverse Effect or would materially and adversely affect the
consummation of this Agreement, the Indenture or the Registration
Rights Agreement or the transactions contemplated hereby or
thereby;
(xvi) to the knowledge of such counsel, neither the
Company nor any of the Subsidiaries has violated any
Environmental Laws, lacks any permits, licenses or other
approvals required of them under applicable Environmental Laws or
is violating any terms and conditions of any such permit, license
or approval, nor has the Company or any of the Subsidiaries
violated any federal, state or local law relating to
discrimination in the hiring, promotion or pay of employees nor
any applicable wage or hour laws, nor any provisions of ERISA or
the rules and regulations promulgated thereunder, nor has the
Company or any of the Subsidiaries engaged in any unfair labor
practice, which in each case would result, singly or in the
aggregate, in a Material Adverse Effect;
(xvii) to the knowledge of such counsel, there is no
action, suit, proceeding or investigation before or by any court
or governmental agency or body, domestic or foreign, pending
against or affecting the Company or any of the Subsidiaries,
which would, singly or in the aggregate, have a Material Adverse
Effect or materially and adversely affect the consummation of
this Agreement, the Indenture or the Registration Rights
Agreement or the transactions contemplated hereby or thereby;
(xviii) to the knowledge of such counsel, (A) no action has
been taken and no statute, rule or regulation or order has been
enacted, adopted or issued by any governmental agency or body
which prevents the issuance of any of the Securities, or suspends
the sale of any of the Securities in any jurisdiction referred to
in Section 4(e) hereof, (B) no injunction, restraining order or
order of any nature by a federal or state court of competent
jurisdiction has been issued with respect to the Company or any
of the Subsidiaries which would prevent or suspend the issuance
or sale of any of the Securities in any jurisdiction referred to
in Section 4(e) hereof, (C) no action, suit or proceeding is
pending or threatened against or affecting the Company or any of
the Subsidiaries before any court or arbitrator or any
governmental body, agency or official, domestic or foreign,
which, if adversely determined, would materially interfere with
or adversely affect the issuance of any of the Securities or in
any manner draw into question the validity of any of the
Operative Documents and (D) every request of any securities
authority or agency of any jurisdiction for additional
information has been complied with in all material respects;
(xix) the Offering Circular, as of its date, and each
amendment of supplement thereto, as of its date (except for the
financial statements, including the notes thereto, and supporting
schedules and other financial, statistical and accounting data
included therein or omitted therefrom, as to which no opinion
need be expressed), contains all the information specified in,
and meeting the requirements of, Rule 144A(d)(4) under the Act;
18
(xx) to the knowledge of such counsel, other than the
holders of the Securities, no holder of any security of the
Company has or will have any right to require the registration of
such security by virtue of any transaction contemplated by this
Agreement or the other Operative Documents, which right has not
been waived; and
(xxi) the execution, delivery and performance of this
Agreement and the other Operative Documents and the consummation
of the transactions contemplated thereby by the Company does not
violate the Apparel Retailers Indenture.
In giving their opinion required by this Section 7(f), Kirkland & Ellis shall
additionally state that such counsel has participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company, your representatives and your
counsel in connection with the preparation of and the Offering Circular and has
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 (except as indicated
above), such counsel advises you 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, to the extent indicated above,
without independent check or verification), no facts came to such counsel's
attention that caused such counsel to believe that the Offering Circular (as
amended or supplemented, if applicable), as of its date or at the Closing Date,
contained or contains 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, in the light of the circumstances under which they were
made, not misleading. Without limiting the foregoing, such counsel may further
state that they assume no responsibility for, and have not independently
verified, the accuracy, completeness or fairness of the financial statements,
notes and schedules and other financial, statistical and accounting data
included in the Offering Circular.
The opinions described in this paragraph (f) shall be rendered to
you at the request of the Company and shall so state therein.
(g) You shall have received an opinion, dated the Closing Date,
of Latham & Watkins, your counsel, in form and substance reasonably
satisfactory to you, covering such matters as are customarily covered in
such opinions.
(h) You shall have received customary comfort letters on and as
of the date hereof as well as on and as of the Closing Date (in the
latter case constituting an affirmation of the statements set forth in
the former), in form and substance satisfactory to you, from Price
Waterhouse, independent accountants, with respect to the financial
statements and certain financial information contained in the Offering
Circular.
(i) Latham & Watkins shall have been furnished with such
documents and opinions, 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.
(j) Prior to the Closing Date, the Company and the Guarantor
shall have furnished to you such further information, certificates and
documents as you may reasonably request.
19
(k) The Company and the Trustees shall have entered into the
Indenture and you shall have received counterparts, conformed as
executed, thereof.
(l) The Company shall have entered into the Registration Rights
Agreement and you shall have received counterparts, conformed as
executed, thereof.
(m) Each holder of a security of the Company who has or will have
any right to require the registration of such security by virtue of any
transaction contemplated by this Agreement or the other Operative
Documents shall have waived all such rights.
(n) The Company shall have obtained any required written consents
under existing agreements in order to effect the transactions
contemplated hereby including, without limitation, the Bank Waiver,
copies of such consents shall have been sent to you and shall be
satisfactory in form and substance to you and your counsel.
8. EFFECTIVE DATE OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution hereof.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by notice to the Company if any of the following has occurred: (i)
subsequent to the date information is provided in the Offering Circular, any
Material Adverse Change which, in your judgment, materially impairs the
investment quality of any of the Series C Senior Subordinated Notes, (ii) any
outbreak or escalation of hostilities or, other national or international
calamity or crisis or material adverse change in the financial markets of the
United States or elsewhere, or any other substantial national or international
calamity or emergency if the effect of such outbreak, escalation, calamity,
crisis or emergency would, in your judgment, make it impracticable or
inadvisable to market any of the Series C Senior Subordinated Notes or to
enforce contracts for the sale of any of the Series C Senior Subordinated Notes,
(iii) any suspension or limitation of trading generally in securities on the New
York Stock Exchange or in the over-the-counter markets or any setting of minimum
prices for trading on such exchange or markets, (iv) any declaration of a
general banking moratorium by either federal or New York authorities, (v) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs that in your judgment has a material
adverse effect on the financial markets in the United States, and would, in your
judgment, make it impracticable or inadvisable to market any of the Series C
Senior Subordinated Notes or to enforce contracts for the sale of any of the
Series C Senior Subordinated Notes, (vi) the enactment, publication, decree, or
other promulgation of any federal or state statute, regulation, rule or order of
any court or other governmental authority which, in your judgment, materially
and adversely affects or will materially and adversely affect the business or
operations of the Company and the Subsidiaries, taken as a whole, or (vii) any
securities of the Company or any of the Subsidiaries shall have been downgraded
or placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
The indemnities and contribution provisions and the other agreements,
representations and warranties of the Company and the Guarantor, their officers
and directors and of you set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Series C Senior Subordinated Notes, regardless of (i) any
investigation, or statement as to the results thereof, made by or on your behalf
or by or on behalf of the Company, the officers or directors of the Company or
any controlling person of the Company, (ii) acceptance of the Series C Senior
Subordinated Notes and payment for them hereunder and (iii) termination of this
Agreement.
20
If this Agreement shall be terminated by you pursuant to clauses (i) or
(vii) of the second paragraph of this Section 8 or because of the failure or
refusal on the part of the Company or the Guarantor to comply with the terms or
to fulfill any of the conditions of this Agreement, the Company agrees to
reimburse you for all out-of-pocket expenses (including the reasonable fees and
disbursements of counsel) incurred by you. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 4(f) hereof.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Guarantor, you,
any Indemnified Person referred to herein and their respective successors and
assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
terms "successors and assigns" shall not include a purchaser of any of the
Series C Senior Subordinated Notes from any of you merely because of such
purchase.
9. NOTICES. Notices given pursuant to any provision of this Agreement
shall be addressed as follows:
If to the Company:
Specialty Retailers, Inc.
10201 Main Street
Houston, Texas 77025
Telecopier No.: (713) 660-3342
Attention: Carl Tooker
With a copy to:
Kirkland & Ellis
Citicorp Center
153 East 53rd
New York, New York 10022
Telecopier No.: (212) 838-4223
Attention: Lance C. Balk
If to Donaldson, Lufkin & Jenrette Securities Corporation:
140 Broadway
New York, New York 10005
Telecopier No.: (212) 504-4991
Attention: Andrew J. Nathanson
With a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Telecopier No.: (212) 751-4864
Attention: Kirk A. Davenport
21
10. INFORMATION RELATING TO YOU. The statements set forth in the last
paragraph on the cover page of, and in the second paragraph, the second sentence
of the third paragraph and the first sentence of the fifth paragraph under the
caption "Plan of Distribution" in, the Offering Circular constitute the only
information furnished to the Company in writing by you expressly for use
therein.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.
22
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument. Please confirm that the foregoing
correctly sets forth the agreement among the Company, the Guarantor and you.
Very truly yours,
SPECIALTY RETAILERS, INC.
JAMES A. MARCUN
Name: James A. Marcun
Title: EVP/CFO
PALAIS ROYAL, INC.
