<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 17, 1998
REGISTRATION NO.
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
IRON AGE HOLDINGS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6749 04-3349775
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NUMBER)IDENTIFICATION NUMBER)
OF INCORPORATION OR
ORGANIZATION)
---------------
ROBINSON PLAZA THREE
SUITE 400
PITTSBURGH, PENNSYLVANIA 15205
(412) 787-4100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
KEITH A. MCDONOUGH
IRON AGE HOLDINGS CORPORATION
ROBINSON PLAZA THREE
SUITE 400
PITTSBURGH, PENNSYLVANIA 15205
(412) 787-4100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
COPY TO:
LAUREN I. NORTON, ESQ.
ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
(617) 951-7000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
AMOUNT MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT REGISTRATION FEE
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12 1/8% Senior Discount Notes due 2009............... $25,000,511 100% $7,375.15
</TABLE>
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ THIS PROSPECTUS AND THE INFORMATION CONTAINED HEREIN ARE SUBJECT TO +
+ COMPLETION OR AMENDMENT. UNDER NO CIRCUMSTANCES SHALL THIS PROSPECTUS +
+ CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 7, 1998
PROSPECTUS
IRON AGE HOLDINGS CORPORATION
[LOGO APPEARS HERE] [LOGO APPEARS HERE]
OFFER TO EXCHANGE ITS 12 1/8%
SENIOR DISCOUNT NOTES DUE MAY 1,
2009, WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, FOR AN EQUAL PRINCIPAL
AMOUNT AT MATURITY OF ITS 12 1/8%
SENIOR DISCOUNT NOTES DUE MAY 1,
2009, WHICH HAVE NOT BEEN SO
REGISTERED
-------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS THEREUNDER WILL EXPIRE AT 5:00 P.M.
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED
-------
Iron Age Holdings Corporation, a Delaware corporation ("Holdings"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), to exchange an aggregate principal amount of
up to $45,140,000 at maturity of its 12 1/8% Senior Discount Notes due 2009
(the "Exchange Discount Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), for a like principal
amount at maturity of its outstanding 12 1/8% Senior Discount Notes due 2009
(the "Original Discount Notes" and, together with the Exchange Discount Notes,
the "Discount Notes"), which have not been so registered, from the holders
thereof. The terms of the Exchange Discount Notes are identical in all material
respects to those of the Original Discount Notes, except for certain transfer
restrictions and registration rights relating to the Original Discount Notes.
Holdings will accept for exchange any and all Original Discount Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on ,
1998, unless extended (as so extended, the "Expiration Date"). Tenders of
Original Discount Notes may be withdrawn at any time prior to the Expiration
Date. The Exchange Offer is not conditioned upon any minimum principal amount
of Original Discount Notes being tendered for exchange pursuant to the Exchange
Offer. Pursuant to the Registration Agreement (as defined), the Exchange Offer
will remain open for not less than 30 days (or longer if required by applicable
law) after the date hereof. The Exchange Offer is subject to certain other
customary conditions. See "The Exchange Offer."
The Discount Notes will accrete in value until May 1, 2003 at a rate per
annum of 12 1/8%, compounded semi-annually, to an aggregate principal amount of
$45.140 million, the principal amount at maturity. Cash interest will not
accrue on the Exchange Discount Notes prior to May 1, 2003. Thereafter, cash
interest on the Exchange Discount Notes will accrue at a rate per annum of 12
1/8% and will be payable semi-annually in cash on May 1 and November 1 of each
year, commencing November 1, 2003. See "Description of Exchange Discount
Notes."
The Exchange Discount Notes will be redeemable at the option of Holdings, in
whole or in part, at any time on or after May 1, 2003 at the redemption prices
set forth herein, plus accrued and unpaid interest and liquidated damages, if
any, to the redemption date. Holdings may also redeem up to 35% of the
aggregate principal amount at maturity of the Discount Notes originally issued
at its option, at any time on or prior to May 1, 2001, at a redemption price
equal to 112.125% of the Accreted Value (as defined) thereof, plus accrued and
unpaid interest and liquidated damages, if any, to the redemption date, with
the proceeds of a Public Equity Offering (as defined) received by Holdings,
following which there is a Public Market (as defined); provided, however, that
at least 65% of the aggregate principal amount at maturity of the Discount
Notes originally issued remains outstanding after such redemption. Upon the
occurrence of a Change of Control (as defined), each holder of Exchange
Discount Notes will have the right to require Holdings to repurchase all of
such holder's Exchange Discount Notes at a price equal to 101% of the Accreted
Value thereof, plus accrued and unpaid interest and liquidated damages, if any,
on or prior to the date of repurchase. The Exchange Discount Notes will not be
subject to any sinking fund requirement. See "Description of Exchange Discount
Notes" and "Certain Federal Income Tax Considerations."
The Exchange Discount Notes will be unsecured, senior obligations of
Holdings, pari passu in right of payment to all existing and future unsecured,
unsubordinated indebtedness of Holdings. All of the operations of Holdings are
conducted through its subsidiaries, and therefore Holdings is dependent upon
the cash flow of its subsidiaries to meet its obligations, including its
obligations on the Discount Notes. The Discount Notes will be effectively
subordinated to all existing and future indebtedness and liabilities of
Holdings' subsidiaries, including trade credit, the Senior Subordinated Notes
(as defined) and indebtedness with respect to the New Credit Facility (as
defined). As of May 2, 1998, (i) the outstanding indebtedness of Holdings was
approximately $25.0 million, and (ii) the outstanding indebtedness of Holdings'
subsidiaries was approximately $123.9 million (exclusive of unused
commitments). The indenture under which the Exchange Discount Notes will be
issued permits Holdings and the Restricted Subsidiaries (as defined) to incur
additional indebtedness, including Senior Indebtedness (as defined). See
"Description of Exchange Discount Notes."
The Exchange Discount Notes are being offered hereunder in order to satisfy
certain obligations of Holdings contained in the Registration Agreement dated
April 24, 1998 (the "Registration Agreement"), among Holdings and the other
signatories thereto. Holdings believes that based on interpretations by the
staff of the Securities and Exchange Commission (the "SEC"), Exchange Discount
Notes issued pursuant to the Exchange Offer in exchange for Original Discount
Notes may be offered for resale, resold and otherwise transferred by each
holder thereof (other than any holder which is an "affiliate" of Holdings
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery requirements of the Securities
Act, provided that such Exchange Discount Notes are acquired in the ordinary
course of such holder's business and such holder has no arrangement with any
person to participate in the distribution of such Exchange Discount Notes.
Each broker-dealer that receives Exchange Discount Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Discount Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of Exchange Discount Notes received in
exchange for Original Discount Notes where such Original Discount Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. Holdings has agreed that, starting on the Expiration Date
and ending on the close of business on the ninetieth day 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."
Holdings will not receive any proceeds from the Exchange Offer and will pay
all expenses incident to the Exchange Offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE EXCHANGE
DISCOUNT NOTES.
-------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
The Exchange Offer is not being made to, nor will Holdings accept surrenders
for exchange from, holders of Original Discount Notes in any jurisdiction in
which such Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.
The Exchange Discount Notes will be available initially only in book-entry
form. Holdings expects that the Exchange Discount Notes issued pursuant to
this Exchange Offer will be issued in the form of a Global Exchange Discount
Note (as defined), which will be deposited with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in its name or in
the name of Cede & Co., its nominee. Beneficial interests in the Global
Exchange Discount Note representing the Exchange Discount Notes will be shown
on, and transfers thereof will be effected through, records maintained by the
Depositary and its participants. After the initial issuance of the Global
Exchange Discount Note, Exchange Discount Notes in certificated form will be
issued in exchange for interests in the Global Exchange Discount Note only on
the terms set forth in the Indenture dated as of April 24, 1998 (the
"Indenture") between Holdings and The Chase Manhattan Bank, as trustee (the
"Trustee"). See "Description of Exchange Discount Notes--Book-Entry Transfer."
Prior to this Exchange Offer, there has been no public market for the
Original Discount Notes. To the extent that Original Discount Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Original Discount Notes could be adversely affected. If a market
for the Exchange Discount Notes should develop, the Exchange Discount Notes
could trade at a discount from their Accreted Value. Holdings does not
currently intend to list the Exchange Discount Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system.
Neither Holdings nor any of its subsidiaries will receive any cash proceeds
from the issuance of the Exchange Discount Notes offered hereby. No dealer-
manager is being used in connection with this Exchange Offer. See "The
Transactions and Use of Proceeds" and "Plan of Distribution."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF ORIGINAL DISCOUNT NOTES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR ORIGINAL DISCOUNT NOTES PURSUANT TO THE EXCHANGE
OFFER.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
WHEN USED IN THIS PROSPECTUS, THE WORDS "BELIEVES," "ANTICIPATES" AND
SIMILAR EXPRESSIONS ARE USED TO IDENTIFY FORWARD LOOKING STATEMENTS. SUCH
STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. HOLDINGS WISHES TO CAUTION
READERS THAT ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED
IN THIS PROSPECTUS, INCLUDING, WITHOUT LIMITATION, CERTAIN STATEMENTS UNDER
"SUMMARY," "THE TRANSACTIONS AND USE OF PROCEEDS," "UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF INCOME AND OTHER FINANCIAL DATA," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND
"BUSINESS" AND LOCATED ELSEWHERE HEREIN REGARDING HOLDINGS' FINANCIAL POSITION
AND BUSINESS STRATEGY, MAY CONSTITUTE FORWARD LOOKING STATEMENTS. ALL OF THESE
FORWARD LOOKING STATEMENTS ARE BASED ON ESTIMATES AND ASSUMPTIONS MADE BY
MANAGEMENT OF HOLDINGS, WHICH ALTHOUGH BELIEVED TO BE REASONABLE, ARE
INHERENTLY UNCERTAIN. THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED ON SUCH
ESTIMATES AND STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH ESTIMATES
OR STATEMENTS WILL BE REALIZED, AND IT IS LIKELY THAT ACTUAL RESULTS WILL
DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD
i
<PAGE>
LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH DIFFERENCES INCLUDE: (1)
INCREASED COMPETITION; (2) INCREASED COSTS; (3) INABILITY TO CONSUMMATE
ACQUISITIONS ON ATTRACTIVE TERMS; (4) LOSS OR RETIREMENT OF KEY MEMBERS OF
MANAGEMENT; (5) INCREASES IN HOLDINGS' COST OF BORROWINGS OR UNAVAILABILITY OF
ADDITIONAL DEBT OR EQUITY CAPITAL ON TERMS CONSIDERED REASONABLE BY
MANAGEMENT; (6) ADVERSE STATE, FEDERAL OR FOREIGN LEGISLATION OR REGULATION OR
ADVERSE DETERMINATIONS BY REGULATORS; (7) CHANGES IN GENERAL ECONOMIC
CONDITIONS IN THE MARKETS IN WHICH HOLDINGS MAY COMPETE AND FLUCTUATIONS IN
DEMAND IN THE SAFETY SHOE INDUSTRY; AND (8) ABILITY TO SUSTAIN HISTORICAL
MARGINS AS THE INDUSTRY DEVELOPS. MANY OF SUCH FACTORS WILL BE BEYOND THE
CONTROL OF HOLDINGS AND ITS MANAGEMENT. FOR FURTHER INFORMATION OR OTHER
FACTORS WHICH COULD AFFECT THE FINANCIAL RESULTS OF HOLDINGS AND SUCH FORWARD
LOOKING STATEMENTS, SEE "RISK FACTORS."
INDUSTRY DATA AND FINANCIAL INFORMATION
Holdings relies on and refers to information it has received from various
industry analysts regarding the markets for its principal products, safety
shoes, which Holdings believes to be reliable, but the accuracy and
completeness of such information is not guaranteed and Holdings has not
independently verified this market data. Similarly, internal Holdings surveys,
while believed by Holdings to be reliable, have not been verified by
independent sources.
AVAILABLE INFORMATION
Holdings has filed a registration statement on Form S-4 (herein referred to,
together with all exhibits and schedules thereto and any amendments thereto,
as the "Exchange Offer Registration Statement") under the Securities Act with
respect to the Exchange Discount Notes offered hereby. This Prospectus, which
forms a part of the Exchange Offer Registration Statement, does not contain
all of the information set forth in the Exchange Offer Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the SEC. For further information with respect to Holdings and
the Exchange Discount Notes offered hereby, reference is made to the Exchange
Offer Registration Statement. Statements made in this Prospectus as to the
contents of certain documents are not necessarily complete and, in each
instance, reference is made to the copy of the document filed as an exhibit to
the Exchange Offer Registration Statement.
Holdings is not currently subject to the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Pursuant to the Indenture, Holdings has agreed that,
until such time as Holdings shall become subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act, (a) Holdings shall provide to the
Trustee, the Initial Purchasers (as defined) and holders of Discount Notes
such annual reports and such information, documents and other reports as are
specified in Sections 13 and 15(d) of the Exchange Act and applicable to a
United States of America corporation subject to such Sections, such
information, documents and other reports to be so provided at the times
specified for the filing of such information, documents and reports under such
Sections, and (b) not later than 45 days after the end of each fiscal quarter
of Holdings, Holdings shall issue a press release setting forth a summary of
the results of operations of Holdings for such fiscal quarter and shall
publish such press release on one of the following national business and
financial wire services: Dow Jones News Service, Reuters Financial Service,
Bloomberg News, PR Newswire or Business Wire. Thereafter, notwithstanding that
Holdings may not be subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, to the extent permitted by the Exchange Act,
Holdings shall file with the SEC and provide the Trustee and holders of
Discount Notes and prospective holders of Discount Notes (upon request) with
such annual reports and such information, documents and other reports as are
specified in such Sections and applicable to a United States of America
corporation subject to such Sections, such information, documents and other
reports to be so filed and provided at the times specified for the filing of
such information, documents and reports under such Sections; provided,
however, that Holdings shall not be
ii
<PAGE>
required to file any report, document or other information with the SEC if the
SEC does not permit such filing. In addition, for so long as any of the
Original Discount Notes remain outstanding, Holdings has agreed to make
available to any prospective purchaser of the Original Discount Notes or
beneficial owner of the Original Discount Notes in connection with any sale
thereof the information required by Rule 144A(d)(4) under the Securities Act.
Any reports or documents filed by Holdings with the SEC (including the
Exchange Offer Registration Statement) may be inspected and copied at the
Public Reference Section of the SEC's office at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the SEC's regional offices in New York (7
World Trade Center, 13th Floor, New York, New York 10048) and Chicago
(Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois
60661). Copies of such reports or other documents may be obtained at
prescribed rates from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, the SEC maintains a web
site that contains reports and other information that is filed through the
SEC's Electronic Data Gathering Analysis and Retrieval System. The web site
can be accessed at http://www.sec.gov.
iii
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise stated in this Prospectus or unless the context
otherwise requires, (i) references to "Holdings" or the "Company" mean Iron Age
Holdings Corporation, a Delaware corporation, and its subsidiaries, and (ii)
references to "Iron Age" mean Iron Age Corporation, a Delaware corporation and
a wholly-owned subsidiary of Holdings, and its subsidiaries. All references to
a fiscal year refer to the 12 months ended on the last Saturday in January of
such year. Holdings utilizes a fiscal year of 52 or 53 weeks, ending on the
last Saturday in January. Each of Holdings' fiscal years ended January 27, 1996
("fiscal 1996") and January 25, 1997 ("fiscal 1997") contained 52 weeks and its
fiscal year ended January 31, 1998 ("fiscal 1998") contained 53 weeks. The
period ended April 25, 1997 ("the three monthes ended April 25, 1997") is
comprised of the period January 26, 1997 through April 25, 1997. The period
ended May 2, 1998 ("the three months ended May 2, 1998") is comprised of the
period February 1, 1998 through May 2, 1998. Except as set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," references to "fiscal 1998" herein represent the pro forma results
of Holdings as if the Fenway Acquisition (as defined) had occurred on January
26, 1997.
THE COMPANY
The Company is the largest distributor of safety shoes in the United States.
The Company's core business is the specialty distribution of safety shoes under
the Iron Age(R) brand name, which comprised 79.9% of fiscal 1998 sales. The
Company also distributes work footwear to the service sector through its Knapp
division and manufactures specialized premium quality safety shoes through its
subsidiary Falcon Shoe Mfg. Co. ("Falcon"). The Company distributes directly to
its customers over 450 styles under the Iron Age, Knapp(TM) and Dunham(R) brand
names. The Company's captive, multi-channel distribution network includes 130
shoemobiles, 103 retail stores and 34 in-plant stores, as well as catalog
sales, branded wholesale merchandising, independent sales representatives and
third-party vendors. The Iron Age products and services are marketed
principally to industrial and government employers, most of which require
safety shoes to be worn at the workplace and provide purchase subsidies under
employer safety programs to the end-user employee. The employers provide these
subsidies to increase workplace safety and ensure compliance with OSHA
regulations, thereby decreasing workers' compensation and insurance costs.
Through superior customer service provided by the Company's factory-to-end-user
distribution and advanced information systems, the Company has established a
diverse and loyal customer base of approximately 48,000 accounts. Management
estimates that the Company has industrial customer retention rates in excess of
90%. The Company believes that its focus on direct supply, responsive customer
service and broad, readily available product offerings distinguishes the
Company from other safety footwear suppliers.
The Company was founded in 1817 and has specialized in safety footwear since
the popularization of steel toe shoes during the 1940s. Under the Company's
current management, which was formed in 1986, the Company has reduced its
reliance on independent distributors, and sales of Iron Age products through
Company-owned shoemobiles and retail stores have increased from approximately
60% in fiscal 1987 to 100% in fiscal 1998. Over the same period, net sales and
EBITDA have increased in each consecutive year, growing at compound annual
growth rates ("CAGR") of 15.2% and 23.2%, respectively. In fiscal 1998, the
Company generated net sales of $118.7 million and EBITDA of $20.5 million,
representing increases of 19.5% and 20.0%, respectively, from the prior fiscal
year.
1
<PAGE>
INDUSTRY OVERVIEW
According to Footwear Market Insights, a market research firm, the United
States work shoe market had sales of over $1.75 billion in 1996. The work shoe
market consists of men's and women's work, safety and duty shoes and boots.
Future Technology Surveys, Inc. estimated the safety shoe segment of the work
shoe market to be $700 million in 1995 with a projected average annual growth
rate of 4% for the following five years. End-user safety shoe customers include
workers in the primary metals, chemical and petroleum, automotive, paper,
mining, utilities, electronics, aerospace, food service, pharmaceutical,
biomedical, agriculture, construction and retail and wholesale trade
industries.
A significant factor influencing the demand for safety shoes is the
increasing concern regarding workplace safety that is derived from the
employer's desire to reduce employee costs from on-the-job injury and to reduce
workers' compensation expenses. Beginning in the 1970s, the federal government
adopted Occupational Safety and Health Administration ("OSHA") regulations
establishing heightened workplace safety standards, including regulations
governing footwear. OSHA regulations established standards requiring employers
to provide their workers with workplaces free from recognized hazards that
could cause serious injury or death and requiring employees to abide by all
safety and health standards that apply to their jobs. Changes to OSHA
regulations in 1994 required employers to assess footwear related hazards and
implement a program designed to mitigate such hazards. According to a 1995
survey by Future Technology Services, Inc., although more than 10 million
employees in the United States are required by OSHA regulations to use foot
protection, only 50% of these employees are currently in compliance.
As the North American market has shifted from an industrial-based economy
towards a service-based economy, demand for protective footwear products has
shifted from heavy industries towards service industries and light
manufacturing ("non-traditional" customers). The heavy industrial customer is
no longer the sole influencing factor in determining the breadth of safety shoe
product line or the nature of its distribution. These new influences on the
protective footwear marketplace have expanded the market within non-traditional
customers for both safety shoe products and related services, leading to
stronger demand.
COMPETITIVE STRENGTHS
The Company believes that its competitive strengths include:
MARKET LEADERSHIP WITH STRONG BRAND RECOGNITION. The Company is the largest
distributor of safety shoes in the United States and in fiscal 1998 had an
approximately 7% share of the overall work shoe market. The Company believes
that it has doubled its share of the safety shoe segment of the work shoe
market over the past decade to approximately 17%. The Company has established
national brand-name recognition in the industrial safety and service sector
markets with its Iron Age and Knapp brands. The Company believes that its
extensive product selection of over 450 styles coupled with its ability to
provide its customers with flexible, superior service through the use of its
captive factory-to-end-user distribution network differentiates it from its
competition. The Company's product line is well recognized in the industry for
superior quality, comfort and safety features.
CONTROL OF COMPREHENSIVE DISTRIBUTION NETWORK. The Company's multi-pronged
distribution network, comprised of 130 shoemobiles, 103 retail stores and 34
in-plant stores, as well as catalog sales and consumer brands, allows the
Company to tailor its marketing approach to customer size, location and product
demand. This integrated network enables the Company to promote the Iron Age
brand name exclusively and standardize information systems, product offerings
and customer service levels. The Company's network covers all of the United
States and key industrial areas in Mexico and Canada. In fiscal 1998, sales
through the Company's shoemobiles and affiliated retail stores ("mobile and
store centers") represented approximately 63% of the Company's aggregate sales.
2
<PAGE>
DIVERSE AND STABLE CUSTOMER BASE. The Company has a geographically diverse
industrial customer base of over 48,000 accounts in a wide variety of
industries, including the pharmaceutical, aerospace, chemical, food, lumber,
transportation and home products industries. The Company's customers include
approximately 60% of all companies included in the Fortune 500. As of January
31, 1998, the Company's top ten customers, which included Merck & Co., Inc.,
E.I. duPont de Nemours and Company and AlliedSignal Inc., represented less than
12% of the Company's total revenues in fiscal 1998. The Company's commitment to
superior customer service has enabled it to establish a loyal customer base
characterized by industrial customer retention rates in excess of 90%.
Virtually all sales to industrial and government customers are accomplished
through safety department-mandated programs, and management estimates that 68%
of such sales were employer-subsidized in fiscal 1998. The Company believes
that heightened sensitivity to workplace safety, supported by federal
regulations, will continue to stimulate demand for its products.
ADVANCED SYSTEMS AND PROCEDURES. The Company's highly automated systems
utilize leading technology, providing management with powerful tools to
strengthen merchandising, purchasing and accounting. All of the Company's
mobile and store centers have been outfitted with point-of-sale ("POS")
computer terminals. The POS system benefits the Company's customers by (i)
reducing transaction time, which minimizes employee downtime, (ii) providing
valuable purchasing data, which allows the employer to monitor safety costs,
and (iii) providing the employer with an efficient and reliable billing system.
The POS system results in lower costs to the Company due to reduced transaction
processing errors and helps it to actively manage inventories and customer
preferences.
BALANCED PRODUCT SOURCING. Through its market leadership position and
extensive operating history, the Company has developed longstanding
relationships with the majority of its 22 suppliers of protective footwear
located in the United States, China, Korea, Canada, Taiwan and the Netherlands.
All products are manufactured to the Company's specifications. In addition,
Falcon, the Company's manufacturing subsidiary, provides access to readily
available production, an inventory of specialty, high-end products and in-depth
knowledge of material and labor costs applicable to third party suppliers.
HISTORY OF SUCCESSFUL ACQUISITIONS. The Company's management team has
demonstrated an ability to identify, acquire and successfully assimilate
complementary acquisition targets. Since 1986, the Company has completed 23
acquisitions of independent distributors, enabling the Company to expand its
market coverage and to extend its primary distribution channel. In addition,
the Company acquired state-of-the-art manufacturing capability through its
purchase of Falcon. Most recently, the Company acquired and successfully
integrated Knapp Shoes, Inc. ("Knapp"), an underperforming competitor with a
strong franchise in the service sector market (the "Knapp Acquisition"). Within
90 days of the Knapp Acquisition, the Company returned Knapp to profitability
by infusing inventory, consolidating manufacturing, distribution and
administrative facilities, reducing personnel and integrating purchasing and
MIS departments.
EXPERIENCED MANAGEMENT TEAM. The Company's Chairman and CEO, Donald Jensen,
has a total of 28 years of experience in the shoe industry. Mr. Jensen,
together with other members of his senior management team--William Mills, Keith
McDonough, William Taaffe and Theodore Johanson--have over 100 years of
industry experience and approximately 79 years with the Company. This
continuity and experience has resulted in strong relationships with suppliers
and customers and significant stability in revenues and earnings. Under the
Company's current management, net sales and EBITDA have increased in each
consecutive year since fiscal 1987, growing at CAGRs of 15.2% and 23.2%,
respectively. Management currently has a 16% fully diluted equity interest in
the Company.
3
<PAGE>
GENERAL BUSINESS STRATEGY
The Company seeks (i) to strengthen its position as a leading distributor of
safety shoes, (ii) to broaden its target market within the service sector and
(iii) to add additional non-slip protective footwear and other complementary
product lines. In order to accomplish these goals, the Company has adopted the
following strategy:
PENETRATE EXISTING ACCOUNTS. The Company intends to increase sales to
existing industrial and government customers by building upon its position as a
leading distributor of safety footwear with strong brand name product
recognition, comprehensive distribution capabilities and advanced information
systems.
TARGET NEW MARKETS. The Company, led by its National Account department,
plans to generate new business opportunities through aggressive targeted
marketing to large potential users of protective safety footwear. The Company
also plans to increase marketing efforts to non-traditional users of protective
footwear (e.g., service industries and light manufacturing/warehouse
facilities) and to pursue selected acquisitions of independent distributors.
The Company also intends to add new retail locations and shoemobiles as
capacity utilization increases in each market.
DEVELOP CONSUMER BRANDS. The Company is revitalizing the widely recognized
Knapp brand name in the service sector of the work shoe market by augmenting
its existing network of independent sales representatives, retail stores,
direct consumer and industrial mail order and branded wholesale merchandising.
In addition, the Company is building a fleet of Knapp mini-vans and plans to
increase the number of Knapp retail locations. The Company has also developed
new, non-slip footwear products that will be marketed under the Knapp brand
name and sold via direct mail to the food service and hospitality industries.
PURSUE SELECTIVE ACQUISITIONS. The Company plans to capitalize on its
position as a leading distributor of safety shoes through selective
acquisitions of independent safety shoe distributors. The Company evaluates
potential acquisition candidates on a regular basis and is currently exploring
potential acquisition opportunities. The Company believes that acquiring
additional distributors will broaden its geographic distribution and promote
additional operating efficiencies.
FENWAY PARTNERS
Fenway Partners, Inc. ("Fenway") is a private equity investment firm
associated with Fenway Partners Capital Fund, L.P. (the "Fenway Fund"), with
approximately $527 million under management. Fenway was formed in 1994 by Peter
Lamm, Richard Dresdale and Andrea Geisser. Together, the firm's principals have
over 60 years of experience building and managing direct investment portfolios
and have made over 80 investments in a wide variety of industries. Fenway
focuses its investment activities on acquiring domestic middle market companies
with revenues between $100 million and $750 million which offer leading market
shares, strong franchises, multiple profit centers and underlying growth.
Fenway's investments include Iron Age, VDK Foods (Van de Kamps, Mrs. Paul's,
Aunt Jemima frozen breakfast and Celeste), Aurora Foods (Mrs. Butterworth's,
Log Cabin and Duncan Hines), Delimex, National School Supply, CT Farm & Country
and Decorative Concepts. On February 26, 1997, the Fenway Fund, together with
certain other investors, in partnership with certain members of management,
acquired all of the outstanding stock of the predecessor to Holdings for an
aggregate purchase price of approximately $143.6 million (the "Fenway
Acquisition").
4
<PAGE>
THE TRANSACTIONS
On April 24, 1998 (the "Issue Date"), Holdings consummated the sale of the
Original Discount Notes in a transaction exempt from the registration
requirements of the Securities Act (the "Original Offering"). Concurrently with
the Original Offering, Holdings and Iron Age entered into a new credit facility
(the "New Credit Facility") that provides for a senior secured credit facility
of approximately $65.0 million. Concurrently with the Original Offering, Iron
Age conducted the offering (the "Note Offering") of its 9 7/8% Senior
Subordinated Notes due 2008 (the "Senior Subordinated Notes") in an aggregate
principal amount of $100 million.
As set forth in the table below, Holdings and Iron Age used excess cash and
the net proceeds (after deduction of related fees and expenses) from the
Original Offering, the Note Offering and the New Credit Facility as follows:
(i) to repay Iron Age's indebtedness under a syndicated senior bank loan
facility (the "Existing Credit Facility") in the amount of $86.8 million;
(ii) to repay Iron Age's 12.5% Senior Subordinated Notes due 2006 (the
"Existing Subordinated Notes") in the amount of $17.3 million; (iii) to pay a
dividend to Holdings' stockholders and to make compensation payments to certain
members of management of Iron Age in the aggregate amount of $20.0 million;
(iv) to redeem Holdings' Series A Preferred Stock (the "Holdings Series A
Preferred Stock") in the amount of approximately $17.8 million; and (v) to pay
certain fees and expenses in connection with such transactions in the amount of
$5.9 million. The transactions described in this paragraph are collectively
referred to herein as the "Transactions."
See "Use of Proceeds," "Description of Other Indebtedness," "Capitalization"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
<TABLE>
<CAPTION>
DOLLARS IN
MILLIONS
----------
<S> <C>
SOURCES OF FUNDS:
Cash........................................................... $ 1.2
New Credit Facility(1)......................................... 21.6
Senior Subordinated Notes...................................... 100.0
Proceeds of the Original Offering.............................. 25.0
------
Total........................................................ $147.8
======
USES OF FUNDS:
Repayment of Existing Credit Facility.......................... $ 86.8
Redemption of Existing Subordinated Notes(2)................... 17.3
Redemption of Holdings Series A Preferred Stock................ 17.8
Dividend to Holdings' Stockholders and Certain Compensation
Payments
to Management of Iron Age..................................... 20.0
Fees and Expenses(3)........................................... 5.9
------
Total........................................................ $147.8
======
</TABLE>
- - --------
(1) Under the New Credit Facility, Iron Age had, as of May 2, 1998, additional
borrowing availability of $41.1 million. See "Description of Other
Indebtedness."
(2) Includes $1.6 million of prepayment premiums.
(3) Represents selling discounts and legal, accounting and other professional
fees.
5
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer........ Up to $45,140,000 aggregate principal amount at
maturity of Exchange Discount Notes are being
offered in exchange for a like aggregate principal
amount at maturity of Original Discount Notes.
Holdings is making the Exchange Offer in order to
satisfy its obligations under the Registration
Agreement relating to the Original Discount Notes.
For a description of the procedures for tendering
Original Discount Notes, see "The Exchange Offer--
Procedures for Tendering."
Expiration Date........... 5:00 p.m., New York City time, on , 1998,
unless the Exchange Offer is extended (in which
case the Expiration Date will be the latest date
and time to which the Exchange Offer is extended).
See "The Exchange Offer--Terms of the Exchange
Offer."
Conditions of the The Exchange Offer is subject to the condition that
Exchange Offer............ the Exchange Offer does not violate applicable law
or SEC staff interpretation. If Holdings determines
that the Exchange Offer is not permitted by
applicable federal law, it may terminate the
Exchange Offer. The Exchange Offer is not
conditioned upon any minimum principal amount of
Original Discount Notes being tendered. See "The
Exchange Offer--Conditions of the Exchange Offer."
Resale of the Exchange
Discount Notes............
Based on an interpretation by the staff of the SEC
set forth in no-action letters issued to third
parties, Holdings believes that Exchange Discount
Notes issued pursuant to the Exchange Offer in
exchange for Original Discount Notes may be offered
for resale, resold and otherwise transferred by any
holder thereof (other than (i) a broker-dealer who
purchased such Original Discount Notes directly
from Holdings for resale pursuant to Rule 144A
("Rule 144A") or any other available exemption
under the Securities Act or (ii) a person that is
an "affiliate" of Holdings 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 the holder is acquiring the Exchange Discount
Notes in its ordinary course of business and is not
participating, and has no arrangement or
understanding with any person to participate, in
the distribution of the Exchange Discount Notes.
Holders of Original Discount Notes wishing to
accept the Exchange Offer must represent to
Holdings that such conditions have been met. In the
event that Holdings' belief is inaccurate, holders
of Exchange Discount Notes who transfer Exchange
Discount Notes in violation of the prospectus
delivery provisions of the Securities Act and
without an exemption from registration thereunder
may incur liability under the Securities Act.
Holdings does not assume or indemnify holders of
Exchange Discount Notes against such liability,
although Holdings does not believe that any such
liability should exist.
Each broker-dealer that receives Exchange Discount
Notes for its own account in exchange for Original
Discount Notes, where such Original Discount Notes
were acquired by such broker-dealer as a result of
6
<PAGE>
market-making activities or other trading
activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such
Exchange Discount Notes. Although such broker-
dealer may be an "underwriter" within the meaning
of the Securities Act, 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. See "Plan of
Distribution."
All resales must be made in compliance with
applicable state securities or "blue sky" laws.
Such compliance may require that the Exchange Notes
be registered or qualified in a particular state or
that the resales be made by or through a licensed
broker-dealer, unless exemptions from these
requirements are available. Holdings assumes no
responsibility with regard to compliance with such
requirements.
The Exchange Offer is not being made to, nor will
Holdings accept surrenders for exchange from,
holders of Original Discount Notes in any
jurisdiction in which the Exchange Offer or the
acceptance thereof would not be in compliance with
the securities or blue sky laws of such
jurisdiction.
Procedures for Tendering
Discount Notes............ Each holder of Original Discount Notes wishing to
accept the Exchange Offer must complete, sign and
date the accompanying Letter of Transmittal or a
facsimile thereof, as the case may be, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Original Discount Notes and any other
required documentation to the Exchange Agent (as
defined) at the address set forth herein. By
executing a Letter of Transmittal, each holder will
represent to Holdings that, among other things, (i)
the Exchange Discount Notes acquired pursuant to
such Exchange Offer are being obtained in the
ordinary course of business of the person receiving
such Exchange Discount Notes, whether or not such
person is the holder, (ii) neither the holder nor
any such other person has any arrangement or
understanding with any person to participate in the
distribution of such Exchange Discount Notes and
that such holder is not engaged in, and does not
intend to engage in, a distribution of Exchange
Discount Notes, and (iii) that neither the holder
nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act, of
Holdings. See "The Exchange Offer--Procedures for
Tendering."
Special Procedures for
Beneficial Owners.........
Any beneficial owner whose Original Discount Notes
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender should contact such registered
holder promptly and instruct such registered holder
to tender on such beneficial owner's behalf. See
"The Exchange Offer--Procedures for Tendering."
7
<PAGE>
Guaranteed Delivery Holders of Original Discount Notes who wish to
Procedures................ tender their Original Discount Notes and whose
Original Discount Notes are not immediately
available or who cannot deliver their Original
Discount Notes, the Letter of Transmittal or any
other documents required by the Letter of
Transmittal, as the case may be, to the Exchange
Agent (or comply with the procedures for book-entry
transfer) prior to the Expiration Date must tender
their Original Discount Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
Untendered Discount Following the consummation of the Exchange Offer,
Notes..................... holders of Original Discount Notes eligible to
participate but who do not tender their Original
Discount Notes will not have any further exchange
rights and such Original Discount Notes will
continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market
for such Original Discount Notes could be adversely
affected by the Exchange Offer.
Consequences of Failure
to Exchange...............
The Original Discount Notes that are not exchanged
pursuant to the Exchange Offer will remain
restricted securities. Accordingly, such Original
Discount Notes may be resold only (i) to Holdings,
(ii) to a qualified institutional buyer pursuant to
Rule 144A or pursuant to Rule 144 under the
Securities Act, (iii) in an offshore transaction
pursuant to the requirements of Rule 903 or Rule
904 of Regulation S under the Securities Act, (iv)
to an institutional accredited investor pursuant to
an exemption under the Securities Act, or (v)
pursuant to an effective registration statement
under the Securities Act. See "The Exchange Offer--
Consequences of Failure to Exchange."
Shelf Registration If (i) because of any change in law or applicable
Statement................. interpretations thereof by the staff of the SEC,
Holdings is not permitted to effect the Exchange
Offer as contemplated hereby, (ii) for any other
reason the Exchange Offer Registration Statement is
not declared effective on or prior to 150 days
after the Issue Date or the Exchange Offer is not
consummated on or prior to 180 days after the Issue
Date, (iii) Salomon Brothers Inc, SBC Warburg
Dillon Read Inc. and Banque Nationale de Paris (the
"Initial Purchasers") so request with respect to
Original Discount Notes not eligible to be
exchanged for Exchange Discount Notes in the
Exchange Offer or the Initial Purchasers do not
receive freely tradeable Exchange Discount Notes in
the Exchange Offer, (iv) any applicable law or
interpretations do not permit any holder of
Original Discount Notes to participate in the
Exchange Offer, (v) any holder (other than an
Initial Purchaser) of Original Discount Notes is
not eligible to participate in the Exchange Offer
or such holder does not receive freely tradeable
Exchange Discount Notes in the Exchange Offer other
than by reason of such holder being an affiliate of
Holdings, or (vi) Holdings so elects, Holdings has
agreed pursuant to the Registration Agreement to
register the Original Discount Notes issued by it
on a shelf registration statement (the "Shelf
Registration
8
<PAGE>
Statement") and use its reasonable best efforts to
cause it to be declared effective by the SEC as
promptly as practicable after the filing thereof,
and if applicable, Holdings has agreed to use its
reasonable best efforts to keep the Shelf
Registration Statement effective for a period of
two years after the Issue Date.
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 Original
Discount Notes and
Delivery of Exchange
Discount Notes............
Holdings will accept for exchange any and all
Original Discount Notes which are properly tendered
in the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The Exchange
Discount Notes issued pursuant to the Exchange
Offer will be delivered promptly following the
Expiration Date. See "The Exchange Offer--Terms of
the Exchange Offer."
Federal Income Tax The exchange pursuant to the Exchange Offer will
Consequences.............. generally 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 Holdings from the
exchange pursuant to the Exchange Offer.
Exchange Agent............ The Chase Manhattan Bank.
9
<PAGE>
THE EXCHANGE DISCOUNT NOTES
<TABLE>
<S> <C>
Issuer........................... Iron Age Holdings Corporation.
Securities Offered............... $45.140 million in aggregate principal amount at matu-
rity of 12 1/8% Senior Discount Notes due 2009 regis-
tered under the Securities Act.
Maturity Date.................... May 1, 2009.
Interest Rate and Payment Dates.. The Discount Notes will accrete in value until May 1,
2003 at a rate per annum of 12 1/8%, compounded semi-
annually, to an aggregate principal amount of $45.140
million, the principal amount at maturity. Cash
interest will not accrue on the Exchange Discount Notes
prior to May 1, 2003. Thereafter, interest on the
Exchange Discount Notes will accrue at a rate per annum
of 12 1/8% and will be payable in cash on May 1 and
November 1 of each year, commencing November 1, 2003.
See "Description of Exchange Discount Notes."
Original Issue Discount.......... The Exchange Discount Notes are being offered at an
original issue discount for United States federal
income tax purposes. Thus, although cash interest will
not be payable on the Exchange Discount Notes prior to
November 1, 2003, original issue discount will accrue
from the Issue Date and will be included as interest
income periodically (including for periods ending prior
to November 1, 2003) in a holder's gross income for
United States federal income tax purposes in advance of
receipt of the cash payments to which the income is
attributable. See "Certain Federal Income Tax
Considerations."
Optional Redemption.............. Except as described below, the Exchange Discount Notes
will not be redeemable at the option of Holdings prior
to May 1, 2003. On and after such date, the Exchange
Discount Notes will be redeemable, at the option of
Holdings, in whole or in part, at the redemption prices
set forth herein, plus accrued and unpaid interest and
liquidated damages, if any, to the redemption date. In
addition, at any time and from time to time prior to
May 1, 2001, Holdings may, at its option, redeem in the
aggregate up to 35% of the aggregate principal amount
at maturity of the Discount Notes originally issued
with the proceeds of one or more Public Equity
Offerings received by Holdings, following which there
is a Public Market, at a redemption price of 112.125%
of the Accreted Value thereof, plus accrued and unpaid
interest and liquidated damages, if any, to the
redemption date; provided, however, that at least 65%
of the aggregate principal amount at maturity of the
Discount Notes originally issued remains outstanding
immediately after each such redemption. See
"Description of Exchange Discount Notes--Optional
Redemption."
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Change of Upon the occurrence of a Change of Control, each holder
Control... of Exchange Discount Notes will have the right to
require Holdings to repurchase all of such holder's
Exchange Discount Notes at a purchase price equal to
101% of the Accreted Value thereof, plus accrued and
unpaid interest and liquidated damages, if any, to the
date of repurchase. See "Description of Exchange
Discount Notes--Change of Control."
Sinking None.
Fund......
Ranking.... The Exchange Discount Notes will be unsecured, senior
obligations of Holdings, pari passu in right of payment
to all existing and future unsecured, unsubordinated
indebtedness of Holdings. All of the operations of
Holdings are conducted through Iron Age and Holdings'
other subsidiaries, and therefore Holdings is dependent
upon the cash flow of its subsidiaries to meet its
obligations, including its obligations on the Discount
Notes. The Discount Notes will be effectively
subordinated to all existing and future indebtedness
and liabilities of Holdings' subsidiaries, including
trade credit, the Senior Subordinated Notes and
indebtedness with respect to the New Credit Facility.
As of May 2, 1998, (i) the outstanding indebtedness of
Holdings was approximately $25.0 million, and (ii) the
outstanding indebtedness of Holdings' subsidiaries was
$123.9 million (exclusive of unused commitments). See
"Description of Exchange Discount Notes."
Restrictive The Indenture contains certain covenants that, among
Covenants.. other things, limit: (i) the incurrence of additional
indebtedness by Holdings or any Restricted Subsidiary,
(ii) the making of Restricted Payments (as defined) by
Holdings or any Restricted Subsidiary (including
certain investments and payments of dividends on, and
redemptions of, capital stock of Holdings or any
Restricted Subsidiary), (iii) the creation of
consensual encumbrances and restrictions with respect
to Restricted Subsidiaries, (iv) sales of assets and
subsidiary stock, (v) certain transactions with
affiliates, (vi) the issuance or sale of capital stock
of Restricted Subsidiaries, (vii) the creation of liens
and (viii) consolidations, mergers and transfers of all
or substantially all of Holdings' assets. However, all
of these covenants are subject to a number of
significant exceptions and qualifications. See
"Description of Exchange Discount Notes--Certain
Covenants."
</TABLE>
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Exchange Discount Notes.
11
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth (i) summary historical consolidated financial
data of Holdings for the five-year period ended January 31, 1998 and the three-
month periods ended April 25, 1997 and May 2, 1998, (ii) the pro forma
consolidated statement of income and other financial data of Holdings for the
twelve-month period ended January 31, 1998 and the three-month period ended May
2, 1998, which give effect to the Fenway Acquisition and the Transactions as if
such events had occurred on January 26, 1997 and (iii) summary historical
balance sheet data of Holdings as of May 2, 1998. The summary historical
consolidated financial data for the five-year period ended January 31, 1998
were derived from audited consolidated financial statements of Holdings. The
summary historical consolidated financial data for the period February 27, 1997
through April 25, 1997 and for the three-month period ended May 2, 1998 were
derived from unaudited financial statements of Holdings, which, in the opinion
of management, include all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the information set forth
therein. The results of operations for the three months ended May 2, 1998 are
not necessarily indicative of the results that may be expected for the full
year. The pro forma financial data and the adjusted balance sheet data are
provided for informational purposes only, are unaudited and are not necessarily
indicative of future results or what the operating results or financial
condition of Holdings would have been had the Fenway Acquisition and the
Transactions actually occurred on the dates assumed. The following table should
be read in conjunction with "Capitalization," "Selected Historical and Pro
Forma Consolidated Financial Data," "Unaudited Pro Forma Consolidated Statement
of Income and Other Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical financial
statements of Holdings, and the accompanying notes thereto, included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR
------------------------------------------------------------
FISCAL YEARS ENDING JANUARY 26,
----------------------------------------------- 1997 THROUGH
JANUARY 29, JANUARY 28, JANUARY 27, JANUARY 25, FEBRUARY 26,
1994 1995 1996 1997 1997
----------- ----------- ----------- ----------- ------------
(IN THOUSANDS EXCEPT FOR FINANCIAL RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales............... $72,158 $85,543 $95,263 $99,360 $10,937
Cost of sales........... 39,043 46,984 50,706 52,437 5,610
------- ------- ------- ------- -------
Gross profit........... 33,115 38,559 44,557 46,923 5,327
Selling, general and
administrative......... 21,961 24,676 28,399 31,267 5,120 (3)
Depreciation............ 1,039 962 1,127 1,322 121
Amortization of
intangible assets...... 1,178 1,239 1,402 1,429 117
------- ------- ------- ------- -------
Operating income
(loss)................ 8,937 11,682 13,629 12,905 (31)(3)
Interest expense........ 3,817 6,163 6,702 6,515 1,116
------- ------- ------- ------- -------
Income (loss) before
income taxes........... 5,120 5,519 6,927 6,390 (1,147)
Provision (benefit) for
income taxes........... 2,145 2,771 3,091 2,800 (452)
------- ------- ------- ------- -------
Net income (loss)...... $ 2,975 $ 2,748 $ 3,836 $ 3,590 $ (695)
======= ======= ======= ======= =======
CASH FLOW DATA:
Net cash (used in)
provided by operating
activities............. $ (360) $ 3,535 $ 1,160 $ 8,817 $ 1,436
Net cash used in
investing activities
(excluding
acquisitions).......... 1,243 3,625 4,679 2,222 117
Net cash (used in)
provided by financing
activities............. (664) 2,193 1,516 (7,040) (2,299)
OTHER DATA:
EBITDA (9).............. $11,154 $14,000 $16,511 $17,079 $ 2,269
EBITDA Margin (9)....... 15.5% 16.4% 17.3% 17.2% 20.7%
Depreciation and
amortization........... $ 2,217 $ 2,318 $ 2,882 $ 3,109 $ 246
Capital expenditures
(10)................... 1,275 1,339 2,898 2,562 117
Cash interest expense
(11)................... 5,207 5,688 6,249 5,385 552
Ratio of earnings to
fixed charges (13)..... 2.3x 1.8x 2.0x 1.9x --
Shoemobiles............. 83 88 91 106 106
Retail stores........... 55 60 69 73 73
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
SUCCESSOR
-----------------------------------------------------------------------
UNAUDITED UNAUDITED PRO FORMA
------------------------- ------------------------------
FEBRUARY 27, FEBRUARY 27,
1997 THROUGH 1997 THROUGH THREE MONTHS YEAR ENDED THREE MONTHS
JANUARY 31, APRIL 25, ENDED MAY 2, JANUARY 31, ENDED MAY 2,
1998(1) 1997(1) 1998 1998(2) 1998
------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales............... $107,769 $17,306 $ 32,167 $118,706 $32,167
Cost of sales........... 53,304 8,795 16,043 58,914 16,043
-------- ------- -------- -------- -------
Gross profit........... 54,465 8,511 16,124 59,792 16,124
Selling, general and
administrative......... 36,541 5,685 12,967 (4) 39,607 (5) 10,722 (5)
Depreciation............ 1,443 245 424 1,570 424
Amortization of
intangible assets...... 2,983 599 846 3,148 846
-------- ------- -------- -------- -------
Operating income
(loss)................ 13,498 1,982 1,887 15,467 4,132
Interest expense........ 9,855 1,449 2,742 15,238 3,887
-------- ------- -------- -------- -------
Income (loss) before
income taxes and
extraordinary item..... 3,643 533 (855) 229 245
Provision (benefit) for
income taxes........... 1,686 205 (128)(4) 984 (5)(6) 346 (5)(6)
-------- ------- -------- -------- -------
Net income (loss)
before extraordinary
item.................. 1,957 328 (727) (755) (101)
Extraordinary item, net
of tax................ -- -- (4,015)(8) -- --
-------- ------- -------- -------- -------
Net income (loss)...... $ 1,957 $ 328 $ (4,742) $ (755)(7) $ (101)(7)
======== ======= ======== ======== =======
CASH FLOW DATA:
Net cash (used in)
provided by operating
activities............. $ (1,912) $ (69) $ (4,442) -- --
Net cash used in
investing activities
(excluding
acquisitions).......... 2,365 132 374 -- --
Net cash (used in)
provided by financing
activities............. 5,956 548 8,505 -- --
OTHER DATA:
EBITDA (9).............. $ 18,225 $ 2,879 $ 3,265 $ 20,486 $ 5,510
EBITDA Margin (9)....... 16.9% 16.6% 10.2% 17.3% 17.1%
Depreciation and
amortization........... $ 4,727 $ 897 $ 1,378 $ 5,019 $ 1,378
Capital expenditures
(10)................... 2,571 163 516 2,688 516
Cash interest expense
(11)................... 7,837 205 2,263 11,539 2,971
EBITDA/cash interest
expense................ 1.78x 1.85x
EBITDA/total interest
expense................ 1.34x 1.42x
Net debt/EBITDA (12).... 7.03x 6.81x
Ratio of earnings to
fixed charges (13)..... 1.3x 1.3x -- 1.0x 1.1x
Shoemobiles............. 122 100 130 122 130
Retail stores........... 95 92 103 95 103
</TABLE>
<TABLE>
<S> <C>
BALANCE SHEET DATA (END OF PERIOD):
Total assets........................................................... $182,569
Total debt............................................................. 150,122
Holdings Series A Perferred Stock...................................... --
Total stockholders' equity............................................. 14,738
</TABLE>
- - --------
(1) The statement of income data and other financial data for the period
February 27, 1997 through January 31, 1998 include the results of Knapp
since it was acquired by Holdings on March 14, 1997.
(2) The unaudited pro forma statement of income data and the other financial
data of Holdings give effect to the Fenway Acquisition and the Transactions
as if such events had occurred on January 26, 1997, as more fully disclosed
in the Unaudited Pro Forma Consolidated Statement of Income and Other
Financial Data and the notes thereto.
(3) Includes $1,054 of non-cash stock-based compensation and $1,000 of non-
recurring management bonuses paid in connection with the Fenway
Acquisition.
(4) Includes approximately $2,245 of compensation payments to certain members
of management of Iron Age in connection with the Transactions and related
tax effect of $960.
13
<PAGE>
(5) Excludes approximately $2,245 of compensation payments to certain members
of management of Iron Age in connection with the Transactions and related
tax effect of $960.
(6) The provision for income taxes for the unaudited pro forma statements of
income for the year ended January 31, 1998 and the three months ended May
2, 1998 is computed by applying the statutory rate of 43%, excluding the
impact of non-deductible goodwill amortization.
(7) Excludes an extraordinary loss on early extinguishment of debt, net of tax
effect, of $4,015 and compensation payments to certain members of
management of Iron Age, net of tax effect, of $1,285 incurred in connection
with the Transactions.
(8) Holdings recorded an extraordinary loss of $4,015, net of tax benefit, for
the three months ended May 2, 1998, due to the early extinguishment of
indebtedness resulting from the repayment of the Existing Subordinated
Notes and the termination of the Existing Credit Facility in connection
with the Transactions.
(9) EBITDA is defined as net income plus (i) provision for income taxes, (ii)
interest expense, (iii) depreciation and amortization, (iv) certain other
non-cash charges described below and (v) certain other non-recurring cash
charges described below. EBITDA presented by Holdings may not be comparable
to EBITDA defined and presented by other companies. EBITDA margin is
defined as EBITDA divided by net sales. Non-cash charges for the year ended
January 25, 1997 and the period January 26, 1997 through February 26, 1997
include stock-based compensation of $1,065 and $1,054, respectively. Non-
recurring cash charges for the period January 26, 1997 through February 26,
1997 include $1,000 of management bonuses paid in connection with the
Fenway Acquisition. Holdings believes that EBITDA provides useful
information regarding Holdings' ability to service its debt; however,
offerees of the Exchange Discount Notes should consider the following
factors in evaluating such measures: EBITDA and related measures (i) should
not be considered in isolation, (ii) are not measures of performance
calculated in accordance with generally accepted accounting principles
("GAAP"), (iii) should not be construed as alternatives or substitutes for
income from operations, net income or cash flows from operating activities
in analyzing Holdings' operating performance, financial position or cash
flows (in each case, as determined in accordance with GAAP) and (iv) should
not be used as indicators of Holdings' operating performance or measures of
its liquidity.
<TABLE>
<CAPTION>
TWELVE MONTHS THREE MONTHS
ENDED ENDED
JANUARY 31,1998 MAY 2, 1998
--------------- ------------
<S> <C> <C>
Pro forma operating income....................... $15,467 $4,132
Depreciation and amortization................... 4,718 1,270
Falcon depreciation in cost of sales............ 301 108
------- ------
EBITDA........................................... $20,486 $5,510
======= ======
</TABLE>
(10) Includes capital expenditures financed through capital leases of $312 in
1994, $347 in 1995, $340 in 1996, $340 in 1997, $0 in the period January
26, 1997 to February 27, 1997, $206 in the period February 27, 1997 to
January 31, 1998, $31 in the period February 27, 1997 to April 25, 1997
and $142 in the three months ended May 2, 1998.
(11) Cash interest expense equals total interest expense less amortization of
deferred financing fees and discount.
(12) Net debt is defined as long term debt including current maturities less
cash and cash equivalents.
(13) In calculating the ratio of earnings to fixed charges, earnings consist of
income before taxes plus fixed charges. Fixed charges consist of interest
expense, amortization of deferred financing costs and discount and the
portion of operating lease expense attributable to interest. For the three
months ended May 2, 1998, Holdings' earnings were inadequate to cover
fixed charges by $855. Adjusted to eliminate non-cash charges of
depreciation and amortization of $1,378 and $2,245 of compensation to
certain members of management in connection with the Transactions for the
three months ended May 2, 1998, such earnings would have exceeded fixed
charges by $2,768.
14
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following factors in
addition to the other information set forth in this Prospectus before making
an investment in the Exchange Discount Notes offered hereby. This Prospectus
contains certain forward looking statements within the meaning of Section 27A
of the Securities Act. Actual results could differ materially from those
projected in the forward looking statements as a result of certain factors and
uncertainties set forth below and elsewhere in this Prospectus.
LIMITATION ON ACCESS TO CASH FLOW OF SUBSIDIARIES; HOLDING COMPANY STRUCTURE
Holdings is a holding company and does not have, and may not in the future
have, any material assets other than the common stock of Iron Age. All of the
operations of Holdings are conducted through Iron Age and its subsidiaries,
and therefore Holdings is dependent upon the cash flow of its subsidiaries to
meet its obligations, including its obligations under the Discount Notes. The
ability of Holdings to pay principal and interest on the Discount Notes and to
satisfy other existing and future debt obligations will depend on Iron Age's
ability to distribute dividends to Holdings. Iron Age is party to the New
Credit Facility and the Senior Subordinated Indenture, each of which imposes
substantial restrictions (including the satisfaction of certain financial
conditions) on Iron Age's ability to pay dividends or make other payments to
Holdings. The ability of Iron Age to comply with such conditions under the New
Credit Facility and the Senior Subordinated Indenture may be affected by
events that are beyond the control of Holdings. If the loans under the New
Credit Facility or the maturity of the Senior Subordinated Notes were to be
accelerated as a result of an event of default thereunder, or if Iron Age were
required to redeem or repurchase any Senior Subordinated Notes prior to the
stated maturity thereof, all or a portion of such outstanding debt would be
required to be paid in full before Iron Age would be permitted to pay
dividends or make other payments to Holdings. Future borrowings by Iron Age
can be expected to contain restrictions or prohibitions on the payment of
dividends by Iron Age to Holdings. Applicable state laws may also, under
certain circumstances, impose significant restrictions on the payment of
dividends by Iron Age or Holdings' other subsidiaries. Although cash interest
will not be payable on the Discount Notes until November 1, 2003, there can be
no assurance that Holdings will have sufficient resources to pay cash interest
on the Discount Notes, to meet its other obligations under the Discount Notes
or to satisfy its other present and future debt obligations (including,
without limitation, its guarantee of Iron Age's obligations under the New
Credit Facility).
As a result of the holding company structure of Holdings, the holders of the
Original Discount Notes are, and the holders of the Exchange Discount Notes
will be, structurally subordinate to all creditors of Holdings' subsidiaries.
In the event of insolvency, liquidation, reorganization, dissolution or other
winding-up of Holdings' subsidiaries, Holdings will not receive any funds
available to pay to creditors of the subsidiaries. As of May 2, 1998, the
aggregate amount of outstanding Indebtedness of Holdings and its subsidiaries
was approximately $148.9 million (exclusive of unused commitments).
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE INDEBTEDNESS
Following the Transactions, Holdings is highly leveraged. As of May 2, 1998,
(i) the outstanding Indebtedness of Holdings was approximately $25.0 million
and (ii) the outstanding indebtedness of Holdings' subsidiaries was
approximately $123.9 million (exclusive of unused commitments). As of May 2,
1998, there was approximately $41.1 million available to Iron Age under the
New Credit Facility for future borrowings. For the three months ended May 2,
1998, Holdings' earnings were inadequate to cover fixed charges by $855,000.
In addition, subject to the restrictions in the New Credit Facility, the
Indenture and the Senior Subordinated Indenture, Holdings and its subsidiaries
may incur additional indebtedness from time to time to finance acquisitions or
capital expenditures or for other purposes. See "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
15
<PAGE>
Holdings' high degree of leverage could have important consequences to
holders of the Discount Notes, including (i) a substantial portion of
Holdings' cash flow from operations must be dedicated to debt service and will
not be available for other purposes, (ii) Holdings' ability to obtain
additional debt financing in the future for working capital, capital
expenditures or acquisitions may be limited, (iii) Holdings' leveraged
position and the covenants that are contained in the Indenture, the Senior
Subordinated Indenture and the New Credit Facility could limit Holdings'
ability to expand (including through acquisitions) and to make capital
improvements, (iv) Holdings may be more leveraged than certain of its
competitors, which may place Holdings at a competitive disadvantage, and (v)
Holdings' ability to refinance the Discount Notes in order to pay the
principal of the Discount Notes at maturity or upon a Change of Control may be
adversely affected. See "Description of Other Indebtedness" and "Description
of Exchange Discount Notes."
Holdings' ability to pay principal and interest on the Discount Notes and to
satisfy its other debt obligations will depend upon its future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond its
control, as well as the availability of revolving credit borrowings under the
New Credit Facility or successor facilities. Holdings anticipates that its
operating cash flow, together with borrowings under the New Credit Facility,
will be sufficient to meet its operating expenses and to service its debt
requirements as they become due. If Holdings is unable to service its
indebtedness, it will be forced to take actions such as reducing or delaying
capital expenditures, selling assets, restructuring or refinancing its
indebtedness (which could include the Discount Notes), or seeking additional
equity capital. There is no assurance that any of these remedies can be
effected on satisfactory terms, if at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Description of Other Indebtedness."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture and the Senior Subordinated Indenture restrict, among other
things, the ability of Holdings and Iron Age to incur additional indebtedness,
incur liens, pay dividends or make certain other restricted payments,
consummate certain asset sales, enter into certain transactions with
affiliates, merge or consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of
the assets of Holdings or Iron Age. In addition, the New Credit Facility
contains other and more restrictive covenants and prohibits Holdings and Iron
Age from prepaying their other indebtedness (including the Discount Notes and
the Senior Subordinated Notes). See "Description of Exchange Discount Notes--
Certain Covenants" and "Description of Other Indebtedness." The New Credit
Facility requires Holdings and Iron Age to maintain specified financial ratios
and satisfy certain financial condition tests. A breach of any of these
covenants could result in a default under the New Credit Facility, the
Indenture and/or the Senior Subordinated Indenture. Upon the occurrence of an
event of default under the New Credit Facility or the Senior Subordinated
Notes, the lenders could elect to declare all amounts outstanding under the
New Credit Facility, together with accrued interest, and the holders of Senior
Subordinated Notes could elect to declare all amounts outstanding under the
Senior Subordinated Notes, together with accrued interest, to be immediately
due and payable. If Holdings and Iron Age were unable to repay the New Credit
Facility, the lenders could proceed against the collateral granted to them to
secure that indebtedness. If the lenders under the New Credit Facility
accelerate the payment of the indebtedness under the New Credit Facility,
there can be no assurance that the assets of Iron Age would be sufficient to
repay in full such indebtedness and the other indebtedness of Holdings and
Iron Age, including the Discount Notes and the Senior Subordinated Notes.
Substantially all of Holdings', Iron Age's, each of their respective present
and future domestic subsidiaries', and, to the extent that no adverse tax
consequence would result therefrom, each of their respective present and
future foreign subsidiaries' assets are pledged as security under the New
Credit Facility. See "Description of Other Indebtedness" and "Description of
Exchange Discount Notes--Certain Covenants."
ORIGINAL ISSUE DISCOUNT; LIMITATIONS ON HOLDERS' CLAIMS
The Exchange Discount Notes are being offered at a discount from their
principal amount at maturity. Consequently, holders of the Exchange Discount
Notes will be required to include amounts in gross income for
16
<PAGE>
federal income tax purposes in advance of receipt of the cash payments to
which the income is attributable. See "Certain Federal Income Tax
Considerations" for a more detailed discussion of the federal income tax
consequences to the holders of the Exchange Discount Notes resulting from the
purchase, ownership or disposition thereof.
Under the Indenture, in the event of an acceleration of the maturity of the
Discount Notes upon the occurrence of an Event of Default, the holders of the
Discount Notes may be entitled to recover only the amount which may be
declared due and payable pursuant to the Indenture, which will be less than
the principal amount at maturity of such Discount Notes. See "Description of
Exchange Discount Notes--Events of Default." If a bankruptcy case is commenced
by or against Holdings under the United States federal bankruptcy code, the
claim of a holder of Discount Notes with respect to the principal amount
thereof may be limited to an amount equal to the sum of (i) the issue price of
the Discount Notes as set forth on the cover page hereof and (ii) that portion
of the original issue discount (as determined on the basis of such issue
price) which is not deemed to constitute "unmature interest" for purposes of
the United States federal bankruptcy code. Any original issue discount that
was not amortized as of any such bankruptcy filing would constitute "unmatured
interest."
RELIANCE ON SUPPLIERS
Holdings relies on broad-based sourcing for its footwear products. Holdings
sources footwear products from 22 manufacturers in six countries, including
the United States, China, Korea, Canada, Taiwan and the Netherlands. In fiscal
1998, 47% of total pairs sold by Holdings were produced by suppliers outside
of the United States and Canada. Holdings believes that its relationship with
third-party manufacturing facilities provide it with a competitive advantage;
thus, Holdings' future results will partly depend on maintaining its close
working relationships with its principal manufacturers. If Holdings'
relationship with any of its principal manufacturers materially deteriorates,
there can be no assurance that such deterioration will not have a material
adverse effect on Holdings' business, financial condition or results of
operations.
Holdings relies heavily on independent manufacturing facilities located in
China. In fiscal 1998, Holdings sold approximately 576,000 pairs of shoes
manufactured in China, which represented approximately 36% of total pairs sold
by Holdings. Although in fiscal 1998 one supplier in China manufactured
approximately 20% of total pairs of shoes sold by Holdings, Holdings does not
believe that it is dependent upon any specific supplier for its product
manufacturing; however, there can be no assurance that the loss of such
supplier would not have a material adverse effect on Holdings' business,
financial condition or results of operations. Historically, the trade
relationship between the United States and China has not had a material
adverse effect on Holdings' business, financial condition or results of
operations. However, there have been, and may be in the future, threats to
deny Most Favored Nation trade status to China. There can be no assurance that
the trade relationship between the United States and China will not worsen,
and if it does worsen, there can be no assurance that Holdings' business,
financial condition or results of operations will not be materially adversely
affected thereby. Further, Holdings cannot predict the effect that changes in
the economic and political conditions in China could have on the economics of
doing business with Chinese manufacturers. Although Holdings believes that it
could find alternative manufacturing sources for those products it currently
sources from China, including its largest supplier, through its existing
relationships with independent third-party manufacturing facilities, the loss
of a substantial portion of its Chinese manufacturing capacity could have a
material adverse effect on Holdings' business, financial condition or results
of operations during the transition to alternative manufacturing facilities.
As is common in the industry, Holdings does not have any long-term contracts
with its independent manufacturers. There can be no assurance that Holdings
will not experience difficulties with such manufacturers, including reduction
in the availability of production capacity, failure to meet production
deadlines or increases in manufacturing costs. Foreign manufacturing is
subject to a number of risks, including work stoppages, transportation delays
and interruptions, political instability, expropriation, nationalization,
foreign currency fluctuations, changing economic conditions, the imposition of
tariffs, import and export controls and other non-tariff barriers and changes
in governmental policies. Any of these events could have a material adverse
effect on Holdings' business, financial condition or results of operations.
Holdings cannot predict whether additional
17
<PAGE>
United States or foreign customs quotas, duties, taxes or other charges or
restrictions will be imposed in the future upon the importation of products
produced outside the United States or what effect such charges or restrictions
could have on its business, financial condition or results of operations.
ACQUISITION STRATEGY
Holdings has pursued and intends to continue to pursue acquisitions as an
important component of its strategy. No assurance can be given that in the
future other suitable acquisition candidates can be acquired on acceptable
terms or that future acquisitions, if completed, will be successful. Future
acquisitions by Holdings could result in the incurrence of additional debt and
contingent liabilities, which could materially adversely affect Holdings'
business, operating results and financial condition. The success of any
completed acquisition will depend on Holdings' ability to integrate
effectively the acquired business into Holdings and its subsidiaries,
including Iron Age. The process of integrating acquired businesses may involve
numerous risks, including difficulties in the assimilation of operations and
products, the diversion of management's attention from other business
concerns, risks of entering markets in which Holdings and its subsidiaries,
including Iron Age, have limited or no direct prior experience and the
potential loss of key employees of the acquired businesses. See "Business--
Business Strategy."
COMPETITION
The work shoe market is highly competitive. Holdings believes that
participants in the work shoe market compete on the basis of distribution
capabilities, retail presence, brand name recognition, corporate
relationships, systems, service, product characteristics, product quality and
price. Some of Holdings' competitors have greater financial and other
resources than Holdings. The level of competition in the markets in which
Holdings operates can adversely impact Holdings' revenues and profitability.
As a result of these and other factors, there can be no assurance that
Holdings will successfully maintain its market position. See "Business--
Competition."
GOVERNMENT CONTRACTS
Approximately 6% of Holdings' sales in fiscal 1998 were made to the General
Service Administration ("GSA"), a purchasing organization of the federal
government. Holdings must continue to meet certain qualification criteria in
order to continue to sell its products to the GSA. Although Holdings believes
that it is in material compliance with all such criteria, there can be no
assurance that this will continue to be the case. The failure of Holdings to
continue to meet GSA requirements, or a material reduction in the amount of
GSA purchases, could have a material adverse effect on Holdings' business,
financial condition or results of operations.
PRODUCT LIABILITY EXPOSURE
Holdings faces an inherent business risk of exposure to product liability
claims. Although Holdings maintains insurance against product liability and
other claims and has not experienced any material unindemnified or uninsured
losses due to such claims, there can be no assurance that it will not
experience such losses in the future. A successful claim brought against
Holdings for which Holdings does not receive indemnification or which is in
excess of available insurance coverage, or any claim or product recall that
results in significant expense or adverse publicity against Holdings, may have
a material adverse effect on Holdings' business, financial condition or
results of operations.
ENVIRONMENTAL MATTERS
Holdings' operations, including its manufacturing operations, are subject to
federal, state, local and foreign laws and regulations relating to the
storage, handling, generation, treatment, emission, release, discharge and
disposal of certain substances and waste materials. While Holdings believes
that it is currently in material
18
<PAGE>
compliance with those laws and regulations, there can be no assurance that
Holdings will not incur significant costs to remediate violations thereof or
to comply with changes in existing laws and regulations (or the enforcement
thereof). Such costs could have a material adverse effect on Holdings'
business, financial condition or results of operations. See "Business--
Environmental Matters."
DEPENDENCE ON KEY MANAGEMENT
The success of Holdings will continue to depend to a significant extent on
its executive and other key management personnel. Although Holdings and Iron
Age have entered into employment agreements with certain of their executive
officers, there can be no assurance that Holdings or Iron Age will be able to
retain their executive officers and key personnel or attract additional
qualified management in the future. In addition, the success of certain
acquisitions contemplated by Holdings and Iron Age may depend, in part, on the
ability of Holdings and Iron Age to retain management personnel of the
acquired companies. See "Management."
CONTROLLING STOCKHOLDER
The Fenway Fund owns more than 88% of the outstanding voting stock of
Holdings. By virtue of such ownership, the Fenway Fund has the power to
control all matters submitted to the stockholders of Holdings and to elect all
directors of Holdings and its subsidiaries. See "Principal Stockholders."
INABILITY TO FUND A CHANGE OF CONTROL OFFER
Upon the occurrence of a Change of Control, each holder of the Discount
Notes may require Holdings to repurchase all of such holder's Discount Notes
at a price equal to 101% of the Accreted Value thereof, plus accrued and
unpaid interest and liquidated damages, if any, to the date of repurchase. A
Change of Control under the Indenture would also constitute a change of
control under the Senior Subordinated Indenture and would permit each holder
of the Senior Subordinated Notes to require Iron Age to repurchase all of such
holder's Senior Subordinated Notes at a price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest and liquidated damages, if
any, to the date of repurchase. The New Credit Facility provides that in the
event of a Change of Control, Holdings may not repurchase any Discount Notes
and Iron Age may not repurchase any Senior Subordinated Notes unless and until
such time as all amounts outstanding under the New Credit Facility are repaid
in full. There can be no assurance that, in the event of a Change of Control,
Holdings will have available sufficient funds to repurchase the Discount
Notes. See "Description of Other Indebtedness" and "Description of Exchange
Discount Notes--Change of Control."