JAMES A. MARCUN
Name: James A. Marcun
Title: EVP/CFO
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: KIRK WORTMAN
Name: Kirk Wortman
Title: Vice President
<PAGE>
EXECUTIION COPY
FIRST AMENDMENT TO PURCHASE AGREEMENT
The undersigned hereby amend that certain Purchase Agreement, dated July
20, 1995 (the "Agreement"), by and among the undersigned, with respect to the
aggregate principal amount of Series C Senior Subordinated Notes ("Notes") to be
issued thereunder, such that the aggregate principal amount of Notes being
purchased and sold thereunder is $18,250,000. In all other respects, the
undersigned parties hereby reaffirm their respective obligations thereunder.
Except as amended by this letter, the Agreement remains in full force and
effect.
This amendment is hereby entered into as of this 25th day of July, 1995,
and shall be effective immediately upon execution. This amendment may be
executed in counterparts.
Very truly yours,
SPECIALTY RETAILERS, INC.
By: JAMES A. MARCUN
Name: James A. Marcun
Title: EVP/CFO
PALAIS ROYAL, INC.
By: JAMES A. MARCUN
Name: James A. Marcun
Title: EVP/CFO
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: KIRK WORTMAN
Name: Kirk Wortman
Title: Vice President
<PAGE>
Exhibit 10.3
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
Dated as of July 27, 1995
by and among
SPECIALTY RETAILERS, INC.
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of July 27, 1995 by Specialty Retailers, Inc., a Delaware
corporation (the "COMPANY"), and Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), who has agreed to purchase the Company's 11% Series C
Senior Subordinated Notes due 2003 (the "SERIES C SENIOR SUBORDINATED NOTES")
pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
July 20, 1995 (the "PURCHASE AGREEMENT"), by the Company and DLJ. In order to
induce DLJ to purchase the Series C Senior Subordinated 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
DLJ set forth in Section 7 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
ACT: The Securities Act of 1933, as amended.
BROKER-DEALER: Any broker or dealer registered under the
Exchange Act.
CLOSING DATE: The date hereof.
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 Act of the Exchange Offer Registration
Statement relating to the Series D Senior Subordinated 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 Series D Senior
Subordinated Notes in the same aggregate principal amount as the aggregate
principal amount of Series C Senior Subordinated Notes that were tendered by
Holders thereof pursuant to the Exchange Offer.
DAMAGES PAYMENT DATE: With respect to the Series C Senior
Subordinated Notes, 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 Act of
the Series D Senior Subordinated 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 Series D Senior Subordinated
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
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which DLJ propose to sell the
Series C Senior Subordinated Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act, and to certain institutional
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3) and
(7) of Regulation D under the 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 July 27, 1995, between the
Company and The First National Bank of Boston, a national banking association,
as trustee (the "TRUSTEE"), pursuant to which the Senior Subordinated Notes are
to be issued, as such Indenture is amended or supplemented from time to time in
accordance with the terms thereof.
INTEREST PAYMENT DATE: As defined in the Indenture and the Senior
Subordinated Notes.
NASD: National Association of Securities Dealers, Inc.
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
at the time such Registration Statement is declared effective, 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 Senior Subordinated Notes, each Person who is a Holder of Senior Subordinated
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 Series D Senior Subordinated 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.
SENIOR SUBORDINATED NOTES: The Series C Senior Subordinated Notes
and the Series D Senior Subordinated Notes.
SERIES D SENIOR SUBORDINATED NOTES: The Company's 11% Series D
Senior Subordinated Notes due 2003 to be issued pursuant to the Indenture in the
Exchange Offer.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
2
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 Act, (b) the
date on which such Senior Note has been effectively registered under the 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 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 an underwriter for
reoffering to the public.
SECTION 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.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under
applicable federal law (after the procedures set forth in Section 6(a)(i) below
have been complied with), the Company shall (i) cause to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 30 days after the Closing Date, a registration statement under the Act
relating to the Series D Senior Subordinated 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, (A) file all pre-effective
amendments to such Registration Statement as may be necessary in order to cause
such Registration Statement to become effective, (B) file, if applicable, a
post-effective amendment to such Registration Statement pursuant to Rule 430A
under the Act and (C) cause all necessary filings, if any, in connection with
the registration and qualification of the Series D Senior Subordinated Notes to
be made under the Blue Sky laws of such jurisdictions as are necessary to permit
Consummation of the Exchange Offer, 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 Series D Senior
Subordinated Notes to be offered in exchange for the Transfer Restricted
Securities and to permit resales of Series D Senior Subordinated Notes held by
Broker-Dealers as contemplated by Section 3(c) below. If, after such Exchange
Offer Registration Statement initially is declared effective by the Commission,
the Exchange Offer or the issuance of Series D Senior Subordinated Notes
thereunder or the resale of Series D Senior Subordinated Notes by Broker-Dealers
pursuant thereto as contemplated by Section 3(c) below is interfered with by any
stop order, injunction or other similar order or requirement of the Commission
or any other governmental agency or court, such Exchange Offer Registration
Statement shall be deemed not to have
3
become effective for purposes of this Agreement during the period in which such
stop order, injunction, or other similar order or requirement shall remain in
effect.
(b) The Company 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 shall cause the Exchange Offer to comply with all applicable federal and
state securities laws. No securities other than the Senior Subordinated Notes
shall be included in the Exchange Offer Registration Statement. The Company
shall use its 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 Series C Senior Subordinated 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),
may exchange such Series C Senior Subordinated Notes pursuant to the Exchange
Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within
the meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with any resales of the Series D Senior
Subordinated 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
Senior Subordinated Notes held by any such Broker-Dealer except to the extent
required by the Commission as a result of a change in policy after the date of
this Agreement.
The Company shall use its 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 Senior Subordinated 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 Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of six months 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 during
such one-year period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Company is not required to
file an Exchange Offer Registration Statement with respect to the Series D
Senior Subordinated Notes because the Exchange Offer is not permitted by
applicable law (after the procedures set forth in Section 6(a)(i) below have
been complied with) or (ii) if any Holder of Transfer Restricted Securities
(other than an "affiliate" of the Company, as defined in Rule 144 under the
Act), within 10 business days after the Consummation of the Exchange Offer (or,
if the Exchange Offer is terminated without being Consummated, within 10
business
4
days after such termination), shall notify the Company that (A) such Holder is
prohibited by law or Commission policy from participating in the Exchange Offer,
or (B) such Holder may not resell the Series D Senior Subordinated Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder, or
(C) such Holder is a Broker-Dealer and holds Series C Senior Subordinated Notes
acquired directly from the Company or one of its affiliates, then the Company
shall cause to be filed a shelf registration statement pursuant to Rule 415
under the Act, which may be an amendment to the Exchange Offer Registration
Statement (in either event, the "SHELF REGISTRATION STATEMENT"), relating to all
such Transfer Restricted Securities the Holders of which shall have provided the
information required pursuant to Section 4(b) hereof, and shall use their best
efforts to cause such Shelf Registration Statement to become effective as soon
as practicable after the Closing Date, but in no event later than 30 business
days following Consummation of the Exchange Offer (or, if the Exchange Offer is
terminated without being Consummated, no later than 30 business days following
such termination); PROVIDED, HOWEVER, that if the Company is not required to
file an Exchange Offer Registration Statement with respect to the Series D
Senior Subordinated Notes because the Exchange Offer is not permitted by
applicable law, no later than 90 days after the Closing Date. The Company shall
use its 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 Senior Subordinated 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 Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least (x) one year following the date on which such Shelf
Registration Statement becomes effective under the Act if Holders holding in the
aggregate less than $3 million in aggregate principal amount of Transfer
Restricted Securities shall have furnished to the Company the information
required by Section 4(b) hereof, (y) two years following the date on which such
Shelf Registration Statement becomes effective under the Act if Holders holding
in the aggregate at least $3 million but less than $8 million in aggregate
principal amount of Transfer Restricted Securities shall have furnished to the
Company the information required by Section 4(b) hereof and (z) three years
following the date on which such Shelf Registration Statement becomes effective
under the Act if Holders holding in the aggregate at least $8 million in
aggregate principal amount of Transfer Restricted Securities shall have
furnished to the Company the information required by Section 4(b) hereof;
PROVIDED, HOWEVER, that for purposes of calculating the aggregate principal
amount of Transfer Restricted Securities the Holders of which shall have
furnished to the Company the information required by Section 4(b) hereof, the
aggregate principal amount of Transfer Restricted Securities held by a Holder
who was unable to participate in the Exchange Offer solely because such Holder
is an affiliate (as such term is defined in Rule 144 under the Act) of the
Company shall be excluded; and PROVIDED, FURTHER that, notwithstanding the
foregoing, at such time as all Holders that have furnished to the Company the
information required by Section 4(b) hereof shall have sold all of the Transfer
Restricted Securities held by them, the obligations of the Company under this
Section 4(a) shall terminate.
(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 10 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
5
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) 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, (ii) 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"), (iii)
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 (iv) 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 without being succeeded within five business
days by a post-effective amendment to such Registration Statement that cures
such failure and that is itself declared effective within three business days
thereafter (each such event referred to in clauses (i) through (iv), a
"REGISTRATION DEFAULT"), the Company hereby jointly and severally agree to pay
liquidated damages to each Holder of Transfer Restricted Securities, during the
first 90-day period immediately following the occurrence of such Registration
Default, in an amount equal to $.05 per $1,000 principal amount of Senior
Subordinated Notes constituting Transfer Restricted Securities held by such
Holder for each week in which the Registration Default continues and has not
been cured. The amount of the liquidated damages for each week in which the
Registration Default continues and has not been cured shall increase by an
additional $.05 per $1,000 principal amount of Transfer Restricted Securities
for each subsequent 90-day period until the applicable Registration Statement is
filed, the applicable Registration Statement is declared effective, the Exchange
Offer is Consummated or the applicable Registration Statement again becomes
effective, as the case may be, up to a maximum amount of liquidated damages of
$.30 per $1,000 principal amount of Transfer Restricted Securities for each week
in which the Registration Default continues and has not been cured. All accrued
liquidated damages shall be paid to Record Holders by wire transfer of
immediately available funds or by federal funds check by the Company on each
Damages Payment Date. Following the cure of all Registration Defaults relating
to any particular Transfer Restricted Security, the payment of liquidated
damages with respect to such Transfer Restricted Security will cease.
All obligations of the Company 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 security
shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Company shall comply with all of the provisions of Section
6(c) below, shall use its 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 substantial question as to whether the Exchange Offer is
permitted by applicable law, the Company hereby agree to seek a
no-action letter or other favorable decision from the Commission
allowing the
6
Company to Consummate an Exchange Offer for such Series C Senior
Subordinated Notes. The Company hereby agrees 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
Commission policy. The Company hereby agrees, 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 Consummation of the Exchange Offer, 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 Series D Senior Subordinated Notes to be issued in the Exchange
Offer and (C) it is acquiring the Series D Senior Subordinated 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 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
Series D Senior Subordinated Notes obtained by such Holder in exchange
for Series C Senior Subordinated Notes acquired by such Holder directly
from the Company.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a supplemental letter
to the Commission (A) stating that the Company is 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 the Company has not entered into any arrangement
or understanding with any Person to distribute the Series D Senior
Subordinated Notes to be received in the Exchange Offer and that, to the
best of the Company's information and belief, each Holder participating
in the Exchange Offer is acquiring the Series D Senior Subordinated
Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Series D Senior Subordinated Notes received in the Exchange Offer.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, if any, the Company shall comply with all the provisions
of Section 6(c) below and shall use its best efforts to effect such registration
to permit the sale of the Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof (as
indicated in the information
7
furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto
the Company will as expeditiously as possible prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the 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, to the extent that the same
are required to be available to permit resales of Series D Senior Subordinated
Notes by BrokerDealers), the Company shall:
(i) use its best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements 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 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 its 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;
(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 4 hereof, 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 Act, and to
comply fully with the applicable provisions of Rules 424 and 430A under
the Act in a timely manner; and comply with the provisions of the 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;
(iii) advise the underwriter(s), if any, and selling
Holders promptly and, if requested by such Persons, 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 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 in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
8
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 shall use its best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time;
(iv) furnish to DLJ, each selling Holder named in any
Registration Statement or Prospectus 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 (including
all documents incorporated by reference after the initial filing of such
Registration Statement), 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 will not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents
incorporated by reference) to which the selling Holders of the 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 prior to 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
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 underwriter(s), all
financial and other records, pertinent corporate documents and
properties of the Company and cause the Company's officers, directors
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;
(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, agree should be included therein, including,
without limitation, information relating to the "Plan of Distribution"
of the Transfer Restricted Securities, including, without limitation,
information with respect to the principal amount of Transfer Restricted
Securities being sold to such underwriter(s), the purchase price being
paid therefor and with respect to 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) 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
9
Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(ix) 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 hereby
consents 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;
(x) enter into such agreements (including, unless not
required pursuant to Section 10 hereof, an underwriting agreement) 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 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 in
such connection, whether or not an underwriting agreement is entered
into and whether or not the registration is an Underwritten
Registration, the Company shall:
(A) furnish to each selling Holder and each underwriter,
if any, upon the date of the Consummation of the Exchange Offer
and, if applicable, the effectiveness of the Shelf Registration
Statement:
(1) a certificate, dated the date of Consummation
of the Exchange Offer or the date of effectiveness of the
Shelf Registration Statement, as the case may be, signed
by (y) the President or any Vice President and (z) a
principal financial or accounting officer of the Company,
confirming, as of the date of thereby, the matters set
forth in paragraphs (a), (b) (the last two clauses), (c)
and (d) of Section 7 of the Purchase Agreement;
(2) an opinion, dated the date of Consummation of
the Exchange Offer or the date of effectiveness of the
Shelf Registration Statement, as the case may be, of
counsel for the Company, covering the matters set forth in
Section 7(f) of the Purchase Agreement (with appropriate
modifications), including a statement to the effect that
such counsel has participated in conferences with officers
and other representatives of the Company, representatives
of the independent public accountants for the Company, DLJ
representatives and DLJ counsel 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 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, and, in the case of the Exchange
Offer Registration Statement, as of the date of
Consummation, contained an untrue statement of a material
fact or omitted to state a material fact
10
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
and, in the case of the opinion dated the date of
Consummation of the Exchange Offer, as of the date of
Consummation, 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, statistical and
accounting data included in any Registration Statement
contemplated by this Agreement or the related Prospectus;
and
(3) a customary comfort letter, dated as of the
date of Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as the
case may be, 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 matters set forth in the comfort letters
delivered pursuant to Section 7(h) of the Purchase
Agreement;
(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 the selling Holders or the
underwriter(s), if any, to evidence compliance with clause (A)
above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the
Company pursuant to this clause (xi).
The above shall be done at each closing under such underwriting
or similar agreement, as and to the extent required thereunder, and if
at any time the representations and warranties of the Company
contemplated in (A)(1) above cease to be true and correct, the Company
shall so advise the underwriter(s), if any, and selling Holders promptly
and if requested by such Persons, shall confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with, and cause 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 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 the
Company shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it 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 it is not now so subject;
(xii) shall issue, upon the request of any Holder of
Series C Senior Subordinated Notes covered by any Registration Statement
contemplated by this Agreement, Series D Senior Subordinated Notes,
having an aggregate principal amount equal to the aggregate principal
11
amount of Series C Senior Subordinated Notes surrendered to the Company
by such Holder in exchange therefor or being sold by such Holder; such
Series D Senior Subordinated Notes to be registered in the name of such
Holder or in the name of the purchaser(s) of such Senior Subordinated
Notes, as the case may be; in return, the Series C Senior Subordinated
Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, 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;
(xiv) 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, in the light of
the circumstances under which they were made, not misleading;
(xv) 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 printed
certificates for the Transfer Restricted Securities which are in a form
eligible for deposit with the Depository Trust Company;
(xvi) 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;
(xvii) 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;
(xviii) 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 with
the Trustee and the Holders of Senior Subordinated 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 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
12
required to be filed with the Commission to enable such Indenture to be
so qualified in a timely manner;
(xix) cause all Transfer Restricted Securities covered by
the Registration Statement to be listed on each securities exchange on
which similar securities issued by the Company are then listed if
requested by the Holders of a majority in aggregate principal amount of
Series C Senior Subordinated Notes or the managing underwriter(s), if
any; and
(xx) 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.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made with the NASD (including, if applicable, the fees and expenses of any
"qualified independent underwriter" and its counsel, as 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 duplicating (including printing certificates for the Series D Senior
Subordinated Notes to be issued in the Exchange Offer and duplicating of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company and, subject to Section 7(b) below, the
Holders of Transfer Restricted Securities; (v) all application and filing fees
in connection with listing Senior Subordinated 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 (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its 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.
13
(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 will reimburse 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 chosen by the Holders of a majority of the principal amount of
such Transfer Restricted Securities in an amount not to exceed $25,000.
SECTION 8. INDEMNIFICATION
(a) The Company 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 Act or Section 20 of the Exchange Act) any Holder (any of the persons
referred to in this clause (ii) being hereinafter 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 PERSON"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, judgments, actions and expenses
(including without limitation and as incurred, reimbursement of all reasonable
costs of investigating, preparing, pursuing or defending any claim or action, or
any investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Person) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement (or any
amendment thereto), or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (or any amendment or supplement
thereto), or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except insofar as such losses, claims, damages, liabilities or expenses are
caused by an untrue statement or omission or alleged untrue statement or
omission that is made in reliance upon and in conformity with information
relating to any of the Holders or their plan of distribution furnished in
writing to the Company by any of the Holders expressly for use therein in
accordance with Section 4(b) hereof, and PROVIDED that the Company shall not be
liable under this Section 8(a) to any Holder that is required by law to deliver
a Prospectus in connection with resales of Series D Senior Subordinated Notes to
the extent that (A) any such loss, claim, damage, liability or expense of such
Holder resulted solely from an untrue statement of a material fact contained in,
or the omission of a material fact from, a preliminary prospectus, which untrue
statement or omission was corrected in the Prospectus and (B) such Holder sold
Series D Senior Subordinated Notes to the person alleging such loss, claim,
damage, liability or expense without sending or giving a copy of the Prospectus.
The Company shall notify you promptly of the institution, threat or assertion of
any claim, proceeding (including any governmental investigation) or litigation
of which the Company is aware in connection with the matters addressed by this
Agreement which involves the Company or an Indemnified Person.