LACK OF PUBLIC MARKET; RESTRICTIONS ON RESALE
The Exchange Discount Notes are new securities for which there currently is
no market. Although the Initial Purchasers have informed Holdings that they
intend to make a market in the Exchange Discount Notes, they are not obligated
to do so and any such market making may be discontinued at any time without
notice. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Exchange Discount Notes. Holdings does not
intend to apply for listing of the Discount Notes on any securities exchange
or for quotation through the Nasdaq National Market.
The liquidity of, and trading market for, the Discount Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, Holdings.
19
<PAGE>
USE OF PROCEEDS
Holdings will receive no proceeds from the issuance of the Exchange Discount
Notes.
20
<PAGE>
CAPITALIZATION
The following table sets forth the historical consolidated capitalization of
Holdings as of May 2, 1998. This table should be read in conjunction with "The
Transactions," "Selected Historical and Pro Forma Consolidated Financial
Data," "Unaudited Pro Forma Consolidated Statement of Income and Other
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and Holdings' Consolidated Financial Statements
and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MAY 2 1998
----------------
(DOLLARS
IN
THOUSANDS)
<S> <C> <C>
Cash........................................................... $ 38
Long-term debt including current maturities(1):
New Credit Facility(2)........................................ 23,900
Other debt.................................................... 1,163
Senior Subordinated Notes..................................... 100,000
Original Discount Notes....................................... 25,059
--------
Total long-term debt......................................... 150,122
Total stockholders' equity..................................... 14,738(3)
--------
Total capitalization........................................... $164,898
========
</TABLE>
- - --------
(1) For a description of Holdings' long-term debt, see Note 7 to Holdings'
Consolidated Financial Statements included elsewhere in this Prospectus.
(2) In connection with the consummation of the Original Offering, Holdings and
Iron Age entered into the New Credit Facility, which provides for
borrowings in an outstanding principal amount of up to $65,000, $30,000 of
which is a revolving credit facility and $35,000 of which is an
acquisition facility. On May 2, 1998, after giving effect to the
Transactions, Iron Age had approximately $41,100 of additional borrowing
availability under the New Credit Facility.
(3) Stockholders' equity reflects (i) a dividend of $17,745 to Holdings'
stockholders, (ii) compensation expense for payments to certain members of
management of Iron Age of $2,245, net of tax benefit, and (iii) an
extraordinary loss on early extinguishment of debt, net of tax benefit, of
$4,015.
21
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
AND OTHER FINANCIAL DATA
FOR THE TWELVE MONTHS ENDED JANUARY 31, 1998 AND THE THREE MONTHS ENDED MAY 2,
1998
The following pro forma financial data have been derived by the application
of pro forma adjustments to the historical consolidated financial statements
of Holdings for the twelve-month period ended January 31, 1998 and the three-
month period ended May 2, 1998. The pro forma financial data presented below
give effect to the Fenway Acquisition and the Transactions as if such events
had occurred on January 26, 1997. The adjustments relating to the Fenway
Acquisition and the Transactions are described in the accompanying notes. The
results of Knapp are included in Successor Historical Statement of Income Data
from the date of the Knapp Acquisition, March 14, 1997. The pro forma
financial data presented below should not be considered indicative of actual
results that would have been achieved had the Fenway Acquisition and the
Transactions occurred on the date assumed and do not purport to indicate
results of operations as of any future date of for any future period. The pro
forma financial data presented below should be read in conjunction with
Holdings' consolidated financial statements and the accompanying notes
thereto, "Summary Historical and Pro Forma Consolidated Financial Data," "The
Transactions," "Capitalization," "Selected Historical and Pro Forma
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," which information is included
elsewhere in this Prospectus.
FOR THE TWELVE MONTHS ENDED JANUARY 31, 1998
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
HISTORICAL HISTORICAL FENWAY PRO FORMA FOR
1/26/97- 2/27/97- ACQUISITION THE FENWAY TRANSACTIONS HOLDINGS
2/26/97 1/31/98 ADJUSTMENTS ACQUISITION ADJUSTMENTS PRO FORMA
----------- ---------- ----------- ------------- ------------ ---------
(IN THOUSANDS EXCEPT FOR FINANCIAL RATIOS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DA-
TA:
Net sales............... $10,937 $107,769 $ -- $118,706 $ -- $118,706
Cost of sales........... 5,610 53,304 -- 58,914 -- 58,914
------- -------- ----- -------- ------- --------
Gross profit (loss).... 5,327 54,465 -- 59,792 -- 59,792
Selling, general and
administrative......... 3,066 (1) 36,541 -- 39,607 -- 39,607 (7)
Depreciation............ 121 1,443 6 (2) 1,570 -- 1,570
Amortization of
intangible assets...... 117 2,983 48 (3) 3,148 -- 3,148
------- -------- ----- -------- ------- --------
Operating income
(loss)................ 2,023 13,498 (54) 15,467 -- 15,467
Interest expense........ 1,116 9,855 (220)(4) 10,751 4,487 (6) 15,238
------- -------- ----- -------- ------- --------
Income (loss) before
income taxes........... 907 3,643 166 4,716 (4,487) 229
Provision (benefit) for
income taxes .......... 431 (1) 1,686 796 (5) 2,913 (1,929)(5) 984 (7)
------- -------- ----- -------- ------- --------
Net income (loss)....... $ 476 $ 1,957 $(630) $ 1,803 $(2,558) $ (755)(8)
======= ======== ===== ======== ======= ========
OTHER DATA:
EBITDA (9).............. $ 20,486
EBITDA Margin (9)....... 17.3%
Depreciation and
amortization........... 5,019
Cash interest expense... 11,539
EBITDA/cash interest
expense................ 1.78x
EBITDA/total interest
expense................ 1.34x
Net debt/EBITDA......... 7.03x
Ratio of earnings to
fixed charges (10)..... 1.0x
</TABLE>
22
<PAGE>
FOR THE THREE MONTHS ENDED MAY 2, 1998
<TABLE>
<CAPTION>
SUCCESSOR
HISTORICAL
2/1/98- TRANSACTIONS COMPANY
5/2/98 ADJUSTMENTS PRO FORMA
---------- ------------ ---------
<S> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Net sales............................ $32,167 $32,167
Cost of sales........................ 16,043 16,043
------- ------ -------
Gross profit (loss)................. 16,124 -- 16,124
Selling, general and administrative.. 10,722 (7) 10,722 (7)
Depreciation......................... 424 424
Amortization of intangible assets.... 846 846
------- ------ -------
Operating income (loss)............. 4,132 -- 4,132
Interest expense..................... 2,742 1,145 (6) 3,887
------- ------ -------
Income (loss) before income taxes.... 1,390 (1,145) 245
Provision (benefit) for income
taxes............................... 832 (7) (486)(5) 346 (7)
------- ------ -------
Net income (loss).................... 558 (8) (659) (101)(8)
======= ====== =======
OTHER FINANCIAL DATA:
EBITDA (9)........................... $ 5,510
EBITDA margin (9).................... 17.1%
Depreciation and Amortization........ 1,378
Cash interest expense................ 2,971
EBITDA/cash interest expense......... 1.85x
EBITDA/total interest expense........ 1.42x
Net debt/EBITDA...................... 6.81x
Ratio of earnings to fixed charges
(10)................................ 1.1x
</TABLE>
NOTES TO THE PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
($ IN THOUSANDS)
(1) Excludes non-recurring charges of $1,000 and $1,054 representing
management bonuses and stock-based compensation, and related tax effect of
$883, paid in connection with the Fenway Acquisition.
(2) Represents incremental depreciation in connection with the Fenway
Acquisition resulting from the evaluation of asset values and useful
lives.
(3) Reflects incremental amortization of goodwill and customer lists over a
useful life of 40 years and 15 years, respectively, resulting from the
Fenway Acquisition.
(4) Reflects the elimination of historical interest expense and the addition
of pro forma interest expense based on indebtedness incurred in connection
with the financing of the Fenway Acquisition as follows:
<TABLE>
<S> <C>
Pro forma interest for the Fenway Acquisition.................... $ 10,751
Historical interest.............................................. (10,971)
--------
Acquisition adjustment........................................... $ (220)
========
</TABLE>
(5) The provision for income taxes is computed by applying Holdings' statutory
rate of 43%, excluding the impact of non-deductible goodwill.
(6) Reflects the elimination of pro forma interest expense based on the
indebtedness incurred in connection with the Fenway Acquisition for the
twelve months ended January 31, 1998, the elimination of historical
interest expense for the three months ended May 2, 1998 and the addition
of pro forma interest expense after giving effect to the Transactions as
follows:
<TABLE>
<CAPTION>
TWELVE MONTHS THREE MONTHS
ENDED ENDED
JANUARY 31, 1998 MAY 2, 1998
---------------- ------------
<S> <C> <C>
Interest on Senior Subordinated Notes....... $ 9,875 $2,469
Interest on New Credit Facility............. 1,497 456
Interest on Discount Notes.................. 3,123 758
Interest on capital leases and other notes.. 167 46
Deferred financing fee amortization for the
Original Offering.......................... 576 158
Pro forma interest expense in connection
with the Fenway Acquisition................ (10,751) --
Historical interest......................... -- (2,742)
-------- ------
Pro forma adjustment for the Transactions... $ 4,487 $1,145
======== ======
</TABLE>
23
<PAGE>
(7) Excludes approximately $2,245 of compensation payments to certain members
of management of Iron Age in connection with the Transactions and related
tax effect of $960.
(8) Excludes an extraordinary loss on early extinguishment of debt, net of tax
effect, of $4,015 and compensation payments to certain members of
management of Iron Age and related tax effect of $1,285 incurred in
connection with the Transactions.
(9) EBITDA is defined as net income plus (i) provision for income taxes, (ii)
interest expense, (iii) depreciation and amortization, (iv) certain other
non-cash charges (described below) and (v) certain other non-recurring
cash charges (described below). EBITDA presented by Holdings may not be
comparable to EBITDA defined and presented by other companies. EBITDA
margin is defined as EBITDA divided by net sales. Non-cash charges for the
year ended January 25, 1997 and the period January 26, 1997 through
February 26, 1997 include stock-based compensation of $1,065 and $1,054,
respectively. Non-recurring cash charges for the period January 26, 1997
through February 26, 1997 include $1,000 of management bonuses paid in
connection with the Fenway Acquisition. Holdings believes that EBITDA
provides useful information regarding Holdings' ability to service its
debt; however, offerees of the Exchange Discount Notes should consider the
following factors in evaluating such measures: EBITDA and related measures
(i) should not be considered in isolation, (ii) are not measures of
performance calculated in accordance with GAAP, (iii) should not be
construed as alternatives or substitutes for income from operations, net
income or cash flows from operating activities in analyzing Holdings'
operating performance, financial position or cash flows (in each case, as
determined in accordance with GAAP) and (iv) should not be used as
indicators of Holdings' operating performance or measures of its
liquidity.
<TABLE>
<CAPTION>
TWELVE MONTHS THREE MONTHS
ENDED ENDED
JANUARY 31, 1998 MAY 2, 1998
---------------- ------------
<S> <C> <C>
Pro forma operating income.................... $15,467 $4,132
Depreciation and amortization................ 4,718 1,270
Falcon depreciation in cost of sales......... 301 108
------- ------
EBITDA........................................ $20,486 $5,510
======= ======
</TABLE>
(10) In calculating the ratio of earnings to fixed charges, earnings consist
of income before taxes plus fixed charges. Fixed charges consist of
interest expense, amortization of deferred financing costs and discount
and the portion of operating lease expense attributable to interest.
24
<PAGE>
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth (i) selected historical consolidated
financial data of Holdings for the five-year period ended January 31, 1998 and
the three-month periods ended April 25, 1997 and May 2, 1998, (ii) the pro
forma consolidated statement of income and other financial data of Holdings
for the twelve-month period ended January 31, 1998 which give effect to the
Fenway Acquisition and the Transactions as if such events had occurred on
January 26, 1997 and (iii) selected historical balance sheet data of Holdings
as of May 2, 1998. The selected historical consolidated financial data for the
five-year period ended January 31, 1998 were derived from audited consolidated
financial statements of Holdings. The audited consolidated financial
statements of Holdings for each of the periods in the three-year period ended
January 31, 1998 are included elsewhere in the Prospectus together with the
report of Ernst & Young LLP, independent accountants. The selected historical
consolidated financial data for each of the years in the two-year period ended
January 28, 1995 were derived from audited consolidated financial statements
of Holdings that are not included herein. The selected historical consolidated
financial data for the period February 27, 1997 through April 25, 1997 and for
the three-month period ended May 2, 1998 were derived from unaudited financial
statements of Holdings, which, in the opinion of management, include all
adjustments (consisting of only normal recurring adjustments) necessary for a
fair presentation of the information set forth therein. The results of
operations for the three months ended May 2, 1998 are not necessarily
indicative of the results that may be expected for the full year. The
following table should be read in conjunction with "Capitalization," "Summary
Historical and Pro Forma Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
historical financial statements of Holdings, and the accompanying notes
thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR
------------------------------------------------------------
FISCAL YEARS ENDING JANUARY 26,
----------------------------------------------- 1997 THROUGH
JANUARY 29, JANUARY 28, JANUARY 27, JANUARY 25, FEBRUARY 26,
1994 1995 1996 1997 1997
----------- ----------- ----------- ----------- ------------
(IN THOUSANDS EXCEPT FOR FINANCIAL RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME
DATA:
Net sales............... $72,158 $85,543 $95,263 $99,360 $10,937
Cost of sales........... 39,043 46,984 50,706 52,437 5,610
------- ------- ------- ------- -------
Gross profit........... 33,115 38,559 44,557 46,923 5,327
Selling, general and
administrative......... 21,961 24,676 28,399 31,267 5,120 (3)
Depreciation............ 1,039 962 1,127 1,322 121
Amortization of
intangible assets...... 1,178 1,239 1,402 1,429 117
------- ------- ------- ------- -------
Operating income
(loss)................ 8,937 11,682 13,629 12,905 (31)(3)
Interest expense........ 3,817 6,163 6,702 6,515 1,116
------- ------- ------- ------- -------
Income (loss) before
income taxes........... 5,120 5,519 6,927 6,390 (1,147)
Provision (benefit) for
income taxes........... 2,145 2,771 3,091 2,800 (452)
------- ------- ------- ------- -------
Net income (loss)...... $ 2,975 $ 2,748 $ 3,836 $ 3,590 $ (695)
======= ======= ======= ======= =======
CASH FLOW DATA:
Net cash (used in)
provided by operating
activities............. $ (360) $ 3,535 $ 1,160 $ 8,817 $ 1,436
Net cash used in
investing activities
(excluding
acquisitions).......... 1,243 3,625 4,679 2,222 117
Net cash (used in)
provided by financing
activities............. (664) 2,193 1,516 (7,040) (2,299)
OTHER DATA:
EBITDA (9).............. $11,154 $14,000 $16,511 $17,079 $ 2,269
EBITDA Margin (9)....... 15.5% 16.4% 17.3% 17.2% 20.7%
Depreciation and
amortization........... $ 2,217 $ 2,318 $ 2,882 $ 3,109 $ 246
Capital expenditures
(10)................... 1,275 1,339 2,898 2,562 117
Cash interest expense
(11)................... 5,207 5,688 6,249 5,385 552
Ratio of earnings to
fixed charges (13)..... 2.3x 1.8x 2.0x 1.9x --
Shoemobiles............. 83 88 91 106 106
Retail stores........... 55 60 69 73 73
<CAPTION>
BALANCE SHEET DATA (END
OF PERIOD):
<S> <C> <C> <C> <C> <C>
Total assets............ $75,514 $86,173 $91,151 $90,043 $ --
Total debt.............. 31,040 35,294 38,295 19,212 --
Holdings Series A
Preferred Stock........ -- -- -- -- --
Total stockholders'
equity................. 34,837 37,268 41,738 48,212 --
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
SUCCESSOR
-----------------------------------------------------------------------
UNAUDITED UNAUDITED PRO FORMA
------------------------- ------------------------------
FEBRUARY 27, FEBRUARY 27,
1997 THROUGH 1997 THROUGH THREE MONTHS YEAR ENDED THREE MONTHS
JANUARY 31, APRIL 25, ENDED MAY 2, JANUARY 31, ENDED MAY 2,
1998(1) 1997(1) 1998 1998(2) 1998
------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME
DATA:
Net sales................ $107,769 $ 17,306 $ 32,167 $118,706 $32,167
Cost of sales............ 53,304 8,795 16,043 58,914 16,043
-------- -------- -------- -------- -------
Gross profit............ 54,465 8,511 16,124 59,792 16,124
Selling, general and
administrative.......... 36,541 5,685 12,967 (4) 39,607 (5) 10,722 (5)
Depreciation............. 1,443 245 424 1,570 424
Amortization of
intangible assets....... 2,983 599 846 3,148 846
-------- -------- -------- -------- -------
Operating income
(loss)................. 13,498 1,982 1,887 15,467 4,132
Interest expense......... 9,855 1,449 2,742 15,238 3,887
-------- -------- -------- -------- -------
Income (loss) before
income taxes and
extraordinary item...... 3,643 533 (855) 229 245
Provision (benefit) for
income taxes............ 1,686 205 (128)(4) 984 (5)(6) 346 (5)(6)
-------- -------- -------- -------- -------
Net income (loss) before
extraordinary item..... 1,957 328 (727) (755) (101)
Extraordinary item, net
of tax................. -- -- (4,015)(8) -- --
-------- -------- -------- -------- -------
Net income (loss)....... $ 1,957 $ 328 $ (4,742) $ (755)(7) $ (101)(7)
======== ======== ======== ======== =======
CASH FLOW DATA:
Net cash (used in)
provided by operating
activities.............. $ (1,912) $ (69) $ (4,442) $ -- $ --
Net cash used in
investing activities
(excluding
acquisitions)........... 2,365 132 374 -- --
Net cash (used in)
provided by financing
activities.............. 5,956 548 8,505 -- --
OTHER DATA:
EBITDA (9)............... $ 18,225 $ 2,879 $ 3,265 $ 20,486 $ 5,510
EBITDA Margin (9)........ 16.9% 16.6% 10.2% 17.3% 17.1%
Depreciation and
amortization............ $ 4,727 $ 897 $ 1,378 $ 5,019 $ 1,378
Capital expenditures
(10).................... 2,571 163 516 2,688 516
Cash interest expense
(11).................... 7,837 205 2,263 11,539 2,971
EBITDA/cash interest
expense................. 1.78x 1.85x
EBITDA/total interest
expense................. 1.34x 1.42x
Net debt/EBITDA (12)..... 7.03x 6.81x
Ratio of earnings to
fixed charges (13)...... 1.3x 1.3x -- 1.0x 1.1x
Shoemobiles.............. 122 100 130 122 130
Retail stores............ 95 92 103 95 103
BALANCE SHEET DATA (END
OF PERIOD):
Total assets............. $174,801 $170,035 $182,569 $ -- $ --
Total debt............... 101,675 96,096 150,122 -- --
Holdings Series A
Preferred Stock.......... -- -- -- -- --
Total stockholders'
equity................... 37,848 38,013 14,738 -- --
</TABLE>
- - --------
(1) The statement of income data and other financial data for the period
February 27, 1997 through January 31, 1998 include the results of Knapp
since it was acquired by Holdings on March 14, 1997.
(2) The unaudited pro forma statement of income data and the other financial
data of Holdings give effect to the Fenway Acquisition and the
Transactions as if such events had occurred on January 26, 1997 and
February 1, 1998, as more fully disclosed in the Unaudited Pro Forma
Consolidated Statement of Income and Other Financial Data and the notes
thereto.
(3) Includes $1,054 of non-cash stock-based compensation and $1,000 of non-
recurring management bonuses paid in connection with the Fenway
Acquisition.
(4) Includes approximately $2,245 of compensation payments to certain members
of management of Iron Age in connection with the Transactions, and related
tax effect of $960.
(5) Excludes approximately $2,245 of compensation payments to certain members
of management of Iron Age in connection with the Transactions, and related
tax effect of $960.
(6) The provision for income taxes for the unaudited pro forma statements of
income for the year ended January 31, 1998 and the three months ended May
2, 1998 is computed by applying the statutory rate of 43%, excluding the
impact of non-deductible goodwill amortization.
26
<PAGE>
(7) Excludes an extraordinary loss on early extinguishment of debt, net of tax
effect, of $4,015 and compensation payments to certain members of
management of Iron Age, net of tax effect, of $1,285 incurred in
connection with the Transactions.
(8) Holdings recorded an extraordinary loss of $4,015, net of tax benefit, for
the three months ended May 2, 1998, due to the early extinguishment of
indebtedness resulting from the repayment of the Existing Subordinated
Notes and the termination of the Existing Credit Facility in connection
with the Transactions.
(9) EBITDA is defined as net income plus (i) provision for income taxes, (ii)
interest expense, (iii) depreciation and amortization, (iv) certain other
non-cash charges described below and (v) certain other non-recurring cash
charges described below. EBITDA presented by Holdings may not be
comparable to EBITDA defined and presented by other companies. EBITDA
margin is defined as EBITDA divided by net sales. Non-cash charges for the
year ended January 25, 1997 and the period January 26, 1997 through
February 26, 1997 include stock-based compensation of $1,065 and $1,054,
respectively. Non-recurring cash charges for the period January 26, 1997
through February 26, 1997 include $1,000 of management bonuses paid in
connection with the Fenway Acquisition. Holdings believes that EBITDA
provides useful information regarding Holdings' ability to service its
debt; however, offerees of the Exchange Discount Notes should consider the
following factors in evaluating such measures: EBITDA and related measures
(i) should not be considered in isolation, (ii) are not measures of
performance calculated in accordance with GAAP, (iii) should not be
construed as alternatives or substitutes for income from operations, net
income or cash flows from operating activities in analyzing Holdings'
operating performance, financial position or cash flows (in each case, as
determined in accordance with GAAP) and (iv) should not be used as
indicators of Holdings' operating performance or measures of its
liquidity.
<TABLE>
<CAPTION>
TWELVE MONTHS THREE MONTHS
ENDED ENDED
JANUARY 31, 1998 MAY 2, 1998
---------------- ------------
<S> <C> <C>
Pro forma operating income...................... $15,467 $4,132
Depreciation and amortization.................. 4,718 1,270
Falcon depreciation in cost of sales........... 301 108
------- ------
EBITDA.......................................... $20,486 $5,510
======= ======
</TABLE>
(10) Includes capital expenditures financed through capital leases of $312 in
1994, $347 in 1995, $340 in 1996, $340 in 1997, $0 in the period January
26, 1997 to February 27, 1997, $206 in the period February 27, 1997 to
January 31, 1998, $31 in the period February 27, 1997 to April 25, 1997
and $142 in the three months ended May 2, 1998.
(11) Cash interest expense equals total interest expense less amortization of
deferred financing fees and discount.
(12) Net debt is defined as long term debt including current maturities less
cash and cash equivalents.
(13) In calculating the ratio of earnings to fixed charges, earnings consist
of income before taxes plus fixed charges. Fixed charges consist of
interest expense, amortization of deferred financing costs and discount
and the portion of operating lease expense attributable to interest. For
the three months ended May 2, 1998, Holdings' earnings were inadequate to
cover fixed charges by $855. Adjusted to eliminate non-cash charges of
depreciation and amortization of $1,378 and $2,245 of compensation to
certain members of management in connection with the Transactions for the
three months ended May 2, 1998, such earnings would have exceeded fixed
charges by $2,768.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of the financial
condition and results of operations of Holdings for the three months ended
April 25, 1997 and May 2, 1998 and the fiscal years ended January 27, 1996,
January 25, 1997 and January 31, 1998. For purposes of this discussion and
analysis, the financial condition and results of operations of Holdings for
the three months ended April 25, 1997 and for fiscal 1998 represent the
combined results of Holdings and its predecessor. This discussion and analysis
should be read in conjunction with, and is qualified in its entirety by, the
sections entitled (i) "Summary Historical and Pro Forma Consolidated Financial
Data" and (ii) the Consolidated Financial Statements of Holdings and the notes
thereto, each of which is included elsewhere in this Prospectus.
OVERVIEW
Holdings' core business is the specialty distribution of safety shoes under
the Iron Age brand name through shoemobiles, retail stores, in-plant stores
and catalog sales in North America. The core business accounted for 79.9% of
fiscal 1998 sales. Holdings' net sales growth in the U.S. core business was
9.3% in fiscal 1998, or 7.2% excluding the impact of the additional week in
fiscal 1998. Holdings' net sales growth in the U.S. core business has averaged
6.9% over the last three fiscal years, excluding the impact of the additional
week in fiscal 1998. In addition to the core business, Holdings operates in
the consumer direct mail, branded wholesale and retail markets through Iron
Age's Consumer Brands Division (the "Consumer Brands Division"). Holdings
manufactures approximately 20% of total pairs of shoes sold internally through
Falcon, its manufacturing subsidiary.
Holdings has an extended history of sales and income growth. Historically,
Holdings' growth has been generated both internally and through the
acquisition of regional independent distributors. Holdings' same store sales
growth rate has averaged 6.2% over the last four fiscal years and was 7.5% for
fiscal 1998, in each case excluding the impact of the additional week in
fiscal 1998. From fiscal 1987 to fiscal 1998, Holdings' net sales and EBITDA
have increased at CAGRs of 15.2% and 23.2%, respectively.
ACQUISITIONS
The Fenway Acquisition occurred on February 26, 1997. Concurrently with the
Fenway Acquisition, (i) Holdings and Iron Age entered into the Existing Credit
Facility, (ii) Iron Age issued the Existing Subordinated Notes, (iii) Holdings
issued the Holdings Series A Preferred Stock, (iv) Holdings issued Common
Stock for equity capital of approximately $32.2 million, and (iv) management
rolled over certain options to acquire shares of the predecessor company into
options to acquire shares of Common Stock of Holdings and were granted
additional options to acquire shares of Holdings. Iron Age used excess cash
and net proceeds from the Original Offering and the New Credit Facility to
repay the Existing Credit Facility and the Existing Subordinated Notes, to pay
a dividend to Holdings to allow Holdings to redeem the Holdings Series A
Preferred Stock and to make compensation payments to certain management
optionholders. The Fenway Acquisition was accounted for by the purchase method
and the purchase price has been allocated to Holdings' assets and liabilities
based on fair market value. The Fenway Acquisition resulted in goodwill of
approximately $84.1 million, which is being amortized over 40 years.
The Knapp Acquisition occurred on March 14, 1997. As part of the Knapp
Acquisition, Holdings contributed an additional $4.0 million of common equity.
At the time of the Knapp Acquisition, Knapp was losing approximately $0.4
million per month. Within 90 days of the Knapp Acquisition, the post-
acquisition operations of Knapp were generating operating income and the
manufacturing, distribution, and administration functions were integrated into
Iron Age. The Knapp Acquisition was accounted for under the purchase method
for business combinations and, accordingly, the results of operations for
Knapp are included in Holdings' financial statements only from the date of the
Knapp Acquisition.
During the last five weeks of the three months ended May 2, 1998, the
Company acquired the stock of Safety Supplies and Service Company, Inc. and
acquired certain assets and assumed certain liabilities of Safety
28
<PAGE>
Depot Ltd., ACT Safety, Inc. and J. Mars Knapp Shoes (the "First Quarter
Acquisitions"). The combined purchase price for the First Quarter Acquisitions
was approximately $4.49 million, including transactions costs of approximately
$150,000. The First Quarter Acquisitions have been accounted for using the
purchase method of accounting for business combinations, and, accordingly, (i)
the results of operations for each of the acquired companies are included in
the Company's financial statements only from the date of the respective
acquisitions and (ii) the purchase price has been allocated to the Company's
assets and liabilities based upon fair market value. The First Quarter
Acquisitions resulted in goodwill of approximately $2.18 million, which is
being amortized over 40 years.
RESULTS OF OPERATIONS
The following table sets forth for the period indicated certain historical
income statement data derived from the consolidated statement of income of
Holdings and its predecessor. The application of the purchase method of
business combinations resulted in a presentation of the results of operations
for fiscal 1998 and for the three months ended April 25, 1997 in two periods,
respectively: (i) for fiscal 1998, a one-month period prior to the Fenway
Acquisition and an 11-month period following the date of the Fenway
Acquisition, and (ii) for the three months ended April 25, 1997, a one-month
period prior to the Fenway Acquisition and a two month-period following the
date of the Fenway Acquisition. For comparability with prior periods, the
following table also includes the results of operations for the two periods in
fiscal 1998 and for the three months ended April 25, 1997 as a combined
twelve-month period or three-month period, respectively. Management's
discussion and analysis addresses the results of operations as combined for
such periods unless otherwise noted.
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR COMBINED
----------------------------------------- -------------- -------------
JAN. 26, 1997 FEB. 27, 1997 TWELVE MONTH
THROUGH THROUGH RESULTS
FISCAL 1996 FISCAL 1997 FEB. 26, 1997 JAN. 31, 1998 JAN. 31, 1998
----------- -------------- -------------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $95,263 $99,360 $10,937 $107,769 $118,706
Gross profit............ 44,557 46,923 5,327 54,465 59,792
Selling, general and
administrative......... 28,399 31,267 5,120 36,541 41,661
Depreciation and
amortization........... 2,529 2,751 238 4,426 4,664
Operating income
(loss)................. 13,629 12,905 (31) 13,498 13,467
Interest expense........ 6,702 6,515 1,116 9,855 10,971
Provision (benefit) for
income taxes........... 3,091 2,800 (452) 1,686 1,234
OTHER DATA:
Gross profit margin..... 46.8% 47.2% 48.7% 50.5% 50.4%
Operating income
margin................. 14.3% 13.0% (0.3)% 12.5% 11.3%
<CAPTION>
PREDECESSOR SUCCESSOR COMBINED SUCCESSOR
-------------- -------------- -------------- -------------
FEB. 27, 1997 THREE MONTH FEB. 1, 1998
JAN. 26, 1997 THROUGH RESULTS THROUGH
THROUGH APRIL 25, 1997 APRIL 25, 1997 MAY 2, 1998
FEB. 26, 1997 (UNAUDITED) (UNAUDITED) (UNAUDITED)
-------------- -------------- -------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................... $10,937 $17,306 $ 28,243 $ 32,167
Gross profit........................ 5,327 8,511 13,838 16,124
Selling, general and
administrative..................... 5,120 5,685 10,805 12,967
Depreciation and amortization....... 238 844 1,082 1,270
Operating income (loss)............. (31) 1,982 1,951 1,887
Interest expense.................... 1,116 1,449 2,565 2,742
(Benefit) provision for income
taxes.............................. (452) 205 (247) (128)
Extraordinary item, net of tax
effect............................. -- -- -- (4,015)
OTHER DATA:
Gross profit margin................. 48.7 % 49.2% 49.0% 50.1%
Operating income margin............. (0.3)% 11.5% 6.9% 5.9%
</TABLE>
29
<PAGE>
THREE MONTHS ENDED APRIL 25, 1997 COMPARED TO THREE MONTHS ENDED MAY 2, 1998
NET SALES. The Company's net sales for the three months ended May 2, 1998
increased to $32.2 million, an increase of $3.9 million, or 13.9%, compared to
the three months ended April 25, 1997. The increase was attributable to
increased sales in the core business of $1.6 million, or 6.3%, and increased
sales of $2.3 million, or 79.4%, from the Knapp division.
GROSS PROFIT. Gross profit increased $2.3 million, or 16.5%, to $16.1
million for the three months ended May 2, 1998 from $13.8 million for the
three months ended April 25, 1997. As a percentage of net sales, gross profit
increased 1.1% to 50.1% in the three months ended May 2, 1998. The increase in
gross profit margin was the result of an increase in gross profit margin in
both the core business and the Knapp division. Gross profit margin in the core
business increased 0.3%. The increase in gross profit margin was attributable
to increased sales of higher margin products, increased sales through the
higher margin shoemobile and retail store channels and stable product costs in
the core business. The remainder of the increase was attributable to Knapp
sales, for which the gross profit margin was 16.5%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $2.2 million to $13.0 million for the three
months ended May 2, 1998 compared to $10.8 million for the three months ended
April 25, 1997. The increase was primarily attributable to an increase of $1.4
million in selling, general and administrative expenses in the Knapp division.
The remainder of the increase was attributable to an increase of $0.6 million,
or 8.0%, in the core business and a $0.2 million increase in nonrecurring or
non-cash charges, as discussed below. In each of the three months ended May 2,
1998 and April 24, 1997, respectively, Holdings had nonrecurring or non-cash
charges related to certain management optionholders and stock compensation
expenses in connection with the Fenway Acquisition and the Transactions,
respectively. Removing the impact of these charges from selling, general and
administrative expenses reduces such expenses by $2.2 million and $2.0 million
for the three months ended May 2, 1998 and April 25, 1997, respectively.
OPERATING INCOME. Operating income decreased $0.1 million, or 5.0%, to $1.9
million in the three months ended May 2, 1998 compared to the three months
ended April 25, 1997. In addition, operating income as a percentage of net
sales was 5.9% in the three months ended May 2, 1998, a decrease of 1.0% from
6.9% in the three months ended April 25, 1997. The decrease in operating
income as a percentage of net sales in the three months ended May 2, 1998 was
principally attributable to the non-recurring payments made to management
optionholders as discussed above and an increase in depreciation and
amortization of $0.2 million due to the increase in basis of goodwill,
customer lists and other intangible assets capitalized as a result of the
Fenway Acquisition and the Knapp Acquisition.
INTEREST EXPENSE. Interest expense increased to $2.7 million in the three
months ended May 2, 1998 compared to $2.6 million in the three months ended
April 25, 1997. The increase was due primarily to the change in capitalization
of the Company in connection with the Fenway Acquisition in February of 1997
and the Knapp Acquisition in March of 1997.
INCOME TAX BENEFIT. Income tax benefit decreased to $0.1 million in the
three months ended May 2, 1998 compared to $0.2 million in the three months
ended April 25, 1997. The decrease was due primarily to an increase in non-
deductible goodwill amortization.
EXTRAORDINARY ITEM. In connection with the Transactions, Holdings recorded
an extraordinary loss of $4.0 million due to early extinguishment of
indebtedness resulting from the repayment of the Existing Subordinated Notes
and the Existing Credit Facility.
FISCAL 1998 COMPARED TO FISCAL 1997
NET SALES. Holdings' net sales for fiscal 1998 increased to $118.7 million,
an increase of $19.3 million, or 19.4%, compared to fiscal 1997. The increase
was attributable to increased sales in the core business of $6.2
30
<PAGE>
million, or 7.1%, sales of $12.8 million from the operations of Knapp and $2.0
million for the additional week in fiscal 1998. The increase was partially
offset by a $1.7 million decrease in sales of Dunham brand products, Iron
Age's Branded Wholesale Division (the "Branded Wholesale Division") and
private label.
GROSS PROFIT. Holdings' gross profit margin increased 3.2% in fiscal 1998
compared to fiscal 1997. In addition, gross profit increased to $59.8 million
in fiscal 1998, an increase of $12.9 million, or 27.5%, compared to fiscal
1997. The increase in gross profit was primarily attributable to the increase
in net sales. The gross profit margin in the core business increased 1.6%.
This increase was attributable to increased sales of higher margin products,
increased sales through the higher margin shoemobile and retail store channels
and stable product costs. The remainder of the increase was attributable to
Knapp sales, for which the gross margin was 55.7%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $41.7 million in fiscal 1998, an increase of
$10.4 million, or 33.2%, compared to fiscal 1997. The acquired Knapp
distribution channels contributed $5.8 million of this increase and the core
business contributed $2.5 million of this increase, which was 8.8% compared to
fiscal 1997. Approximately $0.5 million of the increase was attributable to
the Knapp manufacturing operation within Falcon and a $1.0 million payment to
management in connection with the Fenway Acquisition. The additional week in
fiscal 1998 contributed $0.6 million of the increase.
OPERATING INCOME. Operating income increased to $13.5 million in fiscal
1998, an increase of $0.6 million, or 4.4%, compared to fiscal 1997. This
increase was the direct result of Holdings' gains in both sales and margins in
fiscal 1998. The decrease in operating income percentage to 11.3% in fiscal
1998 from 13.0% in fiscal 1997 was principally attributable to the increase in
amortization due to the increase in basis of goodwill, customer lists and
other intangible assets capitalized as a component of the purchase accounting
related to the Fenway Acquisition and the Knapp Acquisition. Excluding the
$1.0 million non-recurring bonus paid to management in connection with the
Fenway Acquisition and the $1.1 million stock-based compensation in fiscal
1998, the operating income margin would have been 13.0%.
INTEREST EXPENSE. Interest expense increased to $11.0 million in fiscal 1998
compared to $6.5 million in fiscal 1997. The increase was due primarily to the
increase in debt of Holdings related to the Fenway Acquisition.
INCOME TAX EXPENSE. Holdings' provision for income taxes decreased to $1.2
million in fiscal 1998 compared to $2.8 million in fiscal 1997. Holdings
experienced an increase in its overall effective rate primarily as a result of
increased non-deductible goodwill and other intangibles amortization.
FISCAL 1997 COMPARED TO FISCAL 1996
NET SALES. Holdings' net sales were $99.4 million in fiscal 1997, an
increase of $4.1 million, or 4.3%, compared to fiscal 1996. The increase in
net sales was attributable to continued growth in the core business of $6.1
million, or 7.4%. Sales through the Branded Wholesale Division and Dunham
distribution channels increased 6.8% and 8.7%, respectively, for a combined
increase of $0.6 million. These sales gains offset a $2.6 million decrease in
private label from Holdings' Falcon subsidiary.
GROSS PROFIT. Holdings' gross profit margin increased 0.4% in fiscal 1997
compared to fiscal 1996. In addition, Holdings' gross profit increased to
$46.9 million in fiscal 1997, an increase of $2.4 million, or 5.3%, compared
to fiscal 1996. The increase is primarily related to the increase in sales in
Holdings' core business. Gross profit as a percentage of sales increased to
47.2% in fiscal 1997 compared to 46.8% in fiscal 1996. The increase in gross
profit margin was attributable to increased sales of higher margin products,
increased sales through the higher margin shoemobile and retail store channels
and stable product costs in the core business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Holdings' selling, general and
administration expenses were $31.3 million in fiscal 1997, an increase of $2.9
million, or 10.1%, compared to fiscal 1996. The increase of $2.9 million is
primarily attributable to $1.1 million of stock-based compensation for
employee stock options
31
<PAGE>
granted in fiscal 1997. Selling, general and administrative expenses without
giving effect to this charge would have been $30.2 million for fiscal 1997,
compared to $28.4 million for fiscal 1996, an increase of 6.3%. Approximately
$1.1 million of the increase was due to increased costs in connection with the
opening of ten mobile distribution centers during fiscal 1997 and the last
half of fiscal 1996.
AMORTIZATION. Holdings' amortization of intangible assets in fiscal 1997 and
fiscal 1996 was approximately $1.4 million.
OPERATING INCOME. Operating income was $12.9 million in fiscal 1997 compared
to $13.6 million in fiscal 1996, a decrease of 5.3%. After giving effect to
the stock-based compensation discussed above, operating income increased in
fiscal 1997 by $0.3 million, or 2.5%. Other non-recurring charges in fiscal
1997 include $0.1 million in costs associated with the Fenway Acquisition.
INTEREST EXPENSE. Interest expense decreased to $6.5 million in fiscal 1997
compared to $6.7 million in fiscal 1996. The $0.2 million decrease in fiscal
1997 was primarily due to decreases in average balances outstanding under the
Company's revolving working capital facility.
INCOME TAX EXPENSE. Holdings' provision for income taxes decreased from $3.1
million in fiscal 1996 to $2.8 million in fiscal 1997, corresponding
approximately with pretax income. Holdings' effective tax rate differed from
the applicable statutory rate primarily due to non-deductible goodwill and
other intangibles amortization.
LIQUIDITY AND CAPITAL RESOURCES
Holdings' primary cash needs are working capital, capital expenditures and
debt service. Holdings anticipates that it may use cash in the future to
finance acquisitions. Holdings has financed cash requirements primarily
through internally generated cash flow and funds borrowed under Holdings' and
Iron Age's credit facilities.
Net cash used for operating activities was $4.4 million in the three months
ended May 2, 1998, as compared to net cash provided by operating activities of
$1.4 million in the three months ended April 25, 1997. The decrease in cash
from operating activities is primarily a result of the $2.9 million tax
receivable accrued in connection with the extraordinary loss, as discussed
above, and a $1.0 million decrease in accrued interest. Net cash used for
operating activities was $0.5 million in fiscal 1998, as compared to net cash
provided by operating activities of $8.8 million and $1.2 million in fiscal
1997 and fiscal 1996, respectively. The reduction in cash provided by
operating activities in 1998 was the result of a one-time increase in
inventory of $7.0 million related to the Knapp Acquisition. The major
component of the increase in net cash generated by operating activities in
fiscal 1997 and fiscal 1996 was income before non-cash charges of $5.6 million
and $5.7 million, respectively, primarily due to increased income from
operations as described above.
Holdings used cash for investing activities of $4.9 million in the three
months ended May 2, 1998 compared to $142.0 million used for investing
activities in the three months ended April 25, 1997. Holdings used cash for
investing activities of $2.5 million in fiscal 1998 compared to $2.2 million
in fiscal 1997 and $4.7 million in fiscal 1996. Holdings' capital expenditures
were $0.4 million and $0.2 million in the three months ended May 2, 1998 and
April 25, 1997, respectively. Holdings' capital expenditures for the three
months ended May 2, 1998 were related to improvements to retail stores and
shoemobiles in the core business and installing the POS system in newly-
acquired Canadian stores and shoemobiles. Holdings' capital expenditures were
$2.5 million, $2.2 million and $2.6 million in fiscal years 1998, 1997 and
1996, respectively. Holdings anticipates that these expenditures will be
approximately $2.5 million in fiscal 1999.
Holdings' total working capital as of May 2, 1998 was $51.5 million. At
January 31, 1998, working capital was $42.7 million. The primary reason for
the increase to working capital was the elimination of the current portion of
long term senior debt in connection with the Transactions. Management believes
Holdings' liquidity,
32
<PAGE>
working capital and borrowing capacity are sufficient to meet future capital
expenditures, acquisitions and working capital needs in the future.
Excluding cash paid for acquisitions, Holdings generated approximately $2.8
million from financing activities in the three months ended May 2, 1998 due
primarily to borrowings under the New Credit Facility. In the three months
ended April 25, 1997, Holdings used cash of $1.8 million due primarily to
principal payments on debt. Holdings generated approximately $3.7 million in
financing activities in fiscal 1998 due primarily to borrowings by Iron Age
under the Existing Credit Facility. In fiscal 1997, Holdings used $7.0 million
for financing activities due primarily to principal payments on debt and the
payment of a dividend. In fiscal 1996, Holdings generated $1.5 million due
primarily to borrowings under its revolving credit agreement.
Holdings is a holding company, and its ability to pay interest on the
Discount Notes is dependent upon the receipt of dividends from its
subsidiaries. Holdings does not have, and may not in the future have, any
assets other than the common stock of Iron Age (which is pledged to secure the
obligations of Iron Age under the New Credit Facility). Iron Age is party to
the New Credit Facility and the Senior Subordinated Indenture, each of which
imposes substantial restrictions on Iron Age's ability to pay dividends to
Holdings. See "Risk Factors--Limitation on Access to Cash Flow of
Subsidiaries; Holding Company Structure."
Cash flow from operations for the three months ended May 2, 1998 was
sufficient to cover debt service requirements under the New Credit Facility.
Cash flow from operations for fiscal 1998 was sufficient to cover debt service
requirements under the Existing Credit Facility. Holdings' ability to make
scheduled payments of principal, or to pay the interest or premium (if any)
on, or to refinance, its indebtedness (including the Discount Notes), or to
fund planned capital expenditures will depend on its future performance,
which, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond its
control. Based upon the current level of operations, management believes that
cash flow from operations and available cash, together with available
borrowings by Iron Age under the New Credit Facility, will be adequate to meet
Holdings' anticipated future requirements for working capital, budgeted
capital expenditures and scheduled payments of principal and interest on its
indebtedness for the next several years. There can be no assurance that
Holdings' business will generate sufficient cash flow from operations or that
future borrowing will be available under the New Credit Facility in an amount
sufficient to enable Holdings to service its indebtedness, including the
Discount Notes, or to make capital expenditures.
As of May 2, 1998 Holdings' debt consisted of the Original Discount Notes,
the Senior Subordinated Notes, the New Credit Facility and certain other debt.
The New Credit Facility consists of a $35.0 million multiple draw acquisition
term loan facility (the "New Acquisition Credit Facility") and approximately
$30.0 million in revolving credit loans, letters of credit and swing line
loans (the "New Revolving Credit Facility"). Holdings' other debt of $1.0
million consists of capital leases and other notes. As of May 2, 1998,
approximately $12.3 million of the New Acquisition Credit Facility and
approximately $11.6 million of the New Revolving Credit Facility were
outstanding, and Holdings had additional borrowing availability under the New
Acquisition Credit Facility of $22.7 million and under the New Revolving
Credit Facility of approximately $18.4 million. The New Acquisition Credit
Facility matures in quarterly installments from July 2001 until final payment
in April 2004. The New Revolving Credit Facility will mature in April 2004 and
has no scheduled interim amortization.
IMPACT OF THE YEAR 2000 ISSUE
Holdings is in the process of conducting a comprehensive review of its
internal computer systems to identify the systems that could be affected by
the year 2000 issue and is developing an implementation plan to resolve the
issue that is expected to be completed in the latter part of fiscal 1999.
Holdings presently believes that the year 2000 issue will not pose significant
operational problems for Holdings' computer systems as so modified and
converted. Based on a preliminary assessment, Holdings expects to spend under
$50,000 to modify its existing computer systems to ensure proper transaction
processing in the year 2000 and beyond. Through May 2, 1998, Holdings has
incurred approximately $5,000 related to the assessment of, and preliminary
efforts in connection with, its Year 2000 project and the development of a
remediation plan. Holdings plans to complete
33
<PAGE>
the critical elements of the Year 2000 project by November 15, 1998. Holdings
presently believes that the cost of preparing its systems for the year 2000
will not have a material effect on Holdings' current financial position,
liquidity or results of operations. If modifications and conversions are not
completed in a timely manner, the year 2000 issue may have a material impact
on Holdings' operations.
INFLATION AND CHANGING PRICES
Holdings' sales and costs are subject to inflation and price fluctuations.
However, they historically have not, and in the future are not expected to
have, a material adverse effect on Holdings' results of operations.
FORWARD LOOKING STATEMENTS
When used in this Prospectus, the words "believes," "anticipates," and
similar expressions are used to identify forward looking statements. Such
statements are subject to risks and uncertainties which could cause actual
results to differ materially from those projected. Holdings wishes to caution
readers that the following important factors, among the factors discussed in
"Risk Factors" above and others, in some cases have affected and in the future
could affect Holdings' actual results and could cause Holdings' actual results
to differ materially from those expressed in any forward looking statements
made by Holdings: (i) economic conditions in the safety shoe market, (ii)
availability of credit, (iii) increase in interest rates, (iv) cost of raw
materials, (v) inability to maintain state-of-the-art manufacturing
facilities, (vi) heightened competition, including intensification of price
and service competition, the entry of new competitors and the introduction of
new products by existing competitors, (vii) inability to capitalize on
opportunities presented by industry consolidation, (viii) loss or retirement
of key executives, (ix) loss or disruption of Holdings' relationships with its
major suppliers, including Holdings' largest supplier in China and (x)
inability to grow by acquisition of additional safety shoe distributors or to
effectively consolidate operations of businesses acquired.
34
<PAGE>
BUSINESS
The Company is the largest distributor of safety shoes in the United States.
The Company's core business is the specialty distribution of safety shoes
under the Iron Age brand name, which comprised 79.9% of fiscal 1998 sales. The
Company also distributes work footwear to the service sector through its Knapp
division and manufactures specialized premium quality safety shoes through its
subsidiary Falcon. The Company distributes directly to its customers over 450
styles under the Iron Age, Knapp and Dunham brand names. The Company's
captive, multi-channel distribution network includes 130 shoemobiles, 103
retail stores and 34 in-plant stores, as well as catalog sales, branded
wholesale merchandising, independent sales representatives and third-party
vendors. The Iron Age products and services are marketed principally to
industrial and government employers, most of which require safety shoes to be
worn at the workplace and provide purchase subsidies under employer safety
programs to the end-user employee. The employers provide these subsidies to
increase workplace safety and ensure compliance with OSHA regulations, thereby
decreasing workers' compensation and insurance costs. Through superior
customer service provided by the Company's factory-to-end-user distribution
and advanced information systems, the Company has established a diverse and
loyal customer base of approximately 48,000 accounts. Management estimates
that the Company has industrial customer retention rates in excess of 90%. The
Company believes that its focus on direct supply, responsive customer service
and broad, readily available product offerings distinguishes the Company from
other safety footwear suppliers.
The Company was founded in 1817 and has specialized in safety footwear since
the popularization of steel toe shoes during the 1940s. Under the Company's
current management, which was formed in 1986, the Company has reduced its
reliance on independent distributors, and sales of Iron Age products through
Company-owned shoemobiles and retail stores have increased from approximately
60% in fiscal 1987 to 100% in fiscal 1998. Over the same period, net sales and
EBITDA have increased in each consecutive year, growing at CAGRs of 15.2% and
23.2%, respectively. In fiscal 1998, the Company generated net sales of $118.7
million and EBITDA of $20.5 million, representing increases of 19.5% and
20.0%, respectively, from the prior fiscal year.
The Company's principal executive offices are located at Robinson Plaza
Three, Suite 400, Pittsburgh, Pennsylvania 15205, (412) 787-4100.
INDUSTRY OVERVIEW
According to Footwear Market Insights, a market research firm, the United
States work shoe market had sales of over $1.75 billion in 1996. The work shoe
market consists of men's and women's work, safety and duty shoes and boots.
Future Technology Surveys, Inc. estimated the safety shoe segment of the work
shoe market to be $700 million in 1995 with a projected average annual growth
rate of 4% for the following five years. In the United States, the safety shoe
segment of the work shoe market is comprised of three types of customers--
industrial, government and mass merchandising retail. The Company estimates
that sales to industrial and government customers represent over 60% of the
safety shoe market segment. End-user safety shoe customers include workers in
the primary metals, chemical and petroleum, automotive, paper, mining,
utilities, electronics, aerospace, food service, pharmaceutical, biomedical,
agriculture, construction and retail and wholesale trade industries.
A significant factor influencing the demand for safety shoes is the
increasing concern regarding workplace safety that is derived from the
employer's desire to reduce employee costs from on-the-job injury and to
reduce workers' compensation expenses. Beginning in the 1970s, the federal
government adopted OSHA regulations establishing heightened workplace safety
standards, including regulations governing footwear. OSHA regulations
established standards requiring employers to provide their workers with
workplaces free from recognized hazards that could cause serious injury or
death and requiring employees to abide by all safety and health standards that
apply to their jobs. Changes to OSHA regulations in 1994 required employers to
assess footwear related hazards and implement a program designed to mitigate
such hazards. According to a 1995 survey by Future Technology Services, Inc.,
although more than 10 million employees in the United States are required by
OSHA regulations to use foot protection, only 50% of these employees are
currently in compliance.
35
<PAGE>
In order to satisfy the criteria set forth in OSHA regulations, protective
footwear must comply with standards (the "ANSI Standards") established by the
American National Standards Institute ("ANSI"). There are six ANSI categories
for foot protection: impact and compression, metatarsal footwear, conductive
footwear, electrical hazard footwear, sole puncture resistance footwear and
electro-static dissipative footwear. These OSHA regulations, stricter
regulatory enforcement and increased consumer awareness of the regulations
have heightened the focus on safety in the workplace.
As the North American market has shifted from an industrial-based economy
towards a service-based economy, demand for protective footwear products has
shifted from heavy industries towards non-traditional customers in service
industries and light manufacturing. The heavy industrial customer is no longer
the sole influencing factor in determining the breadth of safety shoe product
line or the nature of its distribution. These new influences on the protective
footwear marketplace have expanded the market within non-traditional customers
for both safety shoe products and related services, leading to stronger
demand.
Industry sales consist of sales to companies operating in a wide range of
industries. Sales are made primarily between the distributor and the employer,
which generally has safety departments that monitor compliance with overall
safety requirements and provide safety shoe purchase subsidies. Distributors
of safety shoes to industry customers typically provide a full range of
services, including advice with respect to assessment of workplace safety
requirements, recommendations as to appropriate product selection,
coordination of employer safety subsidy programs, worksite delivery and
fitting of shoes and feedback and follow-up with the corporate employers.
Government sales, which include armed forces, penal institutions, federal,
state, and local municipal employees or civilian employees, are made to two
primary purchasers: GSA-contracted vendors and the military. GSA-contracted
purchases of safety shoes include retail sales to GSA-contracted vendors
through shoemobile service and catalog operations. These orders are made for a
variety of purposes and activities and involve a wide range of products.
Suppliers bid for these orders on the basis of product style and quality,
distribution capability and customer service. Sales to the military consist of
price-sensitive, large-volume orders that are designed to strict
specifications and are bid directly by the manufacturers. Style selection is
minimal and geared towards a specific purpose.
The retail/mass merchandiser segment includes large retail chain stores,
specialty retailers and other retail outlets. This segment is a source of low-
end, protective footwear, the buyers of which include workers whose employers
do not have company-sponsored programs as well as self-employed individuals,
occupational users and agricultural workers.
COMPETITIVE STRENGTHS
The Company believes that its competitive strengths include:
MARKET LEADERSHIP WITH STRONG BRAND RECOGNITION. The Company is the largest
distributor of safety shoes in the United States and in fiscal 1998 had an
approximately 7% share of the overall work shoe market. The Company believes
that it has doubled its share of the safety shoe segment of the work shoe
market over the past decade to approximately 17%. The Company has established
national brand-name recognition in the industrial safety and service sector
markets with its Iron Age and Knapp brands. The Company believes that its
extensive product selection of over 450 styles coupled with its ability to
provide its customers with flexible, superior service through the use of its
captive factory-to-end-user distribution network differentiates it from its
competition. The Company's product line is well recognized in the industry for
superior quality, comfort and safety features.
CONTROL OF COMPREHENSIVE DISTRIBUTION NETWORK. The Company's multi-pronged
distribution network, comprised of 130 shoemobiles, 103 retail stores and 34
in-plant stores, as well as catalog sales and consumer brands, allows the
Company to tailor its marketing approach to customer size, location and
product demand. This
36
<PAGE>
integrated network enables the Company to promote the Iron Age brand name
exclusively and standardize information systems, product offerings and
customer service levels. The Company's network covers all of the United States
and key industrial areas in Mexico and Canada. In fiscal 1998, sales through
the Company's mobile and store centers represented approximately 63% of the
Company's aggregate sales.
DIVERSE AND STABLE CUSTOMER BASE. The Company has a geographically diverse
industrial customer base of over 48,000 accounts in a wide variety of
industries, including the pharmaceutical, aerospace, chemical, food, lumber,
transportation and home products industries. The Company's customers include
approximately 60% of all companies included in the Fortune 500. As of January
31, 1998, the Company's top ten customers, which include Merck & Co., Inc.,
E.I. duPont de Nemours and Company and AlliedSignal Inc., represented less
than 12% of the Company's total revenues in fiscal 1998. The Company's
commitment to superior customer service has enabled it to establish a loyal
customer base characterized by industrial customer retention rates in excess
of 90%. Virtually all sales to industrial and government customers are
accomplished through safety department-mandated programs, and management
estimates that 68% of such sales were employer-subsidized in fiscal 1998. The
Company believes that heightened sensitivity to workplace safety, supported by
federal regulations, will continue to stimulate demand for its products.
ADVANCED SYSTEMS AND PROCEDURES. The Company's highly automated systems
utilize leading technology, providing management with powerful tools to
strengthen merchandising, purchasing and accounting. All of the Company's
mobile and store centers have been outfitted with POS computer terminals. The
POS system benefits the Company's customers by (i) reducing transaction time,
which minimizes employee downtime, (ii) providing valuable purchasing data,
which allows the employer to monitor safety costs, and (iii) providing the
employer with an efficient and reliable billing system. The POS system results
in lower costs to the Company due to reduced transaction processing errors and
helps it to actively manage inventories and customer preferences.
BALANCED PRODUCT SOURCING. Through its market leadership position and
extensive operating history, the Company has developed longstanding
relationships with the majority of its 22 suppliers of protective footwear
located in the United States, China, Korea, Canada, Taiwan and the
Netherlands. All products are manufactured to the Company's specifications. In
addition, Falcon, the Company's manufacturing subsidiary, provides access to
readily available production, an inventory of specialty, high-end products and
in-depth knowledge of material and labor costs applicable to third party
suppliers.
HISTORY OF SUCCESSFUL ACQUISITIONS. The Company's management team has
demonstrated an ability to identify, acquire and successfully assimilate
complementary acquisition targets. Since 1986, the Company has completed 23
acquisitions of independent distributors, enabling the Company to expand its
market coverage and to extend its primary distribution channel. In addition,
the Company acquired state-of-the-art manufacturing capability through its
purchase of Falcon. Most recently, the Company acquired and successfully
integrated Knapp, an underperforming competitor with a strong franchise in the
service sector market. Within 90 days of the Knapp Acquisition, the Company
returned Knapp to profitability by infusing inventory, consolidating
manufacturing, distribution and administrative facilities, reducing personnel
and integrating purchasing and MIS departments.
EXPERIENCED MANAGEMENT TEAM. The Company's Chairman and CEO, Donald Jensen,
has a total of 28 years of experience in the shoe industry. Mr. Jensen,
together with other members of his senior management team--William Mills,
Keith McDonough, William Taaffe and Theodore Johanson--have over 100 years of
industry experience and approximately 79 years with the Company. This
continuity and experience has resulted in strong relationships with suppliers
and customers and significant stability in revenues and earnings. Under the
Company's current management, net sales and EBITDA have increased in each
consecutive year since fiscal 1987, growing at CAGRs of 15.2% and 23.2%,
respectively. Management currently has a 16% fully diluted equity interest in
the Company.
37
<PAGE>
BUSINESS STRATEGY
The Company seeks (i) to strengthen its position as a leading distributor of
safety shoes, (ii) to broaden its target market within the service sector and
(iii) to add additional non-slip protective footwear and other complementary
product lines. In order to accomplish these goals, the Company has adopted the
following strategy:
PENETRATE EXISTING ACCOUNTS. The Company intends to increase sales to
existing industrial and government customers by building upon its position as
a leading distributor of safety footwear with strong brand name product
recognition, comprehensive distribution capabilities and advanced information
systems.
TARGET NEW MARKETS. The Company, led by its National Account department,
plans to generate new business opportunities through aggressive targeted
marketing to large potential users of protective safety footwear. The Company
also plans to increase marketing efforts to non-traditional users of
protective footwear (i.e., service industries and light
manufacturing/warehouse facilities) and to pursue selected acquisitions of
independent distributors. The Company also intends to add new retail locations
and shoemobiles as capacity utilization increases in each market.
DEVELOP CONSUMER BRANDS. The Company is revitalizing the widely recognized
Knapp brand name in the service sector of the work shoe market by augmenting
its existing network of independent sales representatives, retail stores,
direct consumer and industrial mail order and branded wholesale merchandising.
In addition, the Company is building a fleet of Knapp mini-vans and plans to
increase the number of Knapp retail locations. The Company has also developed
new, non-slip footwear products that will be marketed under the Knapp brand
name and sold via direct mail to the food service and hospitality industries.
PURSUE SELECTIVE ACQUISITIONS. The Company plans to capitalize on its
position as a leading distributor of safety shoes through selective
acquisitions of independent safety shoe distributors. The Company evaluates
potential acquisition candidates on a regular basis and is currently exploring
potential acquisition opportunities. The Company believes that acquiring
additional distributors will broaden its geographic distribution and promote
additional operating efficiencies.
SALES AND DISTRIBUTION
Substantially all shoes sourced for distribution by the Company are
transported to its central distribution facility in Penn Yan, New York. From
Penn Yan, the Company distributes its product to end-users through its multi-
pronged distribution network that includes 130 shoemobiles, 103 retail store
centers and 34 in-plant stores. The Company also distributes its products
through catalog operations and channels associated with consumer brands, which
include branded wholesale merchandising, independent sales representatives and
third-party vendors.
MOBILE AND STORE CENTERS. Each "mobile and store center" consists of a
retail store for its products and generally one or more affiliated
shoemobiles. Each shoemobile acts as a mobile selling vehicle for the
Company's products, operating generally within a 150-mile radius of its
affiliated retail store. This segment of the Company's business has grown as
its customers have become more demanding and have required a higher level of
customer service. Throughout the last six years, the Company has identified
this shift in the market and has established new locations in major industrial
markets while upgrading the locations of its existing stores. Typically, each
retail store consists of between 600 and 900 square feet of office and
showroom space and 1,000 to 2,500 square feet of warehouse and receiving
space. Through the retail store channel, the Company is able to service
corporate and individual customers generally located within a 40-mile radius
of a given store.
The Company operates 130 Company shoemobiles throughout the United States,
Canada and Mexico. Shoemobiles vary in size--transporting from 900 to 1,600
pair of shoes--and each contains a display area and a fitting room. The
shoemobile driver/salesperson is responsible for the fitting of footwear and
processing of
38
<PAGE>
orders. In fiscal 1998, the typical shoemobile averaged one and one-half pre-
scheduled account visits per day and 21 pairs sold per business day.
The Company has outfitted each of its shoemobiles and retail stores with its
POS system which permits each sale to be processed immediately via computer.
The development of the POS system has (i) reduced the "per-sale" transaction
time by eliminating the completion of paper sales slips, (ii) eliminated
"incorrect transactions" through the computer generation of all sales
calculations, (iii) streamlined invoicing by relaying all information by modem
to the central home office and (iv) improved customer service by allowing
customers, upon request, to obtain detailed feedback showing footwear usage by
employee, budget center and selling price.
CATALOG DIRECT. The Company reaches both large and small customers with its
safety shoe catalogues. The mail-order segment of the Company's business
provides direct service to certain customers who are either too small or do
not require direct shoemobile service or who are remotely located. Mail-order
sales are promoted through a combination of the product catalogues, the
Company's field sales force and trade advertising.
IN-PLANT STORES. To add further flexibility to its distribution
capabilities, the Company offers large-volume customers an in-plant store
program, which provides the customer with a base stock of inventory and a
sales staff to manage the store on-site at the customer's manufacturing
facility. The customer provides the Company with the necessary store space and
all utilities. Sales at each in-plant store range from 1,200 to 3,100 pairs
annually. The Company currently operates 34 in-plant stores at major corporate
customers throughout the United States. At the in-plant stores, the Company
can provide comprehensive sales data through its POS system.
CONSUMER BRAND CHANNELS. The Company's Consumer Brand Division includes the
Knapp distribution channels, Dunham and the Branded Wholesale Division. Since
its March 1997 acquisition of Knapp, the Company has distributed products to
retail markets through a consumer direct mail catalog and independent sales
representatives and to industrial customers through an industrial direct mail
catalog and a wholesale sales program. The Company's Branded Wholesale
Division provides footwear expertise and seasonal product supply to select
third-party retail stores, including CT Farm and Country.
In addition, through its Falcon manufacturing subsidiary, the Company
manufactures private label footwear for such well known customers as Browning
Arms Company, L.L. Bean, Inc., Cabela's Inc. and H.S. Trask & Co.
PRODUCTS
The Company's product line addresses a full range of protective footwear
applications covering all six ANSI categories in styles for both men and women
in both steel and non-metallic toe caps. Product categories include work,
athletic, hikers, metatarsal, dress/casual and rubber footwear and consist of
over 450 individual styles ranging in price from $10.00 for an inexpensive
steel PVC boot to a $185.00 waterproof boot. The Company's safety footwear is
manufactured in more than 300 length and width combinations, ranging in sizes
from 5 to 17. Sales of Iron Age products are concentrated in traditional,
well-established styles, with sales of new styles in each of fiscal 1996, 1997
and 1998 representing less than 12% of net sales in each period. All the
Company's work and safety shoes and boots are designed, manufactured and
laboratory tested to meet or exceed applicable ANSI Standards. Through its
long-standing relationship with users of safety footwear, the Company has
assembled a product line that is widely regarded as the industry's most
complete. In addition to the Iron Age product line, the Company distributes
work, service oxfords, non-slip and high-end work and hunting boots under the
Knapp and Dunham brand names.
39
<PAGE>
The Company has successfully expanded its product line to meet new customer
demands and substantially increased the categories and types of footwear
offered. As the safety shoe market has diversified, the Company has expanded
its product line, moving from the basic heavy-duty styles toward casual,
lightweight safety footwear that meet the needs of professional, light
industrial and service sector employees. The Company's product offerings
include the following:
<TABLE>
<CAPTION>
IRON AGE KNAPP DUNHAM
<S> <C> <C>
Service Oxfords Premier
Men's Bostonian(R) Work/Farm Boots Waterproof
Men's Work Casuals Steel Toe Safety Boots Wide-Trak(R) Waterproof
Women's Casuals, Work and Waterproof Classic
Metatarsal Outdoor/Hikers Waterproof
Men's Work Westerns & Wellingtons Intro Special Dozer Women's
Men's & Women's Non-Metallic Cap Toe Waterproof
Footwear Men's Slip Resistant All Season
Men's Heavy-Duty Work Boots & Rubber Boots GoreTex(R)
Shoes Western Waterproof
Men's & Women's Heavy Duty Dress
Puncture Resistant Men's Casuals
Men's Heavy-Duty Metatarsals Golf
Men's & Women's Conductive Women's Casual
Footwear Women's Slip Resistant
Men's Safety Toe Rubber Waterproof Women's Work & Sports
Men's Non-Safety Rubber Waterproof Boots
Men's & Women's Non-Safety ESD
</TABLE>
MANUFACTURING
GENERAL. As a result of its strategic acquisitions of Falcon and Knapp, the
Company currently operates two manufacturing facilities in Lewiston, Maine.
Work shoes are manufactured in the Falcon facility in Lewiston primarily for
sale by the Company under the Iron Age brand name. In addition, the Company
sells work shoes manufactured at the Falcon facility directly to third
parties, including Browning Arms Company, L.L. Bean, Inc., Cabela's Inc. and
H.S. Trask & Co. The Company currently manufactures the Knapp product line at
its other Lewiston facility. The Company is in the process of consolidating
the Knapp manufacturing operations into the Falcon facility, a process
expected to be completed during fiscal 1999. In 1997, the Company completed a
three-year capital expenditure program at the Falcon facility that included
investment in equipment, production line enhancements and the addition of five
new sole molds. In fiscal 1998, approximately 20% of total pairs of shoes sold
were manufactured at the two Lewiston facilities.
SUPPLIERS. As a result of its market leadership position and long operating
history, the Company has developed key supply arrangements with 22 leading
footwear manufacturers in six countries: the United States, China, Korea,
Canada, Taiwan and the Netherlands. Although in fiscal 1998 one supplier in
China manufactured approximately 20% of the pairs of shoes sold by the
Company, the Company does not believe that it is dependent upon any specific
supplier for its product manufacturing. In fiscal 1998, 47% of its total pairs
were produced by foreign suppliers and 36% of its total pairs were produced in
China.
TRANSPORTATION/FREIGHT. The Company utilizes its own fleet of five trucks as
well as common carriers to deliver product orders to its mobile and store
centers. The Company's Distribution and Operations Center in Penn Yan, New
York handles all fleet administration and traffic management responsibilities
for the Company's 130 shoemobiles, 76 cars and utility vans and four
intercompany delivery trucks, including the monitoring of Department of
Transportation compliance, vehicle maintenance, truck replacement and
refurbishment and vehicle procurement.
FACILITIES/PROPERTIES
The Company's executive offices are located in Pittsburgh, Pennsylvania. All
of the Company's properties are maintained on a regular basis and are adequate
for the Company's present requirements.
40
<PAGE>
The following table identifies, as of January 31, 1998, the principal
properties utilized by the Company.
<TABLE>
<CAPTION>
SQUARE
FACILITY OWN/LEASE LOCATION FOOTAGE(1)
- - -------- --------- -------- ----------
<S> <C> <C> <C>
Corporate Headquarters......... Lease Pittsburgh, Pennsylvania 20,500
Distribution Facility.......... Own Penn Yan, New York 175,000(2)
Knapp Administration Facility.. Lease Penn Yan, New York 5,500
Falcon Manufacturing Facili-
ty(3)......................... Lease Lewiston, Maine 112,000
Knapp Manufacturing Facili-
ty(3)......................... Lease Lewiston, Maine 122,000
</TABLE>
- - --------
(1) Square footage has been rounded up to the nearest 500 square feet.
(2) Includes 31,000 square feet that is under construction and anticipated to
be completed in April 1998.
(3) The Company plans to consolidate the Knapp manufacturing facility into the
Falcon manufacturing facility during fiscal 1999.
EMPLOYEES
As of January 31, 1998, the Company employed approximately 977 people of
which 567 were involved in sales and distribution, 272 in manufacturing and
138 in administrative. Of such employees, 294 were salaried and 683 were
hourly. None of the Company's employees is presently covered by collective
bargaining agreements. Management considers its employee relations to be good.
COMPETITION
The work shoe market is highly competitive. Management believes that
competition in the industry is based on distribution capabilities, retail
presence, brand name recognition, corporate relationships, systems, service,
product characteristics, product quality and price. The Company's major
competitors in the safety shoe segment of the work shoe industry are Lehigh (a
subsidiary of U.S. Industries, Inc.), Hy-Test (a subsidiary of Wolverine World
Wide, Inc.) and Red Wing Shoe Co. Some of the Company's competitors have
greater financial and other resources than the Company. See "Risk Factors--
Competition."
ENVIRONMENTAL MATTERS
The Company's operations, including manufacturing, are subject to extensive
federal, state, local, and foreign laws and regulations relating to the,
storage, handling, generation, treatment, emission, release, transportation,
discharge and disposal of certain substance and waste materials. Permits are
required for certain of the Company's operations, and these permits are
subject to revocation, modification and renewal by issuing authorities.