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against any
of the Indemnified Persons with respect to which indemnity may be sought against
the Company, such Indemnified Person (or the Holder controlled by such
controlling person) shall promptly notify the Company in writing (PROVIDED, that
the failure to give such notice shall not relieve the Company of its obligations
pursuant to this Agreement, except to the extent that the Company is prejudiced
thereby). Such Indemnified Person shall have the right to employ its own counsel
in any such action and the fees and expenses of such counsel shall be paid, as
incurred,
14
by the Company (regardless of whether it is ultimately determined that an
Indemnified Person is not entitled to indemnification hereunder). The Company
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings 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 (in
addition to any local counsel) at any time for such Indemnified Persons, which
firm shall be designated by the Holders. The Company shall be liable for any
settlement of any such action or proceeding effected with the Company's prior
written consent, which consent shall not be withheld unreasonably, and the
Company agrees to indemnify and hold harmless any Indemnified Person from and
against any loss, claim, damage, liability or expense by reason of any
settlement of any action effected with the written consent of the Company. The
Company shall not, without the prior written consent of each Holder, settle or
compromise or consent to the entry of judgment in or otherwise seek to terminate
any pending or threatened action, claim, litigation or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether or not
any Indemnified Person is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of each Indemnified
Person from all liability arising out of such action, claim, litigation or
proceeding.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the Company, and its
directors, officers, and any person controlling (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Company, and its officers,
directors, partners, employees, representatives and agents of each such person,
to the same extent as the foregoing indemnity from the Company to each
Indemnified Person, but only with respect to claims and actions based on
information relating to such Holder or its plan of distribution furnished in
writing by such Holder expressly for use in any Registration Statement pursuant
to Section 4(b) hereof. In case any action or proceeding shall be brought
against the Company or its directors or officers or any such controlling person
in respect of which indemnity may be sought against a Holder of Transfer
Restricted Securities, such Holder shall have the rights and duties given the
Company and the Company or its directors or officers or such controlling person
shall have the rights and duties given to each Holder by the preceding
paragraph. 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 the Registrable Securities giving rise to such indemnification
obligation.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other hand
from their sale of Transfer Restricted Securities or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportions
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the indemnifying parties and
indemnified party, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and any 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 the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or such Holder on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The indemnity and contribution obligations of the Company set forth
herein shall be in addition to any liability or obligation the Company may
otherwise have to any Indemnified Party.
15
The Company and each Holder of Transfer Restricted Securities
agree that it would not be just and equitable if contribution pursuant to this
Section 8(c) were 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 account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or expenses
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, 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, none of the Holders (and its related Indemnified Persons) shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total consideration received by such Holder with respect to the Senior
Subordinated Notes sold by it exceeds the amount of any damages which such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(c) are several in proportion to the respective principal amount of
Senior Subordinated Notes sold by each of the Holders hereunder and not joint.
SECTION 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
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Act in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration
hereunder unless (a) holders of at least $5 million in aggregate principal
amount of Transfer Restricted Securities shall have furnished to the Company the
information required by Section 4(b) hereof and (b) such Holder (i) 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 (ii) 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;
PROVIDED, HOWEVER, that if holders of less than $5 million in aggregate
principal amount of Transfer Restricted Securities shall have furnished to the
Company the information required by Section 4(b) hereof, all references herein
to an Underwritten Registration (including, without limitation, references to
underwriter(s) and underwriting agreements) shall be of no force or effect, and
the Company shall be under no obligation to facilitate an Underwritten
Registration.
SECTION 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
16
of the Transfer Restricted Securities included in such offering; PROVIDED, that
such investment bankers and managers must be reasonably satisfactory to the
Company.
SECTION 12. MISCELLANEOUS
(a) REMEDIES. Each Holder, in addition to being entitled to
exercise all rights provided herein, in the Indenture, the Purchase Agreement or
granted by law, including recovery of liquidated or other damages, will be
entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement and
hereby agree 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, 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. 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 securities
under any agreement in effect on the date hereof.
(c) ADJUSTMENTS AFFECTING THE SENIOR SUBORDINATED NOTES. The
Company will not take any action, or permit any change to occur, with respect to
the Senior Subordinated 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 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:
c/o Specialty Retailers, Inc.
10201 Main Street
Houston, Texas 77025
Telecopier No.: (713) 660-3342
Attention: Bernard Fuchs
17
With a copy to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022
Telecopier No.: (212) 838-4223
Attention: Lance C. Balk
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.
(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 together with the other
Operative Documents (as defined in the Purchase 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 with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
18
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
SPECIALTY RETAILERS, INC.
By: JAMES A. MARCUN
Name: James A. Marcun
Title: EVP/CFO
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: KIRK WORTMAN
Name: Kirt Wortman
Title: Vice President
<PAGE>
Exhibit 12.1
SPECIALTY RETAILERS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
------------------------------------------------------------ ------------------------------
PRO FORMA PRO FORMA
FEB. 2, FEB. 1, JAN. 30, JAN. 29 JAN. 28, JAN. 28, APR. 30, APR. 29, APR. 29,
1991 1992 1993 1994 1995 1995 1994 1995 1995
-------- -------- -------- -------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income before extraordinary item $ 1,274 $ 3,961 $12,235 $ 17,118 $14,532 $13,159 $ 3,081 $ 4,569 $ 4,227
Minority interest in Bealls Holding 741 749 -- -- -- -- -- -- --
Income tax expense -- 3,993 8,340 9,330 8,339 7,498 1,731 2,919 2,709
------- ------- ------- -------- ------- ------- ------- ------- -------
Income before income tax, minority
interest and extraordinary item 2,015 8,703 20,575 26,448 22,871 20,657 4,812 7,488 6,936
------- ------- ------- -------- ------- ------- ------- ------- -------
Fixed charges charged to expense:
Rental expense(1) 7,073 7,275 7,575 8,803 8,879 8,879 2,146 2,212 2,212
Interest expense 36,841 33,928 32,384 32,137 29,743 31,957 7,527 7,501 8,053
Dividend and accretion on
redeemable preferred stock
of subsidiary 741 749 -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total fixed charges charged
to expense 44,655 41,952 39,959 40,940 38,622 40,836 9,673 9,713 10,265
------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income tax, minority
interest, extraordinary item and
fixed charges charged to expense $46,670 $50,655 $60,534 $67,388 $61,493 $61,493 $14,485 $17,201 $17,201
======= ======= ======= ======= ======= ======= ======= ======= =======
Fixed charges charged to accrual
for centralization and
consolidation:
Rental expense(1) $ 1,123 $ 898 $ 803 $ 298 $ 446 $ 446 $ 81 $ 359 $ 359
Interest expense 1,075 667 381 -- -- -- -- -- --
------- ------- ------- -------- ------- ------- ------- ------- -------
Total fixed charges charged to
accrual for centralization
and consolidation 2,198 1,565 1,184 298 446 446 81 359 359
------- ------- ------- -------- ------- ------- ------- ------- -------
Total fixed charges $46,853 $43,517 $41,143 $41,238 $39,068 $41,282 $ 9,754 $10,072 $10,624
======= ======= ======= ======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges -- 1.16 1.47 1.63 1.57 1.49 1.49 1.71 1.62
======= ======= ======= ======= ======= ======= ======= ======= =======
Deficiency of earnings to cover
fixed charges ($183) -- -- -- -- -- -- -- --
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
(1) Rental expense comprises one-third of all rental expenses incurred during
the period. This is deemed by management to be representative of the
interest factor of rental payments.
EXHIBIT 21.1
SPECIALTY RETAILERS, INC.
SUBSIDIARIES
Jurisdiction Other Names Under
Subsidiary of Incorporation Which Doing Business
- ---------- ---------------- --------------------
Palais Royal, Inc. Texas Bealls
Fashion Bar
Stage
SRI Receivables Delaware None
Purchase Co., Inc.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Specialty Retailers, Inc. of our report
dated April 14, 1995 relating to the consolidated financial statements of
Specialty Retailers, Inc., which appears in such Prospectus. We also consent to
the application of such report to the Financial Statement Schedules for the
three years ended January 28, 1995 listed under Item 21(b) of this Registration
Statement when such schedules are read in conjunction with the financial
statements referred to in our report. The audits referred to in such report also
included these schedules. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Houston, Texas
August 18, 1995
<PAGE>
Exhibit 26.1
SECURITIES ACT OF 1933 FILE NO:
(IF APPLICATION TO DETERMINE ELIGIBILITY
OF TRUSTEE FOR DELAYED OFFERING PURSUANT TO SECTION 305(b)(2)
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)______
----------------------
THE FIRST NATIONAL BANK OF BOSTON
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
04-2472499
(I.R.S. EMPLOYER IDENTIFICATION NO.)
100 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
GARY A. SPEISS, CASHIER AND GENERAL COUNSEL
100 FEDERAL STREET, 24TH FLOOR, BOSTON, MASSACHUSETTS 02110 (617) 434-2870
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
--------------------------
SPECIALTY RETAILERS, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-3034294
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10201 MAIN STREET
HOUSTON, TX 77025
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
11% SERIES D SENIOR SUBORDINATED NOTES DUE 2003
(TITLE OF INDENTURE SECURITIES)
================================================================================
<PAGE>
1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
Comptroller of the Currency of the United States, Washington D.C. Board of
Governors of the Federal Reserve System, Washington, D.C Federal Deposit
Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
IF THE OBLIGOR OR ANY UNDERWRITER FOR THE OBLIGOR IS AN AFFILIATE OF THE
TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
None with respect to the Trustee. (See Notes on page 2) None with respect
to Bank of Boston Corporation.
3. THROUGH 11. NOT APPLICABLE.
12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE
COL. A COL. B COL. C
NATURE OF AMOUNT
INDEBTEDNESS OUTSTANDING DATE DUE
------------ ----------- --------
NONE NONE N/A
13. THROUGH 15. NOT APPLICABLE.
16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY AND
QUALIFICATION.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A certified copy of the Articles of Association of the trustee is filed as
Exhibit No. 1 to statement of eligibility and qualification No. 22-9514 and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CON TAINED IN THE ARTICLES OF ASSOCIATION.