Governmental authorities have the power to enforce compliance with their
regulations, and violations may result in the payment of fines or the entry of
injunctions, or both. The Company does not believe it will be required under
existing environmental laws and enforcement policies to expend amounts that
will have a material adverse effect on its results of operations or financial
condition. The requirements of such laws and enforcement policies, however,
have generally become stricter in recent years. Accordingly, the Company is
unable to predict the ultimate cost of compliance with environmental laws and
enforcement policies.
LEGAL PROCEEDINGS
The Company is a party to various legal actions arising in the ordinary
course of its business. The Company believes that the resolution of these
legal actions will not have a material adverse effect on the Company's
business, results of operations and financial conditions.
41
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding Holdings'
directors and executive officers, including their respective ages as of
January 31, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ---- --- --------
<S> <C> <C>
Donald R. Jensen....................... 59 Chairman, Chief Executive Officer,
President and Director
William J. Mills....................... 38 Executive Vice President and
Director
Keith A. McDonough..................... 39 Vice President-Finance and Chief
Financial Officer
William J. Taaffe...................... 43 Corporate Vice President, Operations
and Distribution
Theodore C. Johanson................... 59 President and Chief Executive
Officer, Falcon Shoe Mfg. Co.
Peter Lamm............................. 46 Director
Andrea Geisser......................... 55 Director
Russell Steenberg...................... 45 Director
</TABLE>
Donald R. Jensen is Chairman, Chief Executive Officer and President of
Holdings. Mr. Jensen has also been Chairman and Chief Executive Officer of
Iron Age since 1994. He joined Iron Age as President and Chief Executive
Officer in 1986. Prior to that time, Mr. Jensen worked in the automotive parts
supply business from 1960 to 1970 and held various positions with Endicott
Johnson Corporation from 1970 to 1985, beginning as a territory salesman. At
Endicott Johnson Corporation, he served as Vice President in charge of the
product development, importing, athletic footwear and rubber footwear
divisions before being named Executive Vice President of the Company in 1985.
William J. Mills is Executive Vice President of Holdings. Mr. Mills has also
been President and Chief Operating Officer of Iron Age since May 1997. He is
primarily responsible for the day-to-day management of all field operations
and the Iron Age sales organization. Mr. Mills joined Iron Age in 1987 as a
District Manager before moving on to manage all national accounts and assume
the position of National Sales Manager. He was promoted to regional Vice
President of Sales in 1991 and to Executive Vice President in 1994. Prior to
1987, he held various positions at Endicott Johnson in product development,
sales, importing and sales management.
Keith A. McDonough is Vice President-Finance of Holdings. Mr. McDonough
joined Iron Age in 1981. He was appointed to Executive Vice President in May
1997 and has been Iron Age's Chief Financial Officer since 1990. Mr. McDonough
is responsible for all corporate financial matters, including financial
reporting, banking and banking relationships, subsidiary financial oversight
and information technology. Mr. McDonough also manages acquisition forecast
development and financial accountability implementation.
William J. Taaffe is Corporate Vice President, Operations and Distribution
of Holdings. Mr. Taaffe has also been President and Chief Operating Officer of
Knapp Division since May 1997. He joined Iron Age as Corporate Vice President,
Operations and Distribution in 1994. Mr. Taaffe is responsible for all sales
and operations of the Knapp Division. Prior to that time, he owned a
management consulting firm from 1990 to 1994. Mr. Taaffe also held various
positions with Triad Systems Corporation, beginning as a territory salesman.
At Triad Systems Corporation, he served as Territory Manager and Regional
Manager before being named Area Manager for Triad's Dental Division in 1988.
42
<PAGE>
Theodore C. Johanson joined Iron Age as President and Chief Executive
Officer of Falcon in August 1994 when Falcon was acquired by Iron Age. Mr.
Johanson, the founder and President of Falcon since 1963, brings management
and manufacturing expertise to the Iron Age Team. He served Eagle Shoe
Manufacturing Co. as a machine operator, Industrial Engineer, Assistant
Factory Superintendent and Salesman from 1954 until founding Falcon. Mr.
Johanson currently serves as a director of KSB Bancorp, Inc.
Peter Lamm became a director of Holdings and Iron Age in 1997. Mr. Lamm is
President of Fenway, a New York-based direct investment firm for institutional
investors with a primary objective of acquiring leading middle-market
companies. From February 1982 to April 1994, Mr. Lamm was a member of Butler
Capital Corporation, a private investment firm, most recently as Senior Direct
Investment Officer and Managing Director. Mr. Lamm currently serves as a
director of VDK Foods, Aurora Foods, Delimex, CT Farm & Country, National
School Supply and Blue Capital.
Andrea Geisser became a director of Holdings and Iron Age in 1997. Mr.
Geisser has been a Managing Director of Fenway since its formation in 1994.
From February 1989 to June 1994, Mr. Geisser was a Managing Director of Butler
Capital Corporation. From 1986 to 1989, Mr. Geisser served as a Managing
Director of Onex Investment Corporation, the largest Canadian leveraged buyout
company. Mr. Geisser currently serves as a director of VDK Foods, Delimex,
Valley Recreation Products and Decorative Concepts.
Russell Steenberg became a director of Holdings and Iron Age in 1997. Mr.
Steenberg has been a Managing Director of Fenway since 1995. From 1983 to
1995, Mr. Steenberg was Vice President and Head of the Corporate Finance Group
of AT&T Investment Management Company, where he had overall responsibility for
the finding, structuring, executing and monitoring of the investments of AT&T
Master Pension Trust. Mr. Steenberg currently serves as a director of Valley
Recreation Products.
DIRECTOR COMPENSATION
Holdings pays no compensation to its independent directors and pays no
additional remuneration to its employees or to executives of Holdings for
serving as directors. There are no family relations among any of the directors
or executive officers.
43
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation earned in fiscal 1998
by Holdings' Chief Executive Officer and each of the other four most highly
compensated executive officers whose remuneration exceeded $100,000 ("Named
Executives"). The current compensation arrangements for each of these officers
are described in "Employment Agreements."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
NUMBER OF
SECURITIES
UNDERLYING ALL OTHER
NAME AND POSITION SALARY BONUS OPTIONS(4) COMPENSATION
- - ----------------- ------------------- ------------ ------------
<S> <C> <C> <C> <C>
Donald R. Jensen............. $ 404,740 $ 554,900(1) 9,351.60 $9,956(5)
Chief Executive Officer,
President
William J. Mills............. 167,857 237,200(2) 3,189.75 9,956(5)
Executive Vice President
Keith A. McDonough........... 118,269 224,760(2) 3,129.75 7,464(6)
Vice President-Finance and
Chief Financial Officer
William J. Taaffe............ 99,176 206,100(2) 1,617.89 6,301(7)
Corporate Vice President,
Operations
and Distribution
Theodore C. Johanson......... 193,123 20,000(3) 200.00 9,005(8)
President and Chief Executive
Officer,
Falcon
</TABLE>
- - --------
(1) Includes $275,000 bonus paid by Iron Age in connection with the Fenway
Acquisition.
(2)Includes $175,000 bonus paid by Iron Age in connection with the Fenway
Acquisition.
(3) Includes $20,000 bonus paid by Iron Age in connection with the Fenway
Acquisition.
(4) Options to acquire common stock of Holdings.
(5) Includes Iron Age allocations of $9,309 under defined contribution plan
for the plan year ended December 31, 1997 and group term life insurance
premiums of $647 paid by Iron Age during the plan year ended December 31,
1997.
(6) Includes Iron Age allocations of $6,948 under defined contribution plan
for the plan year ended December 31, 1997 and group term life insurance
premiums of $516 paid by Iron Age during the plan year ended December 31,
1997.
(7) Includes Iron Age allocations of $5,865 under defined contribution plan
for the plan year ended December 31, 1997 and group term life insurance
premiums of $436 paid by Iron Age during the plan year ended December 31,
1997.
(8) Represents Iron Age allocations under defined contribution plan for the
plan year ended December 31, 1997.
44
<PAGE>
OPTION GRANTS
The table below shows grants of options to purchase common stock of Holdings
made to the Chief Executive Officer and Named Executives during fiscal 1998.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(2)
------------------------------------------------------ -----------------------
FAIR
NUMBER OF % OF TOTAL MARKET
SECURITIES OPTIONS VALUE AT
UNDERLYING GRANTED TO EXERCISE TIME OF
OPTIONS EMPLOYEES IN PRICE GRANT EXPIRATION
NAME GRANTED(1) FISCAL YEAR PER SHARE PER SHARE DATE 5% 10%
- - ---- ---------- ------------ --------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald R. Jensen
Series A(3)............ 6,404.83 55.56 $ 36.36 $363.60 02/28/07 $ 3,560,495 $ 5,807,318
Series B--Basic B(4)... 1,698.00 30.83 363.60 -- 02/28/07 388,278 983,939
Series B--Extra B(5)... 1,248.77 40.83 363.60 -- 02/28/07 285,551 723,643
William J. Mills
Series A(3)............ 1,929.75 16.74 36.36 363.60 02/28/07 1,072,764 1,749,722
Series B--Basic B(4)... 660.00 11.98 363.60 -- 02/28/07 150,920 382,460
Series B--Extra B(5)... 600.00 19.62 363.60 -- 02/28/07 137,200 347,691
Keith A. McDonough
Series A(3)............ 1,929.75 16.74 36.36 363.60 02/28/07 1,072,764 1,749,722
Series B--Basic B(4)... 600.00 10.89 363.60 -- 02/28/07 137,200 347,691
Series B--Extra B(5)... 600.00 19.62 363.60 -- 02/28/07 137,200 347,691
William J. Taaffe
Series A(3)............ 617.89 5.36 36.36 363.60 02/28/07 343,491 560,248
Series B--Basic B(4)... 500.00 9.08 363.60 -- 02/28/07 114,330 289,742
Series B--Extra B(5)... 500.00 16.35 363.60 -- 02/28/97 114,330 289,742
Theodore C. Johanson
Series B--Basic B(4)... 200.00 3.63 363.60 -- 02/28/07 45,733 115,897
</TABLE>
- - --------
(1) Options to acquire common stock of Holdings.
(2) The 5% and 10% assumed annual rates of return do not reflect actual
changes in the value of the common stock of Holdings. The assumed rates
are not intended to be a forecast of future performance, but reflect
projections required by SEC regulations.
(3) Series A Options (as defined) are fully exercisable at all times prior to
expiration date and represent options issued in exchange for existing
options for shares of the parent of the predecessor in connection with the
Fenway Acquisition.
(4) 20% of Series B-Basic B Options (as defined) are exercisable on the last
of each fiscal year in which certain target earnings are met. The Series
B-Basic B Options are also exercisable upon a sale transaction by the
Fenway Fund of all stock or assets of Holdings ("Sale Transaction") if the
net sales proceeds equal or exceed the initial purchase price plus certain
internal rates of return.
(5) Series B-Extra B Options (as defined) are exercisable on a Sale
Transaction if the net sales proceeds equal or exceed the initial purchase
price plus certain internal rates of return.
45
<PAGE>
AGGREGATED OPTION EXERCISES
The table below sets forth information concerning the exercise of stock
options during fiscal 1998 and the value of unexercised stock options at the
end of fiscal 1998 for the Chief Executive Officer and Named Executives.
AGGREGATED OPTION EXERCISES IN
FISCAL 1998 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES OF FISCAL YEAR END AT FISCAL YEAR END(3)
HOLDINGS ---------------------- ---------------------
ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE
- - ---- ----------- -------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
Donald R. Jensen
Predecessor
Options(1)........... 3,429 $1,953,941
Series A(2)........... 6,404.83/0 $2,095,917/0
Series B--Basic B(2).. 339.60/1358.40 0/0
Series B--Extra B(2).. 0/1248.77 0/0
William J. Mills
Predecessor
Options(1)........... 53 31,806
Series A(2)........... 1,929.75/0 631,491/0
Series B--Basic B(2).. 132/528 0/0
Series B--Extra B(2).. 0/600 0/0
Keith A. McDonough
Predecessor
Options(1)........... 53 31,806
Series A(2)........... 1,929.75/0 631,491/0
Series B--Basic B(2).. 120/480 0/0
Series B--Extra B(2).. 0/600 0/0
William J. Taaffe
Series A(1)........... 617.89/0 202,198/0
Series B--Basic B(2).. 100/400 0/0
Series B--Extra B(2).. 0/500 0/0
Theodore C. Johanson
Series B--Basic B(2).. 40/160 0/0
</TABLE>
- - --------
(1) Options to acquire shares of the predecessor in connection with the Fenway
Acquisition.
(2) Options to acquire common stock of Holdings.
(3) Value based on assumed value at January 31, 1998 of $363.60 per share.
EMPLOYMENT AGREEMENTS
Mr. Jensen is currently employed as Chief Executive Officer and Chairman of
the Board of Directors of Holdings and Iron Age and President of Holdings
pursuant to an agreement dated February 26, 1997. Under this agreement, Mr.
Jensen is entitled to receive an annual salary of $400,000. In addition, Mr.
Jensen is eligible for an annual bonus of up to 100% of base salary determined
by Iron Age's achievement of EBITDA targets. If Mr. Jensen is terminated other
than for cause or resigns voluntarily for good reason, he is entitled to
receive continued salary until December 31, 2001 and continued coverage under
group health plans for him and his spouse until his 65th birthday, or until
his spouse's 65th birthday if he dies prior to age 65. If Mr. Jensen's
employment is terminated by reason of his death and he is survived by his
spouse, his surviving spouse is entitled to receive a continuation of his
salary until the month of his 62nd birthday and continued coverage under group
health plans until her 65th birthday. If Mr. Jensen's employment is terminated
by reason of his incapacity, Mr.
46
<PAGE>
Jensen is entitled to receive continued salary less amounts received by him
under group disability plans and social security disability benefits until the
earliest of his death or his 65th birthday and continued coverage under group
health plans for him and his spouse until his 65th birthday if he dies prior
to age 65.
Mr. Mills is currently employed with Iron Age pursuant to an agreement dated
November 20, 1995. Under this agreement, Mr. Mills receives an annual salary
of $142,500, subject to annual increases, and is eligible for a bonus of up to
100% of base salary determined by Iron Age's achievement of operating income
targets. If Mr. Mills is terminated other than for cause or resigns
voluntarily for good reason, he is entitled to receive continued salary for
eighteen months and continued coverage under group health plans for one year
following his termination or resignation. If Mr. Mills' employment is
terminated by reason of his death and he is survived by his spouse, his
surviving spouse is entitled to receive continued coverage under group health
plans until the earlier of her 65th birthday or January 30, 1999. If Mr.
Mills' employment is terminated by reason of his incapacity, Mr. Mills is
entitled to receive continued coverage under group health plans until January
30, 1999.
Mr. McDonough is currently employed with Iron Age pursuant to an agreement
dated November 20, 1995. Under this agreement, Mr. McDonough receives an
annual salary of $100,000, subject to annual increases, and is eligible for a
bonus of up to 100% of base salary determined by Iron Age's achievement of
operating income targets. If Mr. McDonough is terminated other than for cause
or resigns voluntarily for good reason, he is entitled to receive continued
salary for eighteen months and continued coverage under group health plans for
one year following his termination or resignation. If Mr. McDonough's
employment is terminated by reason of his death and he is survived by his
spouse, his surviving spouse is entitled to receive continued coverage under
group health plans until the earlier of her 65th birthday or January 30, 1999.
If Mr. McDonough's employment is terminated by reason of his incapacity, Mr.
McDonough is entitled to receive continued coverage under group health plans
until January 30, 1999.
Mr. Johanson is currently employed as President and Chief Executive Officer
of Falcon pursuant to an agreement dated August 1, 1994. Under this agreement,
Mr. Johanson receives an annual salary of $190,000 and is eligible for a bonus
of 25-35% of base salary determined by Falcon's achievement of operating
income targets. If Mr. Johanson is terminated other than for cause or resigns
voluntarily for good reason, he is entitled to receive continued salary,
reduced by one-half of any compensation received by Mr. Johanson from other
employment, and continued coverage under group health, disability and life
insurance plans, to the extent such benefits are not provided as a result of
other employment, until January 31, 2000. If Mr. Johanson's employment is
terminated by reason of physical or mental disability, Mr. Johanson is
entitled to receive continued coverage under group health and life insurance
plans until January 31, 2000 and payments under Falcon's disability income
plan.
47
<PAGE>
PRINCIPAL STOCKHOLDERS
As of January 31, 1998, the outstanding equity securities of Holdings
consisted of 99,624.89 shares of common stock, par value $0.01 per share
("Common Stock"), and 1,500 shares of Holdings Series A Preferred Stock, par
value $0.01 per share. Pursuant to the Transactions, Holdings redeemed the
1,500 shares of Holdings Series A Preferred Stock on April 24, 1998.
The following table sets forth certain information as of May 2, 1998
regarding the beneficial ownership of (i) each class of voting securities of
Holdings by each person known to Holdings to own more than 5% of any class of
securities of Holdings and (ii) the equity securities of Holding by each
director of Holdings, each of the executive officers of Holdings listed under
"Management" and the directors and executive officers of Holdings as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
---------------------------------
COMMON STOCK
---------------------------------
NUMBER OF PERCENTAGE OF
NAME AND ADDRESS SHARES CLASS
---------------- ---------------- ----------------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS:
Fenway Partners Capital Fund, L.P.(2)...... 88,431.57 88.76%
152 West 57th Street
New York, New York 10019
New York Life Insurance Company(3)......... 11,187.21 10.73
51 Madison Avenue
New York, NY 10010
American Home Assurance Company(4)......... 5,593.61 5.49
c/o AIG Global Investment Co.
200 Liberty Street
New York, NY 10281
DIRECTORS AND EXECUTIVE OFFICERS:
Donald R. Jensen(5)........................ 6,744.43 6.34
William J. Mills(6)........................ 2,061.75 2.03
Keith A. McDonough(7)...................... 2,049.75 2.02
William J. Taaffe(8)....................... 717.89 *
Theodore C. Johanson(9).................... 40.00 *
Peter Lamm(10)............................. -- --
Andrea Geisser(10)......................... -- --
Russell Steenberg(10)...................... -- --
All directors and executive officers as a
group, including the above named
persons................................... 11,613.82 10.44
</TABLE>
- - --------
* Less than one percent.
(1) As used in this table, beneficial ownership means the sole or shared power
to vote, or to direct the voting of a security, or the sole or shared
power to dispose, or direct the disposition of, a security and includes
options and warrants exercisable within 60 days.
(2) Includes shares of Common Stock held by the Fenway Fund and its affiliated
entities FPIP, LLC and FPIP Trust, LLC.
(3) Includes 4,641.66 shares of Common Stock subject to acquisition from
Holdings at a purchase price of $185.52 per share pursuant to a warrant
that expires on February 26, 2007.
(4) Includes 2,320.83 shares of Common Stock subject to acquisition from
Holdings at a purchase price of $185.52 per share pursuant to a warrant
that expires on February 26, 2007.
48
<PAGE>
(5) Includes 6,404.83 shares of Common Stock that may be acquired upon the
exercise of outstanding Series A Options at an exercise price of $36.36
per share and 339.60 shares that may be acquired upon the exercise of
outstanding Series B Options at an exercise price of $363.60 per share
pursuant to the Option Plan (as defined) of Holdings, See "Management."
(6) Includes 1,929.75 shares of Common Stock that may be acquired upon the
exercise of outstanding Series A Options at an exercise price of $36.36
per share and 132 shares that may be acquired upon the exercise of
outstanding Series B Options at an exercise price of $363.60 per share
pursuant to the Option Plan of Holdings. See "Management."
(7) Includes 1,929.75 shares of Common Stock that may be acquired upon the
exercise of outstanding Series A Options at an exercise price of $36.36
per share and 120 shares that may be acquired upon the exercise of
outstanding Series B Options at an exercise price of $363.60 per share
pursuant to the Option Plan of Holdings. See "Management."
(8) Includes 617.89 shares of Common Stock that may be acquired upon the
exercise of outstanding Series A Options at an exercise price of $36.36
per share and 100 shares that may be acquired upon the exercise of
outstanding Series B Options at an exercise price of $363.60 per share
pursuant to the Option Plan of Holdings. See "Management."
(9) Represents 40 shares of Common Stock that may be acquired upon the
exercise of outstanding Series B Options at an exercise price of $363.60
per share pursuant to the Option Plan of Holdings. See "Management."
(10) Messrs. Lamm, Geisser and Steenberg are Managing Directors of Fenway and
limited partners of Fenway Partners, L.P., the sole general partner of
the Fenway Fund. Accordingly, Messrs. Lamm, Geisser and Steenberg may be
deemed to beneficially own shares owned by the Fenway Fund. Messrs. Lamm,
Geisser and Steenberg are members of FPIP, LLC and FPIP Trust, LLC and,
accordingly, may be deemed to beneficially own shares owned by such
funds. Messrs. Lamm, Geisser and Steenberg disclaim beneficial ownership
of any such shares in which they do not have pecuniary interests.
49
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT EQUITY ARRANGEMENTS
Holdings adopted a Stock Option Plan (the "Option Plan") for the benefit of
directors, executive officers, other employees, consultants and advisors of
Holdings and its subsidiaries on February 26, 1997. The Plan provides for
issuance of Series A options ("Series A Options") and Series B options
("Series B Options"). Series B Options are designated as either "Series B-
Basic B Options" or "Series B-Extra B Options." Series A Options vest
immediately in full on the date such options are granted, Series B-Basic B
Options are subject to certain time and performance vesting restrictions and
Series B-Extra B Options vest only in connection with the consummation by the
Fenway Fund of a sale, other than to one of its affiliates, of its entire
equity interest in Holdings. Holdings has reserved 20,244.70 shares of
Holdings common stock for issuance under the Option Plan, 11,527.78 of which
shares are reserved for Series A Options and 8,716.92 of which shares are
reserved for Series B Options.
In February 1997, Holdings granted Series A Options to certain management
employees to purchase an aggregate of 11,527.78 shares of common stock at an
exercise price of $36.36 per share. These Series A Options were issued in
exchange for existing options for shares of the parent of the predecessor in
connection with the Fenway Acquisition. The Series A Options granted expire on
February 28, 2007. In August 1997, Holdings granted to certain management
employees Series B-Basic B Options to purchase an aggregate of 5,508 shares of
common stock and Series B-Extra B Options to purchase an aggregate of 3,058.77
shares of common stock. All of the Series B Options granted expire on February
28, 2007. The exercise price of options granted in August 1997 (i) that were
not vested (as such term is defined in the Option Plan) as of April 24, 1998
is approximately $186 per share and (ii) that were vested (as such term is
defined in the Option Plan) as of April 24, 1998 is approximately $364 per
share. None of the options granted under the Option Plan has been exercised.
See also "Management--Option Grants."
In connection with the Transactions, certain members of management of Iron
Age received payments of $2,255,000.
STOCKHOLDERS AGREEMENT
Holdings, the Fenway Fund, New York Life Insurance Company and American Home
Assurance Company (the "Mezzanine Investors"), Iron Age management and all of
the other stockholders and optionholders of Holdings entered into a
stockholders agreement (the "Stockholders Agreement") that, among other
things, provides for tag-along rights, take-along rights, registration rights,
restrictions on the transfer of shares held by parties to the Stockholders
Agreement, certain rights of first refusal for Holdings and certain preemptive
rights for certain stockholders including the Mezzanine Investors and Iron Age
management. The Stockholders Agreement also provides that the parties thereto
will vote their shares in the same manner as the Fenway Fund in connection
with certain transactions and that the Fenway Fund will be entitled to fix the
number of directors of Holdings. Pursuant to the Stockholders Agreement, the
Fenway Fund is entitled to designate a sufficient number of directors to
maintain a majority of the board of directors of Holdings and Donald R. Jensen
is entitled to designate one director.
MANAGEMENT AGREEMENT
Holdings and Iron Age are party to the amended and restated management
agreement (the "Management Agreement") with Fenway pursuant to which Fenway
agreed to provide management and advisory services to Holdings and Iron Age.
In exchange for such services, Holdings and Iron Age agreed to pay Fenway (i)
annual management fees equal to $250,000 for fiscal 1998 and fiscal 1999,
$275,000 for fiscal 2000, $300,000 for fiscal 2001 and, for each subsequent
fiscal year, 0.25% of the net sales for the immediately preceding fiscal year
which annual management fees shall be increased by an amount to be negotiated
in good faith in the event of an acquisition of a business with an enterprise
value in excess of $50 million, (ii) fees in connection with the negotiation
and consummation by Fenway of senior financing for any acquisition
transactions, which fees shall not exceed the greater of $1 million or 1.5% of
the aggregate transaction value and (iii) certain fees and expenses, including
legal and accounting fees and any out-of-pocket expenses incurred by Fenway in
connection with providing services to Holdings and Iron Age. Holdings and Iron
Age also agreed to indemnify Fenway under certain circumstances. In addition,
pursuant to the Management Agreement, Fenway received $2,070,000 in connection
with the structuring of the Fenway Acquisition and the related senior secured
financing.
50
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT FACILITY
On April 24, 1998, Holdings and Iron Age entered into an agreement with
various banks and other financial institutions, including Banque Nationale de
Paris, as a lender and as agent for the lenders from time to time party
thereto, providing for the New Credit Facility, which consists of (i) the New
Revolving Credit Facility for Iron Age of up to $30.0 million in revolving
credit loans, letters of credit and swing line loans and (ii) a multiple draw
New Acquisition Credit Facility for Iron Age of up to $35.0 million, which may
be borrowed for a period of up to three years after the closing date of the
New Credit Facility for permitted acquisitions by Iron Age.
The New Credit Facility is (i) jointly and severally guaranteed by Holdings,
each of its present and future domestic subsidiaries and, to the extent that
no adverse tax consequence would result therefrom, each of its present and
future foreign subsidiaries and (ii) secured by all of the assets (including
capital stock) owned by Holdings, Iron Age, each of their respective present
and future domestic subsidiaries and, to the extent that no adverse tax
consequence would result therefrom, each of their respective present and
future foreign subsidiaries.
The New Credit Facility requires Holdings and Iron Age to meet certain
financial tests, including, without limitation, maximum leverage ratio,
minimum interest coverage and fixed charges coverage. In addition, the New
Credit Facility contains certain negative covenants limiting, among other
things, additional debt, additional liens, transactions with affiliates,
mergers and consolidations, liquidations and dissolutions, sales of assets,
dividends, capital expenditures, investments, loans and advances, prepayments
and modifications of debt instruments and other matters customarily restricted
in such agreements. The New Credit Facility contains customary events of
default, including, without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, certain events of
bankruptcy and insolvency, failure of any guaranty or security document
supporting the New Credit Facility to be in full force and effect, change of
control of Holdings and change of ownership of the stock of the Company.
Availability under the New Revolving Credit Facility is subject to a
borrowing base of (i) 80% of eligible United States and Canadian accounts
receivable and (ii) 50% of eligible United States and Canadian inventory.
Availability under the New Acquisition Credit Facility is subject to maximum
pro forma Leverage Ratios and Senior Leverage Ratios (each as defined in the
New Credit Facility).
The New Revolving Credit Facility matures in April 2004. The New Acquisition
Credit Facility matures in quarterly installments from July 2001 until final
payment in April 2004.
Iron Age's borrowings under the New Credit Facility bear interest at a
floating rate and may be maintained as Base Rate Loans (as defined in the New
Credit Facility) or, beginning 90 days after the closing date of the New
Credit Facility (or earlier upon syndication) at Iron Age's option, as
Eurodollar Loans (as defined in the New Credit Facility). Base Rate Loans bear
interest at the Base Rate (defined as the higher of (x) the applicable prime
lending rate of Banque Nationale de Paris and (y) the Federal Reserve reported
overnight funds rate plus 0.5%) plus the Applicable Margin (as defined in the
New Credit Facility). Eurodollar Loans bear interest at the Eurodollar Rate
(as defined in the New Credit Facility) plus the Applicable Margin (as defined
in the New Credit Facility).
The Applicable Margin is initially Base Rate plus 0.75% and Eurodollar Rate
plus 2.25% and is subject to reduction according to a pricing grid based upon
the Leverage Ratio.
Iron Age is required to pay to the lenders under the New Credit Facility a
commitment fee equal to 0.4375% per annum, payable in arrears on a quarterly
basis, on the average unused portion of the New Credit Facility during such
quarter. Iron Age is also required to pay to the lenders a quarterly letter of
credit fee with respect to each letter of credit outstanding equal to a
floating rate of interest equal to the Applicable Margin on Eurodollar Loans
times the average daily stated amount of such letter of credit, as well as
customary administrative fees.
51
<PAGE>
The New Credit Facility prescribes that certain amounts must be used to
prepay, and/or to reduce commitments under, the New Credit Facility, including
(a) 100% of the net proceeds of any sale or issuance of equity or any
incurrence of indebtedness after the closing date by Iron Age or any of its
subsidiaries, except for proceeds of the Discount Notes and the Senior
Subordinated Notes and subject to certain other exceptions, (b) 100% of the
net proceeds of any sale or other disposition by Iron Age or any of its
subsidiaries of any assets (including casualties or condemnations), except for
the sale of inventory or obsolete or worn-out property in the ordinary course
of business and subject to certain other exceptions and (c) 50% of Excess Cash
Flow (as defined in the New Credit Facility) for each fiscal year of Iron Age
commencing with the year ending in January 2002.
In general, the mandatory prepayments described above will be applied first,
to prepay the New Acquisition Credit Facility and to reduce the commitments
thereunder and second, to prepay and/or permanently reduce commitments under
the New Revolving Credit Facility. Optional or mandatory prepayments of the
New Acquisition Credit Facility will be applied ratably to the respective
installments thereof. Any prepayments of the New Acquisition Credit Facility
may not be reborrowed.
SENIOR SUBORDINATED NOTES
Concurrently with the Exchange Offer, Iron Age is conducting an exchange
offer for the Senior Subordinated Notes. The exchanged Senior Subordinated
Notes will have the same terms as the original Senior Subordinated Notes
described herein. The Senior Subordinated Notes were issued by Iron Age on
April 24, 1998 in an aggregate principal amount of $100,000,000 and will
mature on May 1, 2008. The Senior Subordinated Notes were issued under the
Senior Subordinated Indenture between Iron Age and The Chase Manhattan Bank,
as trustee, and are unsecured, senior subordinated obligations of Iron Age.
Cash interest on the Senior Subordinated Notes will accrue at the rate of 9
7/8% per annum and will be payable semi-annually on May 1 and November 1 of
each year, commencing November 1, 1998, to the holders of record on the
immediately preceding April 15 and October 15, respectively.
On or after May 1, 2003, the Senior Subordinated Notes may be redeemed at
the option of Iron Age, in whole or in part, at any time or from time to time,
at the following redemption prices (expressed in percentages of principal
amount), plus accrued and unpaid interest and liquidated damages, if any, to
the redemption date, if redeemed during the 12-month period commencing on May
1 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
------ ----------
<S> <C>
2003.............................................................. 104.938%
2004.............................................................. 103.292%
2005.............................................................. 101.646%
2006 and thereafter............................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to May 1, 2001, Iron
Age may, at its option, redeem in the aggregate up to 35% of the original
principal amount of the Senior Subordinated Notes with the proceeds of one or
more Public Equity Offerings (as defined in the Senior Subordinated Indenture)
received by, or invested in, Iron Age, following which there is a Public
Market (as defined in the Senior Subordinated Indenture), at a redemption
price (expressed as a percentage of principal amount) of 109.875% plus accrued
and unpaid interest and liquidated damages, if any, to the redemption date;
provided, however, that at least 65% of the original principal amount of the
Senior Subordinated Notes must remain outstanding after each such redemption.
In the event of a Change of Control (as defined in the Senior Subordinated
Indenture), each holder of Senior Subordinated Notes has the right to require
that Iron Age repurchase such holder's Senior Subordinated Notes at a purchase
price in cash equal to 101% of the principal amount thereof plus accrued and
unpaid interest and liquidated damages, if any, to the date of repurchase.
52
<PAGE>
The Senior Subordinated Indenture contains covenants that, among other
things: limit the ability of Iron Age to incur additional indebtedness
(including a restriction that, subject to certain exceptions, prohibits the
incurrence of indebtedness unless the Consolidated Coverage Ratio (as defined
in the Senior Subordinated Indenture) of Iron Age exceeds 2.00 to 1.00); incur
liens, pay dividends or make certain other restricted payments; consummate
certain asset sales; enter into certain transactions with affiliates; incur
indebtedness that is subordinate in right of payment to any Senior
Indebtedness (as defined in the Senior Subordinated Indenture) and senior in
right of payment to the Senior Subordinated Notes; merge or consolidate with
any other person; or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of Iron Age. Under certain
circumstances, Iron Age will be required to make an offer to purchase Senior
Subordinated Notes at a price equal to 100% of the principal amount thereof,
plus accrued interest to the date of purchase with the proceeds of certain
Asset Dispositions (as defined in the Senior Subordinated Indenture). The
Senior Subordinated Indenture contains certain customary events of default
which include the failure to pay interest and principal, the failure to comply
with certain covenants in the Senior Subordinated Indenture, a default under
certain indebtedness, the imposition of certain final judgments or warrants of
attachment and certain events occurring under bankruptcy laws. See "Risk
Factors--Limitation on Access to Cash Flow of Subsidiaries; Holding Company
Structure."
53
<PAGE>
DESCRIPTION OF EXCHANGE DISCOUNT NOTES
GENERAL
The Exchange Discount Notes are to be issued under the Indenture. The form
and terms of the Exchange Discount Notes are the same as the form and terms of
the Original Discount Notes, except that (i) the Exchange Discount Notes have
been registered under the Securities Act and therefore will not bear legends
restricting their transfer pursuant to the Securities Act, and (ii) the
holders of Exchange Discount Notes will not be entitled to rights under the
Registration Agreement (except under certain limited circumstances). The
Exchange Discount Notes will evidence the same debt as the Original Discount
Notes (which they replace), and will be issued under, and be entitled to the
benefits of, the Indenture.
The following is a summary of certain provisions of the Indenture and the
Exchange Discount Notes, copies of which will be available upon request to
Holdings at the address set forth under "Business." The Indenture is filed as
an exhibit to the Exchange Offer Registration Statement of which this
Prospectus forms a part. The following summary of certain provisions of the
Indenture and the Exchange Discount Notes does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, all the
provisions of the Indenture and the Exchange Discount Notes, including the
definitions of certain terms therein and those terms made a part thereof by
the Trust Indenture Act of 1939, as amended. Capitalized terms used herein and
not otherwise defined have the meanings set forth in the section "--Certain
Definitions." For purposes of this description of the Exchange Discount Notes,
the term "Holdings" refers only to Iron Age Holdings Corporation and not to
any of its direct or indirect subsidiaries, and the term "Iron Age" refers
only to Iron Age Corporation and not to any of its direct or indirect
subsidiaries.
Principal of, and premium and liquidated damages, if any, and interest on,
the Exchange Discount Notes will be payable, and the Exchange Discount Notes
may be exchanged or transferred, at the office or agency of Holdings in the
Borough of Manhattan, The City of New York (which initially shall be the
corporate trust office of the Trustee in New York, New York), except that, at
the option of Holdings, payment of interest may be made by check mailed to the
address of each Holder as such address appears in the Exchange Discount Note
register.
The Exchange Discount Notes will not be entitled to the benefit of any
mandatory sinking fund.
The Exchange Discount Notes will not be guaranteed by any of the
Subsidiaries.
The Exchange Discount Notes will be issued only in fully registered form,
without coupons, in denominations of $1,000 in principal amount at maturity
and any integral multiple of $1,000 in principal amount at maturity. No
service charge will be made for any registration of transfer or exchange of
Exchange Discount Notes, but Holdings may require payment of a sum sufficient
to cover any transfer tax or other similar governmental charge payable in
connection therewith.
TERMS OF THE EXCHANGE DISCOUNT NOTES
The Original Discount Notes were issued at a discount to their aggregate
principal amount at maturity to generate gross proceeds to Holdings on the
Issue Date of approximately $25.0 million. The terms of the Exchange Discount
Notes are identical in all material respects to those of the Original Discount
Notes, except for certain transfer restrictions and registration rights
relating to the Original Discount Notes. The Discount Notes will accrete in
value from the Issue Date until May 1, 2003 at the rate per annum shown on the
cover of this Prospectus, compounded semi-annually, to an aggregate principal
amount of $45.140 million, the principal amount at maturity. All references to
the principal amount of the Discount Notes herein are references to the
principal amount at final maturity. Cash interest will not accrue on the
Exchange Discount Notes prior to May 1, 2003. Thereafter, interest will accrue
at the rate per annum shown on the cover of this Prospectus and will be
54
<PAGE>
payable semi-annually in cash and in arrears to the Holders of record on each
April 15 or October 15 immediately preceding the interest payment date on May
1 and November 1 of each year, commencing November 1, 2003. Cash interest on
the Exchange Discount Notes will accrue from the most recent interest payment
date to which interest on the Discount Notes has been paid or, if no interest
has been paid, from May 1, 2003. The Exchange Discount Notes will mature and
be payable in full on May 1, 2009.
The Exchange Discount Notes will be unsecured, senior obligations of
Holdings and will rank pari passu in right of payment to all existing and
future unsecured, unsubordinated indebtedness of Holdings. Simultaneously with
the Original Offering, Holdings Guaranteed the Bank Indebtedness, which
Guarantee is secured by a pledge of the Capital Stock of Iron Age. All of the
operations of Holdings are conducted through its Subsidiaries, and therefore
Holdings is dependent upon the cash flow of the Subsidiaries to meet its
obligations, including its obligations on the Discount Notes. See "Risk
Factors--Limitation on Access to Cash Flow of Subsidiaries; Holding Company
Structure." The New Credit Facility and the Senior Subordinated Indenture
restrict the ability of Iron Age and the other Subsidiaries of Holdings to pay
dividends or make other distributions to Holdings. The Original Discount Notes
are, and the Exchange Discount Notes will be, effectively subordinated to all
existing and future Indebtedness and liabilities of Holdings' Subsidiaries
(including trade credit, the Senior Subordinated Notes and Indebtedness of
Iron Age and its Subsidiaries in respect of the New Credit Facility). Any
right of Holdings to receive assets of any of its Subsidiaries upon such
Subsidiary's liquidation or reorganization (and the consequent right of
Holders of the Discount Notes to participate in those assets) will be
effectively subordinated to the claims of that Subsidiary's creditors.
OPTIONAL REDEMPTION
Except as set forth below, the Exchange Discount Notes will not be
redeemable at the option of Holdings prior to May 1, 2003. On and after such
date, the Exchange Discount Notes will be redeemable, at Holdings' option, in
whole or in part, at any time or from time to time, upon not less than 30 nor
more than 60 days' prior notice mailed by first-class mail to each Holder's
registered address, at the following redemption prices (expressed in
percentages of principal amount), plus accrued and unpaid interest and
liquidated damages, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month period
commencing on May 1 of the years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
------ ----------------
<S> <C>
2003..................................................... 106.063%
2004..................................................... 104.042%
2005..................................................... 102.021%
2006 and thereafter...................................... 100.000%
</TABLE>
In addition, at any time and from time to time prior to May 1, 2001,
Holdings may, at its option, redeem in the aggregate up to 35% of the
aggregate principal amount at maturity of the Discount Notes originally issued
with the proceeds of one or more Public Equity Offerings received by Holdings,
following which there is a Public Market, at a redemption price (expressed as
a percentage of Accreted Value) of 112.125% plus accrued and unpaid interest
and liquidated damages, if any, to the redemption date (subject to the right
of Holders of record on the relevant record date to receive interest due on
the relevant interest payment date); provided, however, that at least 65% of
the aggregate principal amount at maturity of the Discount Notes originally
issued must remain outstanding after each such redemption.
SELECTION
In the case of any partial redemption, selection of the Discount Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Discount Note of $1,000 in original principal amount
at maturity or less will be redeemed in part. If any Exchange Discount Note is
to be redeemed in part only, the notice of redemption relating to such
Exchange Discount Note shall state the portion of the principal amount at
maturity thereof to be redeemed. A new Exchange Discount Note in principal
amount at maturity equal to the unredeemed portion of
55
<PAGE>
the original Exchange Discount Note will be issued in the name of the Holder
of the original Exchange Discount Note upon cancellation of the original
Exchange Discount Note.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder shall have the right
to require that Holdings repurchase such Holder's Exchange Discount Notes at a
purchase price in cash equal to 101% of the Accreted Value thereof plus
accrued and unpaid interest and liquidated damages, if any, to the date of
repurchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant interest payment date), in
accordance with the provisions of the next paragraph.
Within 30 days following any Change of Control, Holdings shall mail a notice
to each Holder with a copy to the Trustee stating: (i) that a Change of
Control has occurred and that such Holder has the right to require Holdings to
purchase such Holder's Exchange Discount Notes at a purchase price in cash
equal to 101% of the Accreted Value thereof plus accrued and unpaid interest
and liquidated damages, if any, to the date of repurchase (subject to the
right of Holders of record on the relevant record date to receive interest on
the relevant interest payment date), (ii) the circumstances and relevant facts
and relevant financial information regarding such Change of Control, (iii) the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed) and (iv) the procedures determined by
Holdings, consistent with the Indenture, that a Holder must follow in order to
have its Exchange Discount Notes repurchased.
Holdings shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Exchange Discount Notes pursuant to the
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the Indenture, Holdings shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under the Indenture by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
Holdings and the Initial Purchasers. Management of Holdings has no present
intention to engage in a transaction involving a Change of Control, although
it is possible that Holdings would decide to do so in the future. Subject to
the limitations discussed below, Holdings could, in the future, enter into
certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of indebtedness outstanding at
such time or otherwise affect Holdings' capital structure or credit ratings.
The occurrence of a Change of Control would constitute a default under the
New Credit Facility. A Change of Control under the Indenture would also
constitute a change of control under the Senior Subordinated Indenture and
would permit each holder of the Senior Subordinated Notes to require Iron Age
to repurchase all of such holder's Senior Subordinated Notes at a price equal
to 101% of the principal amount thereof, plus accrued and unpaid interest and
liquidated damages, if any, to the date of repurchase. Future Senior
Indebtedness of Holdings and its Subsidiaries may contain prohibitions of
certain events which would constitute a Change of Control or require such
Senior Indebtedness to be repurchased upon a Change of Control. Moreover, the
exercise by the Holders of their right to require Holdings to repurchase the
Discount Notes could cause a default under such Senior Indebtedness, even if
the Change of Control itself does not, due to the financial effect of such
repurchase on Holdings. Finally, Holdings' ability to pay cash to the Holders
upon a repurchase may be limited by Holdings' then existing financial
resources. The New Credit Facility and the Senior Subordinated Indenture will
restrict the ability of Iron Age and the other Subsidiaries of Holdings to pay
dividends or make any other distributions to Holdings. If Holdings is unable
to obtain dividends from Iron Age or the other Subsidiaries of Holdings
sufficient to permit the repurchase of the Discount Notes or does not
refinance such Indebtedness, Holdings will likely not have the financial
resources to repurchase Discount Notes. In any event, there can be no
assurance that Holdings' Subsidiaries will have the resources available to pay
any such dividend or make any such distribution, and there can be no assurance
that sufficient funds will be available when necessary to make any repurchases
required in connection with a Change of Control. Even if sufficient funds were
otherwise available, the terms of the New Credit Facility will (and other
Senior Indebtedness may) prohibit Holdings' prepayment of the Discount Notes
56
<PAGE>
prior to their scheduled maturity. Consequently, if Iron Age is not able (i)
to prepay the New Credit Facility and other Senior Indebtedness containing
similar restrictions or obtain requisite consents, as described above, or (ii)
to make a dividend payment to Holdings to repurchase the Exchange Discount
Notes, Holdings will be unable to fulfill its repurchase obligations if
Holders of Exchange Discount Notes exercise their repurchase rights following
a Change of Control, thereby resulting in a default under the Indenture.
The Change of Control provisions described above may deter certain mergers,
tender offers and other takeover attempts involving Holdings by increasing the
capital required to effectuate such transactions. The definition of "Change of
Control" includes a disposition of all or substantially all of the property
and assets of Holdings and its Restricted Subsidiaries. With respect to the
disposition of property or assets, the phrase "all or substantially all" as
used in the Indenture varies according to the facts and circumstances of the
subject transaction, has no clearly established meaning under New York law
(which is the choice of law under the Indenture) and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the property or assets of a
Person, and therefore it may be unclear as to whether a Change of Control has
occurred and whether Holdings is required to make an offer to repurchase the
Exchange Discount Notes as described above.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Exchange Discount Notes to be
resold as set forth herein will initially be issued in the form of one or more
Global Exchange Discount Notes (the "Global Exchange Discount Notes"). The
Global Exchange Discount Notes will be deposited on the date of the closing of
the sale of the Discount Notes offered hereby with, or on behalf of, the
Depositary and registered in the name of Cede and Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Exchange
Discount Note Holder").
Exchange Discount Notes that are issued as described below under "--
Certified Securities" will be issued in the form of registered definitive
certificates (the "Certificated Securities"). Upon the transfer of
Certificated Securities, such Certificated Securities may, unless all Global
Exchange Discount Notes have previously been exchanged for Certificated
Securities, be exchanged for an interest in the Global Exchange Discount Note
representing the principal amount of Exchange Discount Notes being
transferred, subject to the transfer restrictions set forth in the Indenture.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks 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.
Holdings expects that pursuant to procedures established by the Depositary
(i) upon deposit of the Global Exchange Discount Notes, the Depositary will
credit the accounts of Participants designated by the Initial Purchasers with
portions of the principal amount of the Global Exchange Discount Notes and
(ii) ownership of the Exchange Discount Notes evidenced by the Global Exchange
Discount Notes will be shown on, and the transfer of 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. Prospective purchasers are advised
that 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 Exchange
57
<PAGE>
Discount Notes evidenced by the Global Exchange Discount Note will be limited
to such extent. For certain other restrictions on the transferability of the
Exchange Discount Notes, see "Notice to Investors."
So long as the Global Exchange Discount Note Holder is the registered owner
of any Exchange Discount Notes, the Global Exchange Discount Note Holder will
be considered the sole Holder under the Indenture of any Discount Notes
evidenced by the Global Exchange Discount Notes. Beneficial owners of Exchange
Discount Notes evidenced by the Global Exchange Discount Notes 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. Neither Holdings nor the Trustee will
have any responsibility or liability for any aspect of the records of the
Depositary or for maintaining, supervising or reviewing any records of the
Depositary relating to the Exchange Discount Notes.
Payments in respect of the principal of, premium, if any, interest and
liquidated damages, if any, on any Exchange Discount Notes registered in the
name of the Global Exchange Discount Note Holder on the applicable record date
will be payable by the Trustee to or at the direction of the Global Exchange
Discount Note Holder in its capacity as the registered Holder under the
Indenture. Under the terms of the Indenture, Holdings and the Trustee may
treat the persons in whose names Exchange Discount Notes, including the Global
Exchange Discount Notes, are registered as the owners thereof for the purpose
of receiving such payments. Consequently, neither Holdings nor the Trustee has
or will have any responsibility or liability for the payment of such amounts
to beneficial owners of Exchange Discount Notes. Holdings believes, however,
that it is currently the policy of the Depositary to immediately credit the
accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings 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 Exchange Discount Notes 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.
CERTIFIED SECURITIES
Subject to certain conditions, any person having a beneficial interest in a
Global Exchange Discount Note may, upon request to the Trustee, exchange such
beneficial interest for Exchange Discount Notes in the form of Certified
Securities. Upon any such issuance, the Trustee is required to register such
Certificated Securities in the name of, and cause the same to be delivered to,
such person or persons (or the nominee of any thereof). All such certificated
Exchange Discount Notes would be subject to the legend requirements described
herein under "Notice to Investors." In addition, if (i) Holdings notifies the
Trustee in writing that the Depositary is no longer willing or able to act as
a depositary and Holdings is unable to locate a qualified successor within 90
days or (ii) Holdings, at its option, notifies the Trustee in writing that it
elects to cause the issuance of Exchange Discount Notes in the form of
Certificated Securities under the Indenture, then, upon surrender by the
Global Exchange Discount Note Holder of its Global Exchange Discount Note,
Exchange Discount Notes in such form will be issued to each person that the
Global Exchange Discount Note Holder and the Depositary identify as being the
beneficial owner of the related Exchange Discount Notes.
Neither Holdings nor the Trustee will be liable for any delay by the Global
Exchange Discount Note Holder or the Depositary in identifying the beneficial
owners of Exchange Discount Notes and Holdings and the Trustee may
conclusively rely on, and will be protected in relying on, instructions from
the Global Exchange Discount Note Holder or the Depositary for all purposes.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS. (a) Holdings shall not, and shall not permit any
Restricted Subsidiary to, Incur any Indebtedness unless, on the date of such
Incurrence, the Consolidated Coverage Ratio exceeds 1.75 to 1.00.
58
<PAGE>
(b) Notwithstanding the foregoing paragraph (a), Holdings and its Restricted
Subsidiaries may Incur the following Indebtedness:
(1) Indebtedness Incurred pursuant to the New Acquisition Credit
Facility; provided, however, that, after giving effect to any such
Incurrence, the aggregate principal amount of such Indebtedness then
outstanding thereunder does not exceed the difference between (i) $35
million and (ii) the aggregate amount of all scheduled or otherwise
mandatory permanent repayments (but not optional repayments) of principal
actually made thereunder since the Issue Date;
(2) Indebtedness Incurred pursuant to the New Revolving Credit Facility;
provided, however, that, after giving effect to any such Incurrence, the
aggregate principal amount of such Indebtedness then outstanding thereunder
does not exceed the greater of (i) the difference between (a) $30 million
less any Indebtedness Incurred under clause (15) and (b) the aggregate
amount of all repayments (whether scheduled, otherwise mandatory or
optional) of principal actually made thereunder since the Issue Date to the
extent that the corresponding commitments have been permanently reduced and
(ii) the sum of (x) 50% of the value of the eligible inventory of Holdings
and its Restricted Subsidiaries under the New Revolving Credit Facility and
(y) 80% of the value of the eligible accounts receivable of Holdings and
its Restricted Subsidiaries under the New Revolving Credit Facility, in
each case determined in accordance with GAAP;
(3) Indebtedness of (A) Holdings owing to and held by any Restricted
Subsidiary or (B) a Wholly Owned Subsidiary owing to and held by Holdings
or a Restricted Subsidiary; provided, however, that (x) in the case of
clause (A), any such Indebtedness is subordinated to the Discount Notes,
(y) in the case of clause (B), any subsequent issuance or transfer of any
Capital Stock which results in any such Wholly Owned Subsidiary ceasing to
be a Wholly Owned Subsidiary shall be deemed to constitute the Incurrence
of such Indebtedness by the issuer thereof and (z) in the case of clause
(B), any subsequent transfer of such Indebtedness (other than to Holdings
or a Wholly Owned Subsidiary) shall be deemed to constitute the Incurrence
of such Indebtedness by the issuer thereof;
(4) Indebtedness represented by the Discount Notes;
(5) Indebtedness represented by the Senior Subordinated Notes and the
Subsidiary Guaranties;
(6) Indebtedness outstanding on the Issue Date (other than Indebtedness
described in clause (1), (2) or (3));
(7) Refinancing Indebtedness Incurred in respect of any Indebtedness
described in clause (4), (5), (6) or (8) or this clause (7) or Incurred
pursuant to paragraph (a);
(8) Indebtedness of a Restricted Subsidiary Incurred and outstanding on
the date on which such Restricted Subsidiary became a Restricted Subsidiary
or was acquired by Holdings (other than Indebtedness Incurred to provide
all or any portion of the funds used to consummate the transaction or
series of related transactions pursuant to which such Restricted Subsidiary
became a Subsidiary or was otherwise acquired by Holdings);
(9) Indebtedness of foreign Restricted Subsidiaries, and any Refinancing
Indebtedness thereof; provided, however, that the aggregate principal
amount of such Indebtedness at any time outstanding does not exceed $10
million;
(10) Indebtedness in respect of performance bonds, completion guarantees,
bankers' acceptances, letters of credit and surety or appeal bonds provided
by Holdings or any Restricted Subsidiary in the ordinary course of
business, including, without limitation, letters of credit in respect of
workers' compensation claims or self-insurance, or other Indebtedness with
respect to reimbursement-type obligations regarding workers' compensation
claims;
(11) Hedging Obligations consisting of Interest Rate Agreements and
Currency Agreements entered into in the ordinary course of business and not
for the purpose of speculation; provided, however, that, in the case of
Currency Agreements and Interest Rate Agreements, such Currency Agreements
and Interest
59
<PAGE>
Rate Agreements do not increase the Indebtedness of Holdings outstanding at
any time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder;
(12) Purchase Money Indebtedness, and any Refinancing Indebtedness
thereof, and Capital Lease Obligations Incurred to finance the acquisition
by Holdings or a Restricted Subsidiary of any assets in the ordinary course
of business; provided, however, that the aggregate principal amount of such
Indebtedness at any time outstanding shall not exceed $10 million;
(13) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft of similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within five Business Days of Incurrence;
(14) Indebtedness of Holdings or any Restricted Subsidiary arising from
agreements providing for indemnification, adjustment of purchase price,
earn out or similar obligations, in any case Incurred in connection with
the disposition of any assets of Holdings or any Restricted Subsidiary
(other than Guarantees of Indebtedness Incurred by any Person acquiring all
or any portion of such assets for the purpose of financing such
acquisition) in a principal amount not to exceed the gross proceeds
actually received by Holdings or any Restricted Subsidiary in connection
with such disposition;
(15) Indebtedness Incurred pursuant to any Permitted Receivables
Financing;
(16) Guarantees by Holdings or any Wholly Owned Subsidiary of
Indebtedness of Holdings or any Wholly Owned Subsidiary that was permitted
to be Incurred under another provision of this covenant;
(17) Indebtedness, and any Refinancing Indebtedness thereof, which is not
Senior Indebtedness; provided, however, that the aggregate principal amount
of such Indebtedness at any time outstanding shall not exceed $5 million;
and
(18) Indebtedness, and any Refinancing Indebtedness thereof, in an
aggregate principal amount which, together with all other Indebtedness
(other than Indebtedness permitted by clauses (1) through (17) or paragraph
(a)) of Holdings and the Restricted Subsidiaries outstanding on the date of
Incurrence of such Indebtedness, does not exceed $10 million.
(c) For purposes of determining compliance with the foregoing covenant, (i)
in the event that an item of Indebtedness meets the criteria of more than one
of the types of Indebtedness described above, Holdings, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses
and (ii) an item of Indebtedness may be divided and classified in more than
one of the types of Indebtedness described above.
LIMITATION ON RESTRICTED PAYMENTS. (a) Holdings shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to make a Restricted
Payment if at the time Holdings or such Restricted Subsidiary makes such
Restricted Payment:
(1) a Default shall have occurred and be continuing or would result
therefrom;
(2) Holdings is not able to Incur an additional $1.00 of Indebtedness
pursuant to paragraph (a) of the covenant described under "--Limitation on
Indebtedness"; or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount of any payments made in property other than
in cash to be valued at the fair market value of such property, as
determined in good faith by the Board of Directors) declared or made since
the Issue Date (including any amount included in the calculation of the
amount of Restricted Payments pursuant to paragraph (c) of "--Limitation on
Indebtedness") would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter immediately following the fiscal quarter during which
60
<PAGE>
the Original Discount Notes are originally issued to the end of the
most recent fiscal quarter ending at least 45 days (or, if less, the
number of days after the end of such fiscal quarter as the consolidated
financial statements of Holdings shall be provided to the Noteholders
pursuant to the Indenture) prior to the date of such Restricted Payment
(or, in case such Consolidated Net Income accrued during such period
(treated as one accounting period) shall be a deficit, minus 100% of
such deficit);
(B) the aggregate Net Cash Proceeds received by Holdings from the
issuance or sale of its Capital Stock (other than Disqualified Stock)
and other capital contributions subsequent to the Issue Date (other
than net proceeds received from an issuance or sale of such Capital
Stock to a Subsidiary of Holdings and other than an issuance or sale to
an employee stock ownership plan or to a trust established by Holdings
or any of its Subsidiaries for the benefit of their employees to the
extent that the purchase by such plan or trust is financed by
Indebtedness of such plan or trust to Holdings or any Subsidiary or for
which Holdings or any Subsidiary is liable, directly or indirectly
(including being liable to make cash contributions to such plan or
trust which are used to pay interest or principal on such
Indebtedness), unless such Indebtedness has been repaid with cash on or
prior to the date of determination);
(C) the amount by which Indebtedness of Holdings or its Restricted
Subsidiaries is reduced on Holdings' balance sheet upon the conversion
or exchange (other than by a Subsidiary of Holdings) subsequent to the
Issue Date of any Indebtedness of Holdings or its Restricted
Subsidiaries convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of Holdings (less the amount of any cash, or the
fair market value of any other property, distributed by Holdings or any
Restricted Subsidiary upon such conversion or exchange);
(D) an amount equal to the sum of (i) the net reduction in
Investments in Unrestricted Subsidiaries resulting from dividends,
repayments of loans or advances or other transfers of assets by any
Unrestricted Subsidiary to Holdings or any Restricted Subsidiary, or
the receipt of proceeds by Holdings or any Restricted Subsidiary from
the sale or other disposition of any portion of the Capital Stock of
any Unrestricted Subsidiary, in each case occurring subsequent to the
Issue Date, and (ii) the portion (proportionate to Holdings' equity
interest in such Subsidiary) of the fair market value of the net assets
of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary
is designated a Restricted Subsidiary; provided, however, that the
foregoing sum shall not exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments previously made (and treated as a
Restricted Payment) by Holdings or any Restricted Subsidiary in such
Unrestricted Subsidiary; and
(E) $5 million.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated
Obligations of Holdings or any Restricted Subsidiary made by exchange for,
or out of the proceeds of the substantially concurrent sale of, Capital
Stock of Holdings (other than Disqualified Stock and other than Capital
Stock issued or sold to a Subsidiary or an employee stock ownership plan or
to a trust established by Holdings or any of its Subsidiaries for the
benefit of their employees to the extent that the purchase by such plan or
trust is financed by Indebtedness of such plan or trust to Holdings or any
Subsidiary or for which Holdings or any Subsidiary is liable, directly or
indirectly (including being liable to make cash contributions to such plan
or trust which are used to pay interest or principal on such Indebtedness),
unless such Indebtedness has been repaid with cash on or prior to the date
of determination); provided, however, that (A) such purchase or redemption
shall be excluded from the calculation of the amount of Restricted Payments
and (B) the Net Cash Proceeds from such sale shall be excluded from the
calculation of amounts under clause (3)(B) of paragraph (a) above;
(ii) any purchase or redemption of (A) Subordinated Obligations of
Holdings made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Indebtedness of Holdings which is permitted to be
Incurred pursuant to paragraph (b) of the covenant described under "--
Limitation on Indebtedness"
61
<PAGE>
or (B) Subordinated Obligations of a Restricted Subsidiary made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of such Restricted Subsidiary or Holdings which is permitted
to be Incurred pursuant to paragraph (b) of the covenant described under
"--Limitation on Indebtedness"; provided, however, that, except as
otherwise required by paragraph (c) of the covenant described under "--
Limitation on Indebtedness," such purchase or redemption shall be excluded
from the calculation of the amount of Restricted Payments;
(iii) any purchase or redemption of (A) Disqualified Stock of Holdings
made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Disqualified Stock of Holdings or (B) Disqualified
Stock of a Restricted Subsidiary made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Disqualified Stock of
such Restricted Subsidiary or Holdings; provided, however, that such
purchase or redemption will be excluded from the calculation of the amount
of Restricted Payments;
(iv) payments on the Issue Date of $17.6 million to redeem the
outstanding Holdings Series A Preferred Stock; provided, however, that such
payments will be excluded from the calculation of the amount of Restricted
Payments;
(v) upon the occurrence of a Change of Control and within 60 days after
the completion of the offer to repurchase the Discount Notes pursuant to
the covenant described under "--Change of Control" above (including the
purchase of all Discount Notes tendered), any purchase or redemption of
Subordinated Obligations of Holdings pursuant to the terms thereof as a
result of such Change of Control at a purchase or redemption price not to
exceed 101% of the outstanding principal amount thereof, plus accrued and
unpaid interest thereon, if any; provided, however, that (A) at the time of
such purchase or redemption, no Default or Event of Default shall have
occurred and be continuing or would result therefrom, (B) Holdings would be
able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a)
of the covenant described under "--Limitation on Indebtedness" after giving
pro forma effect to such Restricted Payment, (C) such purchase or
redemption is not made, directly or indirectly, from the proceeds of (or
made in anticipation of) any Issuance of Indebtedness by Holdings or any
Subsidiary and (D) such purchase or redemption will be included in the
calculation of the amount of Restricted Payments;
(vi) dividends paid within 60 days after the date of declaration thereof
if at such date of declaration such dividend would have complied with this
covenant; provided, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments;
(vii) payments to redeem or repurchase Capital Stock of Holdings from
existing or former employees or management of Holdings or any Subsidiary or
their assigns, estates or heirs, in each case in connection with the
repurchase provisions under employee stock option or stock purchase
agreements or other agreements to compensate management employees and in
each case approved by the Board of Directors; provided, however, that at
the time of such payment, no Default or Event of Default shall have
occurred and be continuing or would result therefrom; and provided further,
however, that such redemptions or repurchases shall not exceed an aggregate
amount equal to the sum of (A) $2.0 million and (B) the amount of any
proceeds to Holdings from (1) sales of Capital Stock of Holdings to
management employees subsequent to the Issue Date and (2) any "key-man"
life insurance policies which are used to make such redemptions or
repurchases; and provided further, however, that (x) such payments (other
than payments from the proceeds of any "key-man" life insurance policies)
will be included in the calculation of the amount of Restricted Payments,
(y) such payments from the proceeds of any "key-man" life insurance
policies will be excluded in the calculation of the amount of Restricted
Payments and (z) the cancellation of Indebtedness owing to Holdings from
members of management of Holdings or any of its Restricted Subsidiaries in
connection with a repurchase of Capital Stock of Holdings by Holdings will
be excluded in the calculation of Restricted Payments;
(viii) loans and advances made after the Issue Date to employees or
directors of Holdings or any Subsidiary the proceeds of which are used to
purchase Capital Stock of Holdings; provided, however, that the aggregate
principal amount of such loans and advances shall not exceed $2 million at
any time outstanding; and provided further, however, that such loans and
advances will be included in the calculation of the amount of Restricted
Payments to the extent not repaid; and
62
<PAGE>
(ix) repurchases of Capital Stock of Holdings by Holdings or a Restricted
Subsidiary deemed to occur upon the exercise of stock options if such
Capital Stock represents a portion of the exercise price thereof; provided,
however, that such payments will be excluded in the calculation of the
amount of Restricted Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. Holdings shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or consensual restriction (other than
pursuant to the New Credit Facility) on the ability of any Restricted
Subsidiary (a) to pay dividends or make any other distributions on its Capital
Stock to Holdings or a Restricted Subsidiary or pay any Indebtedness owed to
Holdings, (b) to make any loans or advances to Holdings or (c) to transfer any
of its property or assets to Holdings, except: (i) any encumbrance or
restriction pursuant to an agreement in effect at or entered into on the Issue
Date (including, without limitation, the New Credit Facility, the Senior
Subordinated Indenture and the Indenture), (ii) any encumbrance or restriction
with respect to a Restricted Subsidiary pursuant to an agreement relating to
any Indebtedness Incurred by such Restricted Subsidiary which was entered into
on or prior to the date on which such Restricted Subsidiary was acquired by
Holdings (other than Indebtedness Incurred to provide all or any portion of
the funds used to consummate the transaction or series of related transactions
pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or
was acquired by Holdings) and outstanding on such date, (iii) any encumbrance
or restriction with respect to a Restricted Subsidiary pursuant to an
agreement effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (i) or (ii) of this covenant or this clause
(iii) or contained in any amendment to an agreement referred to in clause (i)
or (ii) of this covenant or this clause (iii); provided, however, that the
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in any such agreement or amendment are no less favorable to the
Holder in any material respect than the encumbrances and restrictions with
respect to such Restricted Subsidiary contained in such agreements, (iv) in
the case of clause (c) above, any encumbrance or restriction (A) that
restricts in a customary manner the subletting, assignment or transfer of any
property or asset that is subject to a lease, license or similar contract, or
the assignment or transfer of any such lease, license or other contract,
including restrictions on assignment, (B) by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any
property or assets of Holdings or any Restricted Subsidiary not otherwise
prohibited by the Indenture, (C) contained in mortgages, pledges or other
security agreements securing Indebtedness of a Restricted Subsidiary to the
extent such encumbrance or restriction restricts the transfer of the property
subject to such mortgages, pledges or other security agreements or (D)
pursuant to customary provisions restricting dispositions of real property
interests set forth in any reciprocal easement agreements of Holdings or any
Restricted Subsidiary, (v) any restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or disposition, (vi)
any encumbrance or restriction with respect to any Receivables Subsidiary
pursuant to an agreement related to Indebtedness of the Receivables Subsidiary
which is permitted under the covenant described under "--Limitation on
Indebtedness" or pursuant to any agreement relating to a Financing Disposition
to or by the Receivables Subsidiary, (vii) any encumbrance or restriction
contained in any agreement or instrument governing Indebtedness (whether or
not outstanding) of foreign Restricted Subsidiaries if such Indebtedness is
permitted under the covenant described under clause (9) of paragraph (b) of
"--Limitation on Indebtedness"; provided, however, that any such restrictions
are ordinary and customary with respect to the type of Indebtedness being
Incurred (under the relevant circumstances), (viii) any customary encumbrance
or restriction imposed by any agreement to sell assets or Capital Stock
permitted under the Indenture to any Person pending the closing of such sale
and (ix) any customary encumbrances or restrictions created in connection with
Indebtedness Incurred under the covenant described in "--Limitation on
Indebtedness" which are no more restrictive than those contained in the Senior
Subordinated Indenture as in effect on the Issue Date.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. Holdings shall not, and
shall not permit any Restricted Subsidiary to, consummate any Asset
Disposition unless Holdings or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value (including as to the value of all non-cash consideration), as
determined in good faith by the Board of Directors, of the shares
63
<PAGE>
and assets subject to such Asset Disposition and at least 80% of the
consideration thereof received by Holdings or such Restricted Subsidiary is in
the form of cash or cash equivalents. In the event and to the extent that the
Net Available Cash received by Holdings or any Restricted Subsidiary from one
or more Asset Dispositions occurring on or after the Issue Date and not
applied pursuant to clause (i) or (ii) below exceeds $5 million, then Holdings
or such Restricted Subsidiary shall (i) within 360 days after the date such
Net Available Cash so received exceeds $5 million and to the extent Holdings
or such Restricted Subsidiary elects (or is required by the terms of any
Senior Indebtedness), (A) apply an amount equal to such excess Net Available
Cash received by Holdings to prepay, repay or purchase Senior Indebtedness of
Holdings or apply an amount equal to such excess Net Available Cash received
by any Restricted Subsidiary to prepay, repay or purchase Indebtedness of such
Restricted Subsidiary, in each case owing to a Person other than Holdings or
any Affiliate of Holdings, or (B) invest (or enter into a binding commitment
to invest; provided, however, that such commitment shall be subject only to
customary conditions (other than financing) and such investment shall be
consummated within 180 days after the end of such 360-day period) an amount
equal to such Net Available Cash not applied pursuant to clause (A), in
Additional Assets (including by means of an Investment in Additional Assets by
a Restricted Subsidiary with Net Available Cash received by Holdings or
another Restricted Subsidiary) and (ii) apply such excess Net Available Cash
(to the extent not applied pursuant to clause (i)) as provided in the
following paragraphs of the covenant described hereunder; provided, however,
that in connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A) above, Holdings or such Restricted Subsidiary shall
retire such Indebtedness and shall cause the related loan commitment, if any,
to be permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased. The amount of such excess Net Available Cash
required to be applied pursuant to clause (ii) above and not theretofore so
applied shall constitute "Excess Proceeds." Pending application of Net
Available Cash pursuant to this provision, such Net Available Cash shall be
invested in Temporary Cash Investments.
If at any time the aggregate amount of Excess Proceeds not theretofore
subject to an Excess Proceeds Offer (as defined below) totals at least $5
million, Holdings shall, not later than 30 days after the end of the period
during which Holdings is required to apply such Excess Proceeds pursuant to
clause (i) of the immediately preceding paragraph (or, if Holdings so elects,
at any time within such period), make an offer (an "Excess Proceeds Offer") to
purchase from the holders thereof on a pro rata basis an aggregate principal
amount of Discount Notes and other pari passu debt obligations subject to a
similar covenant (collectively, the "Pari Passu Notes") equal to the Excess
Proceeds (rounded down to the nearest multiple of $1,000) on such date, at a
purchase price equal to 100% of the Accreted Value of such Discount Notes and
Pari Passu Notes, plus, in each case, accrued interest and liquidated damages,
if any, to the date of purchase (the "Excess Proceeds Payment"). Upon
completion of an Excess Proceeds Offer, the amount of Excess Proceeds
remaining after application pursuant to such Excess Proceeds Offer (including
payment of the purchase price for Discount Notes and Pari Passu Notes duly
tendered) may be used by Holdings for any corporate purpose (to the extent not
otherwise prohibited by the Indenture).
If the Accreted Value (or the aggregate principal amount, as applicable) of
Discount Notes and Pari Passu Notes validly tendered and not withdrawn in
connection with an Excess Proceeds Offer exceeds the Excess Proceeds available
therefor, such Excess Proceeds will be apportioned between the Discount Notes
and such Pari Passu Notes, with the portion of such Excess Proceeds payable in
respect of the Discount Notes equal to the amount of such Excess Proceeds
multiplied by a fraction, the numerator of which is the Accreted Value of the
Discount Notes and the denominator of which is the sum of the Accreted Value
of the Discount Notes and the outstanding principal amount (or accreted value,
as applicable) of the relevant Pari Passu Notes.