A copy of the certificate of T. McLean Griffin, Cashier of the trustee,
dated February 3, 1978, as to corporate succession containing copies of the
Certificate of the Comptroller of the Currency that The Massachusetts Bank,
National Association, into which The First National Bank of Boston was merged
effective January 4, 1971, is authorized to commence the business of banking as
a national banking association, as well as a certificate as to such merger is
filed as Exhibit No. 2 to statement of eligibility and qualification No. 22-9514
and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AU THORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN
PARAGRAPH (1) OR (2) ABOVE.
A copy of a certificate of the Office of the Currency dated February 6,
1978 is filed as Exhibit No. 3 to statement of eligibility and qualification No.
22-9514 and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A certified copy of the existing By-Laws of the trustee dated December 23,
1993 is filed as Exhibit No. 4 to statement of eligibility and qualification No.
22-25754 and is incorporated herein by reference thereto.
5. THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto and made a part hereof.
6. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority is annexed
hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item in this Statement of Eligibility and Qualification
which relates to matters peculiarly within the knowledge of the obligor or any
underwriter for the obligor, the trustee has relied upon information furnished
to it by the obligor and the underwriters, and the trustee disclaims
responsibility for the accuracy or completeness of such information.
The answer furnished to Item 2 of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939, THE TRUSTEE,
THE FIRST NATIONAL BANK OF BOSTON, A NATIONAL BANKING ASSOCIATION ORGANIZED AND
EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA, HAS DULY CAUSED THIS
STATEMENT OF ELIGIBILITY AND QUALIFICATION TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ALL IN THE TOWN OF CANTON AND
COMMONWEALTH OF MASSACHUSETTS, ON THE 8TH DAY OF AUGUST,1995.
THE FIRST NATIONAL BANK OF BOSTON, TRUSTEE
BY : JAMES MOGAVERO
James Mogavero
Autherized Officer
EXHIBIT 6
CONSENT OF TRUSTEE
PURSUANT TO THE REQUIREMENTS OF SECTION 321(B) OF THE TRUST INDENTURE ACT
OF 1939 IN CON NECTION WITH THE PROPOSED ISSUE BY SPECIALTY RETAILERS, INC. OF
11% SERIES D SENIOR SUBORDINATED NOTES, WE HEREBY CONSENT THAT REPORTS OF
EXAMINATIONS BY FEDERAL, STATE, TERRITORIAL, OR DISTRICT AUTHORITIES MAY BE
FURNISHED BY SUCH AUTHORITIES TO THE SECURITIES AND EXCHANGE COMMISSION UPON
REQUEST THEREFOR.
THE FIRST NATIONAL BANK OF BOSTON,TRUSTEE
BY : JAMES MOGAVERO
James Mogavero
Authorized Officer
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION, INCLUDING
DOMESTIC AND FOREIGN SUBSIDIARIES, OF
THE FIRST NATIONAL BANK OF BOSTON
In the Commonwealth of Massachusetts, at the close of business on March
31, 1995. Pub lished in response to call made by Comptroller of the Currency,
under Title 12, United States Code, Section 161. Charter number 200. Comptroller
of the Currency Northeastern District.
ASSETS
<TABLE>
<CAPTION>
DOLLAR
AMOUNTS IN
THOUSANDS
------------
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ..................................................... $ 1,971,610
Interest-bearing balances ...................................................................... 1,260,383
Securities .................................................................................................. 3,477,526
Federal funds sold and securities purchased under agreements to resell in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's:
Federal funds sold ..................................................................................... 513,745
Securities purchased under agreements to resell ........................................................ 51,875
Loans and lease financing receivables:
Loans and leases, net of unearned income ............................................................... $ 26,026,888
LESS: Allowance for loan and lease losses .............................................................. 582,574
LESS: Allocated transfer risk reserve .................................................................. 0
Loans and leases, net of unearned income, allowance and reserve ........................................ 25,444,314
Assets held in trading accounts ............................................................................. 1,607,468
Premises and fixed assets (including capitalized leases) .................................................... 413,833
Other real estate owned ..................................................................................... 49,405
Investments in unconsolidated subsidiaries and associated companies ......................................... 108,438
Customers' liability to this bank on acceptances outstanding ................................................ 310,251
Intangible assets ........................................................................................... 652,421
Other assets ................................................................................................ 1,011,125
------------
TOTAL ASSETS .......................................................................................... $ 36,872,394
============
LIABILITIES
Deposits:
In domestic offices .................................................................................... $ 14,928,754
Noninterest-bearing .................................................................................... $ 3,579,380
Interest-bearing ....................................................................................... 11,349,374
In foreign offices, Edge and Agreement subsidiaries, and IBF's .............................................. 8,714,045
Noninterest-bearing .................................................................................... 622,953
Interest-bearing ....................................................................................... 8,091,092
Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBF's:
Federal funds purchased ................................................................................ 1,466,333
Securities sold under agreements to repurchase ......................................................... 159,556
Demand notes issued to the U.S. Treasury .................................................................... 375,660
Trading Liabilities ......................................................................................... 705,873
Other borrowed money ........................................................................................ 5,774,969
Mortgage indebtedness and obligations under capitalized leases .............................................. 13,961
Bank's liability on acceptances executed and outstanding .................................................... 311,173
Subordinated notes and debentures ........................................................................... 979,246
Other liabilities ........................................................................................... 973,015
TOTAL LIABILITIES ...................................................................................... $ 34,402,585
============
Limited-life preferred stock and equity capital ............................................................. 0
<PAGE>
EQUITY CAPITAL
Perpetual preferred stock and related surplus ............................................................... $ 0
Common stock ................................................................................................ 82,264
Surplus ..................................................................................................... 1,010,634
Undivided profits and capital reserves ...................................................................... 1,428,818
LESS: Net unrealized loss on marketable equity securities ................................................... (48,294)
Cumulative foreign currency translation adjustments ......................................................... (3,613)
Total equity capital ........................................................................................ 2,469,809
------------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK, AND EQUITY ........................................... $ 36,872,394
============
</TABLE>
I, Robert T. Jefferson, Comptroller of the above-named bank, do hereby
declare that this Re port of Condition is true and correct to the best of my
knowledge and belief.
ROBERT T. JEFFERSON
MARCH 31, 1995
We, the undersigned directors, attest to the correctness of this
statement of resources and liabilities. We declare that it has been examined by
us, and to the best of our knowledge and belief has been prepared in conformance
with the instructions and is true and correct.
CHARLES K. GIFFORD
IRA STEPANIAN
J. DONALD MONAN
DIRECTORS
MARCH 31, 1995
Exhibit 28.1
FORM OF
LETTER OF TRANSMITTAL
SPECIALTY RETAILERS, INC.
Offer to Exchange its 11% Series D Senior Subordinated Notes due 2003
for any and all of its outstanding
11% Series C Senior Subordinated Notes due 2003
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON ________, 1995,
UNLESS THE OFFER IS EXTENDED
To The First National Bank of Boston
(the "Exchange Agent")
BY REGISTERED OR CERTIFIED MAIL: BY HAND
The First National Bank of Boston The First National Bank of Boston
Corporate Trust Special Projects Blue Hills Office Park
Attn: Manager - Special Projects Attn: Manager - Special Projects
Mail Stop 45-01-10 Mail Stop 45-01-10
P.O. Box 1666 150 Royall Street
Boston, Massachusetts 02105 Canton, Massachusetts 02021
BY OVERNIGHT COURIER:
The First National Bank of Boston
BY FACSIMILE TRANSMISSION Blue Hills Office Park
The First National Bank of Boston Attn: Manager - Special Projects
Attn: Corporate Trust Department Mail Stop 45-01-10
Special Projects 150 Royall Street
(617) 575-2804 Canton, Massachusetts 02021
TELEPHONE NUMBER:
(617) 575-2950
Delivery of this instrument to an address other than as set
forth above or transmission of instructions via a facsimile number other than
the one listed above will not constitute a valid delivery. The Instructions
accompanying this Letter of Transmittal should be read carefully before this
Letter of Transmittal is completed.
The undersigned hereby acknowledges receipt of the Prospectus
dated _______, 1995 (the "Prospectus") of Specialty Retailers, Inc. (the
"Company") and this Letter of Transmittal (the "LOT"), which together constitute
the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount
of its 11% Series D Senior Subordinated Notes due 2003 (the "New Securities"),
which have been registered under the Securities Act pursuant to a Registration
Statement of which the Prospectus is a part, for each $1,000 principal amount of
its outstanding 11% Series C Senior Subordinated Notes due 2003 (the "Old
Securities"). The term "Expiration Date" shall mean 5:00 p.m., New York City
time, on __________, 1995, unless the Company, in its sole discretion, extends
the Exchange Offer, in which case the term shall mean the latest date and time
to which the Exchange Offer is extended. Capitalized terms used but not defined
have the meaning given to them in the Prospectus.