For the purposes of this covenant, the following are deemed to be cash: (i)
the assumption of Senior Indebtedness of Holdings or any Restricted Subsidiary
and the release of Holdings or such Restricted Subsidiary from all liability
on such Indebtedness in connection with such Asset Disposition and (ii)
securities received by Holdings or any Restricted Subsidiary from the
transferee that are promptly converted by Holdings or such Restricted
Subsidiary into cash; provided, however, that any Designated Noncash
Consideration received by Holdings or any Restricted Subsidiary in such Asset
Sale having an aggregate fair market value, taken together
64
<PAGE>
with all other Designated Noncash Consideration received pursuant to this
proviso that is at that time outstanding, not to exceed $5 million (with the
fair market value of each item of Designated Noncash Consideration being
measured at the time received and without giving effect to subsequent changes
in value), shall be deemed to be cash for the purposes of this provision.
Holdings shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in the event that Excess Proceeds are received by Holdings and Holdings is
required to repurchase Discount Notes as described above. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this covenant, Holdings shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the Indenture by virtue thereof.
The New Credit Facility and the Senior Subordinated Indenture will restrict
the ability of Iron Age and the other Subsidiaries of Holdings to pay
dividends or make any other distributions to Holdings. If Holdings is unable
to obtain dividends from Iron Age or the other Subsidiaries of Holdings
sufficient to permit the repurchase of the Discount Notes or does not
refinance such Indebtedness, Holdings will likely not have the financial
resources to repurchase Discount Notes. In any event, there can be no
assurance that Holdings' Subsidiaries will have the resources available to pay
any such dividend or make any such distribution. Holdings' failure to make an
Asset Sale Offer when required or to purchase tendered Discount Notes when
tendered would constitute an Event of Default under the Indenture.
LIMITATION ON AFFILIATE TRANSACTIONS. (a) Holdings shall not, and shall not
permit any Restricted Subsidiary to, enter into or conduct any transaction
(including the purchase, sale, lease or exchange of any property, employee
compensation arrangements or the rendering of any service) with any Affiliate
of Holdings (an "Affiliate Transaction") unless (1) the terms of such
Affiliate Transaction are no less favorable to Holdings or such Restricted
Subsidiary than those that could be obtained at the time of such transaction
in arms-length dealings with a Person who is not such an Affiliate, (2) if
such Affiliate Transaction involves an amount in excess of $1 million, the
terms of such Affiliate Transaction (i) are set forth in writing, (ii) comply
with clause (1) and (iii) have been approved by a majority of the
disinterested members of the Board of Directors and (3) if such Affiliate
Transaction involves an amount in excess of $10 million, the terms of such
Affiliate Transaction (i) comply with clause (2) and (ii) have been determined
by a nationally recognized investment banking firm to be fair, from a
financial standpoint, to Holdings and its Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i) any
Restricted Payment permitted to be made pursuant to the covenant described
under "--Limitation on Restricted Payments," (ii) any issuance of securities,
or other payments, awards or grants in cash, securities or otherwise pursuant
to, or the funding of, employment arrangements, stock options and stock
ownership plans in the ordinary course of business and approved by the Board
of Directors, (iii) the grant of stock options or similar rights to employees
and directors of Holdings in the ordinary course of business and pursuant to
plans approved by the Board of Directors, (iv) loans or advances to employees
in the ordinary course of business of Holdings or its Restricted Subsidiaries,
but in any event not to exceed $2 million in the aggregate outstanding at any
time, (v) fees, compensation or employee benefit arrangements paid to and
indemnity provided for the benefit of directors, officers or employees of
Holdings or any Subsidiary in the ordinary course of business, (vi) any
Affiliate Transaction between Holdings and a Restricted Subsidiary or between
Restricted Subsidiaries in the ordinary course of business (so long as the
other stockholders of any participating Restricted Subsidiaries which are not
Wholly Owned Subsidiaries are not themselves Affiliates of Holdings), (vii)
transactions with a Receivables Subsidiary pursuant to any Permitted
Receivables Financing, (viii) any payment under Section 1.b or 1.d of the
Management Agreement not to exceed $300,000 in any fiscal year; provided,
however, that (1) at the time of such payment no Default or Event of Default
shall have occurred and be continuing or would result therefrom, and the
Consolidated Coverage Ratio shall exceed 1.50 to 1.00 and (2) any such payment
shall accrue if not paid pursuant to the foregoing clause (1), or (ix) any
payment under the Management Agreement other than under Section 1.b or 1.d
thereof.
65
<PAGE>
LIMITATION ON THE ISSUANCE OR SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. Holdings (i) shall not, and shall not permit any Restricted
Subsidiary to, sell, pledge, hypothecate or otherwise dispose of any shares of
Capital Stock of a Restricted Subsidiary, other than pledges of Capital Stock
of a Restricted Subsidiary securing the Bank Indebtedness or other than to
Holdings or a Wholly Owned Subsidiary and (ii) shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of
any shares of its Capital Stock other than to Holdings or a Wholly Owned
Subsidiary; in each case unless (x) immediately after giving effect to such
sale, pledge, hypothecation or other disposition or issuance, such Restricted
Subsidiary continues to be a Restricted Subsidiary and (y) the proceeds of any
such sale of Capital Stock are treated as Net Available Cash from an Asset
Disposition and are applied in accordance with the terms of the covenant
described under "--Limitation on Sales of Assets and Subsidiary Stock";
provided, however, that this provision shall not prohibit (A) the sale of all
of the Capital Stock of any Restricted Subsidiary (other than Iron Age), (B)
the sale, pledge, hypothecation or other disposition of Preferred Stock of a
Subsidiary in compliance with the terms of the covenant described under "--
Limitation on Indebtedness" or (C) the issuance or sale of any Preferred Stock
of a Restricted Subsidiary if such issuance or sale would be in compliance
with the terms of the covenant described under "--Limitation on Indebtedness";
provided further, however, that Holdings shall not sell, pledge, hypothecate
or otherwise dispose of any shares of Capital Stock of Iron Age, other than
pledges of Capital Stock of Iron Age securing the Bank Indebtedness.
LIMITATION ON LIENS. Holdings shall not, directly or indirectly, Incur or
permit to exist any Lien of any nature whatsoever on any property of Holdings
(including Capital Stock of a Restricted Subsidiary), whether owned at the
Issue Date or thereafter acquired, other than Permitted Liens, unless the
Discount Notes are secured on an equal and ratable basis with the obligations
so secured until such time as such obligation is no longer secured by a Lien.
MERGER AND CONSOLIDATION. Holdings shall not consolidate with or merge with
or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor Company")
shall be a Person organized and existing under the laws of the United States
of America, any State thereof or the District of Columbia and the Successor
Company (if not Holdings) shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, in form satisfactory to the Trustee,
all the obligations of Holdings under the Discount Notes and the Indenture,
(ii) immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary of the Successor Company as a result of such transaction as having
been Incurred by such Successor Company or such Subsidiary of the Successor
Company at the time of such transaction), no Default or Event of Default shall
have occurred and be continuing, (iii) except in the case of a merger the sole
purpose of which is to change Holdings' jurisdiction of incorporation,
immediately after giving effect to such transaction, the Successor Company
would be able to Incur an additional $1.00 of Indebtedness pursuant to
paragraph (a) of the covenant described under "--Limitation on Indebtedness",
(iv) immediately after giving effect to such transaction, the Successor
Company shall have Consolidated Net Worth in an amount that is not less than
the Consolidated Net Worth of Holdings immediately prior to such transaction
and (v) Holdings shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger or
transfer and such supplemental indenture, if any, comply with the Indenture.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to, Holdings.
The Successor Company shall succeed to, and be substituted for, and may
exercise every right and power of, Holdings under the Indenture, but in the
case of a conveyance, transfer or lease of all or substantially all of the
assets of Holdings, Holdings shall not be released from the obligation to pay
the Accreted Value of and interest and liquidated damages, if any, on the
Discount Notes.
SEC REPORTS. Until such time as Holdings shall become subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, (a)
Holdings shall provide the Trustee, the Initial Purchasers, the Noteholders
and prospective Noteholders (upon request) with such annual reports and such
information, documents and other
66
<PAGE>
reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a United States corporation subject to such Sections, such
information, documents and other reports to be so provided at the times
specified for the filing of such information, documents and reports under such
Sections and (b) not later than 45 days after the end of each fiscal quarter
of Holdings, Holdings shall issue a press release setting forth a summary of
the results of operations of Holdings for such fiscal quarter and shall
publish such press release on one of the following national business and
financial wire services: Dow Jones News Service, Reuters Financial Service,
Bloomberg News, PR Newswire or Business Wire. Thereafter, notwithstanding that
Holdings may not be subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, to the extent permitted by the Exchange Act,
Holdings shall file with the SEC and provide the Trustee and Noteholders and
prospective Noteholders (upon request) with such annual reports and such
information, documents and other reports as are specified in such Sections and
applicable to a United States corporation subject to such Sections, such
information, documents and other reports to be so filed and provided at the
times specified for the filing of such information, documents and reports
under such Sections; provided, however, that Holdings shall not be required to
file any report, document or other information with the SEC if the SEC does
not permit such filing.
EVENTS OF DEFAULT
An Event of Default is defined in the Indenture as: (i) a default in the
payment of interest on any Discount Note when due, continued for 30 days, (ii)
a default in the payment of Accreted Value of any Discount Note when due at
its Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise, (iii) the failure by Holdings to comply with its
obligations under "--Certain Covenants--Merger and Consolidation," "--Change
of Control" or "--Limitation on Restricted Payments" above, (iv) the failure
by Holdings to comply for 30 days after notice with any of its obligations
under the covenants (other than the covenants described in clause (iii))
described above under "--Certain Covenants" (in each case other than a failure
to purchase Discount Notes), (v) the failure by Holdings to comply for 60 days
after notice with its other agreements contained in the Indenture, (vi) the
failure by Holdings or any Material Subsidiary to pay any Indebtedness within
any applicable grace period after final maturity or the acceleration of any
such Indebtedness by the holders thereof because of a default, if the total
amount of such Indebtedness unpaid or accelerated exceeds $10 million and such
failure continues for 10 Business Days after notice (the "cross acceleration
provision"), (vii) certain events of bankruptcy, insolvency or reorganization
of Holdings or a Material Subsidiary (the "bankruptcy provisions"), (viii) the
rendering of any judgment or decree for the payment of money in excess of $10
million against Holdings or a Material Subsidiary, if such judgment or decree
remains outstanding for a period of 60 days and is not discharged, waived or
stayed within 10 Business Days after notice (the "judgment default
provision"), (ix) a Subsidiary Guaranty ceases to be in full force and effect
(other than in accordance with the terms of such Subsidiary Guaranty) or a
Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary
Guaranty and such Default continues for 30 days or (x) the failure by any
Subsidiary Guarantor to comply with its obligations under any Subsidiary
Guaranty to which such Subsidiary Guarantor is a party, after any applicable
grace period. However, a default under clause (iv) or (v) will not constitute
an Event of Default until the Trustee or the Holders of 25% in aggregate
principal amount of the outstanding Discount Notes notify Holdings of the
default and Holdings does not cure such default within the time specified in
clauses (iv) and (v) hereof after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of the outstanding Discount
Notes may, after giving 10 Business Days' notice to the Representative
(provided, however, that no such notice need be given if, at such time (i)
prior to the date on which the Bank Indebtedness has been repaid in full in
cash, payment of any Bank Indebtedness shall have been accelerated or (ii) on
or after the date on which the Bank Indebtedness has been repaid in full in
cash, payment of any Senior Indebtedness shall have been accelerated), declare
the Accreted Value of and accrued but unpaid interest and liquidated damages,
if any, on all the Discount Notes to be due and payable. Upon such a
declaration, such Accreted Value, interest and liquidated damages, if any,
shall be due and payable immediately. If an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of Holdings occurs
and is continuing, the Accreted Value of and interest and liquidated damages,
if any, on all the Discount Notes will ipso facto become and be immediately
due and payable without any declaration or other act on the part of the
67
<PAGE>
Trustee or any Holders of the Discount Notes. Under certain circumstances, the
Holders of a majority in aggregate principal amount of the outstanding
Discount Notes may on behalf of all Holders rescind any such acceleration with
respect to the Discount Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee
will be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders of the Discount
Notes unless such Holders have offered to the Trustee reasonable indemnity or
security against any loss, liability or expense. Except to enforce the right
to receive payment of Accreted Value, premium or liquidated damages, if any,
or interest when due, no Holder of a Discount Note may pursue any remedy with
respect to the Indenture or the Discount Notes unless (i) such Holder has
previously given the Trustee notice that an Event of Default is continuing,
(ii) Holders of at least 25% in aggregate principal amount of the outstanding
Discount Notes have requested the Trustee to pursue the remedy, (iii) such
Holders have offered the Trustee reasonable security or indemnity against any
loss, liability or expense, (iv) the Trustee has not complied with such
request within 60 days after the receipt thereof and the offer of security or
indemnity and (v) the Holders of a majority in aggregate principal amount of
the outstanding Discount Notes have not given the Trustee a direction that, in
the opinion of the Trustee, is inconsistent with such request within such 60-
day period. Subject to certain restrictions, the Holders of a majority in
aggregate principal amount of the outstanding Discount Notes are given the
right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or of exercising any trust or power
conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other Holder of a
Discount Note or that would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder of the Discount
Notes and the Representative notice of the Default within 90 days after it
occurs. Except in the case of a Default in the payment of Accreted Value of or
interest or liquidated damages, if any, on any Discount Note, the Trustee may
withhold notice if and so long as a committee of its trust officers determines
that withholding notice is not opposed to the interest of the Holders of the
Discount Notes. In addition, Holdings is required to deliver to the Trustee,
within 120 days after the end of each fiscal year, a certificate indicating
whether the signers thereof know of any Default that occurred during the
previous year. Holdings also is required to deliver to the Trustee and the
Representative, within 30 days after the occurrence thereof, written notice of
any event which would constitute any of certain Defaults, their status and
what action Holdings is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in aggregate principal amount of the Discount
Notes then outstanding (including consents obtained in connection with a
tender offer or exchange for the Discount Notes) and any past default or
compliance with any provisions may also be waived with the consent of the
Holders of a majority in aggregate principal amount at maturity of the
Discount Notes then outstanding. However, without the consent of each Holder
of an outstanding Discount Note affected thereby, no amendment may, among
other things, (i) reduce the amount of Discount Notes whose Holders must
consent to an amendment, (ii) reduce the rate of or extend the time for
payment of interest on, or calculation of Accreted Value for, any Discount
Note, (iii) reduce the principal at maturity or Accreted Value of, or extend
the Stated Maturity of, any Discount Note, (iv) reduce the premium payable
upon the redemption or repurchase of any Note or change the time at which any
Note may be redeemed as described under "--Optional Redemption," (v) reduce
the liquidated damages, or change the time for the payment thereof, as
described under "Exchange Offer; Registration Rights," (vi) make any Discount
Note payable in money other than that stated in the Discount Note, (vii)
impair the right of any Holder of the Discount Notes to receive payment of
Accreted Value of and interest and liquidated damages, if any, on such
Holder's Discount Notes on or after the due date therefor or to institute suit
for the enforcement of any payment on or with respect to such Holder's
Discount Notes or (viii) make any change in the amendment provisions which
require each Holder's consent or in the waiver provisions.
68
<PAGE>
Without the consent of any Holder of the Discount Notes, Holdings and
Trustee may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation or
limited liability company of the obligations of Holdings under the Indenture,
to provide for uncertificated Discount Notes in addition to or in place of
certificated Discount Notes (provided, however, that the uncertificated
Discount Notes are issued in registered form for purposes of Section 163(f) of
the Code, or in a manner such that the uncertificated Discount Notes are
described in Section 163(f)(2)(B) of the Code), to add guarantees with respect
to the Discount Notes, to secure the Discount Notes, to add to the covenants
of Holdings for the benefit of the Holders of the Discount Notes or to
surrender any right or power conferred upon Holdings, to make any change that
does not adversely affect the rights of any Holder of the Discount Notes or to
comply with any requirement of the SEC in connection with the qualification of
the Indenture under the Trust Indenture Act.
The consent of the Holders of the Discount Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, Holdings is
required to mail to Holders of the Discount Notes a notice briefly describing
such amendment. However, the failure to give such notice to all Holders of the
Discount Notes, or any defect therein, will not impair or affect the validity
of the amendment.
TRANSFER
The Exchange Discount Notes will be issued in registered form and will be
transferable only upon the surrender of the Exchange Discount Notes being
transferred for registration of transfer. Holdings may require payment of a
sum sufficient to cover any tax, assessment or other governmental charge
payable in connection with certain transfers and exchanges.
DEFEASANCE
Holdings at any time may terminate all its obligations under the Discount
Notes and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register
the transfer or exchange of the Discount Notes, to replace mutilated,
destroyed, lost or stolen Discount Notes and to maintain a registrar and
paying agent in respect of the Discount Notes. Holdings at any time may
terminate its obligations under the covenants described under "--Certain
Covenants" (other than the covenant described under "--Merger and
Consolidation"), the operation of the cross acceleration provision, the
bankruptcy provisions with respect to Material Subsidiaries and the judgment
default provision described under "--Events of Default" above and the
limitations contained in clauses (iii) and (iv) under "--Merger and
Consolidation" above ("covenant defeasance").
Holdings may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option. If Holdings exercises its legal
defeasance option, payment of the Discount Notes may not be accelerated
because of an Event of Default with respect thereto. If Holdings exercises its
covenant defeasance option, payment of the Discount Notes may not be
accelerated because of an Event of Default specified in clause (iv), (vi),
(vii) (with respect only to Material Subsidiaries) or (viii) under "--Events
of Default" above or because of the failure of Holdings to comply with clause
(iii) or (iv) under "--Merger and Consolidation" above.
In order to exercise either defeasance option, Holdings must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of Accreted Value and interest on the
Discount Notes to redemption or maturity, as the case may be, and must comply
with certain other conditions, including delivery to the Trustee of an Opinion
of Counsel to the effect that Holders of the Discount Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit and defeasance and will be subject to federal income tax on the same
amount and in the same manner and at the
69
<PAGE>
same times as would have been the case if such deposit and defeasance had not
occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable federal income tax law).
CONCERNING THE TRUSTEE
The Chase Manhattan Bank is the Trustee under the Indenture and has been
appointed by Holdings as Registrar and Paying Agent with regard to the
Exchange Discount Notes.
The Holders of a majority in aggregate principal amount of the outstanding
Discount Notes 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 provides that if an Event of
Default occurs (and is not 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 own 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 Discount Notes, unless such Holder
shall have offered to the Trustee security and indemnity satisfactory to it
against any loss, liability or expense and then only to the extent required by
the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Exchange Discount Notes will be
governed by, and construed in accordance with, the laws of the State of New
York without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be
required thereby.
CERTAIN DEFINITIONS
"Accreted Value" means, with respect to any Discount Note, as of a date of
determination: (i) prior to May 1, 2003, the sum of (a) the initial offering
price of such Discount Note and (b) the portion of the excess of the principal
amount of such Discount Note over such initial offering price which shall have
been accreted thereon through such date, such amount to be so accreted on a
daily basis at the rate per annum shown on the cover of this Offering
Memorandum of the initial offering price of such Discount Note, computed on
the basis of a 360-day year of twelve 30-day months from the Issue Date
through the date of determination, compounded semi-annually on each May 1 and
November 1 commencing November 1, 1998; (ii) on or after May 1, 2003, 100% of
the principal amount thereof.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business, (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the
acquisition of such Capital Stock by Holdings or another Restricted Subsidiary
or (iii) Capital Stock constituting a minority interest in any Person that at
such time is a Restricted Subsidiary; provided, however, that any such
Restricted Subsidiary described in clauses (ii) or (iii) above is primarily
engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of the provisions described under "--Certain
Covenants--Limitation on Affiliate Transactions" and "--Certain Covenants--
Limitations on Sales of Assets and Subsidiary Stock" and the definition of the
term "Restricted Payment" only, "Affiliate" shall also mean any beneficial
owner of Capital Stock representing 10% or more of the total voting power of
the Voting Stock (on a fully diluted basis) of Holdings or of rights or
warrants to purchase such Capital Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof.
70
<PAGE>
"Asset Disposition" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) by Holdings or any
Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of
this definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares and, to the
extent required by local ownership laws in foreign countries, shares owned by
foreign shareholders), (ii) all or substantially all the assets of any
division, business segment or comparable line of business of Holdings or any
Restricted Subsidiary or (iii) any other assets of Holdings or any Restricted
Subsidiary outside of the ordinary course of business of Holdings or such
Restricted Subsidiary (other than, in the case of (i), (ii) and (iii) above,
(A) transactions permitted under "--Certain Covenants--Merger and
Consolidation," (B) a disposition by a Restricted Subsidiary to Holdings or by
Holdings or a Restricted Subsidiary to a Wholly Owned Subsidiary and (C) for
purposes of the covenant described under "--Certain Covenants--Limitation on
Sales of Assets and Subsidiary Stock" only, a disposition that constitutes a
Permitted Investment or a Restricted Payment permitted by the covenant
described under "--Certain Covenants-- Limitation on Restricted Payments").
"Attributable Debt" with respect to a Sale/Leaseback Transaction means, as
at the time of determination, the present value (discounted at the interest
rate borne by the Discount Notes, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts (whether outstanding on the
Issue Date or thereafter incurred) payable under or in respect of the New
Credit Facility and the other Loan Documents, including Bank Hedge Agreements
(as such terms are defined in the New Credit Facility), including, without
limitation, principal, premium, if any, interest (including interest accruing
on or after the filing of any petition in bankruptcy or for reorganization
relating to Iron Age whether or not a claim for post-filing interest is
allowed in such proceedings), fees, charges, expenses, reimbursement
obligations, Guarantees and all other amounts payable thereunder or in respect
thereof.
"Board of Directors" means the Board of Directors of Holdings or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified, and accounted for as a capital lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented
by such obligation shall be the capitalized amount of such obligation
determined in accordance with GAAP, and the Stated Maturity thereof shall be
the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Change of Control" means the occurrence of any of the following events:
(i)(a) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in Rules 13d-3 and
71
<PAGE>
13d-5 under the Exchange Act, except that for purposes of this clause (i)
such person shall be deemed to have "beneficial ownership" of all shares
that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of the Voting Stock
of Holdings (or its successor by merger, consolidation or purchase of all
or substantially all of its assets) and (b) the Permitted Holders
beneficially own (as defined in this clause (i)), directly or indirectly,
in the aggregate a lesser percentage of the total voting power of the
Voting Stock of Holdings than such other person and do not have the right
or ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors (for the purposes of this
clause (i), such other person shall be deemed to beneficially own any
Voting Stock of Holdings held by any other entity, if such other person is
the beneficial owner (as defined in this clause (i)), directly or
indirectly, of more than 35% of the voting power of the Voting Stock of
Holdings and the Permitted Holders beneficially own (as defined in this
clause (i)), directly or indirectly, in the aggregate a lesser percentage
of the voting power of the Voting Stock of Holdings and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of Holdings);
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by the Board of Directors or whose
nomination for election by the shareholders of Holdings was approved by a
vote of a majority of the directors of Holdings then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office; or
(iii) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of Holdings and its
Restricted Subsidiaries taken as a whole to any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) other than a
Permitted Holder.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days (or, if less, the
number of days after the end of such fiscal quarter as the consolidated
financial statements of Holdings shall be provided to the Noteholders pursuant
to the Indenture) prior to the date of such determination to (ii) Consolidated
Interest Expense for such four fiscal quarters (in each case determined, for
any fiscal quarter preceding the Issue Date, adjusted on a pro forma basis to
give effect to the Transactions, the Iron Age Transactions and the Application
of Proceeds as if they had occurred at the beginning of such period and
adjusted for any pro forma expense and cost reductions and related adjustments
that are directly attributable to the Transactions, the Iron Age Transactions
and the Application of Proceeds, as estimated in good faith by the Board of
Directors); provided, however, that:
(1) if Holdings or any Restricted Subsidiary (x) has Incurred any
Indebtedness since the beginning of such period that remains outstanding on
such date of determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness,
or both, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such Indebtedness as
if such Indebtedness had been Incurred on the first day of such period
(except that in making such computation, the amount of Indebtedness under
any revolving credit facility outstanding on the date of such calculation
shall be computed based on (A) the average daily balance of such
Indebtedness during such four fiscal quarters or such shorter period for
which such facility was outstanding or (B) if such facility was created
after the end of such four fiscal quarters, the average daily balance of
such Indebtedness during the period from the date of creation of such
facility to the date of such calculation) and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the
first day of such period or (y) has repaid, repurchased, defeased or
otherwise discharged any Indebtedness since the beginning of the period
that is no
72
<PAGE>
longer outstanding on such date of determination, or if the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio
involves a discharge of Indebtedness (in each case other than Indebtedness
incurred under any revolving credit facility unless such Indebtedness has
been permanently repaid and corresponding commitments have been permanently
reduced), EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to the discharge of
such Indebtedness as if such discharge had occurred on the first day of
such period,
(2) if since the beginning of such period Holdings or any Restricted
Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to the EBITDA
(if negative) directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of Holdings or any Restricted Subsidiary repaid, repurchased,
defeased, assumed by a third person (to the extent Holdings and its
Restricted Subsidiaries are no longer liable for such Indebtedness) or
otherwise discharged with respect to Holdings and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period (or,
if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness
of such Restricted Subsidiary to the extent Holdings and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after
such sale),
(3) if since the beginning of such period Holdings or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of assets, which acquisition constitutes all or
substantially all of an operating unit of a business, including any such
Investment or acquisition occurring in connection with a transaction
requiring a calculation to be made hereunder, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto (including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such period,
(4) if since the beginning of such period any Person that subsequently
became a Restricted Subsidiary or was merged with or into Holdings or any
Restricted Subsidiary since the beginning of such period shall have made
any Asset Disposition, any Investment or acquisition of assets that would
have required an adjustment pursuant to clause (2) or (3) above if made by
Holdings or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto as if such Asset Disposition, Investment or
acquisition occurred on the first day of such period,
(5) if since the beginning of such period any Unrestricted Subsidiary
shall have been designated a Restricted Subsidiary, EBITDA and Consolidated
Interest Expense for such period shall be calculated to include all net
income (or loss) and all interest expense of such Subsidiary during the
portion of such period that such Subsidiary was an Unrestricted Subsidiary,
but only to the extent that such net income (or loss) or interest expense
has not been included in EBITDA or Consolidated Interest Expense pursuant
to clauses (1) through (4) above, and
(6) if since the beginning of such period any Restricted Subsidiary shall
have been designated an Unrestricted Subsidiary, EBITDA and Consolidated
Interest Expense for such period shall be calculated to exclude all net
income (or loss) and all interest expense of such Subsidiary during the
portion of such period that such Subsidiary was a Restricted Subsidiary.
For purposes of this definition, whenever pro forma effect is to be given to
an acquisition of assets, the amount of income or earnings relating thereto
and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations
shall be determined in good faith by a responsible financial or accounting
officer of Holdings in accordance with Article 11 of Regulation S-X
promulgated by the SEC. If any Indebtedness bears a floating rate of interest
and is being given pro forma effect, the interest expense of such Indebtedness
shall be calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire period (taking into account any
Interest Rate Agreement applicable to such Indebtedness if such Interest Rate
Agreement has a remaining term in excess of 12 months).
73
<PAGE>
"Consolidated Interest Expense" means, for any period, the total interest
expense of Holdings and its Restricted Subsidiaries on a consolidated basis
determined in accordance with GAAP, plus (a) to the extent not included in
such total interest expense, and to the extent incurred by Holdings or its
Restricted Subsidiaries, (i) interest expense attributable to Capital Lease
Obligations, (ii) amortization of debt discount, (iii) capitalized interest,
(iv) non-cash interest expenses, (v) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs associated with Hedging Obligations (including
amortization of fees), (vii) dividends in respect of all Preferred Stock of
Holdings and its Restricted Subsidiaries and in respect of all Disqualified
Stock of Holdings in each case held by Persons other than Holdings or a Wholly
Owned Subsidiary, (viii) interest actually paid on any Indebtedness of any
other Person that is Guaranteed by Holdings or any Restricted Subsidiary and
(ix) the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust to pay
interest or fees to any Person (other than Holdings or any Wholly Owned
Subsidiary) in connection with Indebtedness Incurred by such plan or trust,
minus (b) to the extent included in such total interest expense, amortization
of deferred financing costs, fees and expenses. For purposes of the foregoing,
total interest expense shall be determined after giving effect to any net
payments made or received by Holdings and its Subsidiaries with respect to
Interest Rate Agreements and Currency Agreements. Notwithstanding the
foregoing, the Consolidated Interest Expense with respect to any Restricted
Subsidiary of Holdings that was not a Wholly Owned Subsidiary shall be
included only to the extent (and in the same proportion) that the net income
of such Restricted Subsidiary was included in calculating Consolidated Net
Income.
"Consolidated Net Income" means, for any period, the net income of Holdings
and its Restricted Subsidiaries on a consolidated basis determined in
accordance with GAAP; provided, however, that there shall not be included in
such Consolidated Net Income: (i) any net income (or loss) of any Person if
such Person is not a Restricted Subsidiary, except that (A) subject to the
exclusion contained in clause (iv) below, Holdings' equity in the net income
of any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such Person
during such period to Holdings or a Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other distribution
paid to a Restricted Subsidiary, to the limitations contained in clause (iii)
below) and (B) Holdings' equity in a net loss of any such Person (other than
an Unrestricted Subsidiary) for such period shall be included in determining
such Consolidated Net Income to the extent of the aggregate investment of
Holdings or any of its Restricted Subsidiaries in such Person, (ii) any net
income (or loss) of any Person acquired by Holdings or a Subsidiary in a
pooling of interests transaction accrued for any period prior to the date of
such acquisition, (iii) any net income of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly, on
the payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to Holdings, except that (A) subject to
the exclusion contained in clause (iv) below, Holdings' equity in the net
income of any such Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash that would
have been permitted to be distributed by such Restricted Subsidiary consistent
with such restriction during such period to Holdings or another Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution paid to another Restricted Subsidiary, to the
limitation contained in this clause) and (B) Holdings' equity in a net loss of
any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income, (iv) any gain (or loss) realized
upon the sale or other disposition of any assets of Holdings or its
consolidated Subsidiaries (including pursuant to any sale-and-leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary course
of business and any gain (or loss) realized upon the sale or other disposition
of any Capital Stock of any Person, (v) extraordinary gains or losses, (vi)
any non-cash compensation charge for employee stock options or other stock
awards, (vii) payments on the Issue Date of up to $2.3 million to certain
management stockholders of Holdings in connection with the Transactions and
the Iron Age Transactions and (viii) the cumulative effect of a change in
accounting principles. Notwithstanding the foregoing, for the purposes of the
covenant described under "Certain Covenants--Limitation on Restricted
Payments" only, there shall be excluded from Consolidated Net Income any
dividends, repayments of loans or advances or other transfers of assets from
Unrestricted Subsidiaries to Holdings or a Restricted Subsidiary to the extent
such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under such covenant pursuant to clause (a)(3)(D) thereof.
74
<PAGE>
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of Holdings and its Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of Holdings ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the
par or stated value of all outstanding Capital Stock of Holdings plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii)
any retained earnings or earned surplus less (A) any accumulated deficit and
(B) any amounts attributable to Disqualified Stock.
"Currency Agreement" means, with respect to any Person, any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Noncash Consideration" means the fair market value of noncash
consideration received by Holdings or any Restricted Subsidiary in connection
with an Asset Sale that is so designated as Designated Noncash Consideration
pursuant to an Officers' Certificate executed by the principal executive
officer and the principal financial officer of Holdings or such Restricted
Subsidiary, less the amount of cash or cash equivalents received in connection
with a sale of such Designated Noncash Consideration. Such Officers'
Certificate shall state the basis of such valuation, which shall be a report
of a nationally recognized investment banking firm with respect to the receipt
in one or a series of related transactions of Designated Noncash Consideration
with a fair market value in excess of $5 million.
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person 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 (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable, at the option of
the holder thereof, for Indebtedness or Disqualified Stock or (iii) is
redeemable at the option of the holder thereof, in whole or in part, in each
case on or prior to the first anniversary of the Stated Maturity of the
Discount Notes; provided, however, that only the portion of Capital Stock
which so matures or is so mandatorily redeemable, is so convertible or
exchangeable or is so redeemable at the option of the holder thereof prior to
the first anniversary of the Stated Maturity of the Discount Notes shall be
deemed to be Disqualified Stock.
"EBITDA" for any period means the sum of Consolidated Net Income plus,
without duplication, the following to the extent deducted in calculating such
Consolidated Net Income: (a) Consolidated Interest Expense, (b) income tax
expense, (c) depreciation expense, (d) amortization expense, (e) payments made
pursuant to clause (viii) of paragraph (b) of "--Certain Covenants--Limitation
on Affiliate Transactions" and (f) all other non-cash items reducing
Consolidated Net Income (other than non-cash items that will require cash
payments and for which an accrual or reserve is, or is required by GAAP to be,
made), less, to the extent added in calculating such Consolidated Net Income,
all non-cash items increasing Consolidated Net Income (excluding such non-cash
items to the extent they represent an accrual for cash receipts to be received
prior to the Stated Maturity of the Discount Notes), in each case for such
period. Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization of, a Subsidiary
of any Person shall be added to Consolidated Net Income to compute EBITDA of
such Person only to the extent (and in the same proportion) that the net
income of such Subsidiary was included in calculating Consolidated Net Income
of such Person.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financing Disposition" means any sale of any accounts receivable, or
interest therein, by Holdings or any Subsidiary to any Receivables Subsidiary,
or by the Receivables Subsidiary, pursuant to a Permitted Receivables
Financing.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles
75
<PAGE>
Board of the American Institute of Certified Public Accountants, (ii)
statements and pronouncements of the Financial Accounting Standards Board and
(iii) such other statements by such other entity as approved by a significant
segment of the accounting profession. All ratios and computations based on
GAAP contained in the Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and
any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole
or in part); provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning. The term
"Guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Discount Note is
registered on the registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by
such Subsidiary at the time it becomes a Subsidiary; provided further,
however, that in the case of a discount security, neither the accrual of
interest nor the accretion of original issue discount shall be considered an
Incurrence of Indebtedness, but the entire face amount of such security shall
be deemed Incurred upon the issuance of such security. The term "Incurrence"
when used as a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium, if any,
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable,
(ii) all Capital Lease Obligations of such Person and all Attributable Debt in
respect of Sale/Leaseback Transactions entered into by such Person, (iii) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services, all conditional sale obligations of such Person and all
obligations of such Person under any title retention agreement (but excluding
trade accounts payables and warranty and service obligations arising in the
ordinary course of business), which purchase price or obligation is due more
than six months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services (provided,
however, that, in the case of obligations of an acquired Person assumed in
connection with an acquisition of such Person, such obligations would
constitute Indebtedness of such Person), (iv) all obligations of such Person
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with respect
to letters of credit securing obligations (other than obligations described in
(i) through (iii) above) entered into in the ordinary course of business of
such Person to the extent such letters of credit are not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit), (v) the amount of all obligations
of such Person with respect to the redemption, repayment or other repurchase
of any Disqualified Stock or, with respect to any Subsidiary of such Person,
any Preferred Stock (but excluding, in each case, any accrued dividends), (vi)
all obligations of the type referred to in clauses (i) through (v) of other
Persons and all dividends of other Persons for the payment of which, in either
case, such Person is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise, including by means of any Guarantee, (vii)
all obligations of the type referred to in
76
<PAGE>
clauses (i) through (vi) of other Persons secured by any Lien on any property
or asset of such Person (whether or not such obligation is assumed by such
Person), the amount of such obligation being deemed to be the lesser of the
fair market value of such property or assets at the date of determination or
the amount of the obligation so secured and (viii) to the extent not otherwise
included in this definition, net Hedging Obligations of such Person (the
amount of any such obligations to be equal at any time to the termination
value of such agreement or arrangement giving rise to such obligation that
would be payable by such Person at such time). The amount of Indebtedness of
any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability, upon
the occurrence of the contingency giving rise to the obligation, of any
contingent obligations as described above at such date.
"Interest Rate Agreement" means with respect to any Person any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other financial agreement or arrangement designed to protect such Person
against fluctuations in interest rates.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business) or other
extensions of credit (including by way of Guarantee or similar arrangement,
but excluding any debt or extensions of credit represented by a bank deposit
other than a time deposit) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued by, such
Person. For purposes of the definition of "Unrestricted Subsidiary" and the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments", (i) "Investment" shall include the portion (proportionate to
Holdings' equity interest in a Restricted Subsidiary to be designated as an
Unrestricted Subsidiary) of the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, Holdings shall be
deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount equal to (x) Holdings' "Investment" in such Subsidiary
at the time of such redesignation less (y) the portion (proportionate to
Holdings' equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time of such redesignation, but in no
event shall such Investment be reduced below zero; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Board of Directors. If Holdings or any Restricted Subsidiary
sells or otherwise disposes of any common stock of any direct or indirect
Restricted Subsidiary (other than to Holdings or a Restricted Subsidiary),
Holdings shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the common stock of such
Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date on which the Original Discount Notes were
originally issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Agreement" means the Management Agreement originally dated as of
February 26, 1997, as amended and in effect on the Issue Date, among Holdings,
Iron Age and Fenway.
"Management Investors" means each of the officers, employees and directors
of Iron Age or Holdings who own Voting Stock (or options to acquire Voting
Stock) of Holdings on the Issue Date, in each case so long as such person
shall remain an officer, employee or director of Holdings or Iron Age.
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or
77
<PAGE>
otherwise, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to the properties or assets that
are the subject of such Asset Disposition or received in any other noncash
form), in each case net of (i) all legal, accounting, investment banking,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all federal, state, provincial, foreign and local taxes required
to be paid or accrued as a liability under GAAP, as a consequence of such
Asset Disposition, (ii) all payments made on any Indebtedness which is secured
by any assets subject to such Asset Disposition, in accordance with the terms
of any Lien upon such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition, or by applicable law, be
repaid out of the proceeds from such Asset Disposition, (iii) all
distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset
Disposition and (iv) the deduction of appropriate amounts provided by the
seller as a reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such Asset
Disposition and retained by Holdings or any Restricted Subsidiary after such
Asset Disposition.
"Net Cash Proceeds" means, with respect to any issuance or sale of Capital
Stock, the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"New Acquisition Credit Facility" means the term credit facility made
available pursuant to the Credit Agreement, dated as of the Issue Date, among
Iron Age, as borrower, Holdings and certain Subsidiaries, as guarantors, and
Banque Nationale de Paris, as agent for the lenders from time to time,
together with all Loan Documents (as defined therein) and all other documents,
instruments and agreements executed in connection therewith, including,
without limitation, any guarantees, security documents and hedge agreements,
in each case, as the same may be amended, supplemented, restated, waived,
modified, Refinanced or replaced from time to time (including any successive
amendments, supplements, restatements, waivers, modifications, Refinancings or
replacements that increase the aggregate amount of borrowings outstanding or
the aggregate commitments of the lenders thereunder, and whether with the
original agent and lenders or another agent or agents or other lenders),
except to the extent that any such amendment, supplement, restatement, waiver,
modification, Refinancing or replacement by Holdings or any Subsidiaries would
violate the covenants described in "--Certain Covenants--Limitation on
Indebtedness."
"New Credit Facility" means the New Acquisition Credit Facility and the New
Revolving Credit Facility.
"New Revolving Credit Facility" means the revolving credit facility made
available pursuant to the Credit Agreement, dated as of the Issue Date, among
Iron Age, as borrower, Holdings and certain Subsidiaries, as guarantors, and
Banque Nationale de Paris, as agent for the lenders from time to time,
together with all Loan Documents (as defined therein) and all other documents,
instruments and agreements executed in connection therewith, including,
without limitation, any guarantees, security documents and hedge agreements,
in each case, as the same may be amended, supplemented, restated, waived,
modified, Refinanced or replaced from time to time (including any successive
amendments, supplements, restatements, waivers, modifications, Refinancings or
replacements that increase the aggregate amount of borrowings outstanding or
the aggregate commitments of the lenders thereunder, and whether with the
original agent and lenders or another agent or agents or other lenders),
except to the extent that any such amendment, supplement, restatement, waiver,
modification, Refinancing or replacement by Holdings or any Subsidiaries would
violate the covenants described in "--Certain Covenants--Limitation on
Indebtedness."
"Note Obligations" means any principal of, premium and liquidated damages,
if any, and interest on, and any other amounts owing under or with respect to
the Discount Notes payable pursuant to the terms of the Discount Notes or the
Indenture or upon acceleration of the Discount Notes, including, without
limitation, amounts received upon the exercise of rights of rescission or
other rights of action (including claims for damages) or otherwise, to the
extent relating to the purchase price of the Discount Notes or amounts
corresponding to such
78
<PAGE>
principal of, premium and liquidated damages, if any, interest on, or other
amounts owing with respect to, the Discount Notes.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to
Holdings or the Trustee.
"Permitted Holders" means Fenway Partners Capital Fund, L.P., New York Life
Insurance Company, American Home Assurance Company, the Management Investors
and their respective Affiliates.
"Permitted Investment" means an Investment by Holdings or any Restricted
Subsidiary in (i) Holdings, (ii) a Restricted Subsidiary or a Person that
will, upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted Subsidiary is
a Related Business, (iii) another Person if as a result of such Investment
such other Person is merged or consolidated with or into, or transfers or
conveys all or substantially all its assets to, Holdings or a Restricted
Subsidiary; provided, however, that such Person's primary business is a
Related Business, (iv) Temporary Cash Investments, (v) receivables owing to
Holdings or any Restricted Subsidiary if created or acquired in the ordinary
course of business, (vi) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary course of
business, (vii) loans or advances to officers and employees made in the
ordinary course of business of Holdings or such Restricted Subsidiary and not
exceeding $2 million in the aggregate outstanding at any time, (viii) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to Holdings or any Restricted Subsidiary
or in satisfaction of judgments, (ix) any Person to the extent such Investment
represents the non-cash portion of the consideration received for an Asset
Disposition as permitted pursuant to the covenant described under "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock", (x) Interest
Rate Agreements and Currency Agreements entered into in the ordinary course of
business and otherwise in compliance with the Indenture, (xi) Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of
such trade creditors or customers, (xii) Investments in Unrestricted
Subsidiaries and additional Investments having an aggregate fair market value,
taken together with all other investments made pursuant to this clause (xii)
that are at that time outstanding, not to exceed $5 million (with the fair
market value of each Investment being measured at the time made and without
giving effect to subsequent changes in value), (xiii) any Investment by
Holdings or any Wholly Owned Subsidiary in a Receivables Subsidiary or any
Investment by a Receivables Subsidiary in any other Person in connection with
a Permitted Receivables Financing; provided, however, that any Investment in a
Receivables Subsidiary is in the form of a purchase money note or an equity
interest and (xiv) Investments the payment for which consists exclusively of
Capital Stock (other than Disqualified Stock) of Holdings.
"Permitted Liens" means (i) Liens existing as of the Issue Date to the
extent and in the manner such Liens are in effect on the Issue Date, (ii)
Liens securing the Discount Notes, (iii) Liens securing Holding's obligations
under the New Credit Facility, (iv) Liens for taxes, assessments or
governmental charges or claims either (A) not delinquent or (B) contested in
good faith by appropriate proceedings and as to which Holdings shall have set
aside on its books such reserves as may be required pursuant to GAAP, (v)
judgment Liens not giving rise to an Event of Default so long as such Lien is
adequately bonded and any appropriate legal proceedings which may have been
duly initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceedings may be initiated shall
not have expired, (vi) Liens securing Hedging Obligations which are
Indebtedness otherwise permitted under the Indenture and (vii) restrictions on
transfer of securities under federal and state securities laws.
"Permitted Receivables Financing" means any financing pursuant to which
Holdings or any Restricted Subsidiary may sell, convey or otherwise transfer
to a Receivables Subsidiary or any other Person (in the case of a transfer by
a Receivables Subsidiary), or grant a security interest in, any accounts
receivable (and related assets) of Holdings or any Restricted Subsidiary;
provided, however, that (i) the covenants, events of default and other
provisions applicable to such financing shall be customary for such
transactions and shall be on market terms (as determined in good faith by the
Board of Directors) at the time such financing is entered into and (ii) such
79
<PAGE>
financing shall be non-recourse to Holdings and its Subsidiaries (other than
the Receivables Subsidiary) except to a limited extent customary for such
transactions.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock" means, as applied to the Capital Stock of any corporation,
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"Public Equity Offering" means a public offering of common stock of Holdings
pursuant to an effective registration statement under the Securities Act.
"Public Market" means any time after (i) a Public Equity Offering has been
consummated and (ii) at least 10% of the total issued and outstanding common
stock of Holdings has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligations
under any title retention agreement, other purchase money obligations and
obligations in respect of industrial revenue bonds or similar Indebtedness, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed and (ii) incurred to
finance the acquisition by Holdings or a Restricted Subsidiary of such asset
(including Additional Assets), including additions and improvements; provided,
however, that any Lien arising in connection with any such Indebtedness shall
be limited to the specified asset being financed or, in the case of real
property or fixtures, including additions and improvements, the real property
on which such asset is attached; and provided further, however, that such
Indebtedness is Incurred within 90 days after such acquisition of such asset
by Holdings or Restricted Subsidiary.
"Receivables Subsidiary" means a bankruptcy-remote, special-purpose Wholly
Owned Subsidiary formed in connection with a Permitted Receivables Financing.
"Refinance" means, with respect to any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease, retire, supplement, substitute,
defer, reissue or restate (including pursuant to any defeasance or discharge
mechanism), or to issue other Indebtedness in exchange or replacement for,
such indebtedness. "Refinanced" and "Refinancing" shall have correlative
meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of Holdings or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture; provided, however, that (i)
such Refinancing Indebtedness has a Weighted Average Life to Maturity of not
less than the Indebtedness being Refinanced and (ii) such Refinancing
Indebtedness has an aggregate principal amount (or if Incurred with original
issue discount, an aggregate issue price) that is equal to or less than the
aggregate principal amount (or if Incurred with original issue discount, the
aggregate accreted value) then outstanding or committed (plus fees and
expenses, including any premium and defeasance costs) under the Indebtedness
being Refinanced; provided further, however, that Refinancing Indebtedness
shall not include (x) Indebtedness of a Subsidiary that Refinances
Indebtedness of Holdings or (y) Indebtedness of Holdings or a Restricted
Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.
"Related Business" means the business of Holdings and its Restricted
Subsidiaries on the Issue Date or any business related, ancillary or
complementary (as determined in good faith by the Board of Directors) to the
businesses of Holdings and the Restricted Subsidiaries on the Issue Date.
"Representative" means, until the date on which the Bank Indebtedness has
been repaid in full in cash, and all commitments and other obligations
thereunder have been terminated, the Agent (or if there is no Agent,
80
<PAGE>
the trustee, agent or representative) under the New Credit Facility and,
thereafter, the trustee, agent or representative for each issue of Senior
Indebtedness.
"Restricted Payment" means, with respect to any Person, (i) the declaration
or payment of any dividends or any other distributions on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the holders of its
Capital Stock, except dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and except dividends or distributions
payable solely to Holdings or a Restricted Subsidiary (and, in the case of
dividends or distributions by a Restricted Subsidiary which is not a Wholly
Owned Subsidiary, to its other holders of Capital Stock on a pro rata basis or
on a basis that results in the receipt by Holdings or a Restricted Subsidiary
of dividends or distributions of greater value than it would receive on a pro
rata basis), (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of Holdings held by any Person (other than a
Restricted Subsidiary) or of any Capital Stock of a Restricted Subsidiary held
by any Affiliate of Holdings (other than a Restricted Subsidiary), including
the exercise of any option to exchange any Capital Stock (in each case other
than in exchange for Capital Stock that is not Disqualified Stock), (iii) the
purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
purchase, repurchase or acquisition; and other than the purchase, repurchase,
defeasance or other acquisition of Subordinated Obligations made solely with
Disqualified Stock of Holdings) or (iv) the making of any Investment (other
than a Permitted Investment) in any Person.
"Restricted Subsidiary" means any Subsidiary of Holdings that is not an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby Holdings or a Restricted Subsidiary
transfers such property to a Person and Holdings or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" of Holdings means the following obligations, whether
outstanding on the date of the Indenture or thereafter Incurred, without
duplication, all obligations consisting of Bank Indebtedness and all
obligations consisting of the principal of and premium, if any, and accrued
and unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to Holdings regardless
of whether post-filing interest is allowed in such proceeding) on, and fees,
charges, expenses, reimbursement obligations, Guarantees and all other amounts
owing in respect of, all other Indebtedness of Holdings, unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that the obligations in respect of such
Indebtedness are subordinated or junior in right of payment to the Discount
Notes; provided, however, that Senior Indebtedness shall not include (1) any
obligation of Holdings to any Subsidiary, except to the extent pledged under
the New Credit Facility, (2) any liability for federal, state, local or other
taxes owed or owing by Holdings, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness of Holdings (and any accrued and unpaid interest in respect
thereof) which is expressly subordinate or junior in right of payment to any
other Indebtedness or other obligation of Holdings, including any Subordinated
Obligations, (5) any Indebtedness represented by Capital Stock or (6) that
portion of any Indebtedness which at the time of Incurrence is Incurred in
violation of the Indenture.
"Senior Subordinated Indenture" means the Indenture, dated as of the Issue
Date between Iron Age and The Chase Manhattan Bank, as trustee, pursuant to
which the Senior Subordinated Notes are to be issued by Iron Age.
81
<PAGE>
"Senior Subordinated Notes" means the 9 7/8% Senior Subordinated Notes due
2008 issued by Iron Age pursuant to the Senior Subordinated Indenture in the
aggregate principal amount of $100 million.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory
redemption provision.
"Subordinated Obligation" means any Disqualified Stock and any other
Indebtedness of Holdings (whether outstanding on the Issue Date or thereafter
Incurred) which is subordinate or junior in right of payment to the Discount
Notes pursuant to a written agreement to that effect.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership or other business entity of which more than 50% of
the total voting power of shares of Capital Stock or other interests
(including partnership interests) entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i)
such Person, (ii) such Person and one or more Subsidiaries of such Person or
(iii) one or more Subsidiaries of such Person. Unless otherwise specified
herein, each reference to a Subsidiary shall refer to a Subsidiary of
Holdings.
"Subsidiary Guarantor" means each Subsidiary that has issued a Subsidiary
Guaranty pursuant to the Senior Subordinated Indenture.
"Subsidiary Guaranty" means the Guarantee of Iron Age's obligations with
respect to the Senior Subordinated Notes by a Subsidiary Guarantor pursuant to
the terms of the Senior Subordinated Indenture.
"Taxes" means all taxes, fees, levies, duties, tariffs, imposts, and
governmental impositions or charges of any kind in the nature of (or similar
to) taxes, payable to any federal, state, local or foreign taxing authority,
including without limitation income, franchise, profits, gross receipts, ad
valorem, net worth, value added, sales, use, service, real or personal
property, special assessments, capital stock, license, payroll, withholding,
employment, social security (or similar), workers' compensation, unemployment
compensation, disability, utility, severance, production, excise, stamp,
occupation, premiums, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, registration, alternative and add-on
minimum, estimated, transfer and gains taxes or other tax of any kind
whatsoever, in all cases including interest, penalties, additional taxes and
additions to tax imposed with respect thereto.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any State thereof or any foreign country recognized
by the United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50 million (or the
foreign currency equivalent thereof) and has outstanding debt which is rated
"A" (or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker
dealer or mutual fund distributor, (iii) repurchase obligations with a term of
not more than 30 days for underlying securities of the types described in
clause (i) above entered into with a bank meeting the qualifications described
in clause (ii) above, (iv) investments in commercial paper, maturing not more
than 180 days after the date of acquisition, issued by a corporation (other
than an Affiliate of Holdings) organized and in existence under the laws of
the United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or
"A-1" (or higher) according to Standard & Poor's Ratings Group, (v)
investments in securities with maturities of six months or less from the date
of acquisition issued or fully guaranteed by any State, Commonwealth or
Territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by Standard & Poor's Ratings
Group or "A" by
82
<PAGE>
Moody's Investors Service, Inc. and (vi) investments in mutual funds whose
investment guidelines restrict such funds' investments to those satisfying the
provisions of clauses (i) through (v) above.
"Unrestricted Subsidiary" means (i) any Subsidiary of Holdings that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of Holdings (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of,
Holdings or any other Subsidiary of Holdings that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total assets of $10,000 or less or (B) if
such Subsidiary has assets greater than $10,000, such designation would be
permitted under the covenant described under "--Certain Covenants--Limitation
on Restricted Payments". The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (x) Holdings could Incur $1.00 of
additional Indebtedness under paragraph (a) of the covenant described under
"--Certain Covenants--Limitation on Indebtedness" and (y) no Default or Event
of Default shall have occurred and be continuing. Any such designation by the
Board of Directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the board resolution giving effect to such designation
and an Officers' Certificate certifying that such designation complied with
the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States
of America (including any agency or instrumentality thereof) for the payment
of which the full faith and credit of the United States of America is pledged
and which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding
and normally entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the then outstanding
aggregate principal amount of such Indebtedness into (ii) the sum of the total
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by Holdings
and/or one or more Wholly Owned Subsidiaries.
83
<PAGE>
THE EXCHANGE OFFER
At the closing of the Original Offering, Holdings and the Initial Purchasers
entered into a registration agreement (the "Registration Agreement"). Pursuant
to the Registration Agreement, Holdings agreed, at its cost, (i) to file with
the SEC on or prior to 90 days after the Issue Date a registration statement
on the appropriate form (the "Exchange Offer Registration Statement") relating
to a registered exchange offer (the "Exchange Offer") for the Original
Discount Notes under the Securities Act and (ii) to use its reasonable best
efforts to cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act on or prior to 150 days after the Issue
Date. As promptly as practicable after the effectiveness of the Exchange Offer
Registration Statement, Holdings will offer to holders of Transfer Restricted
Securities (as defined below) who are not prohibited by any law or policy of
the SEC from participating in the Exchange Offer the opportunity to exchange
their Transfer Restricted Securities for Exchange Discount Notes that are
identical in all material respects to the Original Discount Notes (except that
the Exchange Discount Notes will not contain terms with respect to transfer
restrictions) and that would be registered under the Securities Act. For each
Original Discount Note surrendered to Holdings pursuant to the Exchange Offer,
the holder of such Original Discount Note will receive an Exchange Discount
Note having a principal amount at maturity equal to that of the surrendered
Original Discount Note. Principal on the Exchange Discount Notes will accrete
in the same manner as for the Original Discount Notes. Cash interest on each
Exchange Discount Note will accrue from the last cash interest payment date on
which cash interest was paid on the Original Discount Note surrendered in
exchange thereof or, if no cash interest has been paid on such Original
Discount Note, from May 1, 2003. Holdings will keep the Exchange Offer open
for not less than 30 days (or longer, if required by applicable law) after the
date hereof.
If (i) because of any change in law or applicable interpretations thereof by
the staff of the SEC, Holdings is not permitted to effect the Exchange Offer
as contemplated hereby, (ii) for any other reason the Exchange Offer
Registration Statement is not declared effective on or prior to 150 days after
the Issue Date or the Exchange Offer is not consummated on or prior to 180
days after the Issue Date, (iii) the Initial Purchasers so request with
respect to Original Discount Notes not eligible to be exchanged for Exchange
Discount Notes in the Exchange Offer or the Initial Purchasers do not receive
freely tradeable Exchange Discount Notes in the Exchange Offer, (iv) any
applicable law or interpretations do not permit any holder of Original
Discount Notes to participate in the Exchange Offer, (v) any holder (other
than an Initial Purchaser) of Original Discount Notes is not eligible to
participate in the Exchange Offer or such holder does not receive freely
tradeable Exchange Discount Notes in the Exchange Offer other than by reason
of such holder being an affiliate of Holdings (it being understood that the
requirement that a participating broker-dealer deliver the prospectus
contained in the Exchange Offer Registration Statement in connection with the
sales of Exchange Discount Notes shall not result in such Exchange Discount
Notes being not "freely tradeable") or (vi) Holdings so elects, then Holdings
will file, at its cost, as promptly as practical with the SEC a shelf
registration statement (the "Shelf Registration Statement") to cover resales
of Transfer Restricted Securities by such holders of Original Discount Notes
who satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. For purposes of the
foregoing, "Transfer Restricted Securities" means each Original Discount Note
until (i) the date on which such Original Discount Note has been exchanged for
a freely transferable Exchange Discount Note in the Exchange Offer, (ii) the
date on which such Original Discount Note 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 Original Discount Note
is distributed to the public pursuant to Rule 144 under the Securities Act or
is saleable pursuant to Rule 144(k) under the Securities Act.
Holdings will use its reasonable best efforts to have the Exchange Offer
Registration Statement or, if applicable, the Shelf Registration Statement
(each, a "Registration Statement") declared effective by the SEC as promptly
as practicable after the filing thereof. Unless the Exchange Offer would not
be permitted by a policy of the SEC, Holdings will commence the Exchange Offer
and will use its reasonable best efforts to consummate the Exchange Offer as
promptly as practicable, but in any event on or prior to 180 days after the
Issue Date. If applicable, Holdings will use its reasonable best efforts to
keep the Shelf Registration Statement effective for a period of two years
after the Issue Date. Holdings will, in the event a Shelf Registration
Statement is filed, among
84
<PAGE>
other things, provide to each holder of Original Discount Notes for whom such
Shelf Registration Statement was filed copies of the prospectus which is a
part of such Shelf Registration Statement, notify each such holder when such
Shelf Registration Statement has become effective, and take certain other
actions as are required to permit unrestricted resales of the Original
Discount Notes or the Exchange Discount Notes, as the case may be. A holder of
Original Discount Notes or Exchange Discount Notes selling Original Discount
Notes or Exchange Discount Notes pursuant to a Shelf Registration Statement
will generally be required to be named as a selling securityholder in the
related prospectus and to deliver a prospectus to purchasers, will be subject
to certain of the civil liability provisions under the Securities Act in
connection with such sales, and will be bound by the provisions of the
Registration Agreement that are applicable to such holder (including certain
indemnification obligations).
If (i) a Registration Statement is not filed with the SEC on or prior to 90
days after the Issue Date, (ii) the Exchange Offer Registration Statement or a
Shelf Registration Statement, if applicable, is not declared effective on or
prior to 150 days after the Issue Date, (iii) the Exchange Offer is not
consummated on or prior to 180 days after the Issue Date or (iv) a Shelf
Registration Statement is filed and declared effective on or prior to 150 days
after the Issue Date but shall thereafter cease to be effective or usable (at
any time that Holdings is obligated to maintain the effectiveness thereof) in
connection with resales of Original Discount Notes or Exchange Discount Notes
in accordance with and during the periods specified in the Registration
Agreement (each such event referred to in clauses (i) through (iv), a
"Registration Default"), Holdings will be obligated 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 5c per week per $1,000 of the Accreted Value of the
Original Discount Notes constituting Transfer Restricted Securities held by
such holder. The amount of the liquidated damages will increase an additional
5c per week per $1,000 of the Accreted Value of the Original Discount Notes
constituting Transfer Restricted Securities for each subsequent 90-day period
until the applicable Registration Default has been cured, up to a maximum
amount of Liquidated Damages of 20c per week per $1,000 of the Accreted Value
of the Original Discount Notes constituting Transfer Restricted Securities.
All accrued liquidated damages shall be paid to holders in cash in arrears on
May 1 and November 1 of each year during which such liquidated damages are
payable, commencing on the first such date to occur after the obligation to
pay liquidated damages arises. Following the cure of all Registration
Defaults, the accrual of liquidated damages will cease.
The Registration Agreement also provides that Holdings (i) shall, if
required under applicable securities laws, upon prior written request, make
available for a period of 90 days after the consummation of the Exchange Offer
a prospectus meeting the requirements of the Securities Act to any broker-
dealer for use in connection with any resale of any such Exchange Discount
Notes and (ii) shall pay all expenses incident to the Exchange Offer
(including the expense of one counsel to the holders of the Original Discount
Notes) and will indemnify certain holders of the Original Discount Notes
(including any broker-dealer) against certain liabilities, including
liabilities under the Securities Act. A broker-dealer which delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Registration Agreement (including certain
indemnification rights and obligations).
Each holder of Original Discount Notes who wishes to exchange such Original
Discount Notes for Exchange Discount Notes in the Exchange Offer will be
required to make certain representations, including representations that (i)
any Exchange Discount Notes to be received by it will be acquired in the
ordinary course of its business, (ii) it has no arrangement or understanding
with any person to participate in the distribution of the Exchange Discount
Notes, and (iii) it is not an "affiliate" (as defined in Rule 405 under the
Securities Act) of Holdings, or if it is an affiliate, that it will comply
with the registration and prospectus delivery requirements of the Securities
Act to the extent applicable.
If the holder of Original Discount Notes is not a broker-dealer, it will be
required to represent that it is not engaged in, and does not intend to engage
in, the distribution of the Exchange Discount Notes. If the holder of Original
Discount Notes is a broker-dealer that will receive Exchange Discount Notes
for its own account in exchange for Original Discount Notes that were acquired
as a result of market-making activities or other trading
85
<PAGE>
activities (an "Exchanging Dealer"), it will be required to acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Discount Notes.
Holders of the Original Discount Notes will be required to make certain
representations to Holdings (as described above) 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
Original Discount Notes included in the Shelf Registration Statement and
benefit from the provisions regarding liquidated damages set forth in the
preceding paragraphs. A holder who sells Original Discount Notes pursuant to
the Shelf Registration Statement generally will be required to be named as a
selling securityholder in the related prospectus and to deliver a prospectus
to purchasers, will be subject to certain of the civil liability provisions
under the Securities Act in connection with such sales and will be bound by
the provisions of the Registration Agreement which are applicable to such a
holder (including certain indemnification obligations).
The summary herein of certain provisions of the Registration Agreement is a
description of the material provisions of the Registration Agreement, a copy
of which is filed as an exhibit to the Exchange Offer Registration Statement.
Except as set forth herein, after consummation of the Exchange Offer,
holders of Original Discount Notes have no registration or exchange rights
under the Registration Agreement. See "--Consequences of Failure of Exchange,"
and "--Resales of Exchange Discount Notes; Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
The Original Discount Notes which are not exchanged for Exchange Discount
Notes pursuant to an Exchange Offer and are not included in a resale
prospectus will remain Transfer Restricted Securities. Accordingly, such
Original Discount Notes may not be offered, sold or otherwise transferred
prior to the date which is two years after the later of the date of original
issue and the last date that Holdings or any affiliate of Holdings was the
owner of such securities (or any predecessor thereto) (the "Resale Restriction
Termination Date") only (a) to Holdings (b) pursuant to a registration
statement which has been declared effective under the Securities Act, (c) for
so long as the Original Discount Notes are eligible for resale pursuant to
Rule 144A, to a person the owner reasonably believes is a qualified
institutional buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the transfer is
being made in reliance on Rule 144A, (d) to an "accredited investor" within
the meaning of subparagraph (1), (2), (3) or (7) of paragraph (a) of Rule 501
under the Securities Act that is purchasing for his own account or for the
account of such an "accredited investor" in each case in a minimum of Original
Discount Notes with a purchase price of $500,000 or (c) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of its property or the property of such investor account or
accounts be at all times within its or their control. The foregoing
restrictions on resale will not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Original Discount
Notes is proposed to be made pursuant to clause (d) above prior to the Resale
Restriction Termination Date, the transferor shall deliver a letter from the
transferee to Holdings and the Trustee, which shall provide, among other
things, that the transferee is an "accredited investor" within the meaning of
subparagraph (1), (2), (3) or (7) of paragraph (a) of Rule 501 under the
Securities Act and that it is acquiring such Securities for investment
purposes and not for distribution in violation of the Securities Act. Prior to
any offer, sale or other transfer of Original Discount Notes prior to the
Resale Restriction Termination Date pursuant to clauses (d) or (e) above, the
issuer and the Trustee may require the delivery of an opinion of counsel,
certifications and/or other information satisfactory to each of them.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in the Prospectus and
in the Letter of Transmittal, the form of which is included as Exhibit 99.1 to
the Registration Statement of which this Prospectus is a part, Holdings will
accept any and all Original Discount Notes validly tendered and not withdrawn
prior to the
86
<PAGE>
applicable Expiration Date. Holdings will issue $1,000 principal amount of
Exchange Discount Notes in exchange for each $1,000 principal amount of
Original Discount Notes accepted in the Exchange Offer. Holders may tender
some or all of their Original Discount Notes pursuant to the Exchange Offer.
However, Original Discount Notes may be tendered only in integral multiples of
$1,000 principal amount.
The form and terms of the Exchange Discount Notes are the same as the form
and terms of the Original Discount Notes, except that (i) the Exchange
Discount Notes have been registered under the Securities Act and therefore
will not bear legends restricting their transfer pursuant to the Securities
Act, and (ii) the holders of Exchange Discount Notes will not be entitled to
rights under the Registration Agreement (except under certain limited
circumstances). The Exchange Discount Notes will evidence the same debt as the
Original Discount Notes (which they replace), and will be issued under, and be
entitled to the benefits of, the Indenture.
Solely for reasons of administration (and for no other purpose) Holdings has
fixed the close of business on , 1998 as the record date for the
Exchange Offer for purposes of determining the persons to whom this Prospectus
and the Letter of Transmittal will be mailed initially. Only a registered
holder of Original Discount Notes (or such holder's legal representative or
attorney-in-fact) as reflected on the records of the Trustee under the
Indenture may participate in the Exchange Offer. There will be no fixed record
date for determining registered holders of the Original Discount Notes
entitled to participate in the Exchange Offer.
Holders of the Original Discount Notes do not have any appraisal or
dissenters' rights under the General Corporation Law of Delaware or under the
Indenture in connection with the Exchange Offer. Holdings intends to conduct
the Exchange Offer in accordance with the applicable requirements of the
Exchange Act and the rules and regulations of the SEC thereunder.
Holdings shall be deemed to have accepted validly tendered Original Discount
Notes when, as and if it has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of the Original Discount Notes for purposes of receiving the Exchange Discount
Notes.
If any tendered Original Discount Notes are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Original Discount
Notes will be returned without expense, to the tendering holder thereof as
promptly as practicable after the Expiration Date.
Holders who tender Original Discount Notes 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
the Original Discount Notes pursuant to the Exchange Offer. Holdings will pay
all charges and expenses, other than certain applicable taxes, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSION; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1998, unless Holdings extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date and time to which such
Exchange Offer is extended.
In order to extend the Exchange Offer, Holdings will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, prior to 9:00 a.m., New York City time, on the next
Business Day after the previously scheduled Expiration Date.
Holdings reserves the right, in its sole discretion, (i) to delay accepting
any Original Discount Notes, (ii) extend the Exchange Offer, (iii) if the
condition set forth below under "--Conditions of the Exchange Offer" shall not
have been satisfied, to terminate the Exchange Offer, by giving oral or
written notice of such delay, extension or termination to the Exchange Agent,
or (iv) to amend the terms of the Exchange Offer in any manner.
87
<PAGE>
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by a public announcement thereof. If the
Exchange Offer is amended in a manner determined by Holdings to constitute a
material change, it will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders of
the Original Discount Notes and the Exchange Offer will be extended for a
period of five to ten business days, as required by law, depending upon the
significance of the amendment and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.
Without limiting the manner in which Holdings may choose to make public
announcement of any delay, extension, termination or amendment of its Exchange
Offer, Holdings shall not have an obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release thereof to the Dow Jones News Service.
PROCEDURES FOR TENDERING
Only a registered holder of Original Discount Notes may tender such Original
Discount Notes in the Exchange Offer. To tender in the Exchange Offer, a
Holder must complete, sign and date the Letter of Transmittal, have the
signatures thereon guaranteed if required by such Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal to the Exchange Agent at
the address set forth below under "--Exchange Agent" for receipt prior to the
applicable Expiration Date. In addition, either (i) certificates for such
Original Discount Notes must be received by the Exchange Agent along with the
Letter of Transmittal, or (ii) a timely confirmation of a book-entry transfer
(a "Book-Entry Confirmation") of such Original Discount Notes into the
Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer
described below, must be received by the Exchange Agent prior to the
applicable Expiration Date, or (iii) the Holder must comply with the
guaranteed delivery procedures described below. To be tendered effectively,
the Letter of Transmittal and all other required documents must be received by
the Exchange Agent at the address set forth below under "--Exchange Agent"
prior to the applicable Expiration Date.
The tender by a Holder will constitute an agreement between such holder and
Holdings in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal applicable to such Exchange Offer.
THE METHOD OF DELIVERY OF THE ORIGINAL DISCOUNT NOTES AND THE APPLICABLE
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 APPLICABLE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR
ORIGINAL DISCOUNT NOTES SHOULD BE SENT TO HOLDINGS. 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 Original Discount Notes are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact the registered holder promptly and
instruct such registered holder to tender on such beneficial owner's behalf.
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 such owner's Original Discount Notes, either make appropriate
arrangements to register ownership of the Original Discount Notes in such
beneficial owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
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 Original Discount Notes tendered pursuant thereto are
88
<PAGE>
tendered (i) by a registered holder who has not completed the box entitled
"Special Delivery Instructions" on the Letter of Transmittal designated for
such Original Discount Notes, or (ii) for the account of an Eligible
Institution. In the event that signatures on a Letter of Transmittal or a
notice of withdrawal, as the case may be, are required to be guaranteed, such
guarantee must be by a participant in a recognized signature guarantee
medallion program within the meaning of Rule 17Ad-15 under the Exchange Act
(an "Eligible Institution").
If a Letter of Transmittal is signed by a person other than the registered
holder of any Original Discount Notes listed therein, such Original Discount
Notes must be endorsed or accompanied by a properly completed bond power,
signed by such registered holder as such registered holder's name appears on
such Original Discount Notes, with signature guaranteed by an Eligible
Institution.
If a Letter of Transmittal or any Original Discount Notes 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 evidence
satisfactory to Holdings, as applicable, of their authority to so act must be
submitted with the Letter of Transmittal designated for such Original Discount
Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Original Discount Notes will
be determined by Holdings in its sole discretion, which determination will be
final and binding. Holdings reserves the absolute right to reject any and all
Original Discount Notes not properly tendered or any Original Discount Notes
the issuer's acceptance of which would, in the opinion of counsel for such
issuer, be unlawful. Holdings also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Original Discount
Notes. The interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) by Holdings will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Original Discount Notes must be cured within
such time as Holdings shall determine. Although Holdings intends to notify
holders of defects or irregularities with respect to tenders of Original
Discount Notes issued by it, neither Holdings, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of Original Discount Notes will not be deemed to have been made until
such defects or irregularities have been cured or waived. Any Original
Discount Notes received by the Exchange Agent that are not validly tendered
and as to which the defects or irregularities have not been cured or waived,
or if Original Discount Notes are submitted in a principal amount greater than
the principal amount of Original Discount Notes being tendered by such
tendering holder, such unaccepted or non-exchanged Original Discount Notes
will be returned by the Exchange Agent to the tendering holders (or, in the
case of Original Discount Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described below, such unaccepted or non-
exchanged Original Discount Notes will be credited to an account maintained
with such Book-Entry Transfer Facility), unless otherwise provided in the
Letter of Transmittal designated for such Original Discount Notes, as soon as
practicable following the applicable Expiration Date.
By tendering Original Discount Notes in the Exchange Offer, each registered
holder will represent to the issuer of such Original Discount Notes that,
among other things, (i) the Exchange Discount Notes to be acquired by the
holder and any beneficial owner(s) of such Original Discount Notes
("Beneficial Owner(s)") in connection with the Exchange Offer are being
acquired by the holder and any Beneficial Owner(s) in the ordinary course of
business of the holder and any Beneficial Owner(s), for such holder's own
account, for investment and not with a view to or for sale in connection with
any distribution of the Exchange Discount Notes, (ii) the holder and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in a
distribution of the Exchange Discount Notes, (iii) the Holder and each
Beneficial Owner acknowledge and agree that (x) any person participating in an
Exchange Offer for the purpose of distributing the Exchange Discount Notes
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction with respect
to the Exchange Discount Notes acquired by such person and cannot rely on the
position of the staff of the SEC set
89
<PAGE>
forth in no-action letters that are discussed herein under "--Resales of the
Exchange Discount Notes," and (y) any broker-dealer that receives Exchange
Discount Notes for its own account in exchange for Original Discount Notes
pursuant to an Exchange Offer, where such Original Discount Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities, must deliver a prospectus in connection with any
resale of such Exchange Discount Notes, see "Plan of Distribution," but by so
acknowledging, the holder shall not be deemed to admit that, by delivering a
prospectus, it is an "underwriter" within the meaning of the Securities Act,
(iv) neither the holder nor any Beneficial Owner is an "affiliate," as defined
in Rule 405 under the Securities Act, of Holdings except as otherwise
disclosed to Holdings in writing, and (v) the holder and each Beneficial Owner
understands that a secondary resale transaction described in clause (iii)
above should be covered by an effective registration statement containing the
selling securityholder information required by Item 507 of Regulation S-K of
the SEC.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Original Discount Notes at the Book-Entry Transfer Facility, for
purposes of the Exchange Offers, within two business days after the date of
this Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's system may make book-entry delivery of Original
Discount Notes by causing the Book-Entry Transfer Facility to transfer such
Original Discount Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility in accordance with such Book-Entry Transfer Facility's
procedures for transfer. However, although delivery of Original Discount Notes
may be effected through book-entry transfer at the Book-Entry Transfer
Facility, the applicable Letter of Transmittal, with any required signature
guarantees and any other documents, must be transmitted to and received by the
Exchange Agent at the address set forth below under "--Exchange Agent" on or
prior to the applicable Expiration Date or the guaranteed delivery procedures
described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Discount Notes and (i) whose
Original Discount Notes are not immediately available, or (ii) who cannot
deliver their Original Discount Notes, the Letter of Transmittal or any other
required documents to the Exchange Agent prior to the applicable Expiration
Date, may effect a tender if:
(1) The tender is made through an Eligible Institution;
(2) Prior to the applicable Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by mail, hand delivery or facsimile
transmission) setting forth the name and address of the holder, the
certificate number(s) of such Original Discount Notes and the principal
amount of the Original Discount Notes being tendered, stating that the
tender is being made thereby and guaranteeing that, within five business
days after the applicable Expiration Date, the applicable Letter of
Transmittal together with the certificate(s) representing the Original
Discount Notes (or a Book-Entry Confirmation) and any other documents
required by the applicable Letter of Transmittal will be delivered by the
Eligible Institution to the Exchange Agent; and
(3) Such properly completed and executed Letter of Transmittal, as well
as the certificate(s) representing all tendered Original Discount Notes in
proper form for transfer (or a Book-Entry Confirmation) and all documents
required by the Letter of Transmittal are received by the Exchange Agent
within five business days after the applicable Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Discount Notes
pursuant to an Exchange Offer may be withdrawn, unless theretofore accepted
for exchange as provided in the applicable Exchange Offer, at any time prior
to the Expiration Date of that Exchange Offer.
90
<PAGE>
To be effective, a written or facsimile transmission notice of withdrawal
must be received by the Exchange Agent at its address set forth herein prior
to the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Original Discount Notes to be
withdrawn (the "Depositor"), (ii) identify the Original Discount Notes to be
withdrawn (including the certificate number or numbers and aggregate principal
amount of such Original Discount Notes), and (iii) be signed by the holder in
the same manner as the original signature on the applicable Letter of
Transmittal (including any required signature guarantees). All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by Holdings in its sole respective discretion, which
determination shall be final and binding on all parties. Any Original Discount
Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Discount Notes will be issued
with respect thereto unless the Original Discount Notes so withdrawn are
retendered. Property withdrawn Original Discount Notes may be retendered by
following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the applicable Expiration Date.
Any Original Discount Notes which have been tendered but which are not
accepted for exchange due to the rejection of the tender due to uncured
defects or the prior termination of the applicable Exchange Offer, or which
have been validly withdrawn, will be returned to the holder thereof (unless
otherwise provided in the Letter of Transmittal), as soon as practicable
following the applicable Expiration Date or, if so requested in the notice of
withdrawal, promptly after receipt by the issuer of the Original Discount
Notes of notice of withdrawal without cost to such holder.
CONDITIONS OF THE EXCHANGE OFFER
The Exchange Offer is subject to the condition that the Exchange Offer, or
the making of any exchange by a holder, does not violate applicable law or any
applicable interpretation of the staff of the SEC. If there has been a change
in SEC policy such that there is a substantial question whether the Exchange
Offer is permitted by applicable federal law, Holdings has agreed to seek a
no-action letter or other favorable decision from the SEC allowing Holdings to
consummate the Exchange Offer.
If Holdings determines that the Exchange Offer is not permitted by
applicable Federal law, it may terminate the Exchange Offer. In connection
therewith Holdings may (i) refuse to accept any Original Discount Notes and
return any Original Discount Notes that have been tendered by the holders
thereof, (ii) extend the Exchange Offer and retain all Original Discount Notes
tendered prior to the Expiration of the Exchange Offer, subject to the rights
of such holders of tendered Original Discount Notes to withdraw their tendered
Original Discount Notes, or (iii) waive such termination event with respect to
the Exchange Offer and accept all properly tendered Original Discount Notes
that have not been withdrawn. If such waiver constitutes a material change in
the Exchange Offer, Holdings will disclose such change by means of a
supplement to this Prospectus that will be distributed to each registered
holder of Original Discount Notes, and Holdings will extend the Exchange Offer
for a period of five to ten business days, depending upon the significance of
the waiver and the manner of disclosure to the registered holders of the
Original Discount Notes, if the Exchange Offer would otherwise expire during
such period.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as "Exchange Agent" for the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and other documents
should be directed to the Exchange Agent addressed as follows:
By Registered or Certified Mail or Hand or Overnight Delivery:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Global Trust Services
91
<PAGE>
Facsimile Transmissions: (212) 946-8158
(ELIGIBLE INSTITUTIONS ONLY)
Delivery to other than the above address or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by Holdings. The principal
solicitation is being made by mail; however, additional solicitation may be
made by telegraph, telephone or in person by officers and regular employees of
Holdings and its affiliates.
No dealer-manager has been retained in connection with the Exchange Offer
and no payments will be made to brokers, dealers or others soliciting
acceptance of the Exchange Offer. However, reasonable and customary fees will
be paid to the Exchange Agent for its service and it will be reimbursed for
its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by Holdings and are estimated in the aggregate to be approximately
$ . Such expenses include fees and expenses of the Exchange Agent and the
Trustee under the Indenture, accounting and legal fees and printing costs,
among others.
Holdings will pay all transfer taxes, if any, applicable to the exchange of
the Original Discount Notes pursuant to the Exchange Offer. If, however, a
transfer tax is imposed for any reason other than the exchange of the Original
Discount Notes pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
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 carrying values of the Original Discount Notes are not expected to be
materially different from the fair value of the Exchange Discount Notes at the
time of the exchange. Accordingly, no gain or loss for accounting purposes
will be recognized. The expenses of the Exchange Offer will be amortized over
the term of the Exchange Discount Notes.
RESALES OF THE EXCHANGE DISCOUNT NOTES; PLAN OF DISTRIBUTION
Based on no-action letters issued by the staff of the SEC to third parties,
Holdings believes the Exchange Discount Notes issued pursuant to the Exchange
Offer in exchange for the Original Discount Notes may be offered for resale,
resold and otherwise transferred by any holder thereof (other than (i) a
broker-dealer who purchased such Original Discount Notes directly from
Holdings to resell pursuant to Rule 144A or any other available exemption
under the Securities Act or (ii) a person that is an "affiliate" of Holdings
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 the holder is acquiring the Exchange Discount Notes in its
ordinary course of business and is not participating, and has no arrangement
or understanding with any person to participate, in the distribution of the
Exchange Discount Notes. Holders of Original Discount Notes wishing to accept
the Exchange Offer must represent to Holdings that such conditions have been
met. In the event that Holdings' belief is inaccurate, holders of Exchange
Discount Notes who transfer Exchange Discount Notes in violation of the
prospectus delivery provisions of the Securities Act and without an exemption
from registration thereunder may incur liability under the Securities Act.
Holdings does not assume or indemnify holders against such liability.
All resales must be made in compliance with applicable state securities or
"blue sky" laws. Such compliance may require that the Exchange Discount Notes
be registered or qualified in a particular state or that
92
<PAGE>
the resales be made by or through a licensed broker-dealer, unless exemptions
from these requirements are available. Holdings assumes no responsibility with
regard to compliance with such requirements.
Each affiliate of Holdings must acknowledge that such person will comply
with the registration and prospectus delivery requirements of the Securities
Act to the extent applicable. Each broker-dealer that receives Exchange
Discount Notes in exchange for Original Discount Notes held for its own
account, as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Discount Notes. Although a broker-dealer may be an "underwriter"
within the meaning of the Securities Act, the Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Discount Notes received in exchange for Original Discount Notes.
93
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain federal income tax consequences
associated with the acquisition, ownership, and disposition of the Exchange
Discount Notes by holders who exchange Original Discount Notes for the
Exchange Discount Notes. The summary does not discuss all of the aspects of
federal income taxation that may be relevant to a prospective holder of the
Exchange Discount Notes in light of his or her particular circumstances, or to
certain types of holders (including dealers in securities, insurance
companies, tax-exempt organizations, financial institutions, broker-dealers, S
corporations, and persons who hold the Exchange Discount Notes as part of a
hedge, straddle, "synthetic security" or other integrated investment) that are
subject to special treatment under the federal income tax laws. This
discussion also does not address the tax consequences to nonresident aliens,
foreign corporations, foreign partnerships or foreign trusts that are subject
to United States federal income tax on a net basis on income with respect to
an Exchange Discount Note because such income is effectively connected with
the conduct of a U.S. trade or business. Such holders generally are taxed in a
similar manner to U. S. Holders (as defined below); however, certain special
rules apply. In addition, this discussion is limited to holders who hold the
Exchange Discount Notes as capital assets within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the "Code"). This summary
also does not describe any tax consequences under state, local, or foreign tax
laws.
The discussion is based upon the Code, Treasury Regulations, Internal
Revenue Service ("IRS") rulings and pronouncements, and judicial decisions all
in effect as of the date hereof, all of which are subject to change at any
time by legislative, judicial or administrative action. Any such changes may
be applied retroactively in a manner that could adversely affect a holder of
the Exchange Discount Notes. Holdings has not sought and will not seek any
rulings or opinions from the IRS or counsel with respect to the matters
discussed below. There can be no assurance that the IRS will not take
positions concerning the tax consequences of the purchase, ownership or
disposition of the Exchange Discount Notes which are different from those
discussed herein.
HOLDERS WHO EXCHANGE ORIGINAL DISCOUNT NOTES FOR EXCHANGE DISCOUNT NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE FEDERAL INCOME TAX
CONSEQUENCES THAT MAY APPLY TO THEM, AS WELL AS THE APPLICATION OF STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS.
EXCHANGE OF ORIGINAL DISCOUNT NOTES FOR EXCHANGE DISCOUNT NOTES. The
exchange of an Original Discount Note by a holder for an Exchange Discount
Note pursuant to the Exchange Offer should not constitute a taxable exchange
of the Original Discount Note. As a result, a holder will not recognize
taxable gain or loss upon receipt of an Exchange Discount Note, such holder's
holding period for an Exchange Discount Note will include the holding period
for the Original Discount Note so exchanged and such holder's adjusted tax
basis in an Exchange Discount Note will be the same as such holder's adjusted
tax basis in the Original Discount Note so exchanged.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
A U.S. Holder is any holder who or which is (i) a citizen or resident of the
United States, (ii) a domestic corporation or domestic partnership or (iii) an
estate or trust other than a "foreign estate" or "foreign trust" as defined in
Section 7701(a)(31) of the Code.
CLASSIFICATION OF THE DISCOUNT NOTES. Holdings intends to treat the Exchange
Discount Notes as debt rather than equity for federal income tax purposes. The
IRS could challenge this characterization. If the Exchange Discount Notes were
treated as equity rather than debt, the amount treated as a distribution on
any such instrument would be treated as ordinary dividend income to the extent
of the current or accumulated earnings and profits of Holdings, and any
interest deductions taken by Holdings with respect to the instrument would be
disallowed, which may adversely affect Holdings' financial position.
94
<PAGE>
Pursuant to Section 385(c) of the Code, the characterization of the Exchange
Discount Notes as debt is binding on a holder of the Exchange Discount Notes
unless such holder discloses any inconsistent treatment on such holder's tax
return. Section 385(c) is not binding on the IRS.
The following discussion assumes that the Exchange Discount Notes will be
treated as debt for federal income tax purposes.
ORIGINAL ISSUE DISCOUNT. The Exchange Discount Notes will be considered to
be issued with original issue discount ("OID') for federal income tax
purposes. As a result, holders of Exchange Discount Notes will be required to
include accrued OID in gross income in advance of the receipt of the cash
payments related to such income, but will not be required to include in income
such cash payments when they are received by such holder on the Exchange
Discount Notes.
The amount of OID with respect to an Exchange Discount Note will be equal to
the excess of the instrument's stated redemption price at maturity over its
issue price. For this purpose, the stated redemption price at maturity of an
Exchange Discount Note will equal the sum of all amounts payable pursuant to
the Exchange Discount Note, regardless of whether denominated as principal or
interest. The issue price of the Exchange Discount Notes will be the first
price at which a substantial amount of the Exchange Discount Notes are sold
(other than to brokers, underwriters and placement agents).
The amount required to be included in a U.S. Holder's income as OID in a
taxable year will be equal to the sum of the daily portions of OID for each
day during such taxable year on which such holder holds the Exchange Discount
Note. The daily portions of OID will be determined by allocating, to each day
during such taxable year, a pro rata portion of the OID on the instrument
attributable to the "accrual period" (which may not exceed one year) in which
such day is included. The amount of OID attributable to an accrual period will
be the product of (i) the "adjusted issue price" at the beginning of such
accrual period (i.e., the issue price plus OID attributable to prior accrual
periods, less any cash payments on the instrument during such prior accrual
periods) multiplied by (ii) the yield to maturity of the instrument
(determined by semiannual compounding). Each payment made under an Exchange
Discount Note will be treated first as a payment of any accrued unpaid OID
that has not been allocated to prior payments and second as a payment of
principal. Special rules will apply for calculating OID for initial short or
final accrual periods.
BECAUSE OF THE COMPLEXITY OF THE RULES RELATING TO OID, U.S. HOLDERS SHOULD
CONSULT THEIR TAX ADVISORS AS TO THE APPLICATION OF THE RULES TO THEIR
PARTICULAR CIRCUMSTANCES.
EFFECT OF PAYMENTS ON REDEMPTION AND REPURCHASE RIGHTS. At any time on or
prior to May 1, 2001, Holdings may under certain circumstances redeem in the
aggregate up to 35% of the aggregate principal amount of the Discount Notes
originally issued with the proceeds of one or more Public Equity Offerings by
Iron Age or Holdings, as described above under "Description of Exchange
Discount Notes--Optional Redemption." Further, upon the occurrence of a Change
in Control, each holder of Exchange Discount Notes will have the right to
require Holdings to repurchase all or part of such holder's Discount Notes, as
described above under "Description of Exchange Discount Notes--Change in
Control."
Based on Holdings' current expectations, the likelihood that a Public Equity
Offering or Change in Control will occur is remote. Accordingly, Holdings
intends to take the position that the contingent payments described above do
not, as of the Issue Date, affect the computation of the amount of OID on the
Exchange Discount Notes or the yield to maturity or maturity date of the
Exchange Discount Notes. Holdings' determination in this regard is binding on
a holder, unless such holder discloses in the proper manner to the Internal
Revenue Service that it is taking a different position.
Prospective investors should consult their tax advisors as to the tax
considerations relating to the contingent payments described above. If,
contrary to Holdings' expectations, a Public Equity Offering or Change in
Control were to occur or if the Internal Revenue Service were to take the
position that the contingent payments were not remote as of the Issue Date,
Holdings could be required to redetermine the amount and timing of interest
income realized by a holder of an Exchange Discount Note.
95
<PAGE>
SALE, EXCHANGE OR RETIREMENT OF AN EXCHANGE DISCOUNT NOTE. Upon the sale,
exchange, retirement or other taxable disposition of an Exchange Discount
Note, a U.S. Holder will recognize taxable gain or loss in an amount equal to
the difference between the amount of cash and fair market value of property
received in exchange therefor and such holder's adjusted tax basis in the
Exchange Discount Note. A U.S. Holder's adjusted tax basis in an Exchange
Discount Note will generally be increased by the amounts of any OID included
in income by such holder with respect to such Exchange Discount Note and
decreased by the amounts of any payments actually received by such U.S. Holder
with respect to such Exchange Discount Note.
Gain or loss recognized on the sale or other taxable disposition of an
Exchange Discount Note generally will be capital gain or loss and will be
long-term capital gain or loss if the Exchange Discount Note has been held for
more than one year (the maximum rate of tax on any such long-term capital gain
being further reduced if the Exchange Discount Note were held for more than
eighteen months) and otherwise will be short-term capital gain or loss.
CLASSIFICATION OF EXCHANGE DISCOUNT NOTES AS APPLICABLE HIGH YIELD DISCOUNT
OBLIGATIONS. Section 163 of the Code provides that all of the OID with respect
to certain "applicable high yield discount obligations" will be bifurcated
into two elements: (i) an interest element that is deductible by the issuer
only when paid and (ii) a disqualified portion for which the issuer receives
no deduction (the "disqualified portion"). The Exchange Discount Notes will
constitute applicable high yield discount obligations and therefore the
deduction by Holdings of OID on the Exchange Discount Notes will be limited.
The disqualified portion of OID on the Exchange Discount Note will equal the
product of the total OID on the Exchange Discount Notes times the ratio of (a)
the excess of the yield to maturity over the sum of the long-term applicable
federal rate in effect for the month in which the Exchange Discount Notes are
issued plus 6% to (b) the yield to maturity.
A U.S. Holder of an applicable high yield discount obligation must continue
to include OID on the obligation as it accrues. Corporate U.S. Holders
generally will be eligible for the 70% dividends-received deduction with
respect to the disqualified portion of OID accrued on an Exchange Discount
Note to the extent of Holdings' accumulated or current earnings and profits.
Although the matter is not free from doubt, any amount qualifying as a
dividend should not be subject to extraordinary dividend treatment under
Section 1059 of the Code.
BACKUP WITHHOLDING. The backup withholding rules require a payor to deduct
and withhold a tax if (i) the payee fails to furnish a taxpayer identification
number ("TIN") in the prescribed manner, (ii) the IRS notifies the payor that
the TIN furnished by the payee is incorrect, (iii) the payee has failed to
report properly the receipt of "reportable payments" and the IRS has notified
the payor that withholding is required, or (iv) the payee fails to certify
under the penalty of perjury that such payee is not subject to backup
withholding. If any one of the events discussed above occurs with respect to a
holder of Exchange Discount Notes, Holdings, its paying agent or other
withholding agent will be required to withhold a tax equal to 31% of any
"reportable payment" made in connection with the Exchange Discount Notes of
such holder. A "reportable payment" includes, among other things, amounts paid
in respect of interest or OID on an Exchange Discount Note. Any amounts
withheld from a payment to a holder under the backup withholding rules will be
allowed as a refund or credit against such holder's federal income tax,
provided that the required information is furnished to the IRS. Certain
holders (including, among others, corporations and certain tax-exempt
organizations) are not subject to backup withholding.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS
This section discusses special rules applicable to a Non-U.S. Holder of
Exchange Discount Notes. This summary does not address the tax consequences to
stockholders, partners or beneficiaries in a Non-U.S. Holder or the tax
consequences to Non-U.S. Holders that are subject to United States federal
income tax on a net basis on income with respect to an Exchange Discount Note
because such income is effectively connected with the conduct of a U.S. trade
or business. For purposes hereof, a "Non-U.S. Holder" is any person that is
not a U.S. Holder.
96
<PAGE>
INTEREST AND OID. Payments with respect to OID accrued by a Non-U.S. Holder
that do not qualify for the portfolio interest exception discussed below will
be subject to withholding of federal income tax at a rate of 30% unless a U.S.
income tax treaty applies to reduce the rate of withholding. To claim a treaty
reduced rate, the Non-U.S. Holder must provide a properly executed Form 1001
(See discussion below for changes to withholding tax provisions to be
effective for payments of interest made after December 1, 1999).
Payments with respect to OID accrued by a Non-U.S. Holder on an Exchange
Discount Note will not be subject to federal income or withholding tax if it
qualified as "portfolio interest." Generally, payments with respect to accrued
OID on the Exchange Discount Notes will qualify as portfolio interest if (i)
the Non-U.S. Holder does not own, actually or constructively, 10% or more of
the total combined voting power of all classes of stock of Holdings entitled
to vote, (ii) the Non-U.S. Holder is not a controlled foreign corporation that
is related to Holdings actually or constructively through stock ownership for
federal income tax purposes, (iii) the Non-U.S. Holder is not a bank receiving
interest on a loan entered into in the ordinary course of business, and (iv)
either (x) beneficial owner of the Exchange Discount Note provides Holdings or
its paying agent, a properly executed certification on IRS Form W-8 (or a
suitable substitute form) signed under penalties of perjury that the
beneficial owner is not a "U.S. person" for federal income tax purposes and
that provides the beneficial owner's name and address, or (y) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its business holds the
Exchange Discount Note and certifies to Holdings or its agent under penalties
of perjury that the IRS Form W-8 (or a suitable substitute) has been received
by it from the beneficial owner of the Exchange Discount Note or a qualifying
intermediary and furnishes the payor a copy thereof.
As described above, Holdings intends to treat the Exchange Discount Notes as
debt for federal income tax purposes. If the Exchange Discount Notes were
treated as equity, the amount treated as a distribution on the Exchange
Discount Notes would be subject to federal income taxation at a rate of 30% on
the gross amount of the dividend (unless reduced by an applicable income tax
treaty), which tax generally is collected by withholding at a source. Under
current Treasury Regulations, a Non-U.S. Holder is required to satisfy certain
certification and other requirements in order to claim the benefit of a
reduced rate of withholding under an applicable income tax treaty.
SALE, EXCHANGE OR RETIREMENT OF EXCHANGE DISCOUNT NOTES. Any gain realized
by a Non-U.S. Holder on the sale, exchange or retirement of the Exchange
Discount Notes, will generally not be subject to federal income tax or
withholding unless (i) the Non-U.S. Holder is an individual who was present in
the U.S. for 183 days or more in the taxable year of the disposition and meets
certain other requirements, or (ii) the Non-U.S. Holder is subject to tax
pursuant to certain provisions of the Code applicable to certain individuals
who renounce their U.S. citizenship or terminate long-term U.S. residency. If
a Non-U.S. Holder falls under (ii) above, the holder will be taxed on the net
gain derived from the sale under the graduated federal income tax rates that
are applicable to U.S. citizens, and may be subject to withholding under
certain circumstances. If a Non-U.S. Holder falls under (i) above, the holder
generally will be subject to federal income tax at a rate of 30% on the gain
derived from the sale (or reduced treaty rate) and may be subject to
withholding in certain circumstances.
U.S. INFORMATION REPORTING AND BACKUP WITHHOLDING TAX. Back-up withholding
and information reporting generally will not apply to an Exchange Discount
Note issued in registered form that is beneficially owned by a Non-U.S. Holder
if the certification of Non-U.S. Holder status is provided to Holdings or its
agent as described above in"--Certain Federal Income Tax Consequences to Non-
U.S. Holders--Interest and OID," provided that the payor does not have actual
knowledge that the holder is a U.S. person. Holdings may be required to report
annually on Form 1042-S to the IRS and to each Non-U.S. Holder the amount of
interest paid to, and the tax withheld, if any, with respect to each Non-U.S.
Holder.
If payments of principal and interest are made to the beneficial owner of an
Exchange Discount Note by or through the foreign office of a custodian,
nominee or other agent of such beneficial owner, or if the proceeds of the
sale of Exchange Discount Notes are made to the beneficial owner of an
Exchange Discount Note through a foreign office of a "broker" (as defined in
the pertinent Treasury Regulations), the proceeds will not be subject
97
<PAGE>
to backup withholding (absent actual knowledge that the payee is a U.S.
person). Information reporting (but not backup withholding) will apply,
however, to a payment by a foreign office of a custodian, nominee, agent or
broker that is (i) a U.S. person, (ii) a controlled foreign corporation for
federal income tax purposes, or (iii) derives 50% or more of its gross income
from the conduct of a U.S. trade or business for a specified three-year
period; unless the broker has in its records documentary evidence that the
holder is not a Non-U.S. Holder and certain conditions are met (including that
the broker has no actual knowledge that the holder is a U.S. Holder) or the
holder otherwise establishes an exemption. Payment through the U.S. office of
a custodian, nominee, agent or broker is subject to both backup withholding at
a rate of 31% and information reporting, unless the holder certifies that it
is a Non-U.S. Holder under penalties of perjury or otherwise establishes an
exemption.
Any amount withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a credit against, or refund of, such
holder's federal income tax liability, provided that certain information is
provided by the holder to the IRS.
EFFECT OF NEW WITHHOLDING REGULATIONS. The IRS published Treasury
Regulations on October 14, 1997 that revise the procedures for claiming the
benefit of the portfolio interest exemption, a reduced treaty rate and the
exemption from backup withholding. In general, these regulations will be
effective for payments made after December 31, 1999. They will modify the
requirements imposed on a Non-U.S. Holder for establishing the Non-U.S.
Holder's status as a non-U.S. "beneficial owner" eligible for the portfolio
interest exemption, a reduced treaty rate, or the exemption from backup
withholding. Specifically, the new regulations will require a certification of
information including non-U.S. status, on a new form, by the non-U.S.
beneficial owner with which or with whom payments are associated. The
regulations also prescribe somewhat different procedures for entities
including foreign intermediaries and foreign flow-through entities (such as
foreign partnerships) to claim the benefit of the portfolio interest
exemption, reduced treaty rate(s) or the exemption from backup withholding on
behalf of those non-U.S. beneficial owners for which or for whom such entities
receive payments. Non-U.S. Holders should consult their tax advisors to
determine how the regulations will affect their particular circumstances.
98
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Discount Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Discount Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Discount Notes
received in exchange for Original Discount Notes where such Original Discount
Notes were acquired as a result of market-making activities or other trading
activities. Holdings has agreed that, starting on the Expiration Date and
ending on the close of business on the ninetieth day after the Expiration
Date, it will make this Prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale. In addition,
until , 1998, all dealers effecting transactions in the Exchange
Discount Notes may be required to deliver a prospectus.
Holdings will not receive any proceeds from any sale of Exchange Discount
Notes by broker-dealers. Exchange Discount Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Discount Notes or
a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers
of any such Exchange Discount Notes. Any broker-dealer that resells Exchange
Discount Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Discount Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit of any such resale of Exchange
Discount Notes and any 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 of 90 days after the Expiration Date, Holdings 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. Holdings has agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for the Holders of the
Discount Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the Holders of the Discount Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Discount Notes offered
hereby will be passed upon for Holdings by Ropes & Gray, One International
Place, Boston, Massachusetts 02110.
EXPERTS
The consolidated financial statements of Iron Age Holdings Corporation at
January 31, 1998 and 1997, and for each of the three years in the period
January 31, 1998, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein, and the information under the
caption "Selected Historical Consolidated Financial Data" for each of the five
years in the period ended January 31, 1998, appearing in this Prospectus and
Registration Statement have been derived from consolidated financial
statements audited by Ernst & Young LLP.
Such consolidated financial statements and selected historical consolidated
financial data are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
99
<PAGE>
IRON AGE HOLDINGS CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 27, 1996, JANUARY 25, 1997 AND JANUARY 31, 1998
PERIOD FEBRUARY 27, 1997 THROUGH APRIL 25, 1997 (UNAUDITED) AND
THREE MONTHS ENDED MAY 2, 1998 (UNAUDITED)
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................................. F-2
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets................................................. F-3
Consolidated Statements of Income........................................... F-4
Consolidated Statements of Stockholders' Equity............................. F-5
Consolidated Statements of Cash Flows....................................... F-6
Notes to Consolidated Financial Statements.................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Iron Age Holdings Corporation
We have audited the accompanying consolidated balance sheets of Iron Age
Holdings Corporation and subsidiaries ("Holdings") as of January 25, 1997 and
January 31, 1998, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended January 31, 1998. Our audits also included the financial statement
schedule listed in the index at Item 21.1. These financial statements and
schedule are the responsibility of Holdings' management. Our responsibility is
to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Iron Age
Holdings Corporation and subsidiaries at January 25, 1997 and January 31,
1998, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended January 31, 1998, in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
Ernst & Young LLP
Pittsburgh, Pennsylvania
March 13, 1998
F-2
<PAGE>
IRON AGE HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------- -----------------------
MAY 2,
JANUARY 25, JANUARY 31, 1998
1997 1998 (UNAUDITED)
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 1,517 $ 2,069 $ 38
Accounts receivable, net................. 14,202 15,996 17,427
Inventories.............................. 26,537 36,841 38,397
Prepaid expenses......................... 2,171 1,640 5,659
Deferred income taxes.................... 941 640 696
------- -------- --------
Total current assets................... 45,368 57,186 62,215
Notes receivable and other assets.......... 2,817 290 331
Property and equipment, net................ 9,321 10,479 10,515
Intangible assets, net..................... 32,725 106,846 109,508
------- -------- --------
Total assets........................... $90,231 $174,801 $182,569
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt..... $ 3,007 $ 3,699 $ 668
Accounts payable......................... 3,270 3,510 4,579
Accrued expenses......................... 5,092 7,272 5,471
------- -------- --------
Total current liabilities.............. 11,369 14,481 10,718
Long-term debt, less current maturities.... 60,727 97,976 149,454
Accrued pension liability.................. 516 516 516
Deferred income taxes...................... 1,203 6,949 7,143
------- -------- --------
Total liabilities...................... 73,815 119,922 167,831
Commitments and contingencies.............. -- -- --
Redeemable preferred stock................. -- 17,031 --
Stockholders' equity:
Common stock, $.01 par value, 125,000
shares authorized, 101,020 issued and
outstanding............................. 1 -- --
Common stock, $.01 par value, 200,000
shares authorized, 99,625 issued and
outstanding............................. -- 1 1
Additional paid-in capital............... 7,328 38,086 38,086
Retained earnings........................ 9,310 (174) (23,294)
Comprehensive income..................... (223) (65) (55)
------- -------- --------
Total stockholders' equity............. 16,416 37,848 14,738
------- -------- --------
Total liabilities and stockholders'
equity................................ $90,231 $174,801 $182,569
======= ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
IRON AGE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
------------------------------------ --------------------------------------
FEBRUARY 27, THREE
YEAR ENDED JANUARY 26, FEBRUARY 27, 1997 THROUGH MONTHS ENDED
----------------------- 1997 THROUGH 1997 THROUGH APRIL 25, MAY 2,
JANUARY 27, JANUARY 25, FEBRUARY 26, JANUARY 31, 1997 1998
1996 1997 1997 1998 (UNAUDITED) (UNAUDITED)
----------- ----------- ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $95,263 $99,360 $10,937 $107,769 $17,306 $32,167
Cost of sales........... 50,706 52,437 5,610 53,304 8,795 16,043
------- ------- ------- -------- ------- -------
Gross profit............ 44,557 46,923 5,327 54,465 8,511 16,124
Selling, general and
administrative......... 28,399 31,267 5,120 36,541 5,685 12,967
Depreciation............ 1,127 1,322 121 1,443 245 424
Amortization of
intangible assets...... 1,402 1,429 117 2,983 599 846
------- ------- ------- -------- ------- -------
Operating income
(loss)................. 13,629 12,905 (31) 13,498 1,982 1,887
Interest expense........ 6,702 6,515 1,116 9,855 1,449 2,742
------- ------- ------- -------- ------- -------
Income (loss) before
income taxes........... 6,927 6,390 (1,147) 3,643 533 (855)
Provision (benefit) for
income taxes........... 3,091 2,800 (452) 1,686 205 (128)
------- ------- ------- -------- ------- -------
Income (loss) before
extraordinary item..... $ 3,836 $ 3,590 $ (695) $ 1,957 328 (727)
Extraordinary item, net
of tax................. -- -- -- -- -- (4,015)
------- ------- ------- -------- ------- -------
Net income (loss)....... $ 3,836 $ 3,590 $ (695) $ 1,957 $ 328 $(4,742)
======= ======= ======= ======== ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE>
IRON AGE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------- PAID-IN RETAINED COMPREHENSIVE
SHARES AMOUNTS CAPITAL EARNINGS INCOME TOTAL
------- ------- ------- -------- ------------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR
Balance at January 28,
1995................... 101,020 $ 1 $ 6,263 $ 1,884 $(248) $ 7,900
Net income............ -- -- -- 3,836 -- 3,836
Foreign currency
translation adjust-
ment, net of tax..... -- -- -- -- 4 4
------- ---- ------- -------- ----- -------
Balance at January 27,
1996................... 101,020 1 6,263 5,720 (244) 11,740
Net income............ -- -- -- 3,590 -- 3,590
Stock-based compensa-
tion................. -- -- 1,065 -- -- 1,065
Foreign currency
translation adjust-
ment, net of tax..... -- -- -- -- 21 21
------- ---- ------- -------- ----- -------
Balance at January 25,
1997................... 101,020 1 7,328 9,310 (223) 16,416
Net loss.............. -- -- -- (695) -- (695)
Stock-based compensa-
tion................. -- -- 1,054 -- -- 1,054
Foreign currency
translation adjust-
ment, net of tax..... -- -- -- -- (22) (22)
------- ---- ------- -------- ----- -------
Balance at February 26,
1997................... 101,020 $ 1 $ 8,382 $ 8,615 $(245) $16,753
======= ==== ======= ======== ===== =======
SUCCESSOR
Balance at February 27,
1997................... 88,625 $ 1 $34,086 $ -- $ -- $34,087
Net income............ -- -- -- 1,957 -- 1,957
Capital contribution.. 11,000 -- 4,000 -- -- 4,000
Dividend accrued on
preferred stock...... -- -- -- (2,131) -- (2,131)
Foreign currency
translation adjust-
ment, net of tax..... -- -- -- -- (65) (65)
------- ---- ------- -------- ----- -------
Balance at January 31,
1998................... 99,625 1 38,086 (174) (65) 37,848
Net loss (unaudited).. -- -- -- (4,742) -- (4,742)
Dividends paid on
preferred stock
(unaudited).......... -- -- -- (633) -- (633)
Dividends paid on
common stock
(unaudited).......... -- -- -- (17,745) -- (17,745)
Foreign currency
translation
adjustment, net of
tax (unaudited)...... -- -- -- -- 10 10
------- ---- ------- -------- ----- -------
Balance at May 2, 1998
(unaudited)............ 99,625 $ 1 $38,086 $(23,294) $ (55) $14,738
======= ==== ======= ======== ===== =======
</TABLE>
See accompanying notes.
F-5
<PAGE>
IRON AGE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
------------------------------------ --------------------------------------
YEAR ENDED JANUARY 26, FEBRUARY 27, FEBRUARY 27, THREE
----------------------- 1997 THROUGH 1997 THROUGH 1997 THROUGH MONTHS ENDED
JANUARY 27, JANUARY 25, FEBRUARY 26, JANUARY 31, APRIL 25, MAY 2,
1996 1997 1997 1998 1997 1998
----------- ----------- ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)....... $ 3,836 $ 3,590 $ (695) $ 1,957 $ 328 $ (4,742)
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Extraordinary item, net
of tax................ -- -- -- -- -- 4,015
Depreciation and
amortization.......... 2,882 3,109 246 4,727 897 1,378
Amortization of
deferred financing
fees included in
interest.............. 318 384 16 613 102 539
Provision for losses on
accounts receivable... 14 45 10 30 29 47
Deferred income taxes.. 131 369 -- (602) 2 (134)
Stock-based
compensation.......... -- 1,065 1,054 -- -- --
Changes in operating
assets and
liabilities:
Accounts receivable.... (134) (690) (954) 372 1,376 (618)
Inventories............ (3,611) 1,554 797 (6,976) (2,304) 1
Prepaid expenses....... 23 (143) 65 238 (180) (961)
Other assets........... (386) (182) 20 (14) 2 (294)
Accounts payable....... (3,045) (35) (573) (1,375) 277 388
Accrued expenses....... 1,294 (249) 1,450 (882) (598) (4,061)
Payments of pension
benefits.............. (162) -- -- -- -- --
-------- --------- ------ -------- -------- ---------
Net cash provided by
(used in) operating
activities............. 1,160 8,817 1,436 (1,912) (69) (4,442)
INVESTING ACTIVITIES
Net cash used in
business acquisitions.. -- -- -- (141,717) (141,717) (4,493)
Other assets............ (2,119) -- -- -- -- --
Purchases of property
and equipment.......... (2,560) (2,222) (117) (2,365) (132) (374)
-------- --------- ------ -------- -------- ---------
Net cash used in
investing activities... (4,679) (2,222) (117) (144,082) (141,849) (4,867)
FINANCING ACTIVITIES
Borrowing under
revolving credit
agreement.............. 71,238 93,617 (1,909) 44,450 16,350 33,800
Proceeds from senior
term notes............. -- -- -- 65,000 65,000 --
Proceeds from senior
subordinated notes..... -- -- -- 14,550 14,550 100,000
Proceeds from the
Discount Notes......... -- -- -- -- -- 25,000
Capital contribution ... -- -- -- 55,000 55,000 --
Principal payments on
debt................... (69,413) (100,352) (357) (23,531) (1,074) (111,063)
Payment of financing
costs.................. -- -- -- (7,468) (7,468) (5,112)
Redemption of Holdings
Series A Preferred
Stock.................. -- -- -- -- -- (17,664)
Dividends paid.......... -- -- -- -- -- (17,745)
Principal payments on
capital leases......... (309) (305) (33) (328) (93) 52
-------- --------- ------ -------- -------- ---------
Net cash provided by
(used in) financing
activities............. 1,516 (7,040) (2,299) 147,673 142,265 7,268
Effect of exchange rate
changes on cash and
cash equivalents....... 7 40 (37) (110) (44) 10
-------- --------- ------ -------- -------- ---------
(Decrease) increase in
cash and cash
equivalents............ (1,996) (405) (1,017) 1,569 303 (2,031)
Cash and cash
equivalents at
beginning of year...... 3,918 1,922 1,517 500 500 2,069
-------- --------- ------ -------- -------- ---------
Cash and cash
equivalents at end of
year................... $ 1,922 $ 1,517 $ 500 $ 2,069 $ 803 $ 38
======== ========= ====== ======== ======== =========
Supplemental disclosures
of cash flow
information:
Cash paid during the
period for:
Interest............... $ 6,249 $ 5,385 $ 552 $ 7,837 $ 205 $ 5,869
Income taxes........... $ 2,573 $ 2,568 $ 7 $ 1,138 $ 144 $ 195
Supplemental schedule of
noncash investing and
financing activities:
Capital lease
agreements for
equipment............. $ 340 $ 340 $ -- 206 $ 1 $ 142
======== ========= ====== ======== ======== =========
Assets acquired and
liabilities assumed in
connection with
acquisitions:
Fair value of assets
acquired.............. $ -- $ -- $ -- $171,328 $171,328 $ 5,879
Liabilities assumed.... -- -- -- (21,946) (21,946) (1,236)
-------- --------- ------ -------- -------- ---------
Cash paid.............. -- -- -- 149,382 149,382 4,643
Less fees and
expenses.............. -- -- -- (7,468) (7,468) (150)
Less cash acquired..... -- -- -- (197) (197) --
-------- --------- ------ -------- -------- ---------
Net cash used in
business
acquisitions.......... $ -- $ -- $ -- $141,717 $141,717 $ 4,493
======== ========= ====== ======== ======== =========
</TABLE>
See accompanying notes.
F-6
<PAGE>
IRON AGE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1998 AND MAY 2, 1998
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND ACTIVITIES
The accompanying consolidated financial statements include the accounts of
Iron Age Holdings Corporation and its wholly owned subsidiaries Iron Age
Corporation ("Iron Age"), Falcon Shoe Mfg. Co. ("Falcon"), Iron Age Investment
Company ("Investment Co."), Iron Age Mexico S.A. de C.V. ("Iron Age Mexico"),
Iron Age Canada Ltd. ("Iron Age Canada"), and Safety Supplies and Service
Company, Inc. (together, "Holdings"). All significant intercompany accounts
and transactions have been eliminated in consolidation.
Holdings is majority-owned by Fenway Partners Capital Fund, L.P. (the
"Fenway Fund"). Holdings was acquired by the Fenway Fund and certain other
investors, in partnership with certain members of management, effective
February 26, 1997 (the "Fenway Acquisition") (see Note 2).
The accompanying consolidated financial statements present the twelve-month
period ended January 31, 1998 in two components. The period January 26, 1997
through February 26, 1997 includes the historical results of Iron Age Holdings
Corporation prior to the Fenway Acquisition and the period after February 26,
1997 includes the results of Iron Age Holdings Corporation after the Fenway
Acquisition. In these financial statements, Iron Age Holdings Corporation is
referred to as the "Predecessor" prior to February 26, 1997 and as the
"Successor" or "Holdings" after such date.
Holdings distributes and manufactures work footwear with operations
concentrated in North America. As a percentage of sales, 94% and 6% of
Holdings' operations are related to distributing and manufacturing,
respectively. Holdings has one reportable segment, distribution of work
footwear in the United States.
FISCAL YEAR
Holdings' fiscal year ends on the last Saturday in January. The 1996 and
1997 fiscal years include 52 weeks. The combined periods of January 26, 1997
through February 26, 1997 and February 27, 1997 through January 31, 1998
include 53 weeks.
INTERIM FINANCIAL STATEMENTS
The financial statements of Holdings for the period February 27, 1997
through April 25, 1997 and the three months ended May 2, 1998 and the related
footnote information are unaudited but, in the opinion of management, include
all adjustments (consisting only of normal recurring adjustments and accruals)
which Holdings considers necessary for a fair presentation of the information
set forth therein. Results of operations for interim periods are not
necessarily indicative of the results that may be expected for the entire
year.
CASH AND CASH EQUIVALENTS
Holdings considers all highly liquid investments with a maturity of 90 days
or less at the time of original purchase to be cash equivalents.
INVENTORIES
Approximately 96% of inventories at January 25, 1997 and January 31, 1998
are stated at the lower of last-in, first-out (LIFO) cost or market. The
remaining inventories are stated at the lower of first-in, first-out (FIFO)
cost or market.
F-7
<PAGE>
IRON AGE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CATALOG COSTS
Holdings produces an annual catalog and amortizes the mailing and production
costs over the related revenue stream.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided on the straight-line method based on estimated useful
lives, as follows:
<TABLE>
<S> <C>
Building and improvements...................................... 40 years
Machinery and equipment........................................ 3-10 years
</TABLE>
Leasehold improvements are amortized over the shorter of the useful life of
the asset or the term of the lease. Expenses for repairs, maintenance and
renewals are charged to operations as incurred. Expenditures which improve an
asset or extend its useful life are capitalized.
INTANGIBLE ASSETS
Goodwill--Goodwill represents the excess of amounts paid and liabilities
assumed over the fair value of identifiable tangible and intangible assets
acquired. This amount is amortized using the straight-line method over a
period of 40 years. Holdings evaluates the carrying value of goodwill for
potential impairment on an ongoing basis. Such evaluation considers projected
future operating results, trends and other circumstances. If factors indicated
that goodwill could be impaired, Holdings would use an estimate of the related
business' undiscounted future cash flows over the remaining life of the
goodwill in measuring whether the goodwill is recoverable. If such an analysis
indicated that impairment had occurred, Holdings would adjust the book value
of the goodwill to fair value.
Customer Lists--Customer lists represent the estimated cost of replacing
Holdings' customer base and are being amortized by the straight-line method
over 15 years.
Deferred Financing Cost--Deferred financing costs relate to the costs of
obtaining financing. These costs are being amortized over the period the
related loans are outstanding.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of Holdings' foreign subsidiaries are measured
using the local currency as the functional currency and are translated into
U.S. dollars at exchange rates as of the balance sheet date. Income statement
amounts are translated at the weighted average rates of exchange during the
year. The translation adjustment is accumulated in a separate component of
stockholders' equity. Foreign currency transaction gains and losses are
included in determining net income. Such amounts have not been material.
REVENUE RECOGNITION
Revenue from product sales is recognized at the time products are shipped.
FINANCIAL INSTRUMENTS
Iron Age periodically enters into interest rate swap agreements to moderate
its exposure to interest rate changes and to lower the overall cost of
borrowing.
STOCK-BASED COMPENSATION
Certain members of Holdings' management are granted options to purchase
stock in Holdings. Holdings recognizes stock-based compensation using the
intrinsic value method. Compensation expense related to stock
F-8
<PAGE>
IRON AGE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
option grants is reflected in Holdings' financial statements as a charge to
income and as an addition to paid-in capital. For disclosure purposes, pro
forma net income is provided as if the fair value method had been applied.
INCOME TAXES
Deferred income taxes are provided for the tax consequences of temporary
differences between financial statement carrying amounts and the tax bases of
assets and liabilities. The effect on deferred taxes of a change in tax rates
is recognized in income in the period of the enactment.
COMPREHENSIVE INCOME
As of February 1, 1998, Holdings adopted Financial Accounting Standards
Board Statement No. 130, "Reporting Comprehensive Income". Statement 130
establishes new rules for the reporting and display of comprehensive income
and its components. Statement No. 130 requires foreign currency translation
gains and losses, which are reported separately in stockholder's equity, to be
included in other comprehensive income. The adoption of this statement had no
impact on Holdings' net income or stockholders' equity.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATION
Certain reclassifications have been made to the January 27, 1996 and the
January 25, 1997 consolidated financial statements to conform to the January
31, 1998 presentation.
2. ACQUISITIONS
IRON AGE HOLDINGS CORPORATION (PREDECESSOR)
On February 26, 1997, the Predecessor was acquired in a leveraged buyout
transaction by Holdings through an acquisition corporation for approximately
$143,550,000, including transaction costs of $6,962,000. Holdings was formed
by Fenway Partners, Inc. ("Fenway") and other investors, including certain
members of management, to effect the acquisition. The acquisition was financed
by capital contributions of approximately $50,000,000, borrowings under the
Existing Credit Facility of $79,000,000, and subordinated notes issued to
certain Mezzanine Investors in the amount of $14,550,000 (net of a $450,000
discount).
The Fenway Acquisition of the Predecessor was accounted for under the
purchase method of accounting and, accordingly, the purchase price was
allocated to the assets and liabilities assumed based on their relative fair
values. However, since certain members of management had ownership in the
Predecessor, the net assets acquired were recorded at the reinvesting
stockholders' carryover basis. Therefore, in allocating the purchase price of
Holdings among its net assets, the difference between the fair values of the
net assets acquired has been proportionately reduced by approximately
$1,963,000 with such amount being charged against the gross stockholder's
equity of $36,100,000. Holdings recorded goodwill of approximately $84,073,000
in connection with the transaction, which is being amortized on a straight-
line basis over forty years. Because of this purchase price allocation, the
accompanying consolidated financial statements of Holdings are not directly
comparable to those of the Predecessor.
F-9
<PAGE>
IRON AGE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As Holdings' 1998 financial statements only include the Predecessor's
operations from the date of acquisition, the following selected unaudited pro
forma information is being provided to present a summary of the results of
Holdings as if the acquisition had occurred as of January 28, 1996 and January
26, 1997, giving effect to purchase accounting adjustments. The pro forma data
is for informational purposes only and may not necessarily reflect the results
of operations had the change in ownership been in effect for the years ended
January 25, 1997 and January 31, 1998.
<TABLE>
<CAPTION>
1997 1998
------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Net Sales............................................... $99,360 $118,706
Net loss................................................ (767) 1,803
</TABLE>
KNAPP SHOES, INC. (KNAPP)
On March 14, 1997, Holdings acquired certain assets and assumed certain
liabilities of Knapp Shoes, Inc. ("Knapp") for approximately $5,832,000,
including transaction costs of approximately $506,000. The results of
operations for Knapp are included in the consolidated statement of income from
the date of acquisition. Knapp is a distributor and manufacturer of safety
footwear. The Knapp Acquisition has been accounted for using the purchase
method of accounting and, accordingly, the purchase price and transaction
costs have been allocated to assets acquired and liabilities assumed based on
their estimated fair values. The excess of consideration paid over the
estimated fair value of assets acquired and liabilities assumed of
approximately $4,519,000 is being amortized on the straight-line basis over
forty years.
OTHER ACQUISITIONS
During the three months ended May 2, 1998, Holdings acquired the stock of
Safety Supplies and Service Company, Inc., and acquired certain assets and
assumed certain liabilities of Safety Depot Ltd., ACT Safety, Inc. and J. Mars
Knapp Shoes for approximately $4,493,000, including transaction costs of
approximately $150,000. The results of operations are included from the date
of the acquisitions, respectively. The acquisitions have been accounted for
using the purchase method of accounting and, accordingly, the purchase price
and transaction costs have been allocated to assets acquired and liabilities
assumed based upon their estimated fair values. The excess of consideration
paid over the estimated fair value of assets acquired and liabilities assumed
of approximately $2,182,000 is being amortized on the straight-line basis,
over forty years.
3. ACCOUNTS RECEIVABLE
Accounts receivable are presented net of allowance for doubtful accounts of
approximately $352,000, $382,000 and $429,000 as of January 25, 1997, January
31, 1998 and May 2, 1998, respectively. Holdings does not require collateral
for its trade accounts receivable and maintains an allowance for doubtful
accounts. Management continually evaluates its accounts receivable and adjusts
its allowance for doubtful accounts for changes in potential credit risk.
Holdings serves a diverse customer base and believes there is minimal
concentration of credit risk.
F-10
<PAGE>
IRON AGE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. INVENTORIES
The major components of inventories are as follows:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------- -----------------------
MAY 2,
JANUARY 25, JANUARY 31, 1998
1997 1998 (UNAUDITED)
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Finished products...................... $26,797 $33,527 $36,200
Raw materials.......................... 2,235 3,470 2,490
------- ------- -------
29,032 36,997 38,690
Less excess of current cost over LIFO
inventory value....................... 2,495 156 293
------- ------- -------
$26,537 $36,841 $38,397
======= ======= =======
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------- -----------------------
MAY 2,
JANUARY 25, JANUARY 31, 1998
1997 1998 (UNAUDITED)
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Land and buildings..................... $ 2,417 $ 3,158 $ 3,188
Vehicles............................... 4,360 3,047 3,525
Furniture and fixtures................. 1,664 917 1,080
Machinery and equipment................ 5,290 4,133 4,324
Leasehold improvements................. 993 857 928
------- ------- -------
14,724 12,112 13,045
Less accumulated depreciation and
amortization.......................... 5,403 1,633 2,530
------- ------- -------
Net property and equipment............. $ 9,321 $10,479 $10,515
======= ======= =======
</TABLE>
F-11
<PAGE>
IRON AGE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------- -----------------------
MAY 2,
JANUARY 25, JANUARY 31, 1998
1997 1998 (UNAUDITED)
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Goodwill................................. $38,010 $ 88,592 $91,393
Customer lists........................... 1,741 16,150 16,694
Deferred financing costs................. 1,348 5,518 5,124
Other.................................... 268 262 235
------- -------- --------
41,367 110,522 113,446
Less accumulated amortization............ 8,642 3,676 3,938
------- -------- --------
$32,725 $106,846 $109,508
======= ======== ========
</TABLE>
In connection with the Transactions, Holdings expensed approximately
$4,927,000 of unamortized deferred financing costs related to the Existing
Credit Facility and the Existing Subordinated Notes. Such costs are included
in Holdings' extraordinary loss, net of tax, for the three months ended May 2,
1998. Financing costs incurred in connection with obtaining the 9 7/8% Senior
Subordinated Notes, the 12 1/8% Senior Discount Notes and the New Credit
Facility of approximately $4,249,000 have been deferred by Holdings as of May
2, 1998 and will be amortized over the period the Senior Subordinated Notes,
the Discount Notes and the New Credit Facility are outstanding.
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------- -----------------------
MAY 2,
JANUARY 25, JANUARY 31, 1998
1997 1998 (UNAUDITED)
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
9 7/8% Senior Subordinated Notes due
2008 (a) ............................ $ -- $ -- $100,000
Senior Discount Notes (b)............. -- -- 45,140
New Credit Facility (c)............... -- -- 23,900
Existing Credit Facility (retired) (d)
Working capital advance............. -- 23,000 --
Term A Note......................... -- 18,500 --
Term B Note......................... -- 19,850 --
Term C Note......................... -- 24,813 --
Existing Subordinated Notes (retired)
(e).................................. -- 15,000 --
Other Notes (f)....................... 451 208 317
Capitalized lease obligations (Note
11).................................. 911 754 846
Predecessor obligations (g)........... 62,372 -- --
------- -------- --------
63,374 102,125 170,203
Less:
Current maturities.................. 3,007 3,699 668
Unamortized discount................ -- 450 20,081
------- -------- --------
$60,727 $ 97,976 $149,454
======= ======== ========
</TABLE>
F-12
<PAGE>
IRON AGE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(A) 9 7/8% SENIOR SUBORDINATED NOTES DUE 2008
On April 24, 1998, Iron Age issued $100,000,000 of Senior Subordinated
Notes. Iron Age used the net proceeds from the issuance of the Senior
Subordinated Notes, approximately $21,600,000 of borrowings under its New
Credit Facility and approximately $1,200,000 of cash to (i) extinguish certain
existing indebtedness, (ii) pay a dividend to Holdings to allow Holdings to
redeem the Holdings Series A Preferred Stock, (iii) make compensation payments
to certain management optionholders of Holdings, and (iv) pay fees and
expenses related to these transactions. These transactions resulted in the
recording of an extraordinary loss during April 1998 of approximately
$4,015,000, net of tax.
The Senior Subordinated Notes accrue interest at the rate of 9 7/8% per
annum and are payable semi-annually in arrears on May 1 and November 1,
commencing on November 1, 1998.
The Senior Subordinated Notes are subordinated in right of payment to all
existing and future senior indebtedness of Iron Age.
The Senior Subordinated Notes are redeemable at the option of Iron Age on
and after May 1, 2003 at prices decreasing from 104.938% of the principal
amount thereof to par on May 1, 2006 and thereafter. Iron Age is required to
redeem the outstanding Senior Subordinated Notes based upon certain events as
described in the Senior Subordinated Indenture.
The Senior Subordinated Indenture requires Iron Age and its subsidiaries to
comply with certain restrictive covenants, including a restriction on
dividends and limitations on incurrence of indebtedness, certain payments and
distributions and sales of Iron Age's assets and stock.
(B) 12 1/8% SENIOR DISCOUNT NOTES DUE 2009
On April 24, 1998, Holdings issued $45,140,000 principal amount at maturity
of Discount Notes, the proceeds of which were used (i) to pay a dividend to
Holdings' stockholders, (ii) to redeem the Holdings Series A Preferred Stock
and (iii) to make compensation payments to certain management optionholders.
The Discount Notes accrete at a rate of 12 1/8% per annum compounded
semiannually until May 1, 2003. No interest will accrue prior to May 1, 2003.
Interest will accrue thereafter at a rate of 12 1/8% per annum and is payable
semi-annually in arrears on May 1, and November 1, commencing on November 1,
2003. The Discount Notes mature on May 1, 2009.
The Discount Notes are subordinated in right of payment to all existing and
future senior indebtedness of Holdings.
The Discount Notes are redeemable at the option of Holdings on and after May
1, 2003 at prices decreasing from 106.063% of the principal amount thereof to
par on May 1, 2006 and thereafter. Holdings is required to redeem the
outstanding Discount Notes based upon certain events as described in the
Indenture.
The Indenture requires Holdings and its subsidiaries to comply with certain
restrictive covenants, including a restriction on dividends and limitations on
the incurrence of indebtedness, certain payments and distributions and sales
of Holdings's assets and stock.
(C) NEW CREDIT FACILITY
On April 24, 1998, Iron Age and Holdings entered into a $65,000,000 New
Credit Facility with a syndicate of lenders and a financial institution, as
agent for itself and the other lenders that is comprised of a $30,000,000
revolving working capital facility and a $35,000,000 revolving acquisition
facility. The working capital facility matures on April 24, 2004. The balance
of the revolving acquisition facility converts into a term loan on April 30,
2001 and matures in quarterly installments from July 31, 2001 to April 30,
2004. Under the working capital
F-13
<PAGE>
IRON AGE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
facility, Iron Age has a $2,000,000 letter of credit and a $3,000,000 swing
line facility which will expire April 24, 2004. Outstanding borrowings under
the letter of credit and the swing line facility were $495,000 and $0,
respectively at May 2, 1998.
Borrowings under the New Credit Facility may be used to fund Iron Age's
working capital requirements, finance certain permitted acquisitions and
general corporate requirements of Holdings and pay fees and expenses related
to the foregoing. Iron Age is required to pay a 0.4375% fee on the average
daily unused portion of the New Credit Facility. Iron Age is also subject to
mandatory prepayment terms as described in the New Credit Facility.
Borrowings under the New Credit Facility accrue interest, at the option of
Iron Age, at either LIBOR plus 2.25% or the greater of the financial
institution's, prime rate and the federal funds plus 0.5%. Borrowings on the
New Credit Facility accrue interest at 9.5% at May 2, 1998.
Iron Age has classified its borrowings under the New Credit Facility as
long-term as of May 2, 1998 due to its ability and intent to maintain such
borrowings on a long-term basis.
The New Credit Facility is guaranteed on a senior basis by Holdings and is
collateralized by substantially all of Iron Age's and its subsidiaries'
assets. The New Credit Facility contains certain covenants which require Iron
Age to maintain leverage ratios, fixed charge coverage ratios and interest
coverage ratios. The New Credit Facility further limits capital expenditures
and sales of assets, declaration of dividends and other restricted payments,
and additional indebtedness. The New Credit Facility also restricts the sale
or transferring of Iron Age's assets or capital stock.
(D) EXISTING CREDIT FACILITY (RETIRED)
On February 26, 1997, Holdings and Iron Age entered into a $100,000,000
Existing Credit Facility with a financial syndicate of lenders and a financial
institution, as agent for itself and the other lenders, that was comprised of
a $23,000,000 working capital advance and three term notes (A, B and C) of
$18,500,000, $19,850,000 and $24,813,000, respectively.
The Existing Credit Facility obligations of $86,820,000, including accrued
interest of $253,000, were extinguished with the proceeds of the Senior
Subordinated Notes and the New Credit Facility on April 24, 1998.
(E) EXISTING SUBORDINATED NOTES (RETIRED)
On February 26, 1997, Iron Age issued the Existing Subordinated Notes in the
principal amounts of $10,000,000 and $5,000,000 at a discount. The Existing
Subordinated Notes of $15,000,000 were extinguished with the proceeds of the
Senior Subordinated Notes and the New Credit Facility on April 24, 1998. The
extinguishment required prepayment premiums of $1,562,000 which are included
in extraordinary loss, net of tax, for the three months ended May 2, 1998. The
unamortized debt discount of approximately $434,000 was also expensed at May
2, 1998 in connection with the extinguishment of the Existing Subordinated
Notes and is included in Iron Age's extraordinary loss, net of tax, for the
three months ended May 2, 1998.
(F) OTHER NOTES
Holdings has other notes of approximately $451,000, $208,000 and $317,000 at
January 25, 1997, January 31, 1998 and May 2, 1998, respectively. The notes
will be paid by January 1999. The notes accrue interest at rates varying from
8.5% to 9.5%.
F-14
<PAGE>
IRON AGE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(G) PREDECESSOR OBLIGATIONS
At January 25, 1997, the Predecessor had $62,372,000 of outstanding
obligations that were comprised of a $10,350,000 revolving credit agreement, a
$7,500,000 bank term loan, $12,382,000 of senior stockholder notes and
$32,140,000 of mezzanine stockholder notes. The obligations, including accrued
interest of $747,000, were extinguished in connection with the Fenway
Acquisition that occurred on February 26, 1997.
Future Maturities of Long-Term Debt
Five-year maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Nine months ended January 30, 1999............................ $ 574
2000.......................................................... 291
2001.......................................................... 184
2002.......................................................... 3,164
2003.......................................................... 4,125
2004.......................................................... 4,100
Thereafter.................................................... 157,765
--------
$170,203
========
</TABLE>
8. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by Holdings in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents--The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Long-term debt and interest rate swaps--The carrying amounts of Holdings'
borrowings under its short-term revolving credit agreements and its bank
term loan approximate their fair value. The fair values of Holdings' long-
term debt and interest rate swaps are estimated using discounted cash flow
analysis, based on Holdings' current incremental borrowing rates for
similar types of borrowing arrangements.
The carrying amounts and fair values of Holdings' financial instruments at
January 25, 1997 and January 31, 1998 and May 2, 1998 are as follows:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
---------------- -------------------------------------------------
JANUARY 25, 1997 JANUARY 31, 1998 MAY 2, 1998
---------------- ------------------------ -----------------------
CARRYING FAIR
CARRYING FAIR CARRYING FAIR AMOUNT VALUE
AMOUNT VALUE AMOUNT VALUE (UNAUDITED) (UNAUDITED)
-------- ------- ------------ ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents............ $ 1,517 $ 1,517 $ 2,069 $ 2,069 $ 38 $ 38
Senior Subordinated
Notes.................. -- -- -- -- 100,000 100,000
New Credit Facility..... -- -- -- -- 23,900 23,900
Senior Discount Notes... -- -- -- -- 45,140 45,140
Working capital
advance................ -- -- 23,000 23,000 -- --
Term Notes.............. -- -- 63,163 63,163 -- --
Existing Subordinated
Notes (retired)........ -- -- 15,000 15,000 -- --
Other Notes............. 451 451 208 208 317 317
Predecessor
obligations............ 62,372 62,372 -- -- -- --
Interest rate swap
agreements............. -- -- -- (702) -- (560)
</TABLE>
F-15
<PAGE>
IRON AGE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. EMPLOYEE BENEFIT PLANS
Holdings and its subsidiary Falcon sponsor 401(k) profit sharing defined
contribution pension plans. In connection with the Knapp Acquisition, Holdings
assumed a third 401(k) defined contribution plan which will be merged into
Holdings' plan. Contributions to the plans are based on a percentage of
profits, but may be increased or decreased at the discretion of the Board of
Directors. The plans cover substantially all of its salaried employees. For
the fiscal years ended January 27, 1996 and January 25, 1997, and the periods
January 26, 1997 through February 26, 1997, February 27, 1997 through January
31, 1998 and for the three months ended May 2, 1998, contributions made by
Holdings to the defined contribution plans were approximately $774,000,
$872,000, $0, $589,000 and $363,000, respectively.
10. INCOME TAXES
Income tax expense consisted of the following:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
------------------------------------ --------------------------------------
FEBRUARY 27, THREE
YEAR ENDED JANUARY 26, FEBRUARY 27, 1997 THROUGH MONTHS ENDED
----------------------- 1997 THROUGH 1997 THROUGH APRIL 25, MAY 2,
JANUARY 27, JANUARY 25, FEBRUARY 26, JANUARY 31, 1997 1998
1996 1997 1997 1998 (UNAUDITED) (UNAUDITED)
----------- ----------- ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Income taxes:
Current:
Federal............... $2,435 $1,782 $(450) $2,306 $281 $(179)
State................. 524 649 (2) (24) (3) (87)
------ ------ ----- ------ ---- -----
2,959 2,431 (452) 2,282 278 (266)
Deferred:
Federal............... 62 321 -- (458) (56) 95
State................. 70 48 -- (138) (17) 43
------ ------ ----- ------ ---- -----
132 369 -- (596) (73) 138
------ ------ ----- ------ ---- -----
$3,091 $2,800 $(452) $1,686 $205 $(128)
====== ====== ===== ====== ==== =====
</TABLE>
A reconciliation of U.S. income tax computed at the statutory rate and
actual expense is as follows:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
------------------------------------ --------------------------------------
FEBRUARY 27, THREE
YEAR ENDED JANUARY 26, FEBRUARY 27, 1997 THROUGH MONTHS ENDED
----------------------- 1997 THROUGH 1997 THROUGH APRIL 25, MAY 2,
JANUARY 27, JANUARY 25, FEBRUARY 26, JANUARY 31, 1997 1998
1996 1997 1997 1998 (UNAUDITED) (UNAUDITED)
----------- ----------- ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Amount computed at
statutory rate......... $2,355 $2,173 $ (390) $1,239 $181 $(291)
State and local taxes
less applicable federal
income tax............. 392 460 (1) (107) (13) (29)
Goodwill and other
amortization........... 313 232 26 657 119 190
Other................... 31 (65) (87) (103) (82) 2
------ ------ ----- ------ ---- -----
$3,091 $2,800 $(452) $1,686 $205 $(128)
====== ====== ===== ====== ==== =====
</TABLE>
F-16
<PAGE>
IRON AGE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of the net deferred tax asset and liability are as follows:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------- ------------------
JANUARY 25, JANUARY 31, MAY 2,
1997 1998 1998
----------- ----------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax liabilities:
Inventory.................................. $1,211 $2,244 $2,244
Property and equipment..................... 988 1,088 1,105
Customer lists............................. -- 5,783 5,680
Other...................................... -- 349 618
------ ------ ------
Total deferred tax liabilities........... 2,199 9,464 9,647
Deferred tax assets:
Interest expense........................... 370 2,016 2,016
Inventory.................................. 361 568 580
Accrued expenses........................... 474 526 566
Stock-based compensation................... 360 -- --
Other...................................... 372 45 38
------ ------ ------
Total deferred tax assets................ 1,937 3,155 3,200
------ ------ ------
Net deferred tax liabilities............. $ 262 $6,309 $6,447
====== ====== ======
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
PURCHASE COMMITMENTS
Holdings purchases the majority of its inventory through purchase order
commitments which are denominated in U.S. dollars. Holdings purchased
approximately 18%, 17%, 17% and 20% of its inventory from one vendor for the
fiscal years ended January 27, 1996 and January 25, 1997 and the periods
January 26, 1997 through February 26, 1997 and May 2, 1998 and February 27,
1997 through January 31, 1998, respectively. At January 25, 1997 and January
31, 1998, Holdings had outstanding inventory purchase commitments of
approximately $15,445,000 and $15,275,000 and 14,452,000, respectively.
A significant amount of Holdings' products are produced in the Far East. As
a result, Holdings' operations could be adversely affected by political
instability resulting in the disruption of trade from the countries in which
these suppliers are located or by the imposition of additional duties or
regulations relating to imports or by the supplier's inability to meet
Holdings' production requirements.
F-17
<PAGE>
IRON AGE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
LEASE COMMITMENTS
Holdings leases substantially all of its vehicles and certain other
equipment and facilities. These leases are subject to renewal options for
varying periods. Future minimum payments, by year and in the aggregate, under
capital leases and noncancelable operating leases with initial or remaining
terms of one year or more consisted of the following:
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
<S> <C> <C>
Nine months ended January 30, 1999......... $ 321 $ 2,604
2000....................................... 368 2,621
2001....................................... 236 1,868
2002....................................... 116 1,079
2003....................................... 36 678
2004....................................... -- 474
Thereafter................................. -- 749
------ -------
Total minimum lease payments............... 1,077 $10,073
=======
Less amounts representing interest......... 231
------
Present value of future minimum lease pay-
ments..................................... 846
Less current maturities of capital lease
obligations............................... 351
------
Capital lease obligations.................. $ 495
======
</TABLE>
Operating lease expense under such arrangements was approximately
$1,767,000, $2,271,000, $203,000, $594,000, $3,785,000 and $1,065,000 for the
fiscal years ended January 27, 1996 and January 25, 1997, and the periods
January 26, 1997 through February 26, 1997, for the period February 27, 1997
through April 25, 1997, February 27, 1997 through January 31, 1998 and the
three months ended May 2, 1998, respectively.