This Letter of Transmittal is to be used by holders of Old
Securities if (i) certificates representing the Old Securities are to be
physically delivered to the Exchange Agent herewith, (ii) tender of the Old
Securities is to be made by book-entry transfer to the Exchange Agent's account
at The Depository Trust company (the "Book-Entry Transfer Facility") pursuant to
the procedures set forth in the Prospectus under the caption "The Exchange Offer
Procedures for Tendering" by any financial institution that is a participant in
the Book-Entry Transfer Facility and whose names appears on a security position
listing as the owner of Old Securities (such participants acting on behalf of
holders, are referred to herein, together with such holders, as "Authorized
Holders") or (iii) tender of the Old Securities is to made according to the
guaranteed delivery procedures described in the Prospectus under the caption
"The Exchange Offer -
1
Guaranteed Delivery Procedures." See Instruction 2. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery of the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any
person to whose name Old Securities are registered on the books of the Company
or any other person who has obtained a properly completed bond power from the
registered holder. The undersigned has completed, executed and delivered this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer. Holders who wish to tender their Old
Securities must complete this letter in its entirety.
[ ] CHECK HERE IF TENDERED OLD SECURITIES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _______________________________________________
Account Number: ___________________________________________________________
Transaction Code Number: ___________________________________________________
Principal Amount of Tendered Old Securities: __________________________________
If Holders desire to tender Old Securities pursuant to the
Exchange Offer and (i) time will not permit this Letter of Transmittal,
certificates representing Old Securities or other required document to reach the
Exchange Agent prior to the Expiration Date, or (ii) the procedures for
book-entry transfer cannot be completed prior to the Expiration Date, such
Holders may effect a tender of such Old Securities in accordance with the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer - Guaranteed Delivery Procedures." See Instruction 2 below.
[ ] CHECK HERE IF TENDERED OLD SECURITIES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING (See Instruction 2):
2
Name of Registered or Acting Holder(s): _______________________________________
Window Ticket No. (if any): ___________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ___________________________
Name of Eligible Institution
that Guaranteed Delivery: _____________________________________________________
If Delivered by Book-Entry Transfer,
the Account Number: _________________________________________________________
Transaction Code Number: ____________________________________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ________________________________________________________________________
Address: ______________________________________________________________________
______________________________________________________________________
Attention: ____________________________________________________________________
3
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
BOX 1
DESCRIPTION OF OLD SECURITIES*
<TABLE>
<S> <C> <C> <C>
PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES) OF AGGREGATE PRINCIPAL TENDERED (MUST BE
REGISTERED HOLDER(S) CERTIFICATE AMOUNT REPRESENTED AN INTEGRAL MULTIPLE
(PLEASE FILL IN, IF BLANK) NUMBER(S) BY CERTIFICATE(S) OF $1,000)**
Total
</TABLE>
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Old Securities will be deemed to have tendered the
entire aggregate principal amount represented by the column labeled
"Aggregate Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers
and principal amounts on a separate signed schedule and affix the list
to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of Old
Securities. All other tenders must be in integral multiples of $1,000.
4
<PAGE>
<TABLE>
<CAPTION>
BOX 2 BOX 3
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL REGISTRATION INSTRUCTIONS
(See Instructions 4, 5 and 6) (See Instructions 4, 5 and 6)
<S> <C>
To be completed ONLY if certificates for To be completed ONLY if certificates for Old
Old Securities in a principal amount not tendered, Securities in a principal amount not tendered, or New
or New Securities issued in exchange for Old Securities issued in exchange for Old Securities
Securities accepted for exchange, are to be issued in accepted for exchange, are to be sent to someone other
than the undersigned. the name of someone other than the undersigned, or to the
undersigned at an address other than that shown above.
Issue certificate(s) to:
Delivery certificate(s) to:
Name_____________________________________
(Please Print) Name_______________________________________
(Please Print)
Address__________________________________
Address_____________________________________
_________________________________________
(Include Zip Code) ____________________________________________
(Include Zip Code)
_________________________________________ ____________________________________________
(Tax Indemnification or Social Security Number) (Tax Indemnification or Social Security Number)
</TABLE>
5
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to Specialty Retailers, Inc., a Delaware corporation
(the "Company"), the principal amount of Old Securities indicated in Box 1
above.
Subject to and effective upon the acceptance for exchange of
the principal amount of Old Securities tendered in accordance with this Letter
of Transmittal, the undersigned sells, assigns and transfers to, or upon the
order of, the Company all right, title and interest in and to the Old Securities
tendered hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as its agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Company) with respect to the
tendered Old Securities with the full power of substitution to (i) present such
Old Securities and all evidences of transfer and authenticity to, or transfer
ownership of, such Old Securities on the account books maintained by the
Book-Entry Transfer Facility to, or upon the order of, the Company, (ii) deliver
certificates for such Old Securities to the Company and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company and
(iii) present such Old Securities for transfer on the books of the Company and
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Old Securities, all in accordance with the terms of the Exchange Offer.
The undersigned hereby represents and warrants that the
undersigned has full power and authority to tender, sell, assign and transfer
the Old Securities tendered hereby and that the Company will require good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claims, when the same are
acquired by the Company. The undersigned hereby further represents that any New
Securities acquired in exchange for Old Securities tendered hereby will have
been acquired in the ordinary course of business of the person receiving such
New Securities, whether or not such person is the undersigned, that neither the
undersigned nor any such other person has the arrangement or understanding with
any person to participate in the distribution of such New Securities and that
neither the undersigned nor any such other person is an "affiliate," as defined
in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"),
of the Company. In addition, the undersigned and any such person acknowledge
that (a) any person participating the Exchange Offer for the purpose of
distributing the New Securities must, in the absence of an exemption therefrom,
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale of the New Securities and
cannot rely on the position of the staff of the SEC enunciated in EXXON CAPITAL
HOLDINGS CORPORATION (available April 13, 1989) or similar no-action letters and
(b) failure to comply with such requirements in such instance could result in
the undersigned or such person incurring liability under the Securities Act for
which the undersigned or such person is not indemnified by the Company. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Exchange Agent or the Company to be necessary or desirable to
complete the assignment, transfer and purchase of the Old Securities tendered
hereby. If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in and does not intend to engage in, a distribution of
New Securities. If the undersigned is a broker-dealer that will receive New
Securities for its own account in exchange for Old Securities that were acquired
as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Securities. However, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For purposes of the Exchange Offer, the Company shall be
deemed to have accepted validly tendered Old Securities when and if the Company
has given oral or written notice thereof to the Exchange Agent.
If any Old Securities herewith are not accepted for exchange
pursuant to the Exchange Offer for any reason, certificates for any such
unaccepted Old Securities will be returned, without expense, to the undersigned
at the address shown below or to a different address as may be indicated herein
in Box 3 under "Special Delivery Instructions" as promptly as practicable after
the Expiration Date.
6
All authority conferred or agreed to be conferred by this
Letter of Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representative, successors and assigns.
The undersigned understands that tenders of Old Securities
pursuant to the procedures described under the caption "The Exchange Offer -
Procedures for Tendering" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer, subject only to
withdrawal of such tenders on the terms set forth in the Prospectus under the
caption "The Exchange Offer - Withdrawal of Tenders."
Unless otherwise indicated in Box 2 under "Special
Registration Instructions," please issue the certificates (or electronic
transfers) representing the New Securities issued in exchange for the Old
Securities accepted for exchange and any certificates (or electronic transfers)
for Old Securities not tendered or not exchanged, in the name(s) of the
undersigned. Similarly, unless otherwise indicated in Box 3 under "Special
Delivery Instructions," please send the certificates representing the New
Securities issued in exchange for the Old Securities accepted for exchange and
any certificates (or electronic transfers) for Old Securities not tendered or
not exchanged, in the name(s) of the undersigned. Similarly, unless otherwise
indicated in Box 3 under "Special Delivery Instructions," please send the
certificates representing the New Securities issued in exchange for the Old
Securities accepted for exchange and any certificates for Old Securities not
tendered or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address shown below in the undersigned's signature(s). In the
event that both "Special Registration Instructions" and "Special Delivery
Instructions" are completed, please issue the certificates representing the New
Securities issued in exchange for the Old Securities accepted for exchange in
the name(s) of, and return any certificates for Old Securities not tendered or
not exchanged to, the person(s) so indicated. The undersigned understands that
the Company has no obligation pursuant to the "Special Registration
Instructions" and "Special Delivery Instructions" to transfer any Old Securities
from the name of the registered Holder(s) thereof if the Company does not accept
for exchange any of the Old Securities so tendered.
Holders who wish to tender their Old Securities and (i) whose Old
Securities are not immediately available or (ii) who cannot deliver the Old
Securities, this Letter of Transmittal or any other documents required hereby to
the Exchange Agent prior to the Expiration Date, may tender their Old Securities
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 2 regarding the completion of this Letter of Transmittal printed
below.
PLEASE SIGN HERE WHETHER OR NOT
OLD SECURITIES ARE BEING PHYSICALLY TENDERED HEREBY
X ______________________________________ ______________________ Date
X ______________________________________ ______________________ Date
Area Code and Telephone Number:________________________________
The above lines must be signed by the registered holder(s)
exactly as their name(s) appear(s) on the Old Securities or by a participant in
the Book-Entry Transfer Facility, exactly as such participant's name appears on
a security position listing as the owner of the Old Securities, or by person(s)
authorized to become registered holder(s) by a properly completed bond power
from the registered Holder(s), a copy of which must be transmitted with this
Letter of Transmittal. If Old Securities to which this Letter of Transmittal
relate are held of record by two or more joint Holders, then all such Holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) unless waived by the Company,
submit evidence satisfactory to the Company of such person's authority so to
act. See Instruction 5 regarding the completion of this Letter of Transmittal
printed below.