At January 25, 1997, January 31, 1998 and May 2, 1998, property and
equipment include capitalized vehicle leases of approximately $1,904,000, and
$1,223,000 and $1,455,000, respectively, and accumulated amortization of
approximately $848,000 and $315,000 and $404,000, respectively.
LITIGATION
Holdings is involved from time to time in lawsuits that arise in the normal
course of business. Holdings actively and vigorously defends all lawsuits.
Management believes that there are no lawsuits that will have a material
effect on Holdings' financial position.
12. REDEEMABLE PREFERRED STOCK AND STOCK PURCHASE WARRANTS
Effective February 26, 1997, in connection with the Fenway Acquisition,
Holdings authorized 10,000 shares and issued 1,500 shares of Series A
nonvoting, cumulative, redeemable preferred stock with a par value of $.01 per
share (the "Holdings Series A Preferred Stock") for consideration of
$15,000,000, with a liquidation preference of $10,000 per share. Dividends are
cumulative at an annual rate of 15.5% and are payable in cash or, at the
option of Holdings, in whole or in part in additional Holdings Series A
Preferred Stock. The Holdings Series A Preferred Stock ranks senior to all
classifications of stock. The Holdings Series A Preferred Stock is optionally
redeemable at any time, and mandatorily redeemable on February 26, 2007, upon
not less than ten days notice at a redemption price equal to the liquidation
preference thereof plus accrued and unpaid dividends to the redemption date.
The Holdings Series A Preferred Stock, including accrued and unpaid dividends
of $2,764,000 were redeemed with a portion of the proceeds of the New Credit
Facility and the Senior Subordinated Notes.
F-18
<PAGE>
IRON AGE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In connection with the Fenway Acquisition and the Knapp Acquisition, the
preferred stockholders obtained 9,818 shares of Holdings common stock and
common stock purchase warrants ("Warrants") to acquire 6,962 shares of
Holdings common stock. The Warrants can be exercised at any time through
February 26, 2007 for an exercise price of approximately $186 per share. The
value ascribed to the Warrants to purchase the Holdings common stock resulted
in a discount to the Holdings Series A Preferred Stock and an addition to
paid-in capital of approximately $100,000. The discount is being amortized
over the life of the preferred stock using the straight-line method. The
addition to paid-in capital is net of tax of approximately $40,000.
13. STOCK OPTIONS
SUCCESSOR
The 1997 Stock Option Plan (the "Option Plan") provides for the granting of
either incentive stock options or nonqualified stock options to purchase
shares of Holdings common stock and for other stock-based awards to officers,
directors, key employees, consultants and advisors who, in the opinion of
Holdings' Board of Directors are in a position to make a significant
contribution to the success of Holdings and its subsidiaries. The Option Plan
authorized the issuance of options to purchase up to an aggregate of 20,245
shares of Holdings common stock; 11,528 of which shall be for Series A Options
and 8,717 of which shall be for Series B Options.
Nonqualified Series A Options of 11,528 were granted to certain officers of
Iron Age in connection with the Fenway Acquisition effective February 26, 1997
for aggregate consideration of approximately $3,772,800, or approximately $328
per share. The exercise price of Series A Options is approximately $36 per
share and was computed as the difference between the fair market value of
Holdings common stock at the date of grant less the per share consideration.
The Series A Options are fully vested and exercisable as of January 31, 1998.
The exercise price of options (i) that are not vested (as such term is defined
in the Option Plan) as of April 24, 1998 is approximately $186 per share and
(ii) that have vested (as such term is defined in the Option Plan) as of
April 24, 1998 is approximately $364 per share.
Nonqualified Series B Options of 8,567 were granted as of February 26, 1997
to certain officers of Iron Age with an exercise price of approximately $364
per share. Approximately 65% of the options become exercisable, subject to the
achievement of certain target earnings and continued employment, at the rate
of 20% per year commencing with Holdings' fiscal year ended January 31, 1998.
The remaining 35% of Series B Options vest upon a change of Iron Age control
and the attainment of certain internal rate of return objectives by Holdings'
stockholders as defined in the Option Plan.
Holdings applies APB Opinion 25, Accounting for Stock Issued to Employees,
and related interpretations in accounting for its stock option plan. At
January 31, 1998, no compensation cost has been recognized in Holdings'
financial statements.
Had compensation cost for Holdings' stock option plan been determined based
on the fair value of such awards at the grant date, consistent with the
methods of Financial Accounting Standards Board Statement No. 123, Accounting
for Stock-Based Compensation, Holdings' total net income would have been as
follows:
<TABLE>
<S> <C>
Net income:
As reported..................................... $1,957
Pro forma....................................... 1,801
</TABLE>
F-19
<PAGE>
IRON AGE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The fair values of options granted at February 26, 1997 were estimated using
the minimum value option-pricing model based on the following assumptions:
<TABLE>
<S> <C>
Risk free interest rate.................................. 6.0
Dividend yield........................................... 0.0
Expected life............................................ 3 years
Volatility............................................... Not applicable
</TABLE>
A summary of the status of Holdings' stock option plan as of January 31,
1998 is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
------ --------------
<S> <C> <C>
Outstanding, beginning of period................... -- $--
Granted............................................ 20,245 177
------ ----
Outstanding, end of year........................... 20,245 $177
====== ====
Options exercisable at end of year................. 12,660 $ 65
====== ====
</TABLE>
PREDECESSOR
The Predecessor had an option plan (the "Prior Plan") for eligible officers
and key management personnel. Compensation and other expense related to the
issuance of options under the Prior Plan and warrants was $1,065,000 and
$1,054,000 for the fiscal year ended January 25, 1997 and the period January
26, 1997 through February 26, 1997, respectively.
14. RELATED PARTY TRANSACTIONS
Fenway provides management services to Holdings and Iron Age pursuant to an
amended and restated management agreement (the "Management Agreement") among
Holdings, Iron Age and Fenway. Pursuant to the Management Agreement, Fenway
provides Holdings and Iron Age with general management, advisory and
consulting services with respect to Iron Age's business and with respect to
such other matters as Holdings may reasonably request from time to time,
including, without limitation, strategic planning, financial planning,
business acquisition and general business development services. Prior to the
Fenway Acquisition, a similar agreement was in effect with Butler Capital
Corporation ("BCC"). Holdings paid management fees of $134,000, $132,000, $0,
$250,000, $43,000 and $69,000 in the fiscal years ended January 27, 1996 and
January 25, 1997 and the periods January 26, 1997 through February 26, 1997
and February 27, 1997 through January 31, 1998, February 27, 1997 through
April 25, 1997 and the three months ended May 2, 1998, respectively, for
management and other advisory services and reimbursed Fenway and BCC for
certain expenses incurred in connection with the rendering of such services.
In connection with the Fenway Acquisition and the Knapp Acquisition,
Holdings paid $2,070,000 and $200,000, respectively, to Fenway for financial
advisory fees.
F-20
<PAGE>
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY HOLDINGS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLIC-
ITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE
HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF
HOLDINGS SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS.
------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary................................................................... 1
Risk Factors.............................................................. 15
Use of Proceeds........................................................... 20
Capitalization............................................................ 21
Unaudited Pro Forma Consolidated Statement of Income and Other Financial
Data..................................................................... 22
Selected Historical and Pro Forma Consolidated Financial Data............. 25
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 28
Business.................................................................. 35
Management................................................................ 42
Principal Stockholders.................................................... 48
Certain Relationships and Related Transactions............................ 50
Description of Other Indebtedness......................................... 51
Description of Exchange Discount Notes.................................... 54
The Exchange Offer........................................................ 84
Certain Federal Income Tax Considerations................................. 94
Plan of Distribution...................................................... 99
Legal Matters............................................................. 99
Experts................................................................... 99
Index to Consolidated Financial Statements................................ F-1
</TABLE>
UNTIL , 1998 ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECU-
RITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DE-
LIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UN-
SOLD ALLOTMENTS OR SUBSCRIPTIONS.
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
IRON AGE HOLDINGS CORPORATION
EXCHANGE OFFER
$45,140,000 12 1/8% SENIOR DISCOUNT
NOTES DUE 2009
--------
PROSPECTUS
--------
, 1998
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 102(b) of the Delaware General Corporation Law
("DGCL"), the Registrant's Certificate of Incorporation eliminates the
personal liability of a director to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the DGCL (relating to unlawful payment of dividends and
unlawful stock purchase and redemption) or (iv) for any transaction from which
the director derived an improper personal benefit.
Section 145 of the DGCL authorizes a corporation to indemnify its directors,
officers, employees and other agents in terms sufficiently broad to permit
indemnification (including reimbursement for expenses) under certain
circumstances for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act"). The Registrant's Certificate of Incorporation
contains a provision covering indemnification to the maximum extent permitted
under the DGCL of directors and officers of the Registrant against certain
liabilities and expenses incurred as a result of proceedings involving such
persons in their capacitities as directors, officers or agents of the
Registrant, including proceedings under the Securities Act or the Securities
Exchange Act of 1934, as amended.
At present, there is no pending litigation or proceeding involving a
director, officer or other agent of the Registrant in which indemnification is
being sought, nor is the Registrant aware of any threatened litigation that
may result in a claim for indemnification by any director, officer or other
agent of the Registrant.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
3.1 Holdings Certificate of Incorporation, as amended.
3.2 Holdings By-laws.
4.1 Indenture dated as of April 24, 1998.
4.2 Registration Agreement dated April 24, 1998.
5.1 Opinion of Ropes & Gray re: legality.
10.1 Credit Agreement dated as of April 24, 1998.
10.2 Security Agreement dated April 24, 1998.
10.3 Intellectual Property Security Agreement dated April 24, 1998.
10.4 Canadian Security Agreement dated April 24, 1998.
10.5 Mortgage, Assignment of Leases and Rents, Fixture Filing,
Security Agreement and Financing Statement dated February 26,
1997, as amended April 24, 1998.
10.6 Intercompany Subordination Agreement dated April 24, 1998.
10.7 Subsidiary Guaranty dated April 24, 1998.
10.8 Iron Age Trademark License Agreement with W.L. Gore &
Associates, Inc. dated August 15, 1994.
10.9 Falcon Trademark License Agreement with W.L. Gore &
Associates, Inc. dated July 25, 1994.
10.10 Falcon Manufacturing Certification Agreement with W.L. Gore &
Associates, Inc. dated July 25, 1994.
10.11 General Services Administration Contract effective July 26,
1994, as modified May 24, 1995.
10.12 Amended and Restated Management Agreement dated as of February
26, 1997.
10.13 Stockholders Agreement dated as of February 26, 1997.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
10.14 Amendment No. 1 to Stockholders Agreement dated as of March
25, 1997.
10.15 American Home Assurance Company Joinder to the Stockholders
Agreement dated as of March 25, 1997
10.16 Banque Nationale de Paris Joinder to the Stockholders
Agreement dated as of March 25, 1997.
10.17 Stock Option Plan dated February 26, 1997.
10.18 Securities Purchase Agreement dated February 26, 1997.
10.19 Stock Purchase Agreement dated as of December 26, 1996.
10.20 Amendment No. 1 to Stock Purchase Agreement dated as of
February 26, 1997.
10.21 Pittsburgh, Pennsylvania Lease Agreement dated March 1, 1993,
as amended June 2, 1994, as amended June 12, 1996, as amended
December 10, 1997.
10.22 Jerusalem, New York Lease Agreement dated December 9, 1992, as
amended January 1, 1994, as amended April 1997.
10.23 Jerusalem, New York Lease Agreement dated June 20, 1997, as
amended January 9, 1998.
10.24 Lewiston, Maine Lease Agreement dated January 14, 1994.
10.25 Lewiston, Maine Lease Agreement dated November 30, 1990, as
amended June 8, 1994.
10.26 Ontario, Canada Lease Agreement dated June 11, 1991, as
renewed November 23, 1995.
10.27 Jensen Employment Agreement dated February 26, 1997.
10.28 Mills Employment Agreement dated November 20, 1995.
10.29 McDonough Employment Agreement dated November 20, 1995.
10.30 Johanson Employment Agreement dated August 1, 1994.
10.31 Johanson Non-Competition Agreement dated August 1, 1994.
12.1 Statement regarding computation of ratio of earnings to fixed
charges.
21.1 Subsidiaries of Holdings.
23.1 Consent of Ropes & Gray (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
24.1 Powers of Attorney (included on signature page).
25.1 Statement of Eligibility on Form T-1 of The Chase Manhattan
Bank under the Indenture.
27.1 Financial Data Schedules.
99.1 Form of Letter of Transmittal used in connection with the
Exchange Offer.
99.2 Form of Notice of Guaranteed Delivery used in connection with
the Exchange Offer.
99.3 Form of Exchange Agent Agreement.
</TABLE>
II-2
<PAGE>
(B)
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
IRON AGE HOLDINGS CORPORATION
MAY 2, 1998
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- - ------------------------ ------------ --------------------- ------------ --------------
ADDITIONS
---------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING OF COSTS AND ACCOUNTS-- DEDUCTIONS-- BALANCE AT END
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
- - ------------------------ ------------ ---------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Three Months Ended May
2, 1998 (unaudited):
Deducted from assets
accounts:
Allowance for
doubtful accounts.. $382,000 $47,000 $-- $ -- $429,000
Year ended January 31,
1998:
Deducted from assets
accounts:
Allowance for
doubtful accounts.. 352,000 40,000 -- 10,000(1) 382,000
Year ended January 25,
1997:
Deducted from assets
accounts:
Allowance for
doubtful accounts.. 307,000 45,000 -- -- 352,000
Year ended January 27,
1996:
Deducted from assets
accounts:
Allowance for
doubtful accounts.. 321,000 14,000 -- 28,000(1) 307,000
</TABLE>
- - --------
(1) Uncollectible accounts written off, net of recoveries.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC 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 any such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether or not such indemnification
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:
(1) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) That, every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new
II-3
<PAGE>
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) 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.
(4) That for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(5) That for purposes of determining any liability under the Securities
Act, each post-effective amendment that contained a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(6) 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.
(7) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(8) That, for purposes of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein and the
offering of such securities at the time shall be deemed to be the initial
bona fide offering thereof.
(9) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(10) To file an application for the purpose of determining the
eligibility of the Trustee to act under subsection (a) of section 310 of
the Trust Indenture Act ("Act") in accordance with the rules and
regulations prescribed by the Commission under section 305(b)(2) of the
Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 Pittsburgh,
Commonwealth of Pennsylvania, on the 16th day of June, 1998.
Iron Age Holdings Corporation
/s/ Keith A. McDonough
By: _________________________________
NAME: KEITH A. MCDONOUGH
TITLE: VICE PRESIDENT-- FINANCE, CHIEF
FINANCIAL OFFICER
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 indicated on the 16th day of June, 1998.
KNOW ALL MEN BY THESE PRESENTS that each officer and director of Iron Age
Holdings Corporation whose signature appears below constitutes and appoints
Keith A. McDonough and Andrea Geisser, and each of them, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
revocation, for him or her and in his or her name, place and stead, in any and
all capacities, to execute any and all amendments, or any post-effective
amendments and supplements to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-
fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<S> <C>
SIGNATURES TITLE
/s/ Donald R. Jensen Chairman, Chief Executive Officer,
- - ------------------------------------- President and Director (principal
DONALD R. JENSEN executive officer)
/s/ William J. Mills Executive Vice President and Director
- - -------------------------------------
ILLIAM J. MILLS
/s/ Keith A. McDonough Vice President--Finance and Chief
- - ------------------------------------- Financial Officer (principal
KEITH A. MCDONOUGH financial and accounting officer)
/s/ William J. Taaffe Corporate Vice President, Operations
- - ------------------------------------- and Distribution
WILLIAM J. TAAFFE
/s/ Theodore C. Johanson President and Chief Executive Officer,
- - ------------------------------------- Falcon Shoe Mfg. Co.
THEODORE C. JOHANSON
/s/ Peter Lamm Director
- - -------------------------------------
PETER LAMM
/s/ Andrea Geisser Director
- - -------------------------------------
ANDREA GEISSER
/s/ Russell Steenberg Director
- - -------------------------------------
RUSSELL STEENBERG
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
3.1 Holdings Certificate of Incorporation, as amended.
3.2 Holdings By-laws.
4.1 Indenture dated as of April 24, 1998.
4.2 Registration Agreement dated April 24, 1998.
5.1 Opinion of Ropes & Gray re: legality.
10.1 Credit Agreement dated as of April 24, 1998.
10.2 Security Agreement dated April 24, 1998.
10.3 Intellectual Property Security Agreement dated April 24, 1998.
10.4 Canadian Security Agreement dated April 24, 1998.
10.5 Mortgage, Assignment of Leases and Rents, Fixture Filing,
Security Agreement and Financing Statement dated February 26,
1997, as amended April 24, 1998.
10.6 Intercompany Subordination Agreement dated April 24, 1998.
10.7 Subsidiary Guaranty dated April 24, 1998.
10.8 Iron Age Trademark License Agreement with W.L. Gore &
Associates, Inc. dated August 15, 1994.
10.9 Falcon Trademark License Agreement with W.L. Gore &
Associates, Inc. dated July 25, 1994.
10.10 Falcon Manufacturing Certification Agreement with W.L. Gore &
Associates, Inc. dated July 25, 1994.
10.11 General Services Administration Contract effective July 26,
1994, as modified May 24, 1995.
10.12 Amended and Restated Management Agreement dated as of February
26, 1997.
10.13 Stockholders Agreement dated as of February 26, 1997.
10.14 Amendment No. 1 to Stockholders Agreement dated as of March
25, 1997.
10.15 American Home Assurance Company Joinder to the Stockholders
Agreement dated as of March 25, 1997
10.16 Banque Nationale de Paris Joinder to the Stockholders
Agreement dated as of March 25, 1997.
10.17 Stock Option Plan dated February 26, 1997.
10.18 Securities Purchase Agreement dated February 26, 1997.
10.19 Stock Purchase Agreement dated as of December 26, 1996.
10.20 Amendment No. 1 to Stock Purchase Agreement dated as of
February 26, 1997.
10.21 Pittsburgh, Pennsylvania Lease Agreement dated March 1, 1993,
as amended June 2, 1994, as amended June 12, 1996, as amended
December 10, 1997.
10.22 Jerusalem, New York Lease Agreement dated December 9, 1992, as
amended January 1, 1994, as amended April 1997.
10.23 Jerusalem, New York Lease Agreement dated June 20, 1997, as
amended January 9, 1998.
10.24 Lewiston, Maine Lease Agreement dated January 14, 1994.
10.25 Lewiston, Maine Lease Agreement dated November 30, 1990, as
amended June 8, 1994.
10.26 Ontario, Canada Lease Agreement dated June 11, 1991, as
renewed November 23, 1995.
10.27 Jensen Employment Agreement dated February 26, 1997.
10.28 Mills Employment Agreement dated November 20, 1995.
10.29 McDonough Employment Agreement dated November 20, 1995.
10.30 Johanson Employment Agreement dated August 1, 1994.
10.31 Johanson Non-Competition Agreement dated August 1, 1994.
12.1 Statement regarding computation of ratio of earnings to fixed
charges.
21.1 Subsidiaries of Holdings.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
23.1 Consent of Ropes & Gray (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
24.1 Powers of Attorney (included on signature page).
25.1 Statement of Eligibility on Form T-1 of The Chase Manhattan
Bank under the Indenture.
27.1 Financial Data Schedules.
99.1 Form of Letter of Transmittal used in connection with the
Exchange Offer.
99.2 Form of Notice of Guaranteed Delivery used in connection with
the Exchange Offer.
99.3 Form of Exchange Agent Agreement.
</TABLE>
<PAGE>
Exhibit 3.1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
-------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THAT "IRON AGE HOLDINGS CORPORATION" IS DULY INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE
EXISTENCE NOT HAVING BEEN CANCELED OR DISSOLVED SO FAR AS THE RECORDS OF THIS
OFFICE SHOW AND IS DULY AUTHORIZED TO TRANSACT BUSINESS.
THE FOLLOWING DOCUMENTS HAVE BEEN FILED:
CERTIFICATE OF INCORPORATION, FILED THE THIRD DAY OF FEBRUARY, A.D. 1997,
AT 9 O'CLOCK A.M.
CERTIFICATE OF AMENDMENT, FILED THE TWENTIETH DAY OF FEBRUARY, A.D. 1997,
AT 9 O'CLOCK A.M.
CERTIFICATE OF DESIGNATION, FILED THE TWENTY-FIFTH DAY OF FEBRUARY, A.D.
1997, AT 9 O'CLOCK A.M.
CERTIFIED OF AMENDMENT, CHANGING ITS NAME FROM "IA HOLDINGS CORP." TO "IRON
AGE HOLDINGS CORPORATION", FILED THE TWENTY-SIXTH DAY OF FEBRUARY, A.D. 1997, AT
3:40 O'CLOCK P.M.
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
-------------------
AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE
ONLY CERTIFICATES ON RECORD OF THE AFORESAID CORPORATION.
AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL REPORTS HAVE BEEN FILED TO
DATE.
AND I DO HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES HAVE BEEN PAID TO
DATE.
/s/ Edward J. Freel
-------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9032489
DATE: 4/17/98
-2-
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
-------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "IA HOLDINGS CORP.", FILED IN THIS OFFICE ON THE THIRD DAY OF
FEBRUARY, A.D. 1997, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9028529
DATE: 4/15/98
-3-
<PAGE>
CERTIFICATE OF INCORPORATION
----------------------------
of
--
IA HOLDINGS CORP.
-----------------
1. The name of this corporation is IA Holdings Corp.
2. The registered office of this corporation in the State of Delaware is
located at 1013 Centre Road, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is Corporation Service Company.
3. The purpose of this corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
4. The total number of shares that this corporation shall have authority
to issue is two million (2,000,000) shares of Common Stock, $.01 par value per
share, and one hundred fifty thousand (150,000) shares of Preferred Stock, $.01
par value per share. Subject to the limitations prescribed by law and the
provisions of this Certificate of Incorporation, the Board of Directors of this
corporation is authorized to issue the Preferred Stock from time to time in one
or more series, each of such series to have such voting powers, full or limited,
or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights, and such qualifications,
limitations or restrictions thereof, as shall be determined by the Board of
Directors in a resolution or resolutions providing for the issue of such
Preferred Stock. Subject to the powers, preferences and rights of any Preferred
Stock, including any series thereof, having any preference or priority over, or
rights superior to, the Common Stock and except as otherwise provided bylaw, the
holders of the Common Stock shall have and possess all powers and voting and
other rights pertaining to the stock of this corporation and each share of
Common Stock shall be entitled to one vote.
5. The name and mailing address of the incorporator is: Reza Satchu, c/o
Fenway Partners, Inc., 152 West 57th Street, 59th Floor, New York, New York
10019.
6. Except as otherwise provided in the provisions establishing a class of
stock, the number of authorized shares of any class or series of stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the voting
power of the corporation entitled to vote irrespective of the provisions of
Section 242(b)(2) of the General Corporation Law of the State of Delaware.
-1-
<PAGE>
7. The election of directors need not be by written ballot unless the by-
laws shall so require.
8. In furtherance and not in limitation of the power conferred upon the
board of directors by law, the board of directors shall have power to make,
adopt, alter, amend and repeal from time to time by-laws of this corporation,
subject to the right of the stockholders entitled to vote with respect thereto
to alter and repeal by-laws made by the board of directors.
9. A director of this corporation shall not be liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that exculpation from liability is not permitted
under the General Corporation Law of the State of Delaware as in effect at the
time such liability is determined. No amendment or repeal of this paragraph 9
shall apply to or have any effect on the liability or alleged liability of any
director of the corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
10. This corporation shall, to the maximum extent permitted from time to
time under the law of the State of Delaware, indemnify and upon request advance
expenses to any person who is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit, proceeding or claim,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was or has agreed to be a director or officer of this
corporation or while a director or officer is or was serving at the request of
this corporation as a director, officer, partner, trustee, employee or agent of
any corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, against expenses
(including attorney's fees and expenses), judgments, fines, penalties and
amounts paid in settlement incurred (and not otherwise recovered) in connection
with the investigation, preparation to defend or defense of such action, suit,
proceeding or claim; provided, however, that the foregoing shall not require
-------- -------
this corporation to indemnify or advance expenses to any person in connection
with any action, suit, proceeding, claim or counterclaim initiated by or on
behalf of such person. Such indemnification shall not be exclusive of other
indemnification rights arising under any by-law, agreement, vote of directors or
stockholders or otherwise and shall inure to the benefit of the heirs and legal
representatives of such person. Any person seeking indemnification under this
paragraph 10 shall be deemed to have met the standard of conduct required for
such indemnification unless the contrary shall be established. Any repeal or
modification of the foregoing provisions of this paragraph 10 shall not
adversely affect any right or protection of a director of officer of this
corporation with respect to any acts or omissions of such director or officer
occurring prior to such repeal or modification.
11. The books of this corporation may (subject to any statutory
requirements) be kept outside the State of Delaware as may be designated by the
board of directors or in the by-laws of this corporation.
-2-
<PAGE>
12. If at any time this corporation shall have a class of stock registered
pursuant to the provisions of the Securities Exchange Act of 1934, for so long
as such class is so registered, any action by the stockholders of such class
must be taken at an annual or special meeting of stockholders and may not be
taken by written consent.
13. This corporation shall not be governed by Section 203 of the General
Corporation Law of the State of Delaware.
THE UNDERSIGNED, the sole incorporator named above, hereby certifies that
the facts stated above are true as of this 30th of January, 1997.
/s/ Reza Satchu
--------------------------------
Reza Satchu
-3-
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
-------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "IA HOLDINGS CORP.", FILED IN THIS OFFICE ON THE TWENTIETH DAY OF FEBRUARY,
A.D. 1997, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
-------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9028530
DATE: 4/15/98
-1-
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE
OF INCORPORATION BEFORE PAYMENT FOR
ANY PART OF THE CAPITAL
OF
IA HOLDINGS CORP.
IA Holdings Corp., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify:
FIRST: That the Corporation has not received any payment for any of its
stock.
SECOND: That the Board of Directors of this Corporation has adopted by
unanimous written consent the following resolutions:
RESOLVED: That the Certificate of Incorporation of the Corporation is
hereby amended by striking out Article 4 thereof and by
substituting in lieu of said Article 4 the following new Article
4:
"4. The total number of shares that this corporation shall have
authority to issue is two hundred thousand (200,000) shares of
Common Stock, par value $.01 per share, and fifteen thousand
(15,000) shares of Preferred Stock, par value $.01 per share.
Subject to the limitation prescribed by law and the provisions of
this Certificate of Incorporation, the Board of Directors of this
corporation is authorized to issue the Preferred Stock from time
to time in one or more series, each of such series to have such
voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional
or other special rights, and such qualifications, limitations or
restrictions thereof, as shall be determined by the Board of
Directors in a resolution or resolutions providing for the issue
of such Preferred Stock. Subject to the powers, preferences and
rights of any Preferred stock, including any series thereof,
having any preference or priority over, or rights superior to,
the Common Stock and except as otherwise provided by law, the
holders of the Common Stock shall have and possess all powers and
voting and other rights pertaining to the stock of this
-2-
<PAGE>
corporation and each share of Common Stock shall be entitled to
one vote."
THIRD: That the amendment of the Certificate of Incorporation of the
Corporation herein certified was duly adopted, pursuant to the
provisions of Section 241 of the General Corporation Law of the State
of Delaware, unanimous written consent of the Board of Directors of
the Corporation given in accordance with the provisions of Section
141(f) of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Corporation has caused this Certificate to be
signed by Andrea Geisser, its Vice President, this 20th day of February, 1997.
/s/ Andrea Geisser
-------------------------------
Andrea Geisser
Vice President
Dated: February 20, 1997
-3-
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
-------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "IA HOLDINGS CORP.", FILED IN THIS OFFICE ON THE TWENTY-FIFTH DAY
OF FEBRUARY, A.D. 1997, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
-------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9028531
DATE: 4/15/98
-1-
<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
of the
SERIES A PREFERRED STOCK
of
IA HOLDINGS CORP.
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
I, Andrea Geisser, Vice President of IA Holdings Corp., a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), in accordance with Section 151 of the Delaware General
Corporation Law, certify:
FIRST: The Certificate of Incorporation of the Corporation authorizes the
issuance of up to 15,000 shares of preferred stock, par value $.01 per share, in
one or more series, with such voting powers, designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as may be stated and expressed in a
resolution or resolutions providing for the creation and issuance of any such
series adopted by the Board of Directors of the Corporation (the "Board of
Directors") prior to the issuance of any shares of such series, pursuant to
authority expressly vested in the Board of Directors by the Certificate of
Incorporation of the Corporation.
SECOND: The Board of Directors, by unanimous written consent dated
February 25, 1997, duly adopted the following resolution authorizing the
creation of a new series of such preferred stock, to be known as "Series A
Preferred Stock," stating that 10,000 shares of the authorized and unissued
preferred stock shall constitute such series, and setting forth a statement of
the voting powers, designation, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations and
restrictions thereof as follows:
BE IT RESOLVED, that the terms of the Series A Preferred Stock shall be as
follows:
1. Designation and Number. The designation of the first series of the
----------------------
authorized preferred stock, par value $.01 per share, of the Corporation shall
be Series A Preferred Stock (the "Series A Preferred Stock"). The number of
shares initially constituting the Series A Preferred Stock shall be 10,000.
-1-
<PAGE>
2. Dividends.
---------
2A. General Obligation. When, as and if declared by the Board of
------------------
Directors and to the extent permitted by law, the Corporation shall pay
preferential dividends to the holders of the Series A Preferred Stock as
provided in this Section 2. Dividends on each share of the Series A Preferred
Stock (a "Class A Preferred Share") shall accrue from the date of issuance of
such Class A Preferred Share at the rate of fifteen and one-half percent (15
1/2%) per annum of the Liquidation Value thereof; provided, however, that such
-------- -------
dividend rate shall be subject to increase in the following circumstances and
manner;
(i) In the event that any Class A Preferred Shares are not
redeemed on or before February 26, 2007 (as contemplated by Section 5A)
then the dividend rate applicable on such shares shall thereafter accrue
until redemption of such shares at the following rates for the following
periods:
Period Rate
February 27, 2007 to March 26, 2007 15-1/2%
March 27, 2007 to September 26, 2007 16-1/2%
September 27, 2007 to March 26, 2008 17-1/2%
March 27, 2008 to September 26, 2008 18-1/2%
September 27, 2008 to March 26, 2009 19-1/2%
Thereafter until redeemed 20%
(ii) From and after any Change in Ownership Triggering Event, in
the event that any Class A Preferred Shares with respect to which the
holder thereof has requested redemption and complied with the notice and
other delivery requirements of Section 5E are not so redeemed on the Change
in Ownership Redemption Date then (subject to the provisions of Section 5E
regarding rescission of redemption requests) the dividend rate applicable
to such shares shall thereafter accrue from the Change in Ownership
Redemption Date with respect to such shares until redemption of such shares
at the rate of: seventeen and one-half percent (17-1/2%) per annum for
the six-month period commencing on such Change in Ownership Redemption
Date, eighteen and one-half percent (18-1/2%) for the next succeeding six-
month period, nineteen and one-half percent (19-1/2%) for the next
succeeding six-month period and 20% thereafter until redeemed.
All such dividends shall accrue whether or not they have been declared and
whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends, and such dividends shall be
cumulative such that all accrued and unpaid dividends shall be fully paid, or
shall be declared with funds irrevocably set apart for payment or shall be paid
through issuance of additional Class A Preferred Shares (as hereinafter
provided), before any cash dividends may be paid with respect to any Junior
Securities. The date on which the
-2-
<PAGE>
Corporation initially issues any Class A Preferred Share shall be deemed to be
its "date of issuance" regardless of the number of times transfer of such Class
A Preferred Share is made on the stock records maintained by or for the
Corporation and regardless of the number of certificates which may be issued to
evidence such Class A Preferred Share.
2B. Dividend Payments. Subject to the limitations set forth in Section
-----------------
2A, dividends on the Series A Preferred Stock shall be payable in cash or, at
the option of the Corporation, in whole or in part in additional Class A
Preferred Shares (including fractional shares) on the last day of January of
each year (each such date a "Dividend Payment Date") beginning in January 1998.
In the event the Corporation elects to pay such dividends in the form of
additional Class A Preferred Shares, the Corporation may, but shall not be
obligated to, pay cash in lieu of any fractional shares issuable in connection
with such dividends.
2C. Distribution of Partial Dividend Payments. Except as otherwise
-----------------------------------------
provided herein, if at any time the Corporation pays less than the total amount
of dividends then accrued with respect to the Series A Preferred Stock, such
payment shall be distributed pro rata among the holders thereof based upon the
aggregate accrued but unpaid dividends on the Class A Preferred Shares held by
each such holder.
3. Liquidation. Upon any liquidation, dissolution or winding up of the
-----------
Corporation (whether voluntary or involuntary), each holder of Series A
Preferred Stock shall be entitled to be paid, before any distribution or payment
is made upon any Junior Securities, an amount in cash equal to the aggregate
Liquidation Value of all Class A Preferred Shares held by such holder (plus all
accrued and unpaid dividends thereon), and the holders of Series A Preferred
Stock shall not be entitled to any further payment. If upon any such
liquidation, dissolution or winding up of the Corporation the Corporation's
assets to be distributed among the holders of the Series A Preferred Stock are
insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid under this Section 3, then the entire assets
available to be distributed to the holders of the Series A Preferred Stock shall
be distributed pro rata among such holders based upon the aggregate Liquidation
Value (plus all accrued and unpaid dividends) of the Series A Preferred Stock
held by each such holder. Prior to the liquidation, dissolution or winding up
of the Corporation, the Corporation shall declare for payment all accrued and
unpaid dividends with respect to the Series A Preferred Stock, but only to the
extent of funds of the Corporation legally available for the payment of
dividends. Not less than 20 days prior to the payment date stated therein, the
Corporation shall mail written notice of any such liquidation, dissolution or
winding up to each record holder of Series A Preferred Stock, setting forth in
reasonable detail the amount of proceeds to be paid with respect to each Class A
Preferred Share, each share of Common Stock and each other equity security of
the Corporation in connection with such liquidation, dissolution or winding up.
Whenever the distribution provided for in this Section 3 shall be payable in
property other than cash, the value of such distribution shall be the Fair
Market Value of such property.
-3-
<PAGE>
4. Priority of Series A Preferred Stock on Dividends and Redemptions. So
-----------------------------------------------------------------
long as any Series A Preferred Stock remains outstanding, without the prior
written consent of the holders of two thirds (66-2/3%) of the Class A Preferred
Shares then outstanding, the Corporation shall not, nor shall it permit any
Subsidiary to, redeem, purchase or otherwise acquire directly or indirectly any
Junior Securities, nor shall the Corporation directly or indirectly pay or
declare any dividend or make any distribution upon any Junior Securities;
provided, however, that (i) the Corporation may repurchase or redeem any Junior
- - -------- -------
Securities from any Mezzanine Investor pursuant to the provisions of Section
3.1.7 of the Stockholders Agreement as in effect on the date hereof, (ii) the
Corporation may repurchase or redeem any Junior Securities held by any officers,
directors or employees of the Corporation or its Subsidiaries (or by any Member
of the Immediate Family (as defined in the Stockholders Agreement) of any such
officer, director or employee, or, after the death of any such holder, by any
such holder's estate, executors, administrators and personal representatives or
any such holder's heirs, legatees or distributees) and (iii) the Corporation may
declare and pay any dividend and make any distributions which are payable solely
in the form of additional Junior Securities.
5. Redemptions.
-----------
5A. Mandatory and Optional Redemption. On February 26, 2007, the
---------------------------------
Corporation shall redeem each Class A Preferred Share then outstanding (the
"Mandatory Redemption"), subject to the limitations set forth in Section 5B
below. In addition, the Corporation may, at its option, at any time and from
time to time, redeem all or any portion of the Class A Preferred Shares then
outstanding (each an "Optional Redemption"). Upon either a Mandatory Redemption
or an Optional Redemption, the Corporation shall pay out of funds legally
available therefor a price per Class A Preferred Share equal to the Redemption
Price.
5B. Redemption Payment. For each Class A Preferred Share which is to be
------------------
redeemed hereunder, the Corporation shall be obligated on the Redemption Date to
pay out of funds legally available therefor to the holder of such Class A
Preferred Share (upon surrender by such holder) at the Corporation's principal
office of the certificate representing such Class A Preferred Share) an amount
equal to the Redemption Price; provided, however, that Mandatory Redemption
-------- -------
shall only be made to the extent that funds of the Corporation are legally
available for such purposes after: (i) all obligations under the Senior Credit
Agreement and all other Designated Senior Debt (collectively, the "Senior Credit
Obligations") have been paid in full and all commitments to lend additional
amounts thereunder or under any other agreement with respect to Designated
Senior Debt shall have been canceled (or such redemption has been consented to
by the lenders under the Senior Credit Agreement and any other holders of
Designated Senior Debt to the extent required thereunder) and (ii) the
Subordinated Notes have been paid in full (or such redemption has been consented
to by the holders thereof). If the funds of the Corporation available, after
fulfillment of the conditions set forth in clauses (i) and (ii) of the
immediately preceding sentence (such fulfillment being referred to herein as the
"Satisfaction of the Specified Credit Obligations"), for redemption of Class A
Preferred Shares on any Redemption Date are insufficient to redeem the total
number
-4-
<PAGE>
of Class A Preferred Shares to be redeemed on such date, those funds which are
available after the Satisfaction of the Specified Credit Obligations shall be
used to redeem the maximum possible number of Class A Preferred Shares pro rata
among the holders of the Class A Preferred Shares to be redeemed based upon the
aggregate Redemption Price of such Class A Preferred Shares held by each such
holder. At any time thereafter when additional funds of the Corporation are
available (after Satisfaction of the Specified Credit Obligations) for the
redemption of Class A Preferred Shares, such funds shall thereafter be used to
redeem the balance of the Class A Preferred Shares which the Corporation has
become obligated to redeem on any Redemption Date but which it has not redeemed.
5C. Notice of Redemption. Except as otherwise provided herein, the
--------------------
Corporation shall mail written notice of each redemption of any Series A
Preferred Stock to each record holder thereof not more than 60 nor less than 10
days prior to the date on which such redemption is to be made. In case fewer
than the total number of Class A Preferred Shares represented by any certificate
are redeemed, a new certificate representing the number of unredeemed Class A
Preferred Shares shall be issued to the holder thereof without cost to such
holder within five business days after surrender of the certificate representing
the redeemed Class A Preferred Shares.
5D. Dividends After Redemption Date. No Class A Preferred Shares shall be
-------------------------------
entitled to any dividends accruing after the date on which the Redemption Price
of such Class A Preferred Share is paid (or made available for payment to) to
the holder of such Class A Preferred Share. On such date, all rights of the
holder of such Class A Preferred Share shall cease, and such Class A Preferred
Share shall no longer be deemed to be issued and outstanding.
5E. Special Redemptions. If a Change in Ownership Triggering Event has
-------------------
occurred or the Corporation obtains knowledge that a Change in Ownership
Triggering Event is likely to occur, the Corporation shall give prompt written
notice of such Change in Ownership Triggering Event describing in reasonable
detail the material terms and date of consummation thereof to each holder of
Series A Preferred Stock, provided that: (i) at any time prior to an initial
Public Offering such notice shall be given at least five days prior to the
occurrence of such Change in Ownership Triggering Event and (ii) at any time
after an initial Public Offering such notice shall be given within ten days
after the occurrence of such Change in Ownership Triggering Event. The holders
of the Series A Preferred Stock then outstanding may require the Corporation to
redeem all or any portion of the Series A Preferred Stock owned by such holders
at a price per Class A Preferred Share (payable from funds legally available
therefor after Satisfaction of the Specified Credit Obligations) equal to the
Redemption Price by giving written notice to the Corporation of such election
prior to the later of: (a) 21 days after receipt of the Corporation's notice
and (b) five days prior to the consummation of the Change in Ownership
Triggering Event (the "Expiration Date").
-5-
<PAGE>
Upon receipt of such election(s), the Corporation shall be obligated to
redeem the aggregate number of Class A Preferred Shares specified therein on the
later of: (a) the Business Day upon which the Change in Ownership Triggering
Event occurs or (b) the fifth Business Day after the Corporation's receipt of
such election(s) (the later of such dates being referred to herein as the
"Change in Ownership Redemption Date"); provided, however, that the Corporation
-------- -------
shall not be obligated to consummate such redemption except to the extent that
funds of the Corporation are legally available for such purpose after
Satisfaction of the Specified Credit Obligations. If any proposed Change in
Ownership Triggering Event does not occur, all requests for redemption in
connection therewith shall be automatically rescinded, or if there has been a
material change in the terms or the timing of the transaction, any holder of
Series A Preferred stock may rescind such holder's request from redemption by
delivering written notice thereof to the Corporation prior to the consummation
of the transaction. The Company will give prompt notice to all holders of Class
A Preferred Shares of any material change in the terms of timing of any proposed
Change in Ownership Triggering Event. In the event of any such automatic or
volitional rescission, the increase in dividend rate contemplated by Section
2A(ii) shall not apply to any Series A Preferred Shares the subject of such
rescission.
5F. No Reissuance of Series A Preferred Stock. No share or shares of the
-----------------------------------------
Series A Preferred Stock acquired by the Corporation by reason of redemption,
purchase or otherwise shall be reissued, and all such shares shall be canceled,
retired and eliminated from the shares which the Corporation shall be authorized
to issue.
6. Voting and Other Rights.
-----------------------
6A. Voting. Except as otherwise provided herein and as otherwise required
------
by applicable law, the Series A Preferred Stock shall have no voting rights.
The number of Class A Preferred Shares entitled to vote on any matter shall be
determined as of the record date for the determination of shareholders entitled
to vote on such matter or, if no such record date is established, at the date
such vote is taken or any written consent of shareholders is solicited. Except
to the extent otherwise required by law, the holders of Series A Preferred Stock
shall vote together as a single class on al matters.
6B. Other Rights. In addition to any rights provided by law, without the
------------
written consent of the holders of two thirds (66-2/3%) of the Class A Preferred
Shares then outstanding, the Corporation shall not:
(i) authorize any proposed amendment to the Corporation's
Certificate of Incorporation (including this Certificate of Designation)
that would increase or decrease the aggregate number of authorized shares
of Series A Preferred Stock, increase or decrease the par value of any
shares of Series A Preferred Stock, or alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to
adversely affect them; or
-6-
<PAGE>
(ii) authorize, issue or sell, or obligate itself to authorize,
issue or sell, any class or series of preferred stock that is senior to or
pari passu with the Series A Preferred Stock with respect to dividends,
liquidation preferences or redemption rights (other than additional shares
of Series A Preferred Stock which are issued in lieu of cash dividends
pursuant to Section 2).
7. Registration of Transfer. The Corporation shall keep at its principal
------------------------
office a register for the registration of Series A Preferred Stock. Upon the
surrender of any certificate representing Series A Preferred Stock at such
place, the Corporation shall, at the request of the record holder of such
certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the aggregate
the number of Class A Preferred Shares represented by the surrendered
certificate. Subject to any stockholder or other agreements between the
Corporation and the holders of Series A Preferred Stock, each such new
certificate shall be registered in such name and shall represent such number of
Class A Preferred Shares as is requested by the holder of the surrendered
certificate and shall be substantially identical in form to the surrendered
certificate, and dividends shall accrue on the Series A Preferred Stock
represented by such new certificate from the date to which dividends have been
fully paid on such Series A Preferred Stock represented by the surrendered
certificate.
8. Replacement. Upon receipt of evidence reasonably satisfactory to the
-----------
Corporation of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing Series A Preferred Stock, and in the case of any such
loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to
the Corporation, or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
Class A Preferred Shares of such class represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate, and dividends shall accrue on the Series A
Preferred Stock represented by such new certificate from the date to which
dividends have been fully paid on such lost, stolen, destroyed or mutilated
certificate.
9. Definitions. As used in this Certificate, the following terms are used
-----------
with the meanings ascribed thereto in this Section 9.
"Change in Ownership Triggering Event" means, for purposes of Section 5E,
------------------------------------
any of the following: (i) at any time prior to a Public Offering Fenway and its
affiliates shall cease to retain the right to elect a majority of the Board of
Directors, (ii) at any time after a Public Offering Fenway, the Mezzanine
Investors and the respective affiliates of Fenway and the various Mezzanine
Investors shall cease to have the power to elect a majority of the Board of
Directors or (iii) at any time the Corporation sells all or substantially all of
its assets (including
-7-
<PAGE>
through sale of all or substantially all of the stock of its Subsidiaries or
sale of all or substantially all of the assets of the Corporation and its
Subsidiaries, taken as a whole).
"Closing Date" means the first day on which any shares of Class A Preferred
------------
Stock are issued and sold pursuant to the Securities Purchase Agreement.
"Common Stock" means, collectively, the Corporation's Common Stock and any
------------
capital stock of any class of the Corporation hereafter authorized which is not
limited to a fixed sum of percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in the distribution
of assets upon any liquidation, dissolution or winding up of the Corporation.
"Designated Senior Debt" shall have the meaning set forth in the Note
----------------------
Purchase Agreement.
"Fair Market Value" means the fair market value determined (i) in the case
-----------------
of any property to be valued where the value of such property is reasonably
likely to exceed $5,000,000 in the aggregate, absent any agreement between the
Corporation and the holders of two-thirds (66-2/3%) of the Preferred Stock then
outstanding, by an Independent Investment Banking Firm retained by the
Corporation (the fees and expenses of which shall be the responsibility of the
Corporation) selected as set forth below and (ii) in all other cases, in good
faith by the Board of Directors. In the circumstances identified in clause (i)
of the immediately preceding sentence, the Board of Directors shall provide to
each holder of the Preferred Stock subject to such distribution a list of three
Independent Investment Banking Firms none of whom shall be an Affiliate of the
Corporation, and within 15 days of receipt of such list, the holders of a
majority of the Preferred Stock subject to such distribution shall select from
such list the Independent Investment Banking Firm to perform the calculation;
provided, however, that in the event an Independent Investment Banking Firm is
- - -------- -------
not selected within such 15 day period, the Board of Directors shall make such
selection.
"Fenway" means Fenway Partners Capital Fund, L.P., a Delaware limited
------
partnership.
"IAH" means IAH Acquisition Corp., a Delaware corporation and a subsidiary
---
of the Corporation.
"Independent Investment Banking Firm" means any investment banking firm
-----------------------------------
which is not the beneficial owner of any equity interest in the Company or any
shareholder of the Company.
"Junior Securities" means any Common Stock or any other equity securities
-----------------
of the Corporation which rank junior as to liquidation rights, dividend rights
and redemption rights to the Series A Preferred Stock.
-8-
<PAGE>
"Liquidation Value" of any Class A Preferred Share as of any particular
-----------------
date shall be equal to $10,000.
"Mezzanine Investors" shall have the meaning set forth in the Stockholders
-------------------
Agreement.
"Note Purchase Agreement" means the Note Purchase Agreement dated on or
-----------------------
about February 26, 1997 among IAH, New York Life Insurance Company and Fenway
(as amended and in effect from time to time), a copy of which is maintained at
the Corporation's headquarters and is available to holders of Series A Preferred
Shares upon request.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its capital
---------------
stock or equity securities to the public pursuant to an effective registration
statement under the Securities Act of 1933, as then in effect, or any comparable
statement under any similar federal statute then in force.
"Redemption Date" as to any Class A Preferred Share means the date
---------------
specified in the notice of any redemption at the Corporation's option or at the
holder's option; provided that no such date shall be a Redemption Date unless
--------
the Redemption Price of such Class A Preferred Share is actually paid (or made
available for payment) in full on such date, and if not so paid in full, the
Redemption Date shall be the date on which such amount is fully paid (or made
available for payment).
"Redemption Price" means, for each Class A Preferred Share, the Liquidation
----------------
Value thereof (plus all accrued and unpaid dividends thereon).
"Securities Purchase Agreement" means the Securities Purchase Agreement
-----------------------------
dated on or about February 26, 1997 among the Corporation, IAH, New York Life
Insurance Company and Fenway (as amended and in effect from time to time), a
copy of which is maintained at the Corporation's headquarters and is available
to holders of Series A Preferred Shares upon request.
"Senior Credit Agreement" shall have the meaning provided in the Note
-----------------------
Purchase Agreement.
"Stockholders Agreement" means the Stockholders Agreement dated on or about
----------------------
February 26, 1997 among the Corporation and the stockholders named therein, as
amended and in effect from time to time, a copy of which is maintained at the
Corporation's headquarters and is available to holders of Series A Preferred
Shares upon request.
-9-
<PAGE>
"Subordinated Notes" means the 12.5% Subordinated Notes of IAH issued
------------------
pursuant to the Securities Purchase Agreement.
"Subsidiary" means, with respect to any Person, any corporation, limited
----------
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of 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 that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control the managing general partner of such limited liability
company, partnership, association or other business entity.
10. Amendment and Waiver. No amendment, modification or waiver shall be
--------------------
binding or effective with respect to any provision hereof without the prior
written consent of the holders of a majority of the Series A Preferred Stock
outstanding at the time such action is taken; provided that no such action shall
--------
change (a) the rate at which or the manner in which dividends on the Series A
Preferred Stock accrue or the times at which such dividends become payable or
the amount payable on redemption of the Series A Preferred Stock or the times at
which redemption of Series A Preferred Stock is to occur or (b) the percentage
required to approve any change described in clause (a) above, without the prior
written consent of the holders of one hundred percent (100%) of the Series A
Preferred Stock then outstanding; and provided further that no change in the
-------- -------
terms hereof may be accomplished by merger or consolidation of the Corporation
with another corporation or entity unless the Corporation has obtained the prior
written consent of the holders of the applicable percentage of the Series A
Preferred Stock then outstanding.
11. Notices. Any notice or other communication referred to herein shall
-------
be in writing, addressed as hereinafter provided, and shall be deemed effective
(x) when delivered or (y) if sent by overnight courier, two Business Days after
the same shall have been deposited with such courier, or (z) if delivered or
sent by facsimile transmission, upon confirmation of transmission. Such notices
or other communication shall be addressed as follows: (i) if to the
Corporation, at its principal executive offices and (ii) if to any stockholder,
at such holder's address as it appears in the stock records of the Corporation
(unless otherwise indicated by any such holder).
12. Adjustment. All numbers and amounts set forth herein which refer to
----------
share prices or amounts or liquidation preference related amounts, shall be
appropriately adjusted (as
-10-
<PAGE>
determined by the Board of Directors) to reflect any stock splits, stock
dividends, combinations of shares and other recapitalizations affecting the
Series A Preferred Stock.
In witness whereof, said IA Holdings Corp. has caused this Certificate of
Designation, Preferences and Rights to be executed by an officer of said
Corporation thereunto duly authorized, this 25 day of February 1997.
IA HOLDINGS CORP.
By /s/ Andrea Geisser
------------------------------------
Title: Vice President
-11-
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
-------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "IA HOLDINGS CORP.", CHANGING ITS NAME FROM "IA HOLDINGS CORP." TO "IRON AGE
HOLDINGS CORPORATION", FILED IN THIS OFFICE ON THE TWENTY-SIXTH DAY OF FEBRUARY,
A.D. 1997, AT 3:40 O'CLOCK P.M.
/s/ Edward J. Freel
-------------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9028532
DATE: 4/15/98
-1-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
IA HOLDINGS CORP.
IA Holdings Corp., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST. That the Board of Directors of said corporation by the unanimous
written consent of its members, filed with the minutes of the Board, adopted the
following resolution:
"RESOLVED: That, subject to approval by the stockholders of the
-------- corporation, Article 1 of the Certificate of
Incorporation of the corporation be amended and
restated in its entirety as follows:
1. The name of this corporation is Iron Age Holdings
Corporation."
SECOND: That the said amendment has been consented to and authorized by
the holders of a majority of the issued and outstanding stock entitled to vote
by written consent given in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
-1-
<PAGE>
IN WITNESS WHEREOF, SAID CORPORATION HAS caused this Certificate to be
signed by an officer thereunto duly authorized this 26th day of February, 1997.
IA HOLDINGS CORP.
By: /s/ Andrea Geisser
--------------------------------
Title:
<PAGE>
Exhibit 3.2
By-Laws
of
Iron Age Holdings Corporation
(formerly known as IA Holdings Corp.)
Section 1. LAW, CERTIFICATE OF INCORPORATION
AND BY-LAWS
1.1. These by-laws are subject to the certificate of incorporation of the
corporation. In these by-laws, references to law, the certificate of
incorporation and by-laws mean the law, the provisions of the certificate of
incorporation and the by-laws as from time to time in effect.
Section 2. STOCKHOLDERS
2.1. Annual Meeting. The annual meeting of stockholders shall be held at
--------------
10 a.m. on the second Friday in June in each year, unless that day be a legal
holiday at the place where the meeting is to be held, in which case, the meeting
shall be held at the same hour on the next succeeding day not a legal holiday,
or at such other date and time as shall be designated from time to time by the
board of directors and stated in the notice of the meeting, at which they shall
elect a board of directors and transact such other business as may be required
by law or these by-laws or as may properly come before the meeting.
2.2. Special Meetings. A special meeting of the stockholders may be
----------------
called at any time by the chairman of the board, if any, the president or the
board of directors. A special meeting of the stockholders shall be called by
the secretary, or in the case of the death, absence, incapacity or refusal of
the secretary, by an assistant secretary or some other officer, upon application
of a majority of the directors. Any such application shall state the purpose or
purposes of the proposed meeting. Any such call shall state the place, date,
hour, and purposes of the meeting.
2.3. Place of Meeting. All meetings of the stockholders for the election
----------------
of directors or for any other purpose shall be held at such place within or
without the State of Delaware as may be determined from time to time by the
chairman of the board, if any, the president or the board of directors. Any
adjourned session of any meeting of the stockholders shall be held at the place
designated in the vote of adjournment.
2.4. Notice of Meetings. Except as otherwise provided by law, a written
------------------
notice of each meeting of stockholders stating the place, day and hour thereof
and, in the case of a special meeting, the purposes for which the meeting is
called, shall be given not less then ten nor more than sixty days before the
meeting, to each stockholder entitled to vote thereat, and to each stockholder
who, by law, by the certificate of incorporation or by these by-laws, is
<PAGE>
entitled to notice, by leaving such notice with him or at his residence or usual
place of business, or by depositing it in the United States mail, postage
prepaid, and addressed to such stockholder at his address as it appears in the
records of the corporation. Such notice shall be given by the secretary, or by
an officer or person designated by the board of directors, or in the case of a
special meeting by the officer calling the meeting. As to any adjourned session
of any meeting of stockholders, notice of the adjourned meeting need not be
given if the time and place thereof are announced at the meeting at which the
adjournment was taken except that if the adjournment is for more than thirty
days or if after the adjournment a new record date is set for the adjourned
session, notice of any such adjourned session of the meeting shall be given in
the manner heretofore described. No notice of any meeting of stockholders or
any adjourned session thereof need be given to a stockholder if a written waiver
of notice, executed before or after the meeting or such adjourned session by
such stockholder, is filed with the records of the meeting or if the stockholder
attends such meeting without objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
meeting of the stockholders or any adjourned session thereof need be specified
in any written waiver of notice.
2.5. Quorum of Stockholders. At any meeting of the stockholders a quorum
----------------------
as to any matter shall consist of a majority of the votes entitled to be cast on
the matter, except where a larger quorum is required by law, by the certificate
of incorporation or by these by-laws. Any meeting may be adjourned from time to
time by a majority of the votes properly cast upon the question, whether or not
a quorum is present. If a quorum is present at an original meeting, a quorum
need not be present at an adjourned session of that meeting. Shares of its own
stock belonging to the corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of any corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
2.6. Action by Vote. When a quorum is present at any meeting, a plurality
--------------
of the votes properly cast for election to any office shall elect to such office
and a majority of the votes properly cast upon any question other than an
election to an office shall decide the question, except when a larger vote is
required by law, by the certificate of incorporation or by these by-laws. No
ballot shall be required for any election unless requested by a stockholder
present or represented at the meeting and entitled to vote in the election.
2.7. Action without Meetings. Unless otherwise provided in the
-----------------------
certificate of incorporation, any action required or permitted to be taken by
stockholders for or in connection with any corporate action may be taken without
a meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be
-2-
<PAGE>
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
Delaware by hand or certified or registered mail, return receipt requested, to
its principal place of business or to an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Each such written consent shall bear the date of signature of each
stockholder who signs the consent. No written consent shall be effective to take
the corporate action referred to therein unless written consents signed by a
number of stockholders sufficient to take such action are delivered to the
corporation in the manner specified in this paragraph within sixty days of the
earliest dated consent so delivered.
If action is taken by consent of stockholders and in accordance with the
foregoing, there shall be filed with the records of the meetings of stockholders
the writing or writings comprising such consent.
If action is taken by less than unanimous consent of stockholders, prompt
notice of the taking of such action without a meeting shall be given to those
who have not consented in writing and a certificate signed and attested to by
the secretary that such notice was given shall be filed with the records of the
meetings of stockholders.
In the event that the action which is consented to is such as would have
required the filing of a certificate under any provision of the General
Corporation Law of the State of Delaware, if such action had been voted upon by
the stockholders at a meeting thereof, the certificate filed under such
provision shall state, in lieu of any statement required by such provision
concerning a vote of stockholders, that written consent has been given under
Section 228 of said General Corporation Law and that written notice has been
given as provided in such Section 228.
2.8. Proxy Representation. Every stockholder may authorize another person
--------------------
or persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, objecting to
or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and, if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. The authorization of a proxy may but
need not be limited to specified action, provided, however, that if a proxy
limits its authorization to a meeting or meetings of stockholders, unless
otherwise specifically provided such proxy shall entitle the
-3-
<PAGE>
holder thereof to vote at any adjourned session but shall not be valid after the
final adjournment thereof.
2.9. Inspectors. The directors or the person presiding at the meeting
----------
may, but need not, appoint one or more inspectors of election and any substitute
inspectors to act at the meeting or any adjournment thereof. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspectors shall make a report in writing of any challenge,
question or matter determined by them and execute a certificate of any fact
found by them.
2.10. List of Stockholders. The secretary shall prepare and make, at
--------------------
least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in his name. The stock ledger shall be the only evidence as to who are
stockholders entitled to examine such list or to vote in person or by proxy at
such meeting.
Section 3. BOARD OF DIRECTORS
3.1. Number. The number of directors which shall constitute the whole
------
board shall be not less than one (1) nor more than eleven (11) in number.
Thereafter, within the foregoing limits, the stockholders at the annual meeting
shall determine the number of directors and shall elect the number of directors
as determined. Within the foregoing limits, the number of directors may be
increased at any time or from time to time by the stockholders or by the
directors by vote of a majority of the directors then in office. The number of
directors may be decreased to any number permitted by the foregoing at any time
either by the stockholders or by the directors by vote of a majority of the
directors then in office, but only to eliminate vacancies existing by reason of
the death, resignation or removal of one or more directors. Directors need not
be stockholders.
3.2. Tenure. Except as otherwise provided by law, by the certificate of
------
incorporation or by these by-laws, each director shall hold office until the
next annual meeting and until his successor is elected and qualified, or until
he sooner dies, resigns, is removed or becomes disqualified.
-4-
<PAGE>
3.3. Powers. The business and affairs of the corporation shall be managed
------
by or under the direction of the board of directors who shall have and may
exercise all the powers of the corporation and do all such lawful acts and
things as are not by law, the certificate of incorporation or these by-laws
directed or required to be exercised or done by the stockholders.
3.4. Vacancies. Vacancies and any newly created directorships resulting
---------
from any increase in the number of directors may be filled by vote of the
stockholders at a meeting called for the purpose, or by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. When one or more directors shall resign from the board, effective at
a future date, a majority of the directors then in office, including those who
have resigned, shall have power to fill such vacancy or vacancies, the vote or
action by writing thereon to take effect when such resignation or resignations
shall become effective. The directors shall have and may exercise all their
powers notwithstanding the existence of one or more vacancies in their number,
subject to any requirements of law or of the certificate of incorporation or of
these by-laws as to the number of directors required for a quorum or for any
vote or other actions.
3.5. Committees. The board of directors may, by vote of a majority of the
----------
whole board, (a) designate, change the membership of or terminate the existence
of any committee or committees, each committee to consist of one or more of the
directors; (b) designate one or more directors as alternate members of any such
committee who may replace any absent or disqualified member at any meeting of
the committee; and (c) determine the extent to which each such committee shall
have and may exercise the powers of the board of directors in the management of
the business and affairs of the corporation, including the power to authorize
the seal of the corporation to be affixed to all papers which require it and the
power and authority to declare dividends or to authorize the issuance of stock;
excepting, however, such powers which by law, by the certificate of
incorporation or by these by-laws they are prohibited from so delegating. In
the absence or disqualification of any member of such committee and his
alternate, if any, the member or members thereof present at any meeting and not
disqualified from voting, whether or not constituting a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member. Except as the board of
directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the board or such rules, its
business shall be conducted as nearly as may be in the same manner as is
provided by these by-laws for the conduct of business by the board of directors.
Each committee shall keep regular minutes of its meetings and report the same to
the board of directors upon request.
3.6. Regular Meetings. Regular meetings of the board of directors may be
----------------
held without call or notice at such places within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting
-5-
<PAGE>
following any such determination shall be given to absent directors. A regular
meeting of the directors may be held without call or notice immediately after
and at the same place as the annual meeting of stockholders.
3.7. Special Meetings. Special meetings of the board of directors may be
----------------
held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the chairman of the
board, if any, the president, or by one-third or more in number of the
directors, reasonable notice thereof being given to each director by the
secretary or by the chairman of the board, if any, the president or any one of
the directors calling the meeting.
3.8. Notice. It shall be reasonable and sufficient notice to a director
------
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to him at his usual or last known
business or residence address or to give notice to him in person or by telephone
at least twenty-four hours before the meeting. Notice of a meeting need not be
given to any director if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.9. Quorum. Except as may be otherwise provided by law, by the
------
certificate of incorporation or by these by-laws, at any meeting of the
directors a majority of the directors then in office shall constitute a quorum;
a quorum shall not in any case be less than one-third of the total number of
directors constituting the whole board. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
3.10. Action by Vote. Except as may be otherwise provided by law, by the
--------------
certificate of incorporation or by these by-laws, when a quorum is present at
any meeting the vote of a majority of the directors present shall be the act of
the board of directors.
3.11. Action Without a Meeting. Any action required or permitted to be
------------------------
taken at any meeting of the board of directors or a committee thereof may be
taken without a meeting if all the members of the board or of such committee, as
the case may be, consent thereto in writing, and such writing or writings are
filed with the records of the meetings of the board or of such committee. Such
consent shall be treated for all purposes as the act of the board or of such
committee, as the case may be.
3.12. Participation in Meetings by Conference Telephone. Members of the
-------------------------------------------------
board of directors, or any committee designated by such board, may participate
in a meeting of such board or committee by means of conference telephone or
similar communications equipment by
-6-
<PAGE>
means of which all persons participating in the meeting can hear each other or
by any other means permitted by law. Such participation shall constitute
presence in person at such meeting.
3.13. Compensation. In the discretion of the board of directors, each
------------
director may be paid such fees for his services as director and be reimbursed
for his reasonable expenses incurred in the performance of his duties as
director as the board of directors from time to time may determine. Nothing
contained in this section shall be construed to preclude any director from
serving the corporation in any other capacity and receiving reasonable
compensation therefor.
3.14. Interested Directors and Officers.
---------------------------------
(a) No contract or transaction between the corporation and one or more of
its directors or officers, or between the corporation and any other corporation,
partnership, association, or other organization in which one or more of the
corporation's directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the board of directors
or the committee, and the board or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the board of directors, a
committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
-7-
<PAGE>
Section 4. OFFICERS AND AGENTS
4.1. Enumeration; Qualification. The officers of the corporation shall be
--------------------------
a president, a treasurer, a secretary and such other officers, if any, as the
board of directors from time to time may in its discretion elect or appoint
including without limitation a chairman of the board, one or more vice
presidents and a controller. The corporation may also have such agents, if any,
as the board of directors from time to time may in its discretion choose. Any
officer may be but none need be a director or stockholder. Any two or more
offices may be held by the same person. Any officer may be required by the
board of directors to secure the faithful performance of his duties to the
corporation by giving bond in such amount and with sureties or otherwise as the
board of directors may determine.
4.2. Powers. Subject to law, to the certificate of incorporation and to
------
the other provisions of these by-laws, each officer shall have, in addition to
the duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers as the board of
directors may from time to time designate.
4.3. Election. The officers may be elected by the board of directors at
--------
their first meeting following the annual meeting of the stockholders or at any
other time. At any time or from time to time the directors may delegate to any
officer their power to elect or appoint any other officer or any agents.
4.4. Tenure. Each officer shall hold office until the first meeting of
------
the board of directors following the next annual meeting of the stockholders and
until his respective successor is chosen and qualified unless a shorter period
shall have been specified by the terms of his election or appointment, or in
each case until he sooner dies, resigns, is removed or becomes disqualified.
Each agent shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
4.5. Chairman of the Board of Directors, President and Vice President.
----------------------------------------------------------------
The chairman of the board, if any, shall have such duties and powers as shall be
designated from time to time by the board of directors. Unless the board of
directors otherwise specifies, the chairman of the board, or if there is none
the chief executive officer, shall preside, or designate the person who shall
preside, at all meetings of the stockholders and of the board of directors.
Unless the board of directors otherwise specifies, the president shall be
the chief executive officer and shall have direct charge of all business
operations of the corporation and, subject to the control of the directors,
shall have general charge and supervision of the business of the corporation.
-8-
<PAGE>
Any vice presidents shall have such duties and powers as shall be set forth
in these by-laws or as shall be designated from time to time by the board of
directors or by the president.
4.6. Treasurer and Assistant Treasurers. Unless the board of directors
----------------------------------
otherwise specifies, the treasurer shall be the chief financial officer of the
corporation and shall be in charge of its funds and valuable papers, and shall
have such other duties and powers as may be designated from time to time by the
board of directors or by the president. If no controller is elected, the
treasurer shall, unless the board of directors otherwise specifies, also have
the duties and powers of the controller.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
treasurer.
4.7. Controller and Assistant Controllers. If a controller is elected, he
------------------------------------
shall, unless the board of directors otherwise specifies, be the chief
accounting officer of the corporation and be in charge of its books of account
and accounting records, and of its accounting procedures. He shall have such
other duties and powers as may be designated from time to time by the board of
directors, the president or the treasurer.
Any assistant controller shall have such duties and powers as shall be
designated from time to time by the board of directors, the president, the
treasurer or the controller.
4.8. Secretary and Assistant Secretaries. The secretary shall record all
-----------------------------------
proceedings of the stockholders, of the board of directors and of committees of
the board of directors in a book or series of books to be kept therefor and
shall file therein all actions by written consent of stockholders or directors.
In the absence of the secretary from any meeting, an assistant secretary, or if
there be none or he is absent, a temporary secretary chosen at the meeting,
shall record the proceedings thereof. Unless a transfer agent has been
appointed the secretary shall keep or cause to be kept the stock and transfer
records of the corporation, which shall contain the names and record addresses
of all stockholders and the number of shares registered in the name of each
stockholder. He shall have such other duties and powers as may from time to
time be designated by the board of directors or the president.
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
secretary.
Section 5. RESIGNATIONS AND REMOVALS
5.1. Any director or officer may resign at any time by delivering his
resignation in writing to the chairman of the board, if any, the president, or
the secretary or to a meeting of the board of directors. Such resignation shall
be effective upon receipt unless specified to be
-9-
<PAGE>
effective at some other time, and without in either case the necessity of its
being accepted unless the resignation shall so state. A director (including
persons elected by directors to fill vacancies in the board) may be removed from
office with or without cause by the vote of the holders of a majority of the
shares issued and outstanding and entitled to vote in the election of directors.
The board of directors may at any time remove any officer either with or without
cause. The board of directors may at any time terminate or modify the authority
of any agent. No director or officer resigning and (except where a right to
receive compensation shall be expressly provided in a duly authorized written
agreement with the corporation) no director or officer removed shall have any
right to any compensation as such director or officer for any period following
his resignation or removal, or any right to damages on account of such removal,
whether his compensation be by the month or by the year or otherwise; unless, in
the case of a resignation, the directors, or, in the case of removal, the body
acting on the removal, shall in their or its discretion provide for
compensation.
Section 6. VACANCIES
6.1. If the office of the president or the treasurer or the secretary
becomes vacant, the directors may elect a successor by vote of a majority of
the directors then in office. If the office of any other officer becomes
vacant, any person or body empowered to elect or appoint that officer may choose
a successor. Each such successor shall hold office for the unexpired term, and
in the case of the president, the treasurer and the secretary until his
successor is chosen and qualified or in each case until he sooner dies, resigns,
is removed or becomes disqualified. Any vacancy of a directorship shall be
filled as specified in Section 3.4 of these by-laws.
Section 7. CAPITAL STOCK
7.1. Stock Certificates. Each stockholder shall be entitled to a
------------------
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the board of directors. Such certificate shall be signed by the
chairman or vice chairman of the board, if any, or the president or a vice
president and by the treasurer or an assistant treasurer or by the secretary or
an assistant secretary. Any of or all the signatures on the certificate may be
a facsimile. In case an officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed on such certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent, or registrar at the time of its issue.
7.2. Loss of Certificates. In the case of the alleged theft, loss,
--------------------
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon
-10-
<PAGE>
such terms, including receipt of a bond sufficient to indemnify the corporation
against any claim on account thereof, as the board of directors may prescribe.
Section 8. TRANSFER OF SHARES OF STOCK
8.1. Transfer on Books. Subject to the restrictions, if any, stated or
-----------------
noted on the stock certificate, shares of stock may be transferred on the books
of the corporation by the surrender to the corporation or its transfer agent of
the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
board of directors or the transfer agent of the corporation may reasonably
require. Except as may be otherwise required by law, by the certificate of
incorporation or by these by-laws, the corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to receive notice
and to vote or to give any consent with respect thereto and to be held liable
for such calls and assessments, if any, as may lawfully be made thereon,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been properly transferred on the books of the corporation.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
8.2. Record Date and Closing Transfer Books. In order that the
--------------------------------------
corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of directors, and
which record date shall not be more than sixty nor less than ten days before the
date of such meeting. If no such record date is fixed by the board of
directors, the record date for determining the stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
such record date has been fixed by the board of directors, the record date for
determining
-11-
<PAGE>
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the board of directors is required by the
General Corporation Law of the State of Delaware, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered office in
Delaware by hand or certified or registered mail, return receipt requested, to
its principal place of business or to an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. If no record date has been fixed by the board of directors and prior
action by the board of directors is required by the General Corporation Law of
the State of Delaware, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the board of directors adopts the resolution
taking such prior action.
In order that the corporation may determine the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or to exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the board of directors may
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not
more than sixty days prior to such payment, exercise or other action. If no
such record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
Section 9. CORPORATE SEAL
9.1. Subject to alteration by the directors, the seal of the corporation
shall consist of a flat-faced circular die with the word "Delaware" and the name
of the corporation cut or engraved thereon, together with such other words,
dates or images as may be approved from time to time by the directors.
Section 10. EXECUTION OF PAPERS
10.1. Except as the board of directors may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts or other obligations made,
accepted or endorsed by the corporation shall be signed by the chairman of the
board, if any, the president, a vice president or the treasurer.
Section 11. FISCAL YEAR
11.1. The fiscal year of the corporation shall end on the last Saturday in
January.
-12-
<PAGE>
Section 12. AMENDMENTS
12.1. These by-laws may be adopted, amended or repealed by vote of a
majority of the directors then in office or by vote of a majority of the stock
outstanding and entitled to vote. Any by-law, whether adopted, amended or
repealed by the stockholders or directors, may be amended or reinstated by the
stockholders or the directors.
-13-
<PAGE>
Exhibit 4.1
================================================================================
IRON AGE HOLDINGS CORPORATION
12 1/8% Senior Discount Notes due 2009
--------------------------
INDENTURE
Dated as of April 24, 1998
--------------------------
THE CHASE MANHATTAN BANK
Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.................................................. 1
SECTION 1.02. Other Definitions............................................ 28
SECTION 1.03. Incorporation by Reference of Trust Indenture Act............ 29
SECTION 1.04. Rules of Construction........................................ 30
ARTICLE 2
The Discount Notes
SECTION 2.01. Form and Dating.............................................. 30
SECTION 2.02. Execution and Authentication................................. 31
SECTION 2.03. Registrar and Paying Agent................................... 31
SECTION 2.04. Paying Agent To Hold Money in Trust.......................... 32
SECTION 2.05. Noteholder Lists............................................. 32
SECTION 2.06. Replacement Discount Notes................................... 32
SECTION 2.07. Outstanding Discount Notes................................... 33
SECTION 2.08. Temporary Discount Notes..................................... 33
SECTION 2.09. Cancellation................................................. 34
SECTION 2.10. Defaulted Interest........................................... 34
SECTION 2.11. CUSIP Numbers................................................ 34
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee........................................... 34
SECTION 3.02. Selection of Discount Notes to Be Redeemed................... 35
SECTION 3.03. Notice of Redemption......................................... 35
SECTION 3.04. Effect of Notice of Redemption............................... 36
SECTION 3.05. Deposit of Redemption Price.................................. 36
SECTION 3.06. Discount Notes Redeemed in Part.............................. 37
ARTICLE 4
Covenants
SECTION 4.01. Payment of Discount Notes.................................... 37
<PAGE>
SECTION 4.02. SEC Reports.................................................. 37
SECTION 4.03. Limitation on Indebtedness................................... 38
SECTION 4.04. Limitation on Restricted Payments............................ 42
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries...................................... 47
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock........... 49
SECTION 4.07. Limitation on Affiliate Transactions......................... 53
SECTION 4.08. Limitation on the Issuance or Sale of Capital Stock of
Restricted Subsidiaries...................................... 54
SECTION 4.09. Change of Control............................................ 55
SECTION 4.10. Limitation on Liens.......................................... 56
SECTION 4.11. Compliance Certificate....................................... 56
SECTION 4.12. Further Instruments and Acts................................. 57
SECTION 4.13. Maintenance of Office or Agency.............................. 57
SECTION 4.14. Corporate Existence.......................................... 58
SECTION 4.15. Payment of Taxes............................................. 58
ARTICLE 5
Successor Company
SECTION 5.01. When Holdings May Merge or Transfer Assets................... 59
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default............................................ 60
SECTION 6.02. Acceleration................................................. 62
SECTION 6.03. Other Remedies............................................... 63
SECTION 6.04. Waiver of Past Defaults...................................... 63
SECTION 6.05. Control by Majority.......................................... 63
SECTION 6.06. Limitation on Suits.......................................... 64
SECTION 6.07. Rights of Holders to Receive Payment......................... 64
SECTION 6.08. Collection Suit by Trustee................................... 65
SECTION 6.09. Trustee May File Proofs of Claim............................. 65
SECTION 6.10. Priorities................................................... 65
SECTION 6.11. Undertaking for Costs........................................ 66
SECTION 6.12. Waiver of Stay or Extension Laws............................. 66
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee............................................ 66
SECTION 7.02. Rights of Trustee............................................ 68
SECTION 7.03. Individual Rights of Trustee................................. 69
ii
<PAGE>
SECTION 7.04. Trustee's Disclaimer......................................... 69
SECTION 7.05. Notice of Defaults........................................... 69
SECTION 7.06. Reports by Trustee to Holders................................ 70
SECTION 7.07. Compensation and Indemnity................................... 70
SECTION 7.08. Replacement of Trustee....................................... 71
SECTION 7.09. Successor Trustee by Merger.................................. 72
SECTION 7.10. Eligibility; Disqualification................................ 73
SECTION 7.11. Preferential Collection of Claims Against Holdings........... 73
SECTION 7.12. Conflicting Interests........................................ 73
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Discount Notes; Defeasance......... 74
SECTION 8.02. Conditions to Defeasance..................................... 75
SECTION 8.03. Application of Trust Money................................... 76
SECTION 8.04. Repayment to Holdings........................................ 76
SECTION 8.05. Indemnity for Government Obligations......................... 77
SECTION 8.06. Reinstatement................................................ 77
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders................................... 77
SECTION 9.02. With Consent of Holders...................................... 78
SECTION 9.03. Compliance with Trust Indenture Act.......................... 80
SECTION 9.04. Revocation and Effect of Consents and Waivers................ 80
SECTION 9.05. Notation on or Exchange of Discount Notes.................... 81
SECTION 9.06. Trustee To Sign Amendments................................... 81
ARTICLE 10
Miscellaneous
SECTION 10.01. Trust Indenture Act Controls................................. 81
SECTION 10.02. Notices...................................................... 82
SECTION 10.03. Communication by Holders with Other Holders.................. 83
SECTION 10.04. Certificate and Opinion as to Conditions Precedent........... 83
SECTION 10.05. Statements Required in Certificate or Opinion................ 83
SECTION 10.06. When Discount Notes Disregarded.............................. 84
iii
<PAGE>
SECTION 10.07. Rules by Trustee, Paying Agent and Registrar................. 84
SECTION 10.08. Legal Holidays............................................... 84
SECTION 10.09. Governing Law................................................ 84
SECTION 10.10. No Recourse Against Others................................... 84
SECTION 10.11. Successors................................................... 85
SECTION 10.12. Counterparts................................................. 85
SECTION 10.13. Separability................................................. 85
SECTION 10.14. Benefits of Indenture........................................ 85
SECTION 10.15. Table of Contents; Headings.................................. 85
Appendix A Provisions Relating to Initial Discount Notes and Exchange Notes
Exhibit 1 to
Appendix A Form of Initial Discount Note
Exhibit A Form of Exchange Note
Exhibit B Form of Supplemental Indenture
iv
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- - ------- -------
310(a)(1).................................................................. 7.10
(a)(2)..................................................................... 7.10
(a)(3)..................................................................... N.A.
(a)(4)..................................................................... N.A.
(b).................................................................. 7.08; 7.10
(c)........................................................................ N.A.
311(a)..................................................................... 7.11
(b) ....................................................................... 7.11
(c)........................................................................ N.A.
312(a)..................................................................... 2.05
(b)....................................................................... 10.03
(c)....................................................................... 10.03
313(a)..................................................................... 7.06
(b)(1)..................................................................... N.A.
(b)(2)..................................................................... 7.06
(c)................................................................. 7.06, 10.02
(d)........................................................................ 7.06
314(a)........................................................ 4.02; 4.11; 10.02
(b)........................................................................ N.A.
(c)(1).................................................................... 10.04
(c)(2).................................................................... 10.04
(c)(3)..................................................................... N.A.
(d)........................................................................ N.A.
(e)....................................................................... 10.05
(f)........................................................................ 4.11
315(a)..................................................................... 7.01
(b)................................................................. 7.05; 10.02
(c)........................................................................ 7.01
(d)........................................................................ 7.01
(e)........................................................................ 6.11
316(a)(last sentence)..................................................... 10.06
(a)(1)(A).................................................................. 6.05
(a)(1)(B).................................................................. 6.04
(a)(2)..................................................................... N.A.
(b)........................................................................ 6.07
(c)........................................................................ N.A.
317(a)(1).................................................................. 6.08
(a)(2)..................................................................... 6.09
(b)........................................................................ 2.04
318(a).................................................................... 10.01
N.A. Means Not Applicable.
- - --------------------
Note: This Cross-Reference Table shall not, for any purposes, be deemed to be
part of this Indenture.
v
<PAGE>
INDENTURE, dated as of April 24, 1998 (this "Indenture"), between
---------
IRON AGE HOLDINGS CORPORATION, a Delaware corporation ("Holdings"), and THE
--------
CHASE MANHATTAN BANK, as Trustee.
Each party agrees as follows for the benefit of the other party
and for the equal and ratable benefit of the Holders of Holdings' 12 1/8%
Senior Discount Notes due 2009 (the "Initial Discount Notes"), to be issued,
----------------------
from time to time, in one or more series as provided in this Indenture and, if
and when issued in an exchange for the Initial Discount Notes as provided in the
Registration Agreement (as defined below), Holdings' 12 1/8% Senior Discount
Notes due 2009 (the "Exchange Notes" and, together with the Initial Discount
--------------
Notes, the "Discount Notes"):
--------------
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
-----------
"Accreted Value" means, with respect to any Discount Note, as of a
--------------
date of determination: (i) prior to May 1, 2003, the sum of (a) the initial
offering price of such Discount Note and (b) the portion of the excess of the
principal amount of such Discount Note over such initial offering price which
shall have been accreted thereon through such date, such amount to be so
accreted on a daily basis at the rate per annum equal to 12 1/8% of the initial
offering price of such Discount Note, computed on the basis of a 360-day year of
twelve 30-day months from the Issue Date through the date of determination,
compounded semi-annually on each May 1 and November 1 commencing November 1,
1998; (ii) on or after May 1, 2003, 100% of the principal amount thereof.
"Additional Assets" means (i) any property or assets (other
----------------- -
than Indebtedness and Capital Stock) in a Related Business, (ii) the Capital
--
Stock of a Person that becomes a Restricted Subsidiary as a result of the
acquisition of such Capital Stock by Holdings or another Restricted Subsidiary
or (iii) Capital Stock constituting a minority interest in any Person that at
---
such time is a Restricted Subsidiary; provided, however, that any such
-------- -------
Restricted Subsidiary described in clauses (ii) or (iii) above is primarily
engaged in a Related Business.
<PAGE>
"Affiliate" of any specified Person means any other Person,
---------
directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
-------
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
----------- ----------
foregoing. For purposes of Sections 4.06 and 4.07 and the definition of the term
"Restricted Payment" only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of Holdings or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
"Application of Proceeds" means the application by Holdings
-----------------------
and Iron Age of excess cash and the net proceeds (after deduction of related
fees and expenses) of the Transactions and the Iron Age Transactions (i) to
-
repay Iron Age's indebtedness under the existing syndicated senior bank loan
facility; (ii) to repay Iron Age's Existing Subordinated Notes; (iii) to pay a
-- ---
dividend to Holdings' stockholders and to make compensation payments to certain
members of management of Iron Age and (iv) to redeem the Holdings Series A
--
Preferred Stock.
"Asset Disposition" means any sale, lease, transfer or other
-----------------
disposition (or series of related sales, leases, transfers or dispositions) by
Holdings or any Restricted Subsidiary, including any disposition by means of a
merger, consolidation or similar transaction (each referred to for the purposes
of this definition as a "disposition"), of (i) any shares of Capital Stock of a
----------- -
Restricted Subsidiary (other than directors' qualifying shares and, to the
extent required by local ownership laws in foreign countries, shares owned by
foreign shareholders), (ii) all or substantially all the assets of any division,
--
business segment or comparable line of business of Holdings or any Restricted
Subsidiary or (iii) any other assets of Holdings or any Restricted Subsidiary
---
outside of the ordinary course of business of Holdings or such Restricted
Subsidiary (other than, in the case of (i), (ii) and (iii) above, (A)
-
transactions permitted under Article 5, (B) a disposition by a Restricted
-
Subsidiary to Holdings or by Holdings or a Restricted Subsidiary to a Wholly
Owned Subsidiary and (C)
-
2
<PAGE>
for purposes of Section 4.06 only, a disposition that constitutes a Permitted
Investment or a Restricted Payment permitted by Section 4.04.
"Attributable Debt" with respect to a Sale/Leaseback Transaction
-----------------
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Discount Notes, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with
------------
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of numbers of years from the date of
-
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (ii) the sum of all
--
such payments.
"Bank Indebtedness" means any and all amounts (whether outstanding on
-----------------
the Issue Date or thereafter incurred) payable under or in respect of the New
Credit Facility and the other Loan Documents, including Bank Hedge Agreements
(as such terms are defined in the New Credit Facility), including, without
limitation, principal, premium, if any, interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to Holdings or Iron Age whether or not a claim for post-filing interest is
allowed in such proceedings), fees, charges, expenses, reimbursement obliga-
tions, Guarantees and all other amounts payable thereunder or in respect
thereof.
"Bankruptcy Law" means Title 11, United States Code, or any similar
--------------
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of Holdings or any
------------------
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
------------
"Capital Lease Obligations" means an obligation that is required to
-------------------------
be classified, and accounted for as a
3
<PAGE>
capital lease for financial reporting purposes in accordance with GAAP, and the
amount of Indebtedness represented by such obligation shall be the capitalized
amount of such obligation determined in accordance with GAAP, and the Stated
Maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
-------------
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Change of Control" means the occurrence of any of the following
-----------------
events:
(i)(a) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that for purposes of this clause (i) such person shall be
deemed to have "beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of Holdings (or its successor by merger,
consolidation or purchase of all or substantially all of its assets) and (b) the
Permitted Holders beneficially own (as defined in this clause (i)), directly or
indirectly, in the aggregate a lesser percentage of the total voting power of
the Voting Stock of Holdings than such other person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors (for the purposes of this clause
(i), such other person shall be deemed to beneficially own any Voting Stock of
Holdings held by any other entity, if such other person is the beneficial owner
(as defined in this clause (i)), directly or indirectly, of more than 35% of the
voting power of the Voting Stock of Holdings and the Permitted Holders
beneficially own (as defined in this clause (i)), directly or indirectly, in the
aggregate a lesser percentage of the voting power of the Voting Stock of
Holdings and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the board of
directors of Holdings);
4
<PAGE>
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors (together
with any new directors whose election by the Board of Directors or whose
nomination for election by the shareholders of Holdings was approved by a vote
of a majority of the directors of Holdings then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office; or
(iii) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of Holdings and its
Restricted Subsidiaries taken as a whole to any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Holder.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Consolidated Coverage Ratio" as of any date of determination
---------------------------
means the ratio of (i) the aggregate amount of EBITDA for the period of the most
-
recent four consecutive fiscal quarters ending at least 45 days (or, if less,
the number of days after the end of such fiscal quarter as the consolidated
financial statements of Holdings shall be provided to the Noteholders pursuant
to this Indenture) prior to the date of such determination to (ii) Consolidated
--
Interest Expense for such four fiscal quarters (in each case determined, for any
fiscal quarter preceding the Issue Date, adjusted on a pro forma basis to give
effect to the Transactions, the Iron Age Transactions and the Application of
Proceeds as if they had occurred at the beginning of such period and adjusted
for any pro forma expense and cost reductions and related adjustments that are
directly attributable to the Transactions, the Iron Age Transactions and the
Application of Proceeds, as estimated in good faith by the Board of Directors);
provided, however, that:
- - -------- -------
(1) if Holdings or any Restricted Subsidiary (x) has Incurred any
-
Indebtedness since the beginning of such period that remains outstanding
on such date of determination or if the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to
5
<PAGE>
such Indebtedness as if such Indebtedness had been Incurred on the first
day of such period (except that in making such computation, the amount of
Indebtedness under any revolving credit facility outstanding on the date
of such calculation shall be computed based on (A) the average daily
-
balance of such Indebtedness during such four fiscal quarters or such
shorter period for which such facility was outstanding or (B) if such
-
facility was created after the end of such four fiscal quarters, the
average daily balance of such Indebtedness during the period from the date
of creation of such facility to the date of such calculation) and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period or (y) has repaid,
-
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of the period that is no longer outstanding on such date of
determination, or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio involves a discharge of Indebtedness (in
each case other than Indebtedness incurred under any revolving credit
facility unless such Indebtedness has been permanently repaid and
corresponding commitments have been permanently reduced), EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to the discharge of such Indebtedness
as if such discharge had occurred on the first day of such period,
(2) if since the beginning of such period Holdings or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA
for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of
such Asset Disposition for such period, or increased by an amount equal to
the EBITDA (if negative) directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable to
any Indebtedness of Holdings or any Restricted Subsidiary repaid,
repurchased, defeased, assumed by a third person (to the extent Holdings
and its Restricted Subsidiaries are no longer liable for such
Indebtedness) or otherwise discharged with respect to Holdings and its
continuing Restricted Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock
6
<PAGE>
of any Restricted Subsidiary is sold, the Consolidated Interest Expense
for such period directly attributable to the Indebtedness of such
Restricted Subsidiary to the extent Holdings and its continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after such sale),
(3) if since the beginning of such period Holdings or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person which becomes a
Restricted Subsidiary) or an acquisition of assets, which acquisition
constitutes all or substantially all of an operating unit of a business,
including any such Investment or acquisition occurring in connection with
a transaction requiring a calculation to be made hereunder, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the first
day of such period,
(4) if since the beginning of such period any Person that
subsequently became a Restricted Subsidiary or was merged with or into
Holdings or any Restricted Subsidiary since the beginning of such period
shall have made any Asset Disposition, any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (2) or
(3) above if made by Holdings or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition occurred on the first day of such
period,
(5) if since the beginning of such period any Unrestricted
Subsidiary shall have been designated a Restricted Subsidiary, EBITDA and
Consolidated Interest Expense for such period shall be calculated to
include all net income (or loss) and all interest expense of such
Subsidiary during the portion of such period that such Subsidiary was an
Unrestricted Subsidiary, but only to the extent that such net income (or
loss) or interest expense has not been included in EBITDA or Consolidated
Interest Expense pursuant to clauses (1) through (4) above, and
7
<PAGE>
(6) if since the beginning of such period any Restricted
Subsidiary shall have been designated an Unrestricted Subsidiary, EBITDA
and Consolidated Interest Expense for such period shall be calculated to
exclude all net income (or loss) and all interest expense of such
Subsidiary during the portion of such period that such Subsidiary was a
Restricted Subsidiary.
For purposes of this definition, whenever pro forma effect is
to be given to an acquisition of assets, the amount of income or earnings
relating thereto and the amount of Consolidated Interest Expense associated with
any Indebtedness Incurred in connection therewith, the pro forma calculations
shall be determined in good faith by a responsible financial or accounting
officer of Holdings in accordance with Article 11 of Regulation S-X promulgated
by the SEC. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest expense of such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
-----------------------------
interest expense of Holdings and its Restricted Subsidiaries on a consolidated
basis determined in accordance with GAAP, plus (a) to the extent not included in
-
such total interest expense, and to the extent incurred by Holdings or its
Restricted Subsidiaries, (i) interest expense attributable to Capital Lease
-
Obligations, (ii) amortization of debt discount, (iii) capitalized interest,
-- ---
(iv) non-cash interest expenses, (v) commissions, discounts and other fees and
-- -
charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs associated with Hedging Obligations (including
--
amortization of fees), (vii) dividends in respect of all Preferred Stock of
---
Holdings and its Restricted Subsidiaries and in respect of all Disqualified
Stock of Holdings in each case held by Persons other than Holdings or a Wholly
Owned Subsidiary, (viii) interest actually paid on any Indebtedness of any other
----
Person that is Guaranteed by Holdings or any Restricted Subsidiary and (ix) the
--
cash contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than Holdings or any Wholly Owned Subsidiary) in connection
with Indebtedness
8
<PAGE>
Incurred by such plan or trust, minus (b) to the extent included in such total
-
interest expense, amortization of deferred financing costs, fees and expenses.
For purposes of the foregoing, total interest expense shall be determined after
giving effect to any net payments made or received by Holdings and its
Subsidiaries with respect to Interest Rate Agreements and Currency Agreements.
Notwithstanding the foregoing, the Consolidated Interest Expense with respect to
any Restricted Subsidiary of Holdings that was not a Wholly Owned Subsidiary
shall be included only to the extent (and in the same proportion) that the net
income of such Restricted Subsidiary was included in calculating Consolidated
Net Income.
"Consolidated Net Income" means, for any period, the net income of
-----------------------
Holdings and its Restricted Subsidiaries on a consolidated basis determined in
accordance with GAAP; provided, however, that there shall not be included in
-------- -------
such Consolidated Net Income: (i) any net income (or loss) of any Person if such
-
Person is not a Restricted Subsidiary, except that (A) subject to the exclusion
-
contained in clause (iv) below, Holdings' equity in the net income of any such
Person for such period shall be included in such Consolidated Net Income up to
the aggregate amount of cash actually distributed by such Person during such
period to Holdings or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution paid to a
Restricted Subsidiary, to the limitations contained in clause (iii) below) and
(B) Holdings' equity in a net loss of any such Person (other than an
-
Unrestricted Subsidiary) for such period shall be included in determining such
Consolidated Net Income to the extent of the aggregate investment of Holdings or
any of its Restricted Subsidiaries in such Person, (ii) any net income (or loss)
--
of any Person acquired by Holdings or a Subsidiary in a pooling of interests
transaction accrued for any period prior to the date of such acquisition, (iii)
---
any net income of any Restricted Subsidiary if such Restricted Subsidiary is
subject to restrictions, directly or indirectly, on the payment of dividends or
the making of distributions by such Restricted Subsidiary, directly or
indirectly, to Holdings, except that (A) subject to the exclusion contained in
-
clause (iv) below, Holdings' equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash that would have been permitted to be paid as a
dividend or other distribution to Holdings or another Restricted Subsidiary by
such Restricted Subsidiary consistent with such restriction during such period
(subject, in the case of a
9
<PAGE>
dividend or other distribution paid to another Restricted Subsidiary, to the
limitation contained in this clause) and (B) Holdings' equity in a net loss of
-
any such Restricted Subsidiary for such period shall be included in determining
such Consolidated Net Income, (iv) any gain (or loss) realized upon the sale or
--
other disposition of any assets of Holdings or its consolidated Subsidiaries
(including pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (or loss)
realized upon the sale or other disposition of any Capital Stock of any Person,
(v) extraordinary gains or losses, (vi) any non-cash compensation charge for
- --
employee stock options or other stock awards, (vii) payments on the Issue Date
---
of up to $2.3 million to certain management stockholders of Holdings in
connection with the Transactions and the Iron Age Transactions and (viii) the
----
cumulative effect of a change in accounting principles. Notwithstanding the
foregoing, for the purposes of Section 4.04 only, there shall be excluded from
Consolidated Net Income any dividends, repayments of loans or advances or other
transfers of assets from Unrestricted Subsidiaries to Holdings or a Restricted
Subsidiary to the extent such dividends, repayments or transfers increase the
amount of Restricted Payments permitted under Section 4.04(a)(3)(D).
"Consolidated Net Worth" means the total of the amounts shown
----------------------
on the balance sheet of Holdings and its Restricted Subsidiaries, determined on
a consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of Holdings ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
-
or stated value of all outstanding Capital Stock of Holdings plus (ii) paid-in
--
capital or capital surplus relating to such Capital Stock plus (iii) any
---
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
- -
amounts attributable to Disqualified Stock.
"Corporate Trust Office" means 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 450 West 33rd Street, 15th Floor, New York, New York 10001-2697.
Attention: Global Trust Services, or at any other time at such other address as
the Trustee may designate from time to time by written notice to Holdings.
10
<PAGE>
"Currency Agreement" means, with respect to any Person, any
------------------
foreign exchange contract, currency swap agreement or other similar agreement
to which such Person is a party or a beneficiary.
"Custodian" means any receiver, trustee, assignee, liquidator,
---------
custodian or similar official under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage
-------
of time or both would be, an Event of Default.
"Designated Noncash Consideration" means the fair market value
--------------------------------
of noncash consideration received by Holdings or any Restricted Subsidiary in
connection with an Asset Sale that is so designated as Designated Noncash
Consideration pursuant to an Officers' Certificate executed by the principal
executive officer and the principal financial officer of Holdings or such
Restricted Subsidiary, less the amount of cash or cash equivalents received in
connection with a sale of such Designated Noncash Consideration. Such Officers'
Certificate shall state the basis of such valuation, which shall be a report of
a nationally recognized investment banking firm with respect to the receipt in
one or a series of related transactions of Designated Noncash Consideration with
a fair market value in excess of $5 million.
"Disqualified Stock" means, with respect to any Person, any
------------------
Capital Stock of such Person 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 (i) matures or is mandatorily redeemable pursuant to a
-
sinking fund obligation or otherwise, (ii) is convertible or exchangeable, at
--
the option of the holder thereof, for Indebtedness or Disqualified Stock or
(iii) is redeemable at the option of the holder thereof, in whole or in part, in
---
each case on or prior to the first anniversary of the Stated Maturity of the
Discount Notes; provided, however, that only the portion of Capital Stock which
-------- -------
so matures or is so mandatorily redeemable, is so convertible or exchangeable or
is so redeemable at the option of the holder thereof prior to the first
anniversary of the Stated Maturity of the Discount Notes shall be deemed to be
Disqualified Stock.
"EBITDA" for any period means the sum of Consolidated Net
------
Income plus, without duplication, the following to
11
<PAGE>
the extent deducted in calculating such Consolidated Net Income: (a)
-
Consolidated Interest Expense, (b) income tax expense, (c) depreciation expense,
- -
(d) amortization expense, (e) payments made pursuant to Section 4.07(b)(viii)
- -
and (f) all other non-cash items reducing Consolidated Net Income (other than
-
non-cash items that will require cash payments and for which an accrual or
reserve is, or is required by GAAP to be, made), less, to the extent added in
calculating such Consolidated Net Income, all non-cash items increasing
Consolidated Net Income (excluding such non-cash items to the extent they
represent an accrual for cash receipts to be received prior to the Stated
Maturity of the Discount Notes), in each case for such period. Notwithstanding
the foregoing, the provision for taxes based on the income or profits of, and
the depreciation and amortization of, a Subsidiary of any Person shall be added
to Consolidated Net Income to compute EBITDA of such Person only to the extent
(and in the same proportion) that the net income of such Subsidiary was included
in calculating Consolidated Net Income of such Person.
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
"Existing Subordinated Notes" means the 12.5% Senior
---------------------------
Subordinated Notes due 2006 previously issued by Iron Age.
"Financing Disposition" means any sale of any accounts
---------------------
receivable, or interest therein, by Holdings or any Subsidiary to any
Receivables Subsidiary, or by the Receivables Subsidiary, pursuant to a
Permitted Receivables Financing.
"GAAP" means generally accepted accounting principles in the
----
United States of America as in effect as of the Issue Date, including those set
forth in (i) the opinions and pronouncements of the Accounting Principles Board
-
of the American Institute of Certified Public Accountants, (ii) statements and
--
pronouncements of the Financial Accounting Standards Board and (iii) such other
---
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
this Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of
---------
any Person directly or indirectly guaranteeing any Indebtedness of any other
Person and any obligation,
12
<PAGE>
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
-
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
--
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
- - -------- -------
collection or deposit in the ordinary course of business. The term "Guarantee"
---------
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
---------
Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of
-------------------
such Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a
------ ----------
Discount Note is registered on the registrar's books.
"Holdings Series A Preferred Stock" means Holdings' Series A
---------------------------------
Preferred Stock, par value $.01 per share which is to be redeemed on the Issue
Date.
"Incur" means issue, assume, Guarantee, incur or otherwise
-----
become liable for; provided, however, that any Indebtedness or Capital Stock of
-------- -------
a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Subsidiary at the time it becomes a Subsidiary; provided further,
-------- -------
however, that in the case of a discount security, neither the accrual of
- - -------
interest nor the accretion of original issue discount shall be considered an
Incurrence of Indebtedness, but the entire face amount of such security shall be
deemed Incurred upon the issuance of such security. The term "Incurrence" when
----------
used as a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date
------------
of determination (without duplication), (i) the principal of and premium, if
-
any, in respect of (A) indebtedness of such Person for money borrowed and (B)
- -
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable, (ii) all Capital
--
Lease
13
<PAGE>
Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person, (iii) all obligations
---
of such Person issued or assumed as the deferred purchase price of property or
services, all conditional sale obligations of such Person and all obligations of
such Person under any title retention agreement (but excluding trade accounts
payables and warranty and service obligations arising in the ordinary course of
business), which purchase price or obligation is due more than six months after
the date of placing such property in service or taking delivery and title
thereto or the completion of such services (provided, however, that, in the
-------- -------
case of obligations of an acquired Person assumed in connection with an
acquisition of such Person, such obligations would constitute Indebtedness of
such Person), (iv) all obligations of such Person for the reimbursement of any
--
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in (i) through (iii) above)
entered into in the ordinary course of business of such Person to the extent
such letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the tenth Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit), (v) the amount of all obligations of such Person with respect
-
to the redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, any Preferred Stock (but
excluding, in each case, any accrued dividends), (vi) all obligations of the
--
type referred to in clauses (i) through (v) of other Persons and all dividends
of other Persons for the payment of which, in either case, such Person is
responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee, (vii) all obligations of the
---
type referred to in clauses (i) through (vi) of other Persons secured by any
Lien on any property or asset of such Person (whether or not such obligation is
assumed by such Person), the amount of such obligation being deemed to be the
lesser of the fair market value of such property or assets at the date of
determination or the amount of the obligation so secured and (viii) to the
----
extent not otherwise included in this definition, net Hedging Obligations of
such Person (the amount of any such obligations to be equal at any time to the
termination value of such agreement or arrangement giving rise to such
obligation that would be payable by such Person at such time). The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional
14
<PAGE>
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations as
described above at such date.
"Initial Purchasers" means Salomon Brothers Inc, SBC Warburg
------------------
Dillon Read Inc. and Banque Nationale de Paris.
"Interest Rate Agreement" means with respect to any Person any
-----------------------
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement or other financial agreement or arrangement designed to protect such
Person against fluctuations in interest rates.
"Investment" in any Person means any direct or indirect
----------
advance, loan (other than advances to customers in the ordinary course of
business) or other extensions of credit (including by way of Guarantee or
similar arrangement, but excluding any debt or extensions of credit represented
by a bank deposit other than a time deposit) or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar instruments issued
by, such Person. For purposes of the definition of "Unrestricted Subsidiary" and
Section 4.04, (i) "Investment" shall include the portion (proportionate to
-
Holdings' equity interest in a Restricted Subsidiary to be designated as an
Unrestricted Subsidiary) of the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary; provided, however, that upon a redesignation of such
-------- -------
Subsidiary as a Restricted Subsidiary, Holdings shall be deemed to continue to
have a permanent "Investment" in an Unrestricted Subsidiary in an amount equal
to (x) Holdings' "Investment" in such Subsidiary at the time of such
-
redesignation less (y) the portion (proportionate to Holdings' equity interest
-
in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation, but in no event shall such
Investment be reduced below zero; and (ii) any property transferred to or from
--
an Unrestricted Subsidiary shall be valued at its fair market value at the time
of such transfer, in each case as determined in good faith by the Board of
Directors. If Holdings or any Restricted Subsidiary sells or otherwise disposes
of any common stock of any direct or indirect Restricted Subsidiary (other than
to Holdings or a Restricted Subsidiary), Holdings shall be deemed to have made
an Investment on the date of any such
15
<PAGE>
sale or disposition equal to the fair market value of the common stock of such
Restricted Subsidiary not sold or disposed of.
"Iron Age" means Iron Age Corporation, a Delaware corporation.
--------
"Iron Age Transactions" means the offering by Iron Age of the
---------------------
Senior Subordinated Notes, the entering into by Iron Age of the New Credit
Facility, and the use by Iron Age of excess cash and the net proceeds of such
transactions (i) to repay Iron Age's indebtedness under a syndicated senior bank
-
loan facility, (ii) to repay Iron Age's Existing Subordinated Notes, (iii) to
-- ---
pay a dividend to Holdings that will be used, together with certain net proceeds
of the Transactions, to redeem the Holdings Series A Preferred Stock and (iv) to
--
pay certain fees and expenses in connection with such transactions.
"Issue Date" means the date on which the Discount Notes are
----------
originally issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which
-------------
banking institutions are not required to be open in the State of New York.
"Lien" means any mortgage, pledge, security interest,
----
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof).
"Management Agreement" means the Management Agreement
--------------------
originally dated as of February 26, 1997, as amended and in effect on the Issue
Date, among Holdings, Iron Age and Fenway Partners, Inc.
"Management Investors" means each of the officers, employees
--------------------
and directors of Iron Age or Holdings who own Voting Stock (or options to
acquire Voting Stock) of Holdings on the Issue Date, in each case so long as
such person shall remain an officer, employee or director of Holdings or Iron
Age.
"Net Available Cash" from an Asset Disposition means cash
------------------
payments received therefrom (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment receivable or
otherwise, but only as and when received, but excluding any other consideration
received in the form of assumption by the
16
<PAGE>
acquiring Person of Indebtedness or other obligations relating to the
properties or assets that are the subject of such Asset Disposition or received
in any other noncash form), in each case net of (i) all legal, accounting,
-
investment banking, title and recording tax expenses, commissions and other fees
and expenses incurred, and all federal, state, provincial, foreign and local
taxes required to be paid or accrued as a liability under GAAP, as a consequence
of such Asset Disposition, (ii) all payments made on any Indebtedness which is
--
secured by any assets subject to such Asset Disposition, in accordance with the
terms of any Lien upon such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition, or by applicable law, be
repaid out of the proceeds from such Asset Disposition, (iii) all distributions
---
and other payments required to be made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Disposition and (iv)
--
the deduction of appropriate amounts provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the property or
other assets disposed in such Asset Disposition and retained by Holdings or any
Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds" means, with respect to any issuance or
-----------------
sale of Capital Stock, the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"New Acquisition Credit Facility" means the term credit
-------------------------------
facility made available pursuant to the Credit Agreement, dated as of the Issue
Date, among Iron Age, as borrower, Holdings and certain Subsidiaries, as
guarantors, and Banque Nationale de Paris, as agent for the lenders from time to
time, together with all Loan Documents (as defined therein) and all other
documents, instruments and agreements executed in connection therewith,
including, without limitation, any guarantees, security documents and hedge
agreements, in each case, as the same may be amended, supplemented, restated,
waived, modified, Refinanced or replaced from time to time (including any
successive amendments, supplements, restatements, waivers, modifications,
Refinancings or replacements that increase the aggregate amount of borrowings
outstanding or the aggregate commitments of the lenders thereunder, and whether
with the original agent and lenders or another agent or agents or
17
<PAGE>
other lenders), except to the extent that any such amendment, supplement,
restatement, waiver, modification, Refinancing or replacement by Holdings or any
Subsidiary would violate Section 4.03.
"New Credit Facility" means the New Acquisition
-------------------
Credit Facility and the New Revolving Credit Facility.
"New Revolving Credit Facility" means the revolving credit
-----------------------------
facility made available pursuant to the Credit Agreement, dated as of the Issue
Date, among Iron Age, as borrower, Holdings and certain Subsidiaries, as
guarantors, and Banque Nationale de Paris, as agent for the lenders from time to
time, together with all Loan Documents (as defined therein) and all other
documents, instruments and agreements executed in connection therewith,
including, without limitation, any guarantees, security documents and hedge
agreements, in each case, as the same may be amended, supplemented, restated,
waived, modified, Refinanced or replaced from time to time (including any
successive amendments, supplements, restatements, waivers, modifications,
Refinancings or replacements that increase the aggregate amount of borrowings
outstanding or the aggregate commitments of the lenders thereunder, and whether
with the original agent and lenders or another agent or agents or other
lenders), except to the extent that any such amendment, supplement, restate-
ment, waiver, modification, Refinancing or replacement by Holdings or any
Subsidiary would violate Section 4.03.
"Note Obligations" means any principal of, premium and
----------------
liquidated damages, if any, and interest on, and any other amounts owing under
or with respect to the Discount Notes payable pursuant to the terms of the
Discount Notes or this Indenture or upon acceleration of the Discount Notes,
including, without limitation, amounts received upon the exercise of rights of
rescission or other rights of action (including claims for damages) or
otherwise, to the extent relating to the purchase price of the Discount Notes or
amounts corresponding to such principal of, premium and liquidated damages, if
any, interest on, or other amounts owing with respect to, the Discount Notes.
"Officer" means the Chairman of the Board, the Chief Executive
-------
Officer, the Chief Financial Officer, the President, any Vice President, the
Treasurer or the Secretary of Holdings.
"Officers' Certificate" means a certificate signed by two
---------------------
Officers.
18
<PAGE>
"Opinion of Counsel" means a written opinion from legal
------------------
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to Holdings or the Trustee.
"Permitted Holders" means Fenway Partners Capital Fund, L.P.,
-----------------
New York Life Insurance Company, American Home Assurance Company, the Management
Investors and their respective Affiliates.
"Permitted Investment" means an Investment by Holdings or any
--------------------
Restricted Subsidiary in (i) Holdings, (ii) a Restricted Subsidiary or a Person
- --
that will, upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted Subsidiary is a
- - -------- -------
Related Business, (iii) another Person if as a result of such Investment such
---
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, Holdings or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business,
(iv) Temporary Cash Investments, (v) receivables owing to Holdings or any
-- -
Restricted Subsidiary if created or acquired in the ordinary course of business,
(vi) payroll, travel and similar advances to cover matters that are expected at
--
the time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business, (vii) loans or
---
advances to officers and employees made in the ordinary course of business of
Holdings or such Restricted Subsidiary and not exceeding $2 million in the
aggregate outstanding at any time, (viii) stock, obligations or securities
----
received in settlement of debts created in the ordinary course of business and
owing to Holdings or any Restricted Subsidiary or in satisfaction of judgments,
(ix) any Person to the extent such Investment represents the non-cash portion of
--
the consideration received for an Asset Disposition as permitted pursuant to
Section 4.06, (x) Interest Rate Agreements and Currency Agreements entered into
-
in the ordinary course of business and otherwise in compliance with this
Indenture, (xi) Investments in securities of trade creditors or customers
--
received pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers, (xii) Investments
---
in Unrestricted Subsidiaries and additional Investments having an aggregate fair
market value, taken together with all other investments made pursuant to this
clause (xii) that are at that time outstanding, not to exceed $5 million (with
the fair market value of each Investment being measured at the time made and
without giving effect to subsequent changes in value),
19
<PAGE>
(xiii) any Investment by Holdings or any Wholly Owned Subsidiary in a
----
Receivables Subsidiary or any Investment by a Receivables Subsidiary in any
other Person in connection with a Permitted Receivables Financing; provided,
--------
however, that any Investment in a Receivables Subsidiary is in the form of a
- - -------
purchase money note or an equity interest and (xiv) Investments the payment for
---
which consists exclusively of Capital Stock (other than Disqualified Stock) of
Holdings.
"Permitted Liens" means (i) Liens existing as of the Issue
---------------
Date to the extent and in the manner such Liens are in effect on the Issue Date,
(ii) Liens securing the Discount Notes, (iii) Liens securing Holding's
obligations under the New Credit Facility, (iv) Liens for taxes, assessments or
governmental charges or claims either (A) not delinquent or (B) contested in
good faith by appropriate proceedings and as to which Holdings shall have set
aside on its books such reserves as may be required pursuant to GAAP, (v)
judgment Liens not giving rise to an Event of Default so long as such Lien is
adequately bonded and any appropriate legal proceedings which may have been duly
initiated for the review of such judgment shall not have been finally terminated
or the period within which such proceedings may be initiated shall not have
expired, (vi) Liens securing Hedging Obligations which are Indebtedness
otherwise permitted under the Indenture and (vii) restrictions on transfer of
securities under federal and state securities laws.
"Permitted Receivables Financing" means any financing pursuant
-------------------------------
to which Holdings or any Restricted Sub sidiary may sell, convey or otherwise
transfer to a Receivables Subsidiary or any other Person (in the case of a
transfer by a Receivables Subsidiary), or grant a security interest in, any
accounts receivable (and related assets) of Holdings or any Restricted
Subsidiary; provided, however, that (i) the covenants, events of default and
-------- ------- -
other provisions applicable to such financing shall be customary for such
transactions and shall be on market terms (as determined in good faith by the
Board of Directors) at the time such financing is entered into and (ii) such
--
financing shall be non-recourse to Holdings and its Subsidiaries (other than the
Receivables Subsidiary) except to a limited extent customary for such
transactions.
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization,
government or
20
<PAGE>
any agency or political subdivision thereof or any other entity.
"Preferred Stock" means, as applied to the Capital Stock of
---------------
any corporation, Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Public Equity Offering" means a public offering of common
----------------------
stock of Holdings pursuant to an effective registration statement under the
Securities Act.
"Public Market" means any time after (i) a Public Equity
------------- -
Offering has been consummated and (ii) at least 10% of the total issued and
--
outstanding common stock of Holdings has been distributed by means of an
effective registration statement under the Securities Act or sales pursuant to
Rule 144 under the Securities Act.
"Purchase Money Indebtedness" means Indebtedness (i)
--------------------------- -
consisting of the deferred purchase price of property, conditional sale
obligations, obligations under any title retention agreement, other purchase
money obligations and obligations in respect of industrial revenue bonds or
similar Indebtedness, in each case where the maturity of such Indebtedness does
not exceed the anticipated useful life of the asset being financed and (ii)
--
incurred to finance the acquisition by Holdings or a Restricted Subsidiary of
such asset (including Additional Assets), including additions and improvements;
provided, however, that any Lien arising in connection with any such
- - -------- -------
Indebtedness shall be limited to the specified asset being financed or, in the
case of real property or fixtures, including additions and improvements, the
real property on which such asset is attached; and provided further, however,
-------- ------- -------
that such Indebtedness is Incurred within 90 days after such acquisition of
such asset by Holdings or Restricted Subsidiary.
"Receivables Subsidiary" means a bankruptcy-remote,
----------------------
special-purpose Wholly Owned Subsidiary formed in connection with a Permitted
Receivables Financing.
"Refinance" means, with respect to any Indebtedness, to
---------
refinance, extend, renew, refund, repay, prepay, redeem, defease, retire,
supplement, substitute, defer, reissue or restate (including pursuant to any
defeasance or
21
<PAGE>
discharge mechanism), or to issue other Indebtedness in exchange or replacement
for, such indebtedness. "Refinanced" and "Refinancing" shall have correlative
---------- -----------
meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances
------------------------
any Indebtedness of Holdings or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this Indenture; provided, however, that (i)
-------- ------- -
such Refinancing Indebtedness has a Weighted Average Life to Maturity of not
less than the Indebtedness being Refinanced and (ii) such Refinancing
--
Indebtedness has an aggregate principal amount (or if Incurred with original
issue discount, an aggregate issue price) that is equal to or less than the
aggregate principal amount (or if Incurred with original issue discount, the
aggregate accreted value) then outstanding or committed (plus fees and expenses,
including any premium and defeasance costs) under the Indebtedness being
Refinanced; provided further, however, that Refinancing Indebtedness shall not
-------- ------- -------
include (x) Indebtedness of a Subsidiary that Refinances Indebtedness of
-
Holdings or (y) Indebtedness of Holdings or a Restricted Subsidiary that
-
Refinances Indebtedness of an Unrestricted Subsidiary.
"Registration Agreement" means the Registration Agreement,
----------------------
dated as of April 24, 1998, among Holdings, Salomon Brothers Inc, SBC Warburg
Dillon Read Inc. and Banque Nationale de Paris, as amended or supplemented from
time to time.
"Related Business" means the business of Holdings and its
----------------
Restricted Subsidiaries on the Issue Date or any business related, ancillary or
complementary (as determined in good faith by the Board of Directors) to the
businesses of Holdings and the Restricted Subsidiaries on the Issue Date.
"Representative" means, until the date on which the Bank
--------------
Indebtedness has been repaid in full in cash and all commitments and other
obligations thereunder have been terminated, the Agent (or if there is no Agent,
the trustee, agent or representative) under the New Credit Facility and,
thereafter, the trustee, agent or representative for each issue of Senior
Indebtedness.
"Restricted Payment" means, with respect to any Person, (i)
------------------ -
the declaration or payment of any dividends or any other distributions on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment
22
<PAGE>
to the holders of its Capital Stock, except dividends or distributions payable
solely in its Capital Stock (other than Disqualified Stock) and except dividends
or distributions payable solely to Holdings or a Restricted Subsidiary (and, in
the case of dividends or distributions by a Restricted Subsidiary which is not a
Wholly Owned Subsidiary, to its other holders of Capital Stock on a pro rata
basis or on a basis that results in the receipt by Holdings or a Restricted
Subsidiary of dividends or distributions of greater value than it would receive
on a pro rata basis), (ii) the purchase, redemption or other acquisition or
--
retirement for value of any Capital Stock of Holdings held by any Person (other
than a Restricted Subsidiary) or of any Capital Stock of a Restricted Subsidiary
held by any Affiliate of Holdings (other than a Restricted Subsidiary),
including the exercise of any option to exchange any Capital Stock (in each case
other than in exchange for Capital Stock that is not Disqualified Stock), (iii)
---
the purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations purchased
in anticipation of satisfying a sinking fund obligation, principal installment
or final maturity, in each case due within one year of the date of purchase,
repurchase or acquisition; and other than the purchase, repurchase, defeasance
or other acquisition of Subordinated Obligations made solely with Disqualified
Stock of Holdings) or (iv) the making of any Investment (other than a Permitted
--
Investment) in any Person.
"Restricted Subsidiary" means any Subsidiary of Holdings that
---------------------
is not an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to
--------------------------
property now owned or hereafter acquired whereby Holdings or a Restricted
Subsidiary transfers such property to a Person and Holdings or a Restricted
Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Senior Subordinated Indenture" means the Indenture dated as
-----------------------------
of April 24, 1998 between Iron Age and
23
<PAGE>
The Chase Manhattan Bank, as trustee, pursuant to which the Senior Subordinated
Notes are to be issued by Iron Age.
"Senior Subordinated Notes" means the 9 7/8% Senior
-------------------------
Subordinated Notes due 2008 issued by Iron Age pursuant to the Senior
Subordinated Indenture in the aggregate principal amount of $100 million.
"Senior Indebtedness" of Holdings means the following
-------------------
obligations, whether outstanding on the date of the Indenture or thereafter
Incurred, without duplication, all obligations consisting of Bank Indebtedness
and all obligations consisting of the principal of and premium, if any, and
accrued and unpaid interest (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to Holdings
regardless of whether post-filing interest is allowed in such proceeding) on,
and fees, charges, expenses, reimbursement obligations, Guarantees and all other
amounts owing in respect of, all other Indebtedness of Holdings, unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that the obligations in respect of such Indebtedness
are subordinated or junior in right of payment to the Discount Notes; provided,
--------
however, that Senior Indebtedness shall not include (1) any obligation of
- - -------
Holdings to any Subsidiary, except to the extent pledged under the New Credit
Facility, (2) any liability for federal, state, local or other taxes owed or
owing by Holdings, (3) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities), (4) any Indebtedness of
Holdings (and any accrued and unpaid interest in respect thereof) which is
expressly subordinate or junior in right of payment to any other Indebtedness or
other obligation of Holdings, including any Subordinated Obligations, (5) any
Indebtedness represented by Capital Stock or (6) that portion of any
Indebtedness which at the time of Incurrence is Incurred in violation of the
Indenture.
"Stated Maturity" means, with respect to any security, the
---------------
date specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision.
"Subordinated Obligation" means any Disqualified Stock and any
-----------------------
other Indebtedness of Holdings (whether outstanding on the Issue Date or
thereafter Incurred) which is
24
<PAGE>
subordinate or junior in right of payment to the Discount Notes pursuant to a
written agreement to that effect.
"Subsidiary" means, with respect to any Person, any
----------
corporation, association, partnership or other business entity of which more
than 50% of the total voting power of shares of Capital Stock or other interests
(including partnership interests) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i) such
-
Person, (ii) such Person and one or more Subsidiaries of such Person or (iii)
-- ---
one or more Subsidiaries of such Person. Unless otherwise specified herein, each
reference to a Subsidiary shall refer to a Subsidiary of Holdings.
"Subsidiary Guarantor" means each Subsidiary that has issued a
--------------------
Subsidiary Guaranty pursuant to the Senior Subordinated Indenture.
"Subsidiary Guaranty" means the Guarantee of Iron Age's
-------------------
obligations with respect to the Senior Subordinated Notes by a Subsidiary
Guarantor pursuant to the terms of the Senior Subordinated Indenture.
"Taxes" means all taxes, fees, levies, duties, tariffs,
-----
imposts, and governmental impositions or charges of any kind in the nature of
(or similar to) taxes, payable to any federal, state, local or foreign taxing
authority, including without limitation income, franchise, profits, gross
receipts, ad valorem, net worth, value added, sales, use, service, real or
-- -------
personal property, special assessments, capital stock, license, payroll,
withholding, employment, social security (or similar), workers' compensation,
unemployment compensation, disability, utility, severance, production, excise,
stamp, occupation, premiums, windfall profits, environmental (including taxes
under Section 59A of the Code), customs duties, registration, alternative and
add-on minimum, estimated, transfer and gains taxes or other tax of any kind
whatsoever, in all cases including interest, penalties, additional taxes and
additions to tax imposed with respect thereto.
"Temporary Cash Investments" means any of the following: (i)
-------------------------- -
any investment in direct obligations of the United States of America or any
agency thereof or obligations Guaranteed by the United States of America or any
agency thereof, (ii) investments in time deposit accounts, certificates of
--
deposit and money market deposits maturing
25
<PAGE>
within 180 days of the date of acquisition thereof issued by a bank or trust
company which is organized under the laws of the United States of America, any
State thereof or any foreign country recognized by the United States of America,
and which bank or trust company has capital, surplus and undivided profits
aggregating in excess of $50 million (or the foreign currency equivalent
thereof) and has outstanding debt which is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
---
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
--
investments in commercial paper, maturing not more than 180 days after the date
of acquisition, issued by a corporation (other than an Affiliate of Holdings)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard &
Poor's Ratings Group, (v) investments in securities with maturities of six
-
months or less from the date of acquisition issued or fully guaranteed by any
State, Commonwealth or Territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc. and
(vi) investments in mutual funds whose investment guidelines restrict such
--
funds' investments to those satisfying the provisions of clauses (i) through (v)
above including, without limitation, the VISTA Money Market Funds or any other
fund for which the Trustee or an affiliate of the Trustee serves as an
investment advisor, administrator, shareholder, servicing agent and/or custodian
or sub-custodian, notwithstanding that (a) the Trustee or an affiliate of the
Trustee charges and collects fees and expenses from such funds for services
rendered, (b) the Trustee charges and collects fees and expenses for services
rendered pursuant to this Indenture, and (c) services performed for such funds
and pursuant to this Indenture may converge at any time (it being understood
that Holdings specifically authorizes the Trustee or an affiliate of the Trustee
to charge and collect all fees and expenses from such funds for services
rendered to such funds, in addition to any fees and expenses the Trustee may
26
<PAGE>
charge and collect for services rendered pursuant to this Indenture).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
---
Sections 77aaa-77bbbb) as in effect on the date of this Indenture.
"Transactions" means the offering by Holdings of the Discount
------------
Notes and the entering into of the New Credit Facility by Holdings and Iron Age.
"Trustee" means the party named as such in this Indenture
-------
until a successor replaces it and, thereafter, means the successor.
"Trust Officer" means, when used with respect to the Trustee,
-------------
any officer within the Corporate Trust Office including any Vice President,
Managing Director, Assistant Vice President, Secretary, Assistant Secretary,
Treasurer or Assistant Treasurer, Senior Trust Officer, Trust Officer or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge and familiarity with the particular subject.
"Uniform Commercial Code" means the New York Uniform
-----------------------
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of Holdings
----------------------- -
that at the time of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in the manner provided below and (ii) any Subsidiary
--
of an Unrestricted Subsidiary. The Board of Directors may designate any
Subsidiary of Holdings (including any newly acquired or newly formed Subsidiary)
to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any
property of, Holdings or any other Subsidiary of Holdings that is not a
Subsidiary of the Subsidiary to be so designated; provided, however, that either
-------- -------
(A) the Subsidiary to be so designated has total assets of $10,000 or less or
-
(B) if such Subsidiary has assets greater than $10,000, such designation would
-
be permitted under Section 4.04. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
-------- -------
immediately after giving effect to such designation (x) Holdings could Incur
-
$1.00 of additional Indebtedness under
27
<PAGE>
Section 4.03(a) and (y) no Default or Event of Default shall have occurred and
-
be continuing. Any such designation by the Board of Directors shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the board
resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
---------------------------
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock
------------
or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof.
"Weighted Average Life to Maturity" means, when applied to any
---------------------------------
Indebtedness at any date, the number of years obtained by dividing (i) the then
-
outstanding aggregate principal amount of such Indebtedness into (ii) the sum of
--
the total of the products obtained by multiplying (a) the amount of each then
-
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (b)
-
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all
-----------------------
the Capital Stock of which (other than directors' qualifying shares) is owned
by Holdings and/or one or more Wholly Owned Subsidiaries.
SECTION 1.02. Other Definitions.
-----------------
Defined in
Term Section
- - ---- ----------
"Affiliate Transaction".....................................................4.07
---------------------
"Bankruptcy Law"............................................................6.01
--------------
"Blockage Notice"..........................................................10.03
---------------
"control" "controlling", "controlled".........................1.01 ("Affiliate")
------- ----------- ----------
28
<PAGE>
"covenant defeasance option".............................................8.01(b)
--------------------------
"Custodian".................................................................6.01
---------
"disposition"........................................1.01 ("Asset Dispositions")
-----------
"Event of Default"..........................................................6.01
----------------
"Excess Proceeds"........................................................4.06(a)
---------------
"Excess Proceeds Offer"..................................................4.06(b)
---------------------
"Excess Proceeds Payment"................................................4.06(b)
-----------------------
"Exchange Notes"..........................................introductory paragraph
--------------
"Guaranteed Obligations"...................................................11.01
----------------------
"Guarantor"...................................................1.01 ("Guarantee")
---------
"Holdings"................................................introductory paragraph
--------
"Incurrence"......................................................1.01 ("Incur")
----------
"Indenture"...............................................introductory paragraph
---------
"Initial Discount Notes"..................................introductory paragraph
----------------------
"legal defeasance option"................................................8.01(b)
-----------------------
"Noteholder".....................................................1.01 ("Holder")
----------
"Discount Notes"..........................................introductory paragraph
--------------
"Notice of Default".........................................................6.01
-----------------
"Notice of Intent to Accelerate"...........................................10.04
------------------------------
"Notice of Intent to Demand Payment".......................................12.04
----------------------------------
"Offer Amount"...........................................................4.06(f)
------------
"Offer Period"...........................................................4.06(f)
------------
"parent entity".......................................1.01 ("Change of Control")
-------------
"pari passu Notes".......................................................4.06(b)
----------------
"pay the Discount Notes"...................................................10.03
----------------------
"Paying Agent"..............................................................2.03
------------
"Payment Blockage Period"..................................................10.03
-----------------------
"Prohibited Transaction".................................................5.02(a)
----------------------
"Purchase Date"..........................................................4.06(f)
-------------
"Refinanced", Refinancing"....................................1.01 ("Refinance")
------------------------
"Registrar".................................................................2.03
---------
"Successor Company".........................................................5.01
-----------------
SECTION 1.03. Incorporation by Reference of Trust Indenture
---------------------------------------------
Act. Whenever this Indenture refers to a provision of the TIA, the provision is
- - ---
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Discount Notes;
"indenture security holder" means a Holder of Discount Notes;
"indenture to be qualified" means this Indenture;
29
<PAGE>
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means Holdings and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context
---------------------
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined herein has
the meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in
the plural include the singular.
ARTICLE 2
The Discount Notes
SECTION 2.01. Form and Dating. The Discount Notes will be
---------------
issued only in fully registered form, without coupons, in denominations of
$1,000 and any integral multiple of $1,000. Provisions relating to the Initial
Discount Notes and the Exchange Notes are set forth in Appendix A, which is
hereby incorporated in and expressly made part of this Indenture. The Initial
Discount Notes and the Trustee's certificate of authentication shall be sub-
stantially in the form of Exhibit 1 to Appendix A, which is hereby incorporated
in and expressly made a part of this Indenture. The Exchange Notes and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of this
Indenture. The Discount Notes may have notations, legends or endorsements
required by law, stock
31
<PAGE>
exchange rule, agreements to which Holdings is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to Holdings). Each Discount Note shall be dated the date of its authentication.
The terms of the Discount Notes set forth in (i) Exhibit 1 to Appendix A and
-
(ii) Exhibit A are part of the terms of this Indenture.
--
SECTION 2.02. Execution and Authentication. Two Officers shall
----------------------------
sign the Discount Notes for Holdings by manual or facsimile signature.
If an Officer whose signature is on a Discount Note no longer
holds that office at the time the Trustee authenticates the Discount Note, the
Discount Note shall be valid nevertheless.
A Discount Note shall not be valid until an authorized
signatory of the Trustee manually signs the certificate of authentication on the
Discount Note. The signature shall be conclusive evidence that the Discount Note
has been authenticated under this Indenture.
The Trustee may appoint an authenticating agent reasonably
acceptable to Holdings to authenticate the Discount Notes. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Discount
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 any Registrar, Paying Agent or agent
for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. Holdings shall
--------------------------
maintain an office or agency where Discount Notes may be presented for
registration of transfer or for exchange (the "Registrar") and an office or
---------
agency where Discount Notes may be presented for payment (the "Paying Agent").
------------
The Registrar shall keep a register of the Discount Notes and of their transfer
and exchange. Holdings 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. Holdings may
change any Paying Agent or Registrar without notice to any Holder.
Holdings shall notify the Trustee promptly in writing of the
name and address of any Paying Agent or Registrar not party to this Indenture.
If Holdings fails to
31
<PAGE>
appoint or maintain a Registrar or Paying Agent, the Trustee shall act as such
and shall be entitled to appropriate compensation therefor pursuant to Section
7.07. Holdings or any of its domestically incorporated Subsidiaries may act as
Paying Agent or Registrar.
Holdings initially appoints the Trustee as Registrar and
Paying Agent in connection with the Discount Notes.
SECTION 2.04. Paying Agent To Hold Money in Trust. On or prior
-----------------------------------
to each due date of the principal, interest and liquidated damages on any
Discount Note, Holdings shall deposit with the Paying Agent a sum sufficient to
pay such principal, interest and liquidated damages when so becoming due.
Holdings shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of Noteholders
or the Trustee all money held by the Paying Agent for the payment of principal,
interest and liquidated damages on the Discount Notes and shall notify the
Trustee in writing of any default by Holdings in making any such payment. If
Holdings or a Subsidiary acts as Paying Agent, it shall segregate the money held
by it as Paying Agent and hold it as a separate trust fund for the benefit of
the Holders. Holdings at any time may require a Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed by the Paying
Agent. Upon complying with this Section 2.04, the Paying Agent shall have no
further liability for the money delivered to the Trustee.
SECTION 2.05. Noteholder 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 Noteholders. If the Trustee is not the
Registrar, Holdings shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably request of the names and addresses of Noteholders.
SECTION 2.06. Replacement Discount Notes. If any mutilated
--------------------------
Discount Note is surrendered by a Holder to the Registrar or if the Holder of a
Discount Note claims that the Discount Note has been lost, destroyed or
wrongfully taken, Holdings shall issue and the Trustee shall authenticate a
replacement Discount Note if the requirements of Section 8-405 of the Uniform
Commercial Code are met and the
32
<PAGE>
Holder satisfies any other reasonable requirements of the Trustee. If required
by Holdings or the Trustee, such Holder shall furnish an indemnity bond
sufficient in the judgment of Holdings and the Trustee to protect Holdings, the
Trustee, the Paying Agent and the Registrar from any loss which any of them may
suffer if a Discount Note is replaced. Holdings and the Trustee may charge the
Holder for their expenses in replacing a Discount Note. Every replacement
Discount Note is an additional obligation of Holdings.
SECTION 2.07. Outstanding Discount Notes. The Discount Notes
--------------------------
outstanding at any time are all Discount Notes authenticated by the Trustee
except for those canceled by it, those delivered to it for cancellation and
those described in this Section 2.07 as not outstanding. A Discount Note does
not cease to be outstanding because Holdings or an Affiliate of Holdings holds
the Discount Note.
If a Discount Note is replaced pursuant to Section 2.06, it
ceases to be outstanding unless the Trustee and Holdings receive proof
satisfactory to them that the replaced Discount Note is held by a bona fide
purchaser, in which event the replacement Discount Note shall cease to be
outstanding, subject to the provisions of Section 8-405 of the Uniform
Commercial Code.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal, interest and liquidated damages payable on that
date with respect to the Discount Notes (or portions thereof) to be redeemed or
maturing, as the case may be, on that date and the Paying Agent is not
prohibited from paying such money to the Noteholders on that date pursuant to
the terms of this Indenture, then on and after that date such Discount Notes (or
portions thereof) shall cease to be outstanding and interest on them shall cease
to accrue.
SECTION 2.08. Temporary Discount Notes. Until definitive
------------------------
Discount Notes are ready for delivery, Holdings may prepare and the Trustee
shall authenticate temporary Discount Notes upon a written order of Holdings
signed by two Officers of Holdings. Temporary Discount Notes shall be
substantially in the form of definitive Discount Notes but may have variations
that Holdings considers appropriate for temporary Discount Notes. Without
unreasonable delay, Holdings shall prepare and the Trustee shall authenticate
33
<PAGE>
definitive Discount Notes and deliver them in exchange for temporary Discount
Notes.
SECTION 2.09. Cancellation. Holdings at any time may deliver
------------
Discount Notes to the Trustee for cancellation. The Registrar and the Paying
Agent shall forward to the Trustee any Discount Notes surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else
shall cancel and destroy (subject to the record retention requirements of the
Exchange Act) all Discount Notes surrendered for registration of transfer,
exchange, payment or cancellation and deliver a certificate of such destruction
to Holdings. Holdings may not issue new Discount Notes to replace Discount Notes
it has redeemed, paid or delivered to the Trustee for cancellation.
SECTION 2.10. Defaulted Interest. If Holdings defaults in a
------------------
payment of interest on the Discount Notes, Holdings shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. Holdings may pay the defaulted interest to the persons who are
Noteholders on a subsequent special record date. Holdings shall fix or cause to
be fixed any such special record date and payment date to the reasonable
satisfaction of the Trustee and shall promptly mail to each Noteholder a notice
that states the special record date, the payment date and the amount of
defaulted interest to be paid.
SECTION 2.11. CUSIP Numbers. Holdings in issuing the Discount
-------------
Notes may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee
shall use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is made
- - -------- -------
as to the correctness of such numbers either as printed on the Discount Notes or
as contained in any notice of a redemption and that reliance may be placed only
on the other identification numbers printed on the Discount Notes, and any such
redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If Holdings elects to redeem
------------------
Discount Notes pursuant to paragraph 5 of
34
<PAGE>
the Discount Notes, it shall notify the Trustee in writing of the redemption
date, the principal amount of Discount Notes to be redeemed and the paragraph of
the Discount Notes pursuant to which the redemption will occur.
Holdings shall give each notice to the Trustee provided for in
this Section at least 30 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate from Holdings to the effect that such redemption will comply with
the conditions herein.
SECTION 3.02. Selection of Discount Notes to Be Redeemed. If
------------------------------------------
fewer than all the Discount Notes are to be redeemed, the Trustee shall select
the Discount Notes to be redeemed pro rata or by lot or by such other method
that the Trustee in its sole discretion deems to be fair and appropriate and
that complies with applicable legal and securities exchange requirements, if
any. The Trustee shall make the selection from outstanding Discount Notes not
previously called for redemption. The Trustee may select for redemption portions
of the principal of Discount Notes that have denominations larger than $1,000.
Discount Notes and portions of them the Trustee selects shall be in amounts of
$1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to
Discount Notes called for redemption also apply to portions of Discount Notes
called for redemption. The Trustee shall notify Holdings promptly of the
Discount Notes or portions of Discount Notes to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not
--------------------
more than 60 days before a date for redemption of Discount Notes, Holdings shall
mail a notice of redemption by first-class mail to each Holder of Discount Notes
to be redeemed. The notice shall identify the Discount Notes to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Discount Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
35
<PAGE>
(5) if fewer than all the outstanding Discount Notes are
to be redeemed, the identification and principal amounts of the
particular Discount Notes to be redeemed;
(6) that, unless Holdings defaults in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest on Discount
Notes (or portion thereof) called for redemption ceases to accrue on
and after the redemption date; and
(7) that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in such notice or
printed on the Discount Notes.
At Holdings' written request, the Trustee shall give the notice of redemption in
Holdings' name and at Holdings' expense. In such event, Holdings shall provide
the Trustee with the information required by this Section at least 30 days
before the redemption date.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
------------------------------
redemption is mailed, Discount Notes called for redemption become due and
payable on the redemption date and at the redemption price stated in the notice.
Upon surrender to the Paying Agent, such Discount Notes shall be paid at the
redemption price stated in the notice, plus accrued and unpaid interest and
liquidated damages, if any, to the redemption date. Failure to give notice or
any defect in the notice to any Holder shall not affect the validity of the
notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. On or prior to the
---------------------------
redemption date, Holdings shall deposit with the Paying Agent (or, if Holdings
or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money
sufficient to pay the redemption price of, and accrued and unpaid interest and
liquidated damages, if any, on, all Discount Notes to be redeemed on that date
other than Discount Notes or portions of Discount Notes called for redemption
which have been delivered by Holdings to the Trustee for cancellation. The
Paying Agent shall promptly return to Holdings after the redemption date any
money deposited with the Paying Agent by Holdings in excess of the amounts
necessary to pay the redemption price of, and accrued and unpaid interest and
liquidated damages, if any, on, all Discount Notes to be redeemed on the
redemption date. If Holdings complies with the foregoing provisions of
36
<PAGE>
this Article 3, then on and after the redemption date, interest shall cease to
accrue on the Discount Notes (or the portions thereof) called for redemption. If
a Discount 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 Holder in whose name such Discount Note was registered at the
close of business on such record date.
SECTION 3.06. Discount Notes Redeemed in Part. Upon surrender
-------------------------------
and cancellation of a Discount Note that is redeemed in part, Holdings shall
execute and the Trustee shall authenticate for the Holder (at Holdings' expense)
a new Discount Note equal in principal amount to the unredeemed portion of the
Discount Note surrendered.
ARTICLE 4
Covenants
SECTION 4.01. Payment of Discount Notes. Holdings shall
-------------------------
promptly pay the principal of, interest and liquidated damages, if any, on the
Discount Notes on the dates and in the manner provided in the Discount Notes and
in this Indenture. Principal, interest and liquidated damages shall be
considered paid on the date due if on such date the Trustee or the Paying Agent
holds in accordance with this Indenture money sufficient to pay all principal,
interest and liquidated damages, if any, then due and the Trustee or the Paying
Agent, as the case may be, is not prohibited from paying such money to the
Noteholders on that date pursuant to the terms of this Indenture. Holdings shall
pay interest on overdue principal at the rate specified therefor in the
Discount Notes, and it shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Until such time as Holdings shall
-----------
become subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, (a) Holdings shall provide the Trustee, the Initial Purchasers,
the Noteholders and prospective Noteholders (upon request) with such annual
reports and such information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to a United States of
America corporation subject to such Sections, such information, documents and
other reports to be so provided at the times specified for the filing of such
information,
37
<PAGE>
documents and reports under such Sections and (b) not later than 45 days after
the end of each fiscal quarter of Holdings, Holdings shall issue a press release
setting forth a summary of the results of operations of Holdings for such fiscal
quarter and shall publish such press release on one of the following national
business and financial wire services: Dow Jones News Service, Reuters Financial
Service, Bloomberg News, PR Newswire or Business Wire. Thereafter,
notwithstanding that Holdings may not be subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act, to the extent permitted by the
Exchange Act, Holdings shall file with the SEC and provide the Trustee and
Noteholders and prospective Noteholders (upon request) with such annual reports
and such information, documents and other reports as are specified in such
Sections and applicable to a United States of America corporation subject to
such Sections, such information, documents and other reports to be so filed and
provided at the times specified for the filing of such information, documents
and reports under such Sections; provided, however, that Holdings shall not be
-------- -------
required to file any report, document or other information with the SEC if the
SEC does not permit such filing.