7
Name(s): _____________________________________________________________________
(Please Print)
Capacity: _____________________________________________________________________
Address: ______________________________________________________________________
(Include Zip Code)
_______________________________________________________________________________
MEDALLION SIGNATURE GUARANTEE (If
required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution: ___________________________
(Authorized Signature)
_______________________________________________________________________________
(Title)
_______________________________________________________________________________
(Name of Firm)
_______________________________________________________________________________
(Address, Include Zip Code)
_______________________________________________________________________________
(Area Code and Telephone Number)
Dated: ________________________________________________________________________
8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR
OLD SECURITIES OR BOOK ENTRY CONFIRMATIONS. Certificates representing the
tendered Old Securities (or a confirmation of book-entry transfer into the
Exchange Agent's account with the Book-Entry Transfer Facility for tendered Old
Securities transferred electronically), as well as properly completed and duly
executed copy of this Letter of Transmittal (or facsimile thereof), a Substitute
Form W-9 (or facsimile thereof) and any other documents required by this Letter
of Transmittal must be received by the Exchange Agent at its address set forth
herein prior to the Expiration Date. The method of delivery of certificates for
Old Securities and all other required documents is at the election and risk of
the tendering Holder and delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. Instead of delivery
by mail, it is recommended that the Holder use an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. Neither the Company nor the Exchange Agent is under an obligation to
notify any tendering Holder of the Company's acceptance of tendered Old
Securities prior to the Closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender
their Old Securities but whose Old Securities are not immediately available and
who cannot deliver their certificates for Old Securities (or comply with the
procedures for book-entry transfer prior to the Expiration Date), the Letter of
Transmittal and any other documents required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date must tender their Old Securities
according to the guaranteed delivery procedures set forth below. Pursuant to
such procedures:
(i) such tender must be made by or through a firm which is a
member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., or is a commercial bank or
trust company having an office or correspondent in the United States
(an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must
have received from the Holder and the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail, or hand delivery) setting forth the name and
address of the Holder, the certificate number or numbers of the
tendered Old Securities, and the principal amount of tendered Old
Securities and stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile
thereof), together with the tendered Old Securities (or a confirmation
of book-entry transfer into the Exchange Agent's account with the Book
Entry Transfer Facility for Old Securities transferred electronically)
and any other required documents will be deposited by the Eligible
Institution with the Exchange Agent; and
(iii) such properly completed and executed Letter of
Transmittal and certificates representing the tendered Old Securities
in proper form for transfer (or a confirmation of book-entry transfer
into the Exchange Agent's account with the Book-Entry Transfer Facility
for Old Securities transferred electronically) must be received by the
Exchange Agent within five New York Stock Exchange trading days after
the Expiration Date.
Any Holder who wishes to tender Old Securities pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery relating to such Old Securities
prior to the Expiration Date. Failure to complete the guaranteed delivery
procedures outlined above will not, of itself, affect the validity or effect a
revocation of any Letter of Transmittal form properly completed and executed by
a Holder who attempted to use the guaranteed delivery person.
3. TENDER BY HOLDER. Only a Holder of Old Securities may
tender such Old Securities in the Exchange Offer. Any beneficial owner of Old
Securities who is not the registered Holder and who wishes to tender should
arrange with such Holder to execute and deliver this Letter of Transmittal on
such owner's behalf or must, prior to completing and executing this Letter of
Transmittal and delivering such Old Securities, either make appropriate
arrangements to register ownership of the Old Securities in such owner's name or
obtain a properly completed bond power from the registered Holder (the "Acting
Holder").
9
4. PARTIAL TENDERS. Tenders of Old Securities will be accepted
only in integral multiples of $1,000 in principal amount. If less than the
entire principal amount of Old Securities is tendered, the tendering Holder
should fill in the principal amount tendered in the column labeled "Aggregate
Principal Amount Tendered" of the box entitled "Description of Old Securities"
(Box 1) above. The entire principal amount of Old Securities delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
Old Securities for the principal amount of Old Securities not tendered and New
Securities exchanged for any Old Securities tendered will be sent to the Holder
at his or her registered address (or transferred to the account of the
Book-Entry Facility designated above), unless a different address (or account)
is provided in the appropriate box on this Letter of Transmittal, as soon as
practicable following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; MEDALLION GUARANTEE OF SIGNATURES. If this Letter of Transmittal
is signed by the registered Holder(s) of the Old Securities tendered herewith,
the signatures must correspond with the name(s) as written on the face of the
tendered Old Securities without alteration, enlargement, or any change
whatsoever. If this Letter of Transmittal is signed by a participant in the
Book-Entry Transfer Facility, the signature must correspond with the name as it
appears on the security position listing as the owner of the Old Securities.
If any of the tendered Old Securities are owned of record by
two or more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Securities are held in different names on several Old
Securities, it will be necessary to complete, sign, and submit as many separate
copies of the Letter of Transmittal documents as there are names in which
tendered Old Securities are held.
If this Letter of Transmittal is signed by the registered
Holder or Acting Holder, and New Securities are to be issued and any untendered
or unaccepted principal amount of Old Securities are to be reissued or returned
to the registered Holder or Acting Holder, then, the registered Holder or Acting
Holder need not and should not endorse any tendered Old Securities nor provide a
separate bond power. In any other case (including if this Letter of Transmittal
is not signed by the Acting Holder), the registered Holder or Acting Holder must
either properly endorse the Old Securities tendered or transmit a properly
completed separate bond power with this Letter of Transmittal (in either case,
executed exactly as the name(s) of the registered Holder(s) appear(s) on such
Old Securities, and, with respect to a participant in the Book-Entry Transfer
Facility whose name appears on a security position listing as the owner of Old
Securities, exactly as the name(s) of the participant(s) appear(s) on such
security position listings), with the signature(s) on the endorsement or bond
power guaranteed by an Eligible Institution unless such certificates or bond
powers are signed by an Eligible Institution (as defined in the Prospectus).
If this Letter of Transmittal or any Old Securities or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing and,
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with this Letter of Transmittal.
No medallion signature guarantee is required if (i) this
Letter of Transmittal is signed by the registered Holder(s) of the Old
Securities tendered herewith (or by a participant in the Book-Entry Transfer
Facility whose name appears on a security position listing as the owner of the
tendered Old Securities) and the issuance of New Securities (and any Old
Securities not tendered or not accepted) are to be issued directly to such
registered Holder(s) (or, if signed by a participant in the Book-Entry Transfer
Facility, any New Securities or Old Securities not tendered or not accepted are
to be deposited to such participant's account at such Book-Entity Transfer
Facility) and neither the "Special Delivery Instructions" (Box 3) nor the
"Special Registration Instructions" (Box 2) has been completed, or (ii) such Old
Securities are tendered for the account of an Eligible Institution. In all other
cases, all signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering
Holders should indicate, in the applicable box, the name and address (or account
at the Book-Entry Transfer Facility) in which the New Securities and/or
substitute Old Securities for principal amounts not tendered or not accepted for
exchange are to be sent (or deposited), if different from the name and address
or account of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the employer identification number or social
security number of the person named must also be indicated and the indicated and
the tendering Holders should complete the applicable box.
10
If no such instructions are given, the New Securities (and any
Old Securities not tendered or not accepted) will be issued in the name of and
sent to the Acting Holder of the Old Securities or deposited at such Acting
Holders' account at the Book-Entry Transfer Facility.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if
any, applicable to the sale and transfer of Old Securities to it or its order
pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any
reason other than the transfer and sale of Old Securities to the Company or its
order pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or on any other person) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption from taxes therefrom is not submitted with this Letter of
Transmittal, the amount of transfer taxes will be billed directly to such
tendering Holder.
Except as provided in this Instruction 7, it will not be
necessary for transfer tax stamps to be affixed to the Old Securities listed in
this Letter of Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law required
that a Holder of any Old Securities which are accepted for exchange must provide
the Company (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a Holder who is an individual is his or her social
security number. If the Company is not provided with the correct TIN, the Holder
may be subject to a $50 penalty imposed by Internal Revenue Service. (If
withholding results in an over-payment of taxes, a refund may be obtained.)
Certain Holders (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering Holder must
provide such Holder's correct TIN by completing the Substitute Form W-9 set
forth herein, certifying that the TIN provided is correct (or that such Holder
is awaiting a TIN), and that (i) the Holder has not been notified by the
Internal Revenue Service that such Holder is subject to backup withholding as a
result of failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified the Holder that such Holder is no longer subject to
backup withholding. If the Old Securities are registered in more than one name
or are not in the name of the actual owner, see the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
information on which TIN to report.
The Company reserves the right in its sole discretion o take
whatever steps are necessary to comply with the Company's obligation regarding
backup withholding.
9. VALIDITY OF TENDERS. All questions as to the validity,
form, eligibility (including time of receipt), and acceptance of tendered Old
Securities will be determined by the Company, in its sole discretion, which
determination will be final and binding. The Company reserves the right to
reject any and all Old Securities not validly tendered or any Old Securities,
the Company's acceptance of which would, in the opinion of the Company or its
counsel, be unlawful. The Company also reserves the right to waive any
conditions of the Exchange Offer or defects or irregularities in tenders of Old
Securities as to any ineligibility of any Holder who seeks to tender Old
Securities in the Exchange Offer. The interpretation of the terms and conditions
of the Exchange Offer (includes this Letter of Transmittal and the instructions
hereto) by the Company shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Old Securities must
be cured within such time as the Company shall determine. The Company will use
reasonable efforts to give notification of defects or irregularities with
respect to tenders of Old Securities, but shall not incur any liability for
failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute
right to amend, waive or modify specified conditions in the Exchange Offer in
the case of any tendered Old Securities.
11. NO CONDITIONAL TENDER. No alternative, conditional,
irregular or contingent tender of Old Securities on transmittal of this Letter
of Transmittal will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED OLD SECURITIES. Any
tendering Holder whose Old Securities have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instruction.
11
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance and requests for additional copies of the Prospectus
may be directed to the Exchange Agent at the address specified in the
Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED OLD SECURITIES AND ISSUANCE OF NEW
SECURITIES; RETURN OF OLD SECURITIES. Subject to the terms and conditions of the
Exchange Offer, the Company will accept for exchange all validly tendered Old
Securities as soon as practicable after the Expiration Date and will issue New
Securities therefor as soon as practicable thereafter. For purposes of the
Exchange Offer, the Company shall be deemed to have accepted tendered Old
Securities when, as and if the Company has given written and oral notice thereof
to the Exchange Agent. If any tendered Old Securities are not exchanged pursuant
to the Exchange Offer for any reason, such unexchanged Old Securities will be
returned, without expense, to the undersigned at the address shown above (or
credited to the undersigned's account at the Book-Entry Transfer Facility
designated above) or at a different address as may be indicated under "Special
Delivery Instructions."
12
<PAGE>
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the
limited withdrawal rights set forth in the Prospectus under the caption "The
Exchange Offer - Withdrawal of Tenders."
PAYOR'S NAME: SPECIALTY RETAILERS, INC.
<TABLE>
<S> <C> <C>
SUBSTITUTE Name (if joint names, list first and
circle the name of the person or entity
whose number you enter in Part 1 below.
See instructions if you name has
changed.)
Form W-9 Address
Department of Treasury City, State and ZIP Code
List account number(s) here (optional)
Internal Revenue Service Part 1 - PLEASE PROVIDE YOUR Social Security Number
TAXPAYER IDENTIFICATION or TIN
NUMBER ("TIN") IN THE BOX AT
RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW
Part 2 - Check the box if you are NOT
subject to backup withholding under the
provisions of section 3408(a)(1)(C) of
the Internal Revenue Code because (1)
you have not been notified that you are
subject to backup withholding as a
result of failure to report all interest
of dividends (2) the Internal Revenue
Service has notified you that you are no
longer subject to backup withholding. [ ]
Payor's Request for TIN CERTIFICATION - UNDER THE Part 3 -
PENALTIES OF PERJURY, I CERTIFY AWAITING TIN
THAT THE INFORMATION
PROVIDED ON THIS FORM IS TRUE, [ ]
CORRECT AND COMPLETE.
SIGNATURE DATE
</TABLE>
Note
FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FROM W-9 FOR ADDITIONAL DETAILS.
13
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FROM W-9
PAGE 1 OF 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup
withholding on ALL payments include the following:
o A corporation
o A financial institution
o An organization exempt from tax under section 501(a), or an individual
retirement plan.
o The United States or any agency or
instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
o A registered dealer in securities or commodities
registered in the U.S. or a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under
section 584(a).
o An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of
1940.
o A foreign central bank of issue.
Payments of dividends and patronage dividends not
generally subject to backup withholding include the
following:
o Payments to nonresident alien subject to
withholding under section 1441.
o Payments to partnerships not engaged in a trade
or business in the U.S. and which have at least
one nonresident partner
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Payments of interest not generally subject to backup
withholding include the following:
o Payments of interest and obligations issued by
individuals.
Note: You may be subject to backup withholding if this interest is $00 or
more and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payor.
o Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
o Payments described in section 6049(b)(5) to
nonresident aliens.
o Payments on tax-free covenant bonds under
section 1451.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Exempt payees described above should file Form W-i to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYOR, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACT OF THE FORM, AND RETURN IT TO
THE PAYOR. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice - Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payors
who must report the payments to the IRS. The IRS uses the number for
identification purposes. Payors must be given the numbers whether or not
recipients are required to file returns. Payors must generally withhold 20% of
taxable interest, dividends, and certain other payments to a payee who does not
furnish a taxpayer identification number to a payor. Certain penalties may also
apply.
PENALTIES
(1) Penalty for Failure to Furnish Taxpayer Identification Number - If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments - If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) Civil Penalty for False Information With Respect to Withholding - If you
made a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT
YOUR TAX CONSULTANT OR THE
INTERNAL REVENUE SERVICE
14
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2 of 2
Guidelines for Determining the Proper Identification Number to Give the Payor,
Social Security numbers have nine digits separate by two hyphens: e.g.,
000-00-0000. Employer identification numbers have nine-digits separated by only
one hyphen: e.g., 00-0000000. The table below will help determine the number to
give the Payor.
<TABLE>
<S> <C> <C> <C>
For this type of account: Give the For this type of account: Give the EMPLOYER
SOCIAL SECURITY IDENTIFICATION
number of: number of
1. For an individual account The individual 8. Sole proprietorship account The owner
2. Two or more individuals The actual owner of the 9. A valid trust, estate or The legal entity (Do not
(joint account) account or, if combined pension trust furnish the identifying
funds, any one of the number of the personal
individuals representative or trustee
unless the legal entity
itself is not designated in
the account title)
3. Husband and wife (joint The actual owner of the 10. Corporate account The corporation
account) account or, if joint
funds, either person
4. Custodian account of a The minor 11. Religious, charitable, or The organization
minor (Uniform Gift educational organization
Minors Act) account
5. Adult and minor (joint The adult or, if the 12. Partnership account held in The partnership
account) minor is the only the name of business
contributor, the minor
6. Account in the name of The ward, minor, or 14. A broker or registered The broker or nominee
guardian or committee for incompetent person nominee
a designated ward, minor,
or incompetent person
7.a The usual revocable The Grantor-trustee 15. Account with the The public safety
savings trust account Department of Agriculture
(grantor is also trustee) in the name of a public
entity (such as a State of
local government, school
district, or prison) that
receives agricultural
program payments
b. So-called trust account that
is not legal or valid trust
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's minor's or incompetent person's name and furnish the
ward's, minor's or incompetent person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled with there is more than one name, the number
will be considered to be that of the first name listed.
15
16
Exhibit 28.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
11% SENIOR SUBORDINATED NOTES DUE 2003
OF
SPECIALTY RETAILERS, INC.
Pursuant to the Prospectus Dated ___, 1995
This form must be used by a holder of 11% Senior Subordinated Notes due
2003 (the "Old Securities") of Specialty Retailers, Inc., a Delaware corporation
(the "Company"), who wishes to tender Old Securities to the Exchange Agent
pursuant to the guaranteed delivery procedures described in "The Exchange Offer
Guaranteed Delivery Procedures" of the Company's Prospectus, dated ___, 1995
(the "Prospectus") and in Instruction 2 to the related Letter of Transmittal.
Any holder who wishes to tender Old Securities pursuant to such guaranteed
delivery procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date of the Exchange Offer.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON ___, 1995 UNLESS EXTENDED (THE
"EXPIRATION DATE").
The First National Bank of Boston
(the "Exchange Agent")
BY OVERNIGHT CARRIER OR BY HAND: BY REGISTERED OR CERTIFIED MAIL:
The First National Bank of Boston The First National Bank of Boston
Blue Hills Office Park Corporate Trust Special Projects
Attn: Manager - Special Projects Attn: Manager - Special Projects
Mail Stop 45-01-10 Mail Stop 45-01-10
150 Royall Street P.O. Box 1666
Canton, Massachusetts 02021 Boston, Massachusetts 02105
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
1
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Securities set forth below pursuant to the guaranteed delivery procedures
set forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Securities listed below:
<TABLE>
<S> <C> <C>
CERTIFICATE NUMBER(S) (IF KNOWN) OF OLD SECURITIES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
</TABLE>
2
PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s) or
Authorized Signatory:_________________ Date: ___________________, 1995
______________________________________ Address:_____________________________
______________________________________ _____________________________________
Name(s) of Registered Holder(s):______ Area Code and Telephone No.__________
______________________________________
______________________________________
This Notice of Guaranteed Delivery must be signed by the holder(s) exactly
as their name(s) appear on certificates for Old Securities or on a security
position listing as the owner of Old Securities, or by person(s) authorized to
become holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s): ______________________________________________________________________
_______________________________________________________________________________
Capacity: _____________________________________________________________________
Address(es):___________________________________________________________________
_______________________________________________________________________________
3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the Old Securities tendered hereby in
proper form for transfer (or confirmation of the book-entry transfer of such Old
Securities into the Exchange Agent's account at the Book-Entry Transfer Facility
described in the prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures" and in the Letter of Transmittal) and any other required
documents, all by 5:00 p.m., New York City time, on the fifth New York Stock
Exchange trading day following the Expiration Date.
<TABLE>
<S> <C>
Name of firm__________________________ ________________________________________
(Authorized Signature)
Address_______________________________ Name____________________________________
(Please Print)
______________________________________ Title___________________________________
(Include Zip Code)
Area Code and Tel. No. _______________ Dated_____________________________, 1995
</TABLE>
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF
TRANSMITTAL.
4
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. The method
of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Securities
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Securities without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Old Securities, the signature must correspond with
the name shown on the security position listing as the owner of the Old
Securities.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Old Securities listed or a participant of the
Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the Old Securities or signed as the name of the participant
shown on the Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
5