SECTION 4.03. Limitation on Indebtedness. (a) Holdings shall
--------------------------
not, and shall not permit any Restricted Subsidiary to, Incur any Indebtedness
unless, on the date of such Incurrence, the Consolidated Coverage Ratio exceeds
1.75 to 1.00.
(b) Notwithstanding the foregoing paragraph (a), Holdings and
its Restricted Subsidiaries may Incur the following Indebtedness:
(1) Indebtedness Incurred pursuant to the New Acquisition
Credit Facility; provided, however, that, after giving effect to any
-------- -------
such Incurrence, the aggregate principal amount of such Indebtedness
then outstanding thereunder does not exceed the difference between (i)
-
$35 million and (ii) the aggregate amount of all scheduled or otherwise
--
mandatory permanent repayments (but not optional repayments) of
principal actually made thereunder since the Issue Date;
(2) Indebtedness Incurred pursuant to the New Revolving Credit
Facility; provided, however, that, after giving effect to any such
-------- -------
Incurrence, the aggregate principal amount of such Indebtedness then
outstanding thereunder does not exceed the greater of (i)
-
38
<PAGE>
the difference between (a) $30 million less any Indebtedness Incurred
-
under clause (15) and (b) the aggregate amount of all repayments
-
(whether scheduled, otherwise mandatory or optional) of principal
actually made thereunder since the Issue Date to the extent that the
corresponding commitments have been permanently reduced and (ii) the
--
sum of (x) 50% of the value of the eligible inventory of Holdings and
-
its Restricted Subsidiaries under the New Revolving Credit Facility
and (y) 80% of the value of the eligible accounts receivable of
-
Holdings and its Restricted Subsidiaries under the New Revolving Credit
Facility, in each case determined in accordance with GAAP;
(3) Indebtedness of (A) Holdings owing to and held by any
-
Restricted Subsidiary or (B) a Wholly Owned Subsidiary owing to and
-
held by Holdings or a Restricted Subsidiary; provided, however, that
-------- -------
(x) in the case of clause (A), any such Indebtedness is subordinated to
-
the Discount Notes, (y) in the case of clause (B), any subsequent
-
issuance or transfer of any Capital Stock which results in any such
Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary shall
be deemed to constitute the Incurrence of such Indebtedness by the
issuer thereof and (z) in the case of clause (B), any subsequent
-
transfer of such Indebtedness (other than to Holdings or a Wholly Owned
Subsidiary) shall be deemed to constitute the Incurrence of such
Indebtedness by the issuer thereof;
(4) Indebtedness represented by the Discount Notes;
(5) Indebtedness represented by the Senior Subordinated
Notes and the Subsidiary Guaranties;
(6) Indebtedness outstanding on the Issue Date (other
than Indebtedness described in clause (1), (2) or (3));
(7) Refinancing Indebtedness Incurred in respect of any
Indebtedness described in clause (4), (5), (6) or (8) or this clause
(7) or Incurred pursuant to paragraph (a);
(8) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on the date on which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by Holdings (other than
Indebtedness
39
<PAGE>
Incurred to provide all or any portion of the funds used to consummate
the transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Subsidiary or was otherwise
acquired by Holdings);
(9) Indebtedness of foreign Restricted Subsidiaries, and any
Refinancing Indebtedness thereof; provided, however, that the aggregate
-------- -------
principal amount of such Indebtedness at any time outstanding does not
exceed $10 million;
(10) Indebtedness in respect of performance bonds, completion
guarantees, bankers' acceptances, letters of credit and surety or
appeal bonds provided by Holdings or any Restricted Subsidiary in the
ordinary course of business, including, without limitation, letters of
credit in respect of workers' compensation claims or self-insurance, or
other Indebtedness with respect to reimbursement-type obligations
regarding workers' compensation claims;
(11) Hedging Obligations consisting of Interest Rate
Agreements and Currency Agreements entered into in the ordinary course
of business and not for the purpose of speculation; provided, however,
-------- -------
that, in the case of Currency Agreements and Interest Rate Agreements,
such Currency Agreements and Interest Rate Agreements do not increase
the Indebtedness of Holdings outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest
rates or by reason of fees, indemnities and compensation payable
thereunder;
(12) Purchase Money Indebtedness, and any Refinancing
Indebtedness thereof, and Capital Lease Obligations Incurred to finance
the acquisition by Holdings or a Restricted Subsidiary of any assets in
the ordinary course of business; provided, however, that the aggregate
-------- -------
principal amount of such Indebtedness at any time outstanding shall
not exceed $10 million;
(13) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft of similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided,
--------
40
<PAGE>
however, that such Indebtedness is extinguished within five Business
-------
Days of Incurrence;
(14) Indebtedness of Holdings or any Restricted Subsidiary
arising from agreements providing for indemnification, adjustment of
purchase price, earn out or similar obligations, in any case Incurred
in connection with the disposition of any assets of Holdings or any
Restricted Subsidiary (other than Guarantees of Indebtedness Incurred
by any Person acquiring all or any portion of such assets for the
purpose of financing such acquisition) in a principal amount not to
exceed the gross proceeds actually received by Holdings or any
Restricted Subsidiary in connection with such disposition;
(15) Indebtedness Incurred pursuant to any Permitted
Receivables Financing;
(16) Guarantees by Holdings or any Wholly Owned Subsidiary of
Indebtedness of Holdings or any Wholly Owned Subsidiary that was
permitted to be Incurred under another provision of this Section 4.03;
(17) Indebtedness, and any Refinancing Indebtedness thereof,
which is not Senior Indebtedness; provided, however, that the aggregate
-------- -------
principal amount of such Indebtedness at any time outstanding shall not
exceed $5 million; and
(18) Indebtedness, and any Refinancing Indebted ness thereof,
in an aggregate principal amount which, together with all other
Indebtedness (other than Indebtedness permitted by clauses (1) through
(17) or paragraph (a)) of Holdings and the Restricted Subsidiaries
outstanding on the date of Incurrence of such Indebtedness, does not
exceed $10 million.
(c) For purposes of determining compliance with this Section
4.03, (i) in the event that an item of Indebtedness meets the criteria of more
-
than one of the types of Indebtedness described in this Section 4.03, Holdings,
in its sole discretion, will classify such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of the above
clauses of this Section 4.03 and (ii) an item of Indebtedness may be divided and
--
classified in more than one of the types of Indebtedness described in this
Section 4.03.
41
<PAGE>
SECTION 4.04. Limitation on Restricted Payments.
---------------------------------
(a) Holdings shall not, and shall not permit any Restricted Subsidiary,
directly or indirectly, to make a Restricted Payment if at the time Holdings or
such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing or would
result therefrom;
(2) Holdings is not able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments (the amount of any payments made in property
other than in cash to be valued at the fair market value of such
property, as determined in good faith by the Board of Directors)
declared or made since the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during
the period (treated as one accounting period) from the
beginning of the fiscal quarter immediately following the
fiscal quarter during which the Discount Notes are originally
issued to the end of the most recent fiscal quarter ending at
least 45 days (or, if less, the number of days after the end
of such fiscal quarter as the consolidated financial
statements of Holdings shall be provided to the Noteholders
pursuant to this Indenture) prior to the date of such
Restricted Payment (or, in case such Consolidated Net Income
accrued during such period (treated as one accounting period)
shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by
Holdings from the issuance or sale of its Capital Stock (other
than Disqualified Stock) and other capital contributions
subsequent to the Issue Date (other than net proceeds received
from an issuance or sale of such Capital Stock to a Subsidiary
of Holdings and other than an issuance or sale to an employee
stock ownership plan or to a trust established by Holdings or
any of its Subsidiaries for the benefit of their employees to
the extent that the purchase by such plan or trust is financed
by Indebtedness of such plan or trust to Holdings or any
Subsidiary or for which
42
<PAGE>
Holdings or any Subsidiary is liable, directly or indirectly
(including being liable to make cash contributions to such
plan or trust which are used to pay interest or principal on
such Indebtedness), unless such Indebtedness has been repaid
with cash on or prior to the date of determination);
(C) the amount by which Indebtedness of Holdings or
its Restricted Subsidiaries is reduced on Holdings' balance
sheet upon the conversion or exchange (other than by a
Subsidiary of Holdings) subsequent to the Issue Date of any
Indebtedness of Holdings or its Restricted Subsidiaries
convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of Holdings (less the amount of any cash,
or the fair market value of any other property, distributed by
Holdings or any Restricted Subsidiary upon such conversion or
exchange);
(D) an amount equal to the sum of (i) the net
-
reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans or advances or
other transfers of assets by any Unrestricted Subsidiary to
Holdings or any Restricted Subsidiary, or the receipt of
proceeds by Holdings or any Restricted Subsidiary from the
sale or other disposition of any portion of the Capital Stock
of any Unrestricted Subsidiary, in each case occurring
subsequent to the Issue Date, and (ii) the portion
--
(proportionate to Holdings' equity interest in such
Subsidiary) of the fair market value of the net assets of an
Unrestricted Subsidiary at the time such Unrestricted Sub
sidiary is designated a Restricted Subsidiary; provided,
--------
however, that the foregoing sum shall not exceed, in the case
-------
of any Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment) by
Holdings or any Restricted Subsidiary in such Unrestricted
Subsidiary; and
(E) $5 million.
43
<PAGE>
(b) The provisions of Section 4.04(a) shall
not prohibit:
(i) any purchase or redemption of Capital Stock or
Subordinated Obligations of Holdings or any Restricted
Subsidiary made by exchange for, or out of the proceeds of the
substantially concur rent sale of, Capital Stock of Holdings
(other than Disqualified Stock and other than Capital Stock
issued or sold to a Subsidiary or an employee stock ownership
plan or to a trust established by Holdings or any of its
Subsidiaries for the benefit of their employees to the extent
that the purchase by such plan or trust is financed by
Indebtedness of such plan or trust to Holdings or any
Subsidiary or for which Holdings or any Subsidiary is liable,
directly or indirectly (including being liable to make cash
contributions to such plan or trust which are used to pay
interest or principal on such Indebtedness), unless such
Indebtedness has been repaid with cash on or prior to the date
of determination); provided, however, that (A) such purchase
-------- ------- -
or redemption shall be excluded from the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds
-
from such sale shall be excluded from the calculation of
amounts under Section 4.04(a)(3)(B);
(ii) any purchase or redemption of (A) Subordinated
-
Obligations of Holdings made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Indebtedness
of Holdings which is permitted to be Incurred pursuant to
Sections 4.03(b) or (B) Subordinated Obligations of a
-
Restricted Subsidiary made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Indebtedness
of such Restricted Subsidiary or Holdings which is permitted
to be Incurred pursuant to Section 4.03(b); provided, however,
-------- -------
that, such purchase or redemption shall be excluded from the
calculation of the amount of Restricted Payments;
(iii) any purchase or redemption of (A) Disqualified
-
Stock of Holdings made by exchange for, or out of the proceeds
of the substantially concurrent sale of, Disqualified Stock of
Holdings or (B) Disqualified Stock of a Restricted Sub-
44
<PAGE>
sidiary made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Disqualified Stock of such
Restricted Sub sidiary or Holdings; provided, however, that
-------- -------
such purchase or redemption will be excluded from the
calculation of the amount of Restricted Payments;
(iv) payments on the Issue Date of $17.6 million to
redeem the outstanding Holdings Series A Preferred Stock;
provided, however, that such payments will be excluded from
-------- -------
the calculation of the amount of Restricted Payments;
(v) upon the occurrence of a Change of Control and
within 60 days after the completion of the offer to repurchase
the Discount Notes pursuant to Section 4.09 (including the
purchase of all Discount Notes tendered), any purchase or
redemption of Subordinated Obligations of Holdings pursuant to
the terms thereof as a result of such Change of Control at a
purchase or redemption price not to exceed 101% of the
outstanding principal amount thereof, plus accrued and unpaid
interest thereon and liquidated damages, if any; provided,
--------
however, that (A) at the time of such purchase or redemption,
------- -
no Default or Event of Default shall have occurred and be
continuing or would result therefrom, (B) Holdings would be
-
able to Incur an additional $1.00 of Indebtedness pursuant to
Section 4.03(a) after giving pro forma effect to such
Restricted Payment, (C) such purchase or redemption is not
-
made, directly or indirectly, from the proceeds of (or made in
anticipation of) any Issuance of Indebtedness by Holdings or
any Subsidiary and (D) such purchase or redemption will be
-
included in the calculation of the amount of Restricted
Payments;
(vi) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such
dividend would have complied with this Section 4.04; provided,
--------
however, that such dividend shall be included in the
-------
calculation of the amount of Restricted Payments;
(vii) payments to redeem or repurchase Capital Stock
of Holdings from existing or former employees or management of
Holdings or any Subsidiary or their assigns, estates or
heirs, in
45
<PAGE>
each case in connection with the repurchase provisions under
employee stock option or stock purchase agreements or other
agreements to compensate management employees and in each case
approved by the Board of Directors; provided, however, that at
-------- -------
the time of such payment, no Default or Event of Default shall
have occurred and be continuing or would result therefrom; and
provided further, however, that such redemptions or
-------- ------- -------
repurchases shall not exceed an aggregate amount equal to the
sum of (A) $2.0 million and (B) the amount of any proceeds to
- -
Holdings from (1) sales of Capital Stock of Holdings to
-
management employees subsequent to the Issue Date and (2) any
-
"key-man" life insurance policies which are used to make such
redemptions or repurchases; and provided further, however,
-------- ------- -------
that (x) such payments (other than payments from the proceeds
-
of any "key-man" life insurance policies) will be included in
the calculation of the amount of Restricted Payments, (y) such
-
payments from the proceeds of any "key-man" life insurance
policies will be excluded in the calculation of the amount of
Restricted Payments and (z) the cancellation of Indebtedness
-
owing to Holdings from members of management of Holdings or
any of its Restricted Subsidiaries in connection with a
repurchase of Capital Stock of Holdings by Holdings will be
excluded in the calculation of the amount of Restricted
Payments;
(viii) loans and advances made after the Issue Date
to employees or directors of Holdings or any Subsidiary the
proceeds of which are used to purchase Capital Stock of
Holdings; provided, however, that the aggregate principal
-------- -------
amount of such loans and advances shall not exceed $2 million
at any time outstanding; and provided further, however, that
-------- ------- -------
such loans and advances will be included in the calculation of
the amount of Restricted Payments to the extent not repaid;
and
(ix) repurchases of Capital Stock of Holdings by
Holdings or a Restricted Subsidiary deemed to occur upon the
exercise of stock options if such Capital Stock represents a
portion of the exercise price thereof; provided, however, that
-------- -------
46
<PAGE>
such payments will be excluded in the calculation of the
amount of Restricted Payments.
SECTION 4.05. Limitation on Restrictions on Distributions from
------------------------------------------------
Restricted Subsidiaries. Holdings shall not, and shall not permit any Restricted
- - -----------------------
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or consensual restriction (other than pursuant to
the New Credit Facility) on the ability of any Restricted Subsidiary (a) to pay
-
dividends or make any other distributions on its Capital Stock to Holdings or a
Restricted Subsidiary or pay any Indebtedness owed to Holdings, (b) to make any
-
loans or advances to Holdings or (c) to transfer any of its property or assets
-
to Holdings, except:
(i) any encumbrance or restriction pursuant to an agreement
in effect at or entered into on the Issue Date (including, without
limitation, the New Credit Facility, the Senior Subordinated Indenture
and this Indenture);
(ii) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary which was entered
into on or prior to the date on which such Restricted Subsidiary was
acquired by Holdings (other than Indebtedness Incurred to provide all
or any portion of the funds used to consummate, the transaction or
series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by Holdings)
and outstanding on such date;
(iii) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement effecting a Refinancing
of Indebtedness Incurred pursuant to an agreement referred to in
clause (i) or (ii) of this Section 4.05 or this clause (iii) or
contained in any amendment to an agreement referred to in clause (i) or
(ii) of this Section 4.05 or this clause (iii); provided, however, that
-------- -------
the encumbrances and restrictions with respect to such Restricted
Subsidiary contained in any such agreement or amendment are no less
favorable to the Holder in any material respect than the encumbrances
and restrictions with respect to such Restricted Subsidiary contained
in such agreements;
47
<PAGE>
(iv) in the case of Section 4.05(c), any encumbrance or
restriction (A) that restricts in a customary manner the subletting,
-
assignment or transfer of any property or asset that is subject to a
lease, license or similar contract, or the assignment or transfer of
any such lease, license or other contract, including restrictions on
assignment, (B) by virtue of any transfer of, agreement to transfer,
-
option or right with respect to, or Lien on, any property or assets of
Holdings or any Restricted Subsidiary not otherwise prohibited by this
Indenture, (C) contained in mortgages, pledges or other security
-
agreements securing Indebtedness of a Restricted Subsidiary to the
extent such encumbrance or restriction restricts the transfer of the
property subject to such mortgages, pledges or other security
agreements or (D) pursuant to customary provisions restricting
-
dispositions of real property interests set forth in any reciprocal
easement agreements of Holdings or any Restricted Subsidiary;
(v) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or
disposition;
(vi) any encumbrance or restriction with respect to any
Receivables Subsidiary pursuant to an agreement related to Indebtedness
of the Receivables Subsidiary which is permitted under Section 4.03 or
pursuant to any agreement relating to a Financing Disposition to or by
the Receivables Subsidiary;
(vii) any encumbrance or restriction contained in any
agreement or instrument governing Indebtedness (whether or not
outstanding) of foreign Restricted Subsidiaries if such Indebtedness
is permitted under Section 4.03(b)(9); provided, however, that any such
-------- -------
restrictions are ordinary and customary with respect to the type of
Indebtedness being Incurred (under the relevant circumstances);
(viii) any customary encumbrance or restriction imposed by any
agreement to sell assets or Capital Stock permitted under this
Indenture to any Person pending the closing of such sale; and
48
<PAGE>
(ix) any customary encumbrances or restrictions created in
connection with Indebtedness Incurred under Section 4.03 which are no
more restrictive than those contained in the Senior Subordinated
Indenture as in effect on the Issue Date.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary
--------------------------------------------
Stock. (a) Holdings shall not, and shall not permit any Restricted Subsidiary
- - -----
to, consummate any Asset Disposition unless Holdings or such Restricted
Subsidiary receives consideration at the time of such Asset Disposition at least
equal to the fair market value (including as to the value of all non-cash
consideration), as determined in good faith by the Board of Directors, of the
shares and assets subject to such Asset Disposition and at least 80% of the
consideration thereof received by Holdings or such Restricted Subsidiary is in
the form of cash or cash equivalents. In the event and to the extent that the
aggregate Net Available Cash received by Holdings or any Restricted Subsidiary
from one or more Asset Dispositions occurring on or after the Issue Date and not
applied pursuant to clause (i) or (ii) below exceeds $5 million, then Holdings
or such Restricted Subsidiary shall (i) within 360 days after the date such Net
-
Available Cash so received exceeds $5 million and to the extent Holdings or such
Restricted Subsidiary elects (or is required by the terms of any Senior
Indebtedness), (A) apply an amount equal to such excess Net Available Cash
-
received by Holdings to prepay, repay or purchase Senior Indebtedness of
Holdings or apply an amount equal to such excess Net Available Cash received by
any Restricted Subsidiary to prepay, repay or purchase Indebtedness of such
Restricted Subsidiary, in each case owing to a Person other than Holdings or any
Affiliate of Holdings, or (B) invest (or enter into a binding commitment to
-
invest; provided, however, that such commitment shall be subject only to
-------- -------
customary conditions (other than financing) and such investment shall be
consummated within 180 days after the end of such 360-day period) an amount
equal to such Net Available Cash not applied pursuant to clause (A), in
Additional Assets (including by means of an Investment in Additional Assets by a
Restricted Subsidiary with Net Available Cash received by Holdings or another
Restricted Subsidiary) and (ii) apply such excess Net Available Cash (to the
--
extent not applied pursuant to clause (i)) as provided in paragraphs (b) through
(f) of this Section 4.06; provided, however, that in connection with any
-------- -------
prepayment, repayment or purchase of Indebtedness pursuant to clause (A) above,
Holdings or such Restricted Subsidiary shall retire such Indebtedness and shall
cause the related loan
49
<PAGE>
commitment, if any, to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased. The amount of such excess Net
Available Cash required to be applied pursuant to clause (ii) above and not
theretofore so applied shall constitute "Excess Proceeds." Pending application
---------------
of Net Available Cash pursuant to this Section 4.06(a), such Net Available Cash
shall be invested in Temporary Cash Investments.
(b) If at any time the aggregate amount of Excess Proceeds not
theretofore subject to an Excess Proceeds Offer totals at least $5 million,
Holdings shall, not later than 30 days after the end of the period during which
Holdings is required to apply such Excess Proceeds pursuant to Section
4.06(a)(i) (or, if Holdings so elects, at any time within such period), make an
offer (an "Excess Proceeds Offer") to purchase from the holders thereof on a pro
---------------------
rata basis an aggregate principal amount of Discount Notes and other pari passu
---- -----
debt obligations subject to a similar covenant (collectively, the "pari passu
---- -----
Notes") equal to the Excess Proceeds (rounded down to the nearest multiple of
- - -----
$1,000) on such date, at a purchase price equal to 100% of the Accreted Value of
such Discount Notes and pari passu Notes, plus, in each case, accrued interest
---- -----
and liquidated damages, if any, to the date of purchase (the "Excess Proceeds
------ --------
Payment"). Upon completion of an Excess Proceeds Offer, the amount of Excess
- - -------
Proceeds remaining after application pursuant to such Excess Proceeds Offer
(including payment of the purchase price for Discount Notes and pari passu Notes
---- -----
duly tendered) may be used by Holdings for any corporate purpose (to the extent
not otherwise prohibited by this Indenture).
(c) If the Accreted Value (or the aggregate principal amount,
as applicable) of Discount Notes and pari passu Notes validly tendered and not
---- -----
withdrawn in connection with an Excess Proceeds Offer exceeds the Excess
Proceeds available therefor, such Excess Proceeds will be apportioned between
the Discount Notes and such pari passu Notes, with the portion of such Excess
---- -----
Proceeds payable in respect of the Discount Notes equal to the amount of such
Excess Proceeds multiplied by a fraction, the numerator of which is the Accreted
Value of the Discount Notes and the denominator of which is the sum of the
Accreted Value of the Discount Notes and the outstanding principal amount (or
accreted value, as applicable) of the relevant pari passu Notes.
---- -----
(d) For the purposes of this Section 4.06, the following are
deemed to be cash: (i) the assumption of Senior Indebtedness of Holdings or any
-
Restricted Subsidiary
50
<PAGE>
and the release of Holdings or such Restricted Subsidiary from all liability on
such Indebtedness in connection with such Asset Disposition and (ii) securities
--
received by Holdings or any Restricted Subsidiary from the transferee that are
promptly converted by Holdings or such Restricted Subsidiary into cash;
provided, however, that any Designated Noncash Consideration received by
- - -------- -------
Holdings or any Restricted Subsidiary in such Asset Sale having an aggregate
fair market value, taken together with all other Designated Noncash
Consideration received pursuant to this proviso that is at that time
outstanding, not to exceed $5 million (with the fair market value of each item
of Designated Noncash Consideration being measured at the time received and
without giving effect to subsequent changes in value), shall be deemed to be
cash for the purposes of this Section 4.06(d).
(e) Holdings shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in the event that Excess Proceeds are received by Holdings and
Holdings is required to repurchase Discount Notes pursuant to this Section 4.06.
To the extent that the provisions of any securities laws or regulations conflict
with the provisions of this Section 4.06, Holdings shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Indenture by virtue hereof.
(f) (1) Promptly, and in any event within 30 days after
Holdings becomes obligated to make an Excess Proceeds Offer, Holdings shall be
obligated to deliver to the Trustee and send, by first-class mail to each
Holder, a written notice stating that the Holder may elect to have such Holder's
Discount Notes purchased by Holdings either in whole or in part (subject to
prorationing as hereinafter described in the event the Excess Proceeds Offer is
oversubscribed) in integral multiples of $1,000 of principal amount, at the
applicable purchase price. The notice shall specify a purchase date not less
than 30 days nor more than 60 days after the date of such notice (the "Purchase
--------
Date") and shall contain such information concerning the business of Holdings
- - ----
which Holdings in good faith believes will enable such Holders to make an
informed decision (which will include (i) a description of material developments
-
in Holdings' business subsequent to the date of the latest reports furnished by
Holdings to the Holders pursuant to Section 4.02 and (ii) if material,
--
appropriate pro forma financial information) and all instructions and materials
51
<PAGE>
necessary to tender Discount Notes pursuant to the Excess Proceeds Offer,
together with the information required to be provided pursuant to Section
4.06(f)(2).
(2) Not later than the date upon which written notice of an
Excess Proceeds Offer is delivered to the Trustee pursuant to Section 4.06(f)(1)
above, Holdings shall deliver to the Trustee an Officers' Certificate as to (i)
-
the amount of the Excess Proceeds Offer (the "Offer Amount"), (ii) the
----- ------ --
allocation of the Net Available Cash from the Asset Dispositions pursuant to
which such Excess Proceeds Offer is being made and (iii) the compliance of such
---
allocation with the provisions of Section 4.06(a). On or prior to the Purchase
Date, Holdings shall also irrevocably deposit with the Trustee or with a paying
agent (or, if Holdings is acting as its own paying agent, segregate and hold in
trust) in Temporary Cash Investments, maturing on the last day prior to the
Purchase Date or on the Purchase Date if funds are immediately available by open
of business, an amount equal to the Offer Amount to be held for payment in
accordance with the provisions of this Section 4.06(f). Upon the expiration of
the period for which the Excess Proceeds Offer remains open (the "Offer
-----
Period"), Holdings shall deliver to the Trustee for cancellation the Discount
- - ------
Notes or portions thereof which have been properly tendered to and are to be
accepted by Holdings. The Trustee shall, on the Purchase Date, mail or deliver
payment to each tendering Holder in the amount of the purchase price. In the
event that the aggregate purchase price of the Discount Notes delivered by
Holdings to the Trustee is less than the Offer Amount, the Trustee shall deliver
the excess to Holdings immediately after the expiration of the Offer Period for
application in accordance with Section 4.06(b).
(3) Holders electing to have a Discount Note purchased shall
be required to surrender the Discount Note, with an appropriate form duly
completed, to Holdings at the address specified in the notice at least three
Business Days prior to the Purchase Date. Holders shall be entitled to withdraw
their election if the Trustee or Holdings receives not later than one Business
Day prior to the Purchase Date, a telegram, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Discount Note
which was delivered for purchase by the Holder and a statement that such Holder
is withdrawing his election to have such Discount Note purchased. If at the
expiration of the Offer Period the aggregate principal amount of Discount Notes
surrendered by Holders exceeds the Offer Amount,
52
<PAGE>
Holdings shall select the Discount Notes to be purchased on a pro rata basis
(with such adjustments as may be deemed appropriate by Holdings so that only
Discount Notes in denominations of $1,000, or integral multiples thereof, shall
be purchased). Holders whose Discount Notes are purchased only in part shall be
issued new Discount Notes equal in principal amount to the unpurchased portion
of the Discount Notes surrendered.
(4) At the time Holdings delivers Discount Notes to the
Trustee which are to be accepted for purchase, Holdings shall also deliver an
Officers' Certificate stating that such Discount Notes are to be accepted by
Holdings pursuant to and in accordance with the terms of this Section 4.06. A
Discount Note shall be deemed to have been accepted for purchase at the time the
Trustee, directly or through an agent, mails or delivers payment therefor to the
surrendering Holder.
SECTION 4.07. Limitation on Affiliate Transactions. (a)
------------------------------------
Holdings shall not, and shall not permit any Restricted Subsidiary to, enter
into or conduct any transaction (including the purchase, sale, lease or exchange
of any property, employee compensation arrangements or the rendering of any
service) with any Affiliate of Holdings (an "Affiliate Transaction") unless (1)
--------------------- -
the terms of such Affiliate Transaction are no less favorable to Holdings or
such Restricted Subsidiary than those that could be obtained at the time of such
transaction in arms-length dealings with a Person who is not such an Affiliate,
(2) if such Affiliate Transaction involves an amount in excess of $1 million,
-
the terms of such Affiliate Transaction (i) are set forth in writing, (ii)
- --
comply with clause (1) and (iii) have been approved by a majority of the
---
disinterested members of the Board of Directors and (3) if such Affiliate
-
Transaction involves an amount in excess of $10 million, the terms of such
Affiliate Transaction (i) comply with clause (2) and (ii) have been determined
- --
by a nationally recognized investment banking firm to be fair, from a financial
standpoint, to Holdings and its Restricted Subsidiaries.
(b) The provisions of Section 4.07(a) shall not prohibit (i)
any Restricted Payment permitted to be made pursuant to Section 4.04, (ii) any
--
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans in the ordinary course of business and
approved by the Board of Directors, (iii) the grant of stock options or similar
---
53
<PAGE>
rights to employees and directors of Holdings in the ordinary course of business
and pursuant to plans approved by the Board of Directors, (iv) loans or advances
--
to employees in the ordinary course of business of Holdings or its Restricted
Subsidiaries, but in any event not to exceed $2 million in the aggregate
outstanding at any time, (v) fees, compensation or employee benefit arrangements
-
paid to and indemnity provided for the benefit of directors, officers or
employees of Holdings or any Subsidiary in the ordinary course of business, (vi)
--
any Affiliate Transaction between Holdings and a Restricted Subsidiary or
between Restricted Subsidiaries in the ordinary course of business (so long as
the other stockholders of any participating Restricted Subsidiaries which are
not Wholly Owned Subsidiaries are not themselves Affiliates of Holdings), (vii)
---
transactions with a Receivables Subsidiary pursuant to any Permitted Receivables
Financing, (viii) any payment under Section 1.b or 1.d of the Management
----
Agreement not to exceed $300,000 in any fiscal year; provided, however, that (1)
-------- ------- -
at the time of such payment no Default or Event of Default shall have occurred
and be continuing or would result therefrom, and the Consolidated Coverage Ratio
shall exceed 1.50 to 1.00 and (2) any such payment shall accrue if not paid
pursuant to the foregoing clause (1), or (ix) any payment under the Management
--
Agreement other than under Section 1.b or 1.d thereof.
SECTION 4.08. Limitation on the Issuance or Sale of Capital
---------------------------------------------
Stock of Restricted Subsidiaries. Holdings (i) shall not, and shall not permit
- - -------------------------------- -
any Restricted Subsidiary to, sell, pledge, hypothecate or otherwise dispose of
any shares of Capital Stock of a Restricted Subsidiary, other than pledges of
Capital Stock securing the Bank Indebtedness or other than to Holdings or a
Wholly Owned Subsidiary and (ii) shall not permit any Restricted Subsidiary,
--
directly or indirectly, to issue or sell or otherwise dispose of any shares of
its Capital Stock other than to Holdings or a Wholly Owned Subsidiary; in each
case unless (x) immediately after giving effect to such sale, pledge,
-
hypothecation or other disposition or issuance, such Restricted Subsidiary
continues to be a Restricted Subsidiary and (y) the proceeds of any such sale of
-
Capital Stock are treated as Net Available Cash from an Asset Disposition and
are applied in accordance with the terms of Section 4.06; provided, however,
-------- -------
that this Section 4.08 shall not prohibit (A) the sale of all of the Capital
-
Stock of any Restricted Subsidiary (other than Iron Age), (B) the sale, pledge,
-
hypothecation or other disposition of Preferred Stock of a Subsidiary in
compliance with Section 4.03 or (C) the
-
54
<PAGE>
issuance or sale of any Preferred Stock of a Restricted Subsidiary if such
issuance or sale would be in compliance with Section 4.03, provided further,
-------- -------
however, that Holdings shall not sell, pledge, hypothecate or otherwise dispose
- - -------
of any shares of Capital Stock of Iron Age, other than pledges of Capital Stock
of Iron Age securing the Bank Indebtedness.
SECTION 4.09. Change of Control. (a) Upon the occurrence of a
-----------------
Change of Control, each Holder shall have the right to require that Holdings
repurchase such Holder's Discount Notes at a purchase price in cash equal to
101% of the Accreted Value thereof plus accrued and unpaid interest and
liquidated damages, if any, to the date of repurchase (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), in accordance with the provisions of Section
4.09(b).
(b) Within 30 days following any Change of Control, Holdings
shall mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder
has the right to require Holdings to purchase such Holder's Discount
Notes at a purchase price in cash equal to 101% of the Accreted Value
thereof plus accrued and unpaid interest and liquidated damages, if
any, to the date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest and liquidated
damages, if any, on the relevant interest payment date);
(2) the circumstances and relevant facts and
relevant financial information regarding such Change of
Control;
(3) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and
(4) the procedures determined by Holdings, consistent with
this Indenture, that a Holder must follow in order to have its Discount
Notes repurchased.
Holders electing to have a Discount Note purchased shall be
required to surrender the Discount Note, with an appropriate form duly
completed, to Holdings at the address specified in the notice at least three
Business Days prior to the purchase date. Holders will be entitled to withdraw
55
<PAGE>
their election if the Trustee or Holdings receives not later than one Business
Day prior to the purchase date, a telegram, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Discount Note
which was delivered for purchase by the Holder and a statement that such Holder
is withdrawing his election to have such Discount Note purchased.
(c) On the purchase date, all Discount Notes purchased by
Holdings under this Section 4.09 shall be delivered by the Trustee for
cancellation, and Holdings shall pay the purchase price plus accrued and unpaid
interest and liquidated damages, if any, to the Holders entitled thereto.
(d) Holdings shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Discount Notes pursuant to
this Indenture. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Indenture, Holdings shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Indenture by virtue thereof.
SECTION 4.10. Limitation on Liens. Holdings shall not,
-------------------
directly or indirectly, Incur or permit to exist any Lien of any nature
whatsoever on any property of Holdings (including Capital Stock of a Restricted
Subsidiary), whether owned at the Issue Date or thereafter acquired, other than
Permitted Liens, unless the Discount Notes are secured on an equal and ratable
basis with the obligations so secured until such time as such obligation is no
longer secured by a Lien.
SECTION 4.11. Compliance Certificate. (a) Holdings shall
----------------------
deliver to the Trustee, within 120 days after the end of each fiscal year, an
Officers' Certificate stating that a review of the activities of Holdings and
its Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether Holdings
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 Holdings 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
56
<PAGE>
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 Holdings 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 Discount
Notes is prohibited or if such event has occurred, a description of the event
and what action Holdings is taking or proposes to take with respect thereto.
(b) Holdings shall deliver to the Trustee and the
Representative as soon as possible, and in any event within 30 days after
Holdings becomes aware of the occurrence of any Default or Event of Default, an
Officers' Certificate specifying such Default or Event of Default and what
action Holdings is taking or proposes to take with respect thereto.
SECTION 4.12. Further Instruments and Acts. Upon request of
----------------------------
the Trustee, Holdings will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.13. Maintenance of Office or Agency. Holdings shall
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or agency
where (i) the Discount Notes may be surrendered for registration of transfer or
-
exchange, (ii) the Discount Notes may be presented for payment and (iii) notices
-- ---
and demands to or upon Holdings in respect of the Discount Notes and this
Indenture may be served. Holdings 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 Holdings 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
address of the Trustee's Corporate Trust Office as set forth in Section 10.02.
Holdings may also from time to time designate one or more
other offices or agencies where the Discount 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 Holdings of its obligation to maintain an office or agency in
the Borough of Manhattan, The City of New York, for such purposes. Holdings
shall
57
<PAGE>
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.
Holdings hereby initially designates the Trustee's Corporate
Trust Office as such office of Holdings in accordance with this Section 4.14.
SECTION 4.14. Corporate Existence. Subject to Article 5,
-------------------
Holdings shall do or cause to be done all things necessary to, and shall cause
each of its Subsidiaries to, preserve and keep in full force and effect the
corporate, partnership or limited liability company existence and rights
(charter and statutory), licenses and/or franchises of Holdings and each of its
Subsidiaries; provided, however, that Holdings or any of its Subsidiaries shall
-------- -------
not be required to preserve any such existence (in the case of Subsidiaries),
rights, licenses or franchises if (x) Holdings shall reasonably determine that
-
the preservation thereof is no longer desirable in the conduct of the business
of Holdings and its Subsidiaries taken as a whole or (y) the loss thereof is not
-
materially adverse to Holdings and its Subsidiaries taken as a whole or to the
ability of Holdings to otherwise satisfy its obligations hereunder; provided
--------
further, however, that the foregoing shall not prohibit the sale, transfer or
- - ------- -------
conveyance of a Subsidiary or any of its assets in compliance with the terms of
this Indenture.
SECTION 4.15. Payment of Taxes. Holdings shall timely pay or
----------------
discharge, or cause to be paid or discharged, all material taxes, assessments
and governmental charges levied or imposed upon Holdings or any Subsidiary or
upon the income, profits or property of Holdings or any Subsidiary; provided,
--------
however, that Holdings shall not be required to pay or discharge or cause to be
- - -------
paid or discharged any such tax, assessment, charge or claim the amount,
applicability or validity of which is being contested in good faith by
appropriate proceedings properly instituted and diligently conducted and for
which adequate provision (in the good faith judgment of management of Holdings)
has been made or where the failure to effect such payment or discharge is not
adverse in any material respect to the Holders or is not materially adverse to
Holdings and its Subsidiaries taken as a whole or to the ability of Holdings to
otherwise satisfy its obligations hereunder.
58
<PAGE>
ARTICLE 5
Successor Company
SECTION 5.01. When Holdings May Merge or Transfer Assets.
------------------------------------------
Holdings shall not consolidate with or merge with or into, or convey, transfer
or lease, in one transaction or a series of transactions, all or substantially
all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and existing under the
-----------------
laws of the United States of America, any State thereof or the District
of Columbia and the Successor Company (if not Holdings) shall expressly
assume, by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of
Holdings under the Discount Notes and this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Subsidiary of the Successor Company as a result of such
transaction as having been Incurred by such Successor Company or such
Subsidiary of the Successor Company at the time of such transaction),
no Default or Event of Default shall have occurred and be continuing;
(iii) except in the case of a merger the sole purpose of which
is to change Holdings' jurisdiction of incorporation, immediately after
giving effect to such transaction, the Successor Company would be able
to Incur an additional $1.00 of Indebtedness pursuant to Section
4.03(a);
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount that
is not less than the Consolidated Net Worth of Holdings immediately
prior to such transaction; and
(v) Holdings shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture, if
any, comply with this Indenture.
59
<PAGE>
Notwithstanding the foregoing clauses (ii), (iii) and (iv),
any Restricted Subsidiary may consolidate with, merge into, or transfer all or
part of its properties and assets to, Holdings.
The Successor Company shall succeed to, and be substituted
for, and may exercise every right and power of, Holdings under this Indenture,
but in the case of a conveyance, transfer or lease of all or substantially all
of the assets of Holdings, Holdings shall not be released from the obligation to
pay the Accreted Value of and interest and liquidated damages, if any, on the
Discount Notes.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default"
-----------------
is:
(i) a default in the payment of interest and liquidated
damages, if any, on any Discount Note when due, continued for 30 days;
(ii) a default in the payment of Accreted Value of any
Discount Note when due at its Stated Maturity, upon optional
redemption, upon required repurchase, upon declaration or otherwise;
(iii) the failure by Holdings to comply with its obligations
under Section 4.04 or 4.09 or Article 5;
(iv) the failure by Holdings to comply for 30 days after
notice with any of its obligations under Section 4.02, 4.03, 4.05,
4.06, 4.07, 4.08, 4.10 or 4.13 (other than a failure to purchase
Discount Notes when required under Section 4.06);
(v) the failure by Holdings to comply for 60 days after notice
with any of its agreements in the Discount Notes or this Indenture
(other than those referred to in clauses (i), (ii), (iii) and (iv)
above);
(vi) the failure by Holdings or any Material Subsidiary to
pay any Indebtedness within any applicable grace period after final
maturity or the acceleration of any such Indebtedness by the holders
thereof because of a default, if the total amount of such Indebtedness
60
<PAGE>
unpaid or accelerated exceeds $10 million and such
failure continues for 10 Business Days after notice;
(vii) Holdings or any Material Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against
it in an involuntary case,
(C) consents to the appointment of a Custodian of it or
for any substantial part of its property,
(D) makes a general assignment for the benefit of its
creditors or
(E) takes any comparable action under any foreign laws;
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against Holdings or any Material
Subsidiary in an involuntary case,
(B) appoints a Custodian of Holdings or any Material
Subsidiary or for any substantial part of its property,
(C) orders the winding up or liquidation of Holdings or
any Material Subsidiary or
(D) any similar relief is granted with respect to
Holdings or any Material Subsidiary under any foreign laws,
and in each such case the order or decree remains
unstayed and in effect for 60 days; or
(ix) the rendering of any judgment or decree for the payment
of money in excess of $10 million against Holdings or a Material
Subsidiary, if such judgment or decree remains outstanding for a period
of 60 days and is not discharged, waived or stayed within 10 Business
Days after notice;
61
<PAGE>
(x) a Subsidiary Guaranty ceases to be in full force and
effect (other than in accordance with the terms of such Subsidiary
Guaranty of the Senior Subordinated Indenture) or a Subsidiary
Guarantor denies or disaffirms its obligations under its Subsidiary
Guaranty and such Default continues for 30 days; or
(xi) the failure by any Subsidiary Guarantor to comply with
its obligations under any Subsidiary Guaranty to which such Subsidiary
Guarantor is a party, after any applicable grace period.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
Notwithstanding the foregoing a default under clause (iv) or
(v) shall not constitute an Event of Default until the Trustee or the Holders of
at least 25% in aggregate principal amount of the outstanding Discount Notes
notify Holdings of the default and Holdings does not cure such default within
the time specified in clauses (iv) and (v) after receipt of such notice. Such
notice must specify the default, demand that it be remedied and state that such
notice is a "Notice of Default" (and, if given by the Holders, a copy of such
-----------------
notice shall also be given to the Trustee).
SECTION 6.02. Acceleration. If an Event of Default occurs
------------
and is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount of the outstanding Discount Notes may, after giving 10
Business Days' notice to the holders of all Designated Senior Indebtedness and
the Representative (provided, however, that no such notice need be given if, at
-------- -------
such time (i) prior to the date on which the Bank Indebtedness has been repaid
-
in full in cash, payment of any Bank Indebtedness shall have been accelerated or
(ii) on or after the date on which the Bank Indebtedness has been repaid in full
--
in cash, payment of any Designated Senior Indebtedness shall have been
accelerated), declare the Accreted Value of, and accrued but unpaid interest and
liquidated damages, if any, on, all the Discount Notes to be due and payable.
Upon such a declaration, such Accreted Value, interest and liquidated damages
shall be due and payable immediately. If an Event of Default
62
<PAGE>
relating to certain events of bankruptcy, insolvency or reorganization of
Holdings occurs and is continuing, the Accreted Value of, and interest and
liquidated damages, if any, on, all the Discount Notes will ipso facto become
---- -----
and be immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders of the Discount Notes. The Holders of a
majority in aggregate principal amount of the outstanding Discount Notes by
written notice to the Trustee may on behalf of all Holders rescind any such
acceleration with respect to the Discount Notes and its consequences.
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 Accreted Value of, or interest or liquidated damages, if any, on, the
Discount Notes or to enforce the performance of any provision of the Discount
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Discount Notes or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Noteholder in exercising
any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default. No
remedy is exclusive of any other remedy. All available remedies are cumulative
to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults. The Holders of a
-----------------------
majority in aggregate principal amount of the Discount Notes by notice to the
Trustee may waive an existing Default and its consequences, except (i) a Default
-
in the payment of the Accreted Value of, or interest or liquidated damages, if
any, on, a Discount Note or (ii) a Default in respect of a provision that under
--
Section 9.02 cannot be amended without the consent of each Noteholder affected.
When a Default is waived, it is deemed cured, but no such waiver shall extend to
any subsequent or other Default or impair any consequent right.
SECTION 6.05. Control by Majority. Subject to Section 7.02,
-------------------
the Holders of a majority in aggregate principal amount of the Discount Notes
may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or of exercising any trust or power conferred on
the Trustee. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture or that the Trustee determines is unduly
63
<PAGE>
prejudicial to the rights of other Noteholders or would involve the Trustee in
personal liability; provided, however, that the Trustee may take any other
-------- -------
action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the
-------------------
right to receive payment of Accreted Value, premium, interest or liquidated
damages, if any, when due, a Noteholder may not pursue any remedy with respect
to this Indenture or the Discount Notes unless:
(1) the Holder has previously given to the Trustee written
notice stating that an Event of Default is continuing;
(2) the Holders of at least 25% in aggregate principal amount
of the Discount Notes have made a written request to the Trustee to
pursue the remedy;
(3) such Holders have offered to the Trustee reasonable
security or indemnity satisfactory to the Trustee against any loss,
liability or expense;
(4) the Trustee has not complied with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of a majority in aggregate principal amount
of the Discount Notes have not given the Trustee a written direction
that in the opinion of the Trustee is inconsistent with the written
request during such 60-day period.
A Noteholder may not use this Indenture to prejudice the rights of another
Noteholder or to obtain a preference or priority over another Noteholder.
SECTION 6.07. Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of Accreted Value of, and interest and liquidated damages, if
any, on, the Discount Notes held by such Holder, on or after the respective due
dates expressed in the Discount Notes, or to bring suit for the enforcement of
any such payment on or
64
<PAGE>
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(i) or 6.01(ii) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against Holdings for the whole amount then due and owing (together with interest
on any unpaid interest to the extent lawful) and the amounts provided for in
Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
--------------------------------
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Noteholders
allowed in any judicial proceedings relative to Holdings, its creditors or its
property and, unless prohibited by law or applicable regulations, may vote on
behalf of the Holders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such judicial proceeding
is hereby authorized by each Holder to make payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money
----------
or property pursuant to this Article 6, it shall pay out the money or property
in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Noteholders for amounts due and unpaid on the
Discount Notes for Accreted Value, interest and liquidated damages,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Discount Notes for Accreted Value,
interest and liquidated damages, respectively; and
THIRD: to Holdings.
The Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 6.10. At least 15 days before
such record date, Holdings shall mail to each Noteholder and the Trustee a
notice that
65
<PAGE>
states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the
---------------------
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, 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 6.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit
by Holders of more than 10% in aggregate principal amount of the Discount Notes.
SECTION 6.12. Waiver of Stay or Extension Laws. Holdings (to
--------------------------------
the extent it may lawfully do so) shall not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture; and Holdings (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) The duties and
-----------------
responsibilities of the Trustee shall be as provided by the TIA and this
Indenture. If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture and use the
same degree of care and skill in their exercise as a prudent Person would
exercise or use under the circumstances in the conduct of such Person's own
affairs.
66
<PAGE>
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(1) this paragraph (c) does not limit the effect of paragraph
(b) of this Section 7.01;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
written direction received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with Holdings.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
67
<PAGE>
(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, or take any action at the request or direction of the Holders
if it shall have reasonable grounds to believe that repayment of such funds or
reasonable indemnity satisfactory to it against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01 and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. Subject to the provisions
-----------------
of Section 315 of the TIA:
(a) The Trustee may conclusively rely and shall be fully
protected in relying on any document believed by it to be genuine and to have
been signed or presented by the proper person. The Trustee need not investigate
any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents, attorneys, custodians
and nominees and shall not be responsible for the misconduct or negligence of
any agent attorney, custodian and/or nominee appointed with due care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
-------- -------
constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Discount Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
68
<PAGE>
(f) Any request or direction of Holdings addressed to the
Trustee shall be sufficiently evidenced by a writing signed in the name of
Holdings by a Holdings Officer and any resolution of the Board of Directors
shall be sufficiently evidenced by a resolution of the Board of Directors.
(g) 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 satisfactory to it against the costs,
expenses and liabilities that might be incurred by the Trustee in the event that
it acts in compliance with such request or direction.
(h) In the event that the Trustee is also acting as Paying
Agent or Registrar hereunder, the rights and protections afforded to the Trustee
pursuant to this Article 7 shall also be afforded to such Paying Agent or
Registrar.
(i) The Trustee shall not be charged with knowledge of any
Default of Event of Default unless either (i) a Trust Officer shall have actual
-
knowledge of such Default or Event of Default or (ii) written notice of such
--
Default or Event of Default shall have been given to the Trustee by Holdings or
any Holder.
SECTION 7.03. Individual Rights of Trustee. The Trustee in
----------------------------
its individual or any other capacity may become the owner or pledgee of Discount
Notes and may otherwise deal with Holdings and its Affiliates with the same
rights it would have if it were not Trustee. Any Paying Agent or Registrar may
do the same with like rights. However, the Trustee must comply with Sections
7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
--------------------
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Discount Notes, it shall not be accountable for Holdings'
use of the proceeds from the Discount Notes, and it shall not be responsible for
any statement of Holdings in this Indenture or in any document issued in
connection with the sale of the Discount Notes or in the Discount Notes other
than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
------------------
continuing and if it is actually known to a
69
<PAGE>
Trust Officer of the Trustee, the Trustee shall mail to each Noteholder and the
Representative notice of the Default within 30 days after it occurs. Except in
the case of a Default in payment of Accreted Value of, or interest or liquidated
damages on, any Discount Note, the Trustee may withhold the notice to the
Noteholders if and so long as a committee of Trust Officers in good faith
determines that withholding the notice is not opposed to the interests of
Noteholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
-----------------------------
practicable after each May 15 beginning with May 15, 1999, and in any event
prior to July 15 in each year, the Trustee shall mail to each Noteholder a brief
report dated as of such date that complies with Section 313(a) of the TIA. The
Trustee also shall comply with Section 313(b) of the TIA. The Trustee shall also
transmit by mail all reports as required by Section 313(c) of the TIA.
A copy of each report at the time of its mailing to
Noteholders shall be filed with the SEC and each stock exchange, if any, on
which the Discount Notes are listed in accordance with Section 313(d) of the
TIA. Holdings agrees to notify promptly the Trustee in writing whenever the
Discount Notes become listed on any stock exchange and of any delisting thereof.
SECTION 7.07. Compensation and Indemnity. Holdings shall pay
--------------------------
to the Trustee promptly upon request from time to time reasonable compensation
for its services. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. Holdings shall reimburse the
Trustee promptly upon request for all reasonable out-of-pocket expenses incurred
or made by it, including costs of collection, in addition to the compensation
for its services. Such expenses shall include, without limitation, the
reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts and other persons not
regularly in its employ. Holdings shall indemnify and hold harmless the Trustee
and its officers, directors, agents and employees against any and all loss,
liability or expense (including attorneys' fees, expenses, disbursements, and
advances) incurred by it in connection with the acceptance and administration of
this trust and the performance of its duties hereunder. The Trustee shall notify
Holdings promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify Holdings shall not
70
<PAGE>
relieve Holdings of its obligations hereunder. Holdings shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and Holdings shall pay the fees and expenses of such counsel. Holdings
need not reimburse any expense or indemnify against any loss, liability or
expense incurred by the Trustee through the Trustee's own wilful misconduct,
negligence or bad faith. Holdings need not pay for any settlement made by the
Trustee without Holdings' consent, such consent not to be unreasonably withheld.
To secure Holdings' payment obligations in this Section 7.07, the Trustee shall
have a lien prior to the Discount Notes on all money or property held or
collected by the Trustee other than money or property held in trust to pay
Accreted Value of, and interest and liquidated damages on, particular Discount
Notes.
Holdings' payment obligations pursuant to this Section 7.07
shall survive the discharge of this Indenture or the resignation or removal of
the Trustee. When the Trustee incurs expenses after the occurrence of a Default
specified in Section 6.01(vii) or (viii) with respect to Holdings, the expenses
are intended to constitute expenses of administration under the Bankruptcy Law.
The Company shall comply with the provisions of Section
313(b)(2) of the TIA to the extent applicable.
SECTION 7.08. Replacement of Trustee. The Trustee may resign
----------------------
at any time by so notifying Holdings in writing. The Holders of a majority in
aggregate principal amount of the Discount Notes may remove the Trustee by so
notifying the Trustee and Holdings in writing and may appoint a successor
Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10
or Section 7.12;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
71
<PAGE>
If the Trustee resigns, is removed by Holdings or by the Holders of a majority
in aggregate principal amount of the Discount Notes and such Holders do not
reasonably promptly appoint a successor Trustee reasonably satisfactory to
Holdings, or if a vacancy exists in the office of Trustee for any reason (the
Trustee in such event being referred to herein as the retiring Trustee),
Holdings shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to Holdings. 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
Noteholders. The retiring Trustee shall promptly transfer all property held by
it as Trustee to the successor Trustee, subject to the lien provided for in
Section 7.07.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in aggregate principal amount of the Discount Notes may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to
this Section 7.08, Holdings' obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
---------------------------
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee provided that such transferee
corporation shall be eligible under this Article 7 to serve as Trustee
hereunder.
If, at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture, any of the
72
<PAGE>
Discount Notes shall have been authenticated but not delivered, any such
successor to the Trustee may adopt the certificate of authentication of any
predecessor Trustee, and deliver such Discount Notes so authenticated; and if at
that time, any of the Discount Notes shall not have been authenticated, any
successor to the Trustee may authenticate such Discount Notes either in the name
of any predecessor hereunder or in the name of the successor to the Trustee; and
in all such cases such certificates shall have the full force which it is
anywhere in the Discount Notes or in this Indenture provided that the
certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The
-----------------------------
Trustee shall at all times satisfy the requirements of Section 310(a) of the
TIA. The Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of condi-
tion. The Trustee shall comply with Section 310(b) of the TIA; provided,
--------
however, that there shall be excluded from the operation of Section 310(b)(1) of
- - -------
the TIA any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of Holdings are
outstanding if the requirements for such exclusion set forth in Section
310(b)(1) of the TIA are met.
SECTION 7.11. Preferential Collection of Claims Against
-----------------------------------------
Holdings. The Trustee shall comply with Section 311(a) of the TIA, excluding any
- - --------
creditor relationship listed in Section 311(b) of the TIA. A Trustee who has
resigned or been removed shall be subject to Section 311(a) of the TIA to the
extent indicated therein.
SECTION 7.12. Conflicting Interests. If the Trustee has or
---------------------
shall acquire a conflicting interest within the meaning of the TIA, the Trustee
shall either eliminate such interest or resign, to the extent and in the manner
provided by, and subject to the provisions of, the TIA and this Indenture. To
the extent permitted by the TIA, the Trustee shall not be deemed to have a
conflicting interest by virtue of being a Trustee under this Indenture with
respect to the Discount Notes.
73
<PAGE>
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Discount Notes;
----------------------------------------
Defeasance. (a) When (i) Holdings delivers to the Trustee all outstanding
- - ---------- -
Discount Notes (other than Discount Notes replaced pursuant to Section 2.06) for
cancellation or (ii) all outstanding Discount Notes have become due and payable,
--
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article 3, and Holdings irrevocably deposits with the Trustee funds
sufficient to pay at maturity or upon redemption all outstanding Discount
Notes, including interest and liquidated damages, if any, thereon to maturity or
such redemption date (other than Discount Notes replaced pursuant to Section
2.06), and if in either case Holdings pays all other sums payable hereunder by
Holdings, then this Indenture shall, subject to Section 8.01(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of Holdings accompanied by an Officers' Certificate and an
Opinion of Counsel and at the cost and expense of Holdings.
(b) Subject to Sections 8.01(c) and 8.02, Holdings at any time
may terminate (i) all its obligations under the Discount Notes and this
-
Indenture ("legal defeasance option") or (ii) its obligations under Sections
----------------------- --
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.13, 5.01(iii) and
5.01(iv) and the operation of Sections 6.01(vi), 6.01(vii), 6.01(viii) and
6.01(ix) (but, in the case of Sections 6.01(vii) and 6.01(viii), with respect
only to Material Subsidiaries) ("covenant defeasance option"). The Company may
--------------------------
exercise its legal defeasance option notwithstanding its prior exercise of its
covenant defeasance option.
If Holdings exercises its legal defeasance option, payment of
the Discount Notes may not be accelerated because of an Event of Default with
respect thereto. If Holdings exercises its covenant defeasance option, payment
of the Discount Notes may not be accelerated because of an Event of Default
specified in Sections 6.01(iii), 6.01(iv), 6.01(vi), 6.01(vii), 6.01(viii) and
6.01(ix) (but, in the case of Sections 6.01(iii), not with respect to an Event
of Default under Sections 5.01(i) or 5.02(ii), and in the case of Sections
6.01(vii) and 6.01(viii), with respect only to Material Subsidiaries).
74
<PAGE>
Upon satisfaction of the conditions set forth herein and upon
request of Holdings, the Trustee shall acknowledge in writing the discharge of
those obligations that Holdings terminates.
(c) Notwithstanding Sections 8.01(a) and 8.01(b), Holdings'
obligations in Sections 2.03, 2.04, 2.05, 2.06, 7.07, 7.08, 8.04, 8.05 and 8.06
shall survive until the Discount Notes have been paid in full. Thereafter,
Holdings' obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company may
------------------------
exercise its legal defeasance option or its covenant defeasance option only if:
(1) Holdings irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations for the payment of Accreted Value
of, and interest and liquidated damages, if any, on, the Discount Notes
to redemption or maturity, as the case may be;
(2) Holdings delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that such deposits by Holdings will provide cash at such times
and in such amounts as will be sufficient to pay Accreted Value,
interest and liquidated damages when due on all the Discount Notes to
maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Sections 6.01(7) or (8) with
respect to Holdings occurs which is continuing at the end of such
123-day period;
(4) the deposit does not constitute a default under any other
agreement binding on Holdings,
(5) in the case of the legal defeasance option, Holdings shall
have delivered to the Trustee an Opinion of Counsel stating that (i)
-
Holdings has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the Issue Date there
--
has been a change in the applicable United States federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel (which opinion may be subject to customary assumptions and
exclusions) shall confirm that, the Noteholders will
75
<PAGE>
not recognize income, gain or loss for United States federal income tax
purposes as a result of such defeasance and will be subject to United
States 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,
(6) in the case of the covenant defeasance option, Holdings
shall have delivered to the Trustee an Opinion of Counsel (which
opinion may be subject to customary assumptions and exclusions) to the
effect that the Noteholders will not recognize income, gain or loss for
United States federal income tax purposes as a result of such covenant
defeasance and will be subject to United States federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred, and
(7) Holdings delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
to the legal defeasance or covenant defeasance, as the case may be, and
discharge of the Discount Notes as contemplated by this Article 8 have
been complied with.
Before or after a deposit, Holdings may make arrangements
satisfactory to the Trustee for the redemption of Discount Notes at a future
date in accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall
--------------------------
hold in trust money or U.S. Government Obligations deposited with it pursuant to
this Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of Accreted Value of, and interest and liquidated
damages, if any, on the Discount Notes.
SECTION 8.04. Repayment to Holdings. The Trustee and the
---------------------
Paying Agent shall promptly turn over to Holdings upon written request any
excess money or securities held by them at any time. Subject to any applicable
abandoned property law, the Trustee and the Paying Agent shall pay to Holdings
upon request any money held by them for the payment of Accreted Value of, or
interest or liquidated damages, if any, on, the Discount Notes that remains
unclaimed for two years, and, thereafter, Noteholders entitled to the money
76
<PAGE>
shall look to Holdings for payment as general unsecured
creditors.
SECTION 8.05. Indemnity for Government Obligations. The
------------------------------------
Company shall pay and shall fully indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against deposited U.S. Government
Obligations or the principal and interest received on such U.S. Government
Obligations. This section shall survive the termination or resignation of the
Trustee.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
-------------
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, Holdings' obligations under this
Indenture and the Discount Notes shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, if
-------- -------
Holdings has made any payment of Accreted Value of, or interest or liquidated
damages on, any Discount Notes because of the reinstatement of its obligations,
Holdings shall be subrogated to the rights of the Holders of such Discount Notes
to receive such payment from the money or U.S. Government Obligations held by
the Trustee or Paying Agent.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. Notwithstanding
--------------------------
Section 9.02, except as set forth below in this Section 9.01, Holdings and the
Trustee may amend or supplement this Indenture or the Discount Notes without
notice to or consent of any Noteholder:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to provide for assumption by a successor of the
obligations of Holdings under the Indenture in accordance with Article
5;
77
<PAGE>
(c) to provide for uncertificated Discount Notes in addition
to or in place of certificated Discount Notes; provided, however, that
-------- -------
the uncertificated Discount Notes are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Discount Notes are described in Section 163(f)(2)(B) of
the Code;
(d) to add Guarantees with respect to the Discount Notes or to
secure the Discount Notes;
(e) to add to the covenants of Holdings for the benefit of
the Holders or to surrender any right or power herein conferred upon
Holdings;
(f) to comply with any requirement of the SEC in connection
with the qualification of this Indenture under the TIA; or
(g) to make any change that does not adversely affect the
rights of any Noteholder.
After an amendment or supplement to this Indenture under this
Section 9.01 becomes effective, Holdings shall mail to Noteholders a notice
briefly describing such amendment or supplement to this Indenture. The failure
to give such notice to all Noteholders, or any defect therein, shall not impair
or affect the validity of an amendment under this Section 9.01.
Upon the written request of Holdings, and upon receipt by the
Trustee of an Officers' Certificate and an Opinion of Counsel, the Trustee shall
join with Holdings in the execution of any amended or supplemental indenture
authorized or permitted by the terms of this Indenture and shall make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee shall not be obligated to enter into any such amended or
supplemental indenture that adversely affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.02. With Consent of Holders. Except as set forth
-----------------------
below in this Section 9.02, Holdings and the Trustee may amend or supplement
this Indenture or the Discount Notes without notice to any Noteholders but with
the written consent of the Holders of at least a majority in aggregate principal
amount at maturity of the Discount Notes then outstanding. However, without the
consent of each
78
<PAGE>
Noteholder affected thereby, an amendment may not (with respect to any Discount
Notes held by a non-consenting Holder):
(i) reduce the amount of Discount Notes whose Holders must
consent to an amendment;
(ii) reduce the rate of or extend the time for payment of
interest on, or calculation of Accreted Value for, any Discount Note;
(iii) reduce the principal at maturity or Accreted Value of,
or extend the Stated Maturity of, any Discount Note;
(iv) reduce the premium payable upon the redemption or
repurchase of any Discount Note or change the time at which any
Discount Note may be redeemed in accordance with Article 3,
(v) reduce the liquidated damages on the Discount Notes, or
change the time of payment thereof, as provided in the Registration
Agreement;
(vi) make any Discount Note payable in money other than that
stated in the Discount Note;
(vii) impair the right of any Holder to receive payment of
Accreted Value of, and interest and liquidated damages, if any, on,
such Holder's Discount Notes on or after the due date therefor or to
institute suit for enforcement of any payment on or with respect to
such Holder's Discount Notes; or
(viii) make any change in Section 6.04 or 6.07 or this second
sentence of this Section 9.02.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment or supplement to this Indenture under this
Section 9.02 becomes effective, Holdings shall mail to Noteholders a notice
briefly describing such amendment or supplement to this Indenture. The failure
to give such notice to all Noteholders, or any defect therein,
79
<PAGE>
shall not impair or affect the validity of an amendment under this Section 9.02.
Upon the written request of Holdings, and upon receipt by the
Trustee of an Officers' Certificate and an Opinion of Counsel, the Trustee shall
join with Holdings in the execution of any amended or supplemental indenture
authorized or permitted by the terms of this Indenture and shall make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee shall not be obligated to enter into any such amended or
supplemental indenture that adversely affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.03. Compliance with Trust Indenture Act. Every
-----------------------------------
amendment or supplement to this Indenture or the Discount Notes shall comply
with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
---------------------------------------------
consent to an amendment or supplement to or waiver of this Indenture by a Holder
of a Discount Note shall bind such Holder and every subsequent Holder of that
Discount Note or portion of the Discount Note that evidences the same debt as
the consenting Holder's Discount Note, even if notation of the consent or waiver
is not made on the Discount Note. However, any such Holder or subsequent Holder
may revoke any consent or waiver as to such Holder's Discount Note or portion of
the Discount Note if the Trustee receives the notice of revocation before the
date the applicable amendment, supplement or waiver becomes effective. After an
amendment, supplement or waiver becomes effective, it shall bind every
Noteholder. An amendment, supplement or waiver becomes effective upon the
execution of such amendment, supplement or waiver by Holdings and the Trustee.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Noteholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Noteholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date.
80
<PAGE>
No such consent shall be valid or effective for more than 120 days after such
record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder of Discount Notes, unless it makes a change described in
the second sentence of the first paragraph of Section 9.02 or the second
paragraph of Section 9.02, in which case the amendment, supplement or waiver
shall bind only those Noteholders which consented to it and every subsequent
Holder of a Discount Note or portion thereof which evidences the same debt as a
consenting Holder's Discount Note.
SECTION 9.05. Notation on or Exchange of Discount Notes. If
-----------------------------------------
an amendment, supplement or waiver changes the terms of a Discount Note, the
Trustee may, but shall not be required to, require the Holder of such Discount
Note to deliver it to the Trustee, and the Trustee may place an appropriate
notation on such Discount Note regarding the changed terms and return it to the
Holder. Alternatively, if Holdings so determines, Holdings in exchange for such
Discount Note shall issue, and the Trustee shall authenticate, a new Discount
Note that reflects the changed terms. Failure to make the appropriate notation
or to issue a new Discount Note shall not affect the validity of such amendment,
supplement or waiver.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall
--------------------------
sign any amendment, supplement or waiver authorized pursuant to this Article 9
if such amendment, supplement or waiver does not adversely affect the rights,
duties, liabilities or immunities of the Trustee. In signing such amendment,
the Trustee shall be entitled to receive indemnity reasonably satisfactory to it
and to receive, and shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that such amendment, supplement or
waiver is authorized or permitted by this Indenture.
ARTICLE 10
Miscellaneous
SECTION 10.01. Trust Indenture Act Controls. If any
----------------------------
provision of this Indenture limits, qualifies or conflicts with another
provision which is required to be
81
<PAGE>
included in this Indenture by the TIA, the required provision shall control.
SECTION 10.02. Notices. Any notice or communication by
-------
Holdings or the Trustee to the other is duly given if in writing and delivered
in Person or sent by first class mail (registered or certified, return receipt
requested), telecopier or overnight air guaranteeing next day delivery, to the
other's address:
if to Holdings:
Iron Age Corporation
Robinson Plaza Three, Suite 400
Pittsburgh, Pennsylvania 15205
attention: Chief Executive Officer
fax: 412-787-8112
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
attention: Lauren I. Norton
fax: 617-951-7050
if to the Trustee:
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, New York 10001
attention: Global Trust Services
fax: 212-946-8158
The Company or the Trustee by notice to the other 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 receipt is 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 Noteholder shall be sent by
first class mail (registered or certified, return
82
<PAGE>
receipt requested) or by overnight air courier guaranteeing next day delivery to
such Noteholder's address as it appears on the registration books of the
Registrar. Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication is given in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 10.03. Communication by Holders with Other Holders.
-------------------------------------------
Noteholders may communicate pursuant to Section 312(b) of the TIA with other
Noteholders with respect to their rights under this Indenture or the Discount
Notes. The Company, the Trustee, the Registrar and anyone else shall have the
protection of Section 312(c) of the TIA.
SECTION 10.04. Certificate and Opinion as to Conditions
----------------------------------------
Precedent. Upon any request or application by Holdings to the Trustee to take or
- - ---------
refrain from taking any action under this Indenture, Holdings shall furnish to
the Trustee:
(1) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been satisfied; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been satisfied;
SECTION 10.05. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the
83
<PAGE>
statements or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such Person, such
Person has made such examination or investigation as is necessary to
enable such Person to express an informed opinion as to whether or not
such covenant or condition has been satisfied; and
(4) a statement as to whether or not, in the opinion of such
Person, such covenant or condition has been satisfied.
SECTION 10.06. When Discount Notes Disregarded. In
-------------------------------
determining whether the Holders of the required principal amount of Discount
Notes have concurred in any direction, waiver or consent, Discount Notes owned
by Holdings or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with Holdings shall be disregarded
and deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Discount Notes which the Trustee actually knows are so owned
shall be so disregarded. Also, subject to the foregoing, only Discount Notes
outstanding at the time shall be considered in any such determination.
SECTION 10.07. Rules by Trustee, Paying Agent and Registrar.
--------------------------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Noteholders. The Registrar and the Paying Agent may make reasonable rules for
their functions.
SECTION 10.08. Legal Holidays. If a payment date is a Legal
--------------
Holiday, payment shall be made on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period. If a regular
record date is a Legal Holiday, the record date shall not be affected.
SECTION 10.09. Governing Law. THIS AGREEMENT SHALL BE
-------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO ITS CONFLICTS OF LAW RULES.
SECTION 10.10. No Recourse Against Others. No director,
--------------------------
officer, employee or stockholder, as such, of Holdings shall have any liability
for any obligations of Holdings under the Discount Notes or this Indenture or
for any claim based on, in respect of or by reason of such
84
<PAGE>
obligations or their creation. By accepting a Discount Note, each Noteholder
shall waive and release all such liability. The waiver and release shall be part
of the consideration for the issue of the Discount Notes.
SECTION 10.11. Successors. All agreements of Holdings in
----------
this Indenture and the Discount Notes shall bind its successors. All agreements
of the Trustee in this Indenture shall bind its successors.
SECTION 10.12. Counterparts. This Indenture may be executed
------------
in one or more counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
One signed copy is enough to prove this Indenture.
SECTION 10.13. Separability. In case any provision in this
------------
Indenture or the Discount 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 10.14. Benefits of Indenture. Nothing in this
---------------------
Indenture or in the Discount Notes, express or implied, shall give to any
Person, other than the parties hereto and their successors hereunder, and the
Holders, any benefit or any legal or equitable right, remedy or claim under this
Indenture except as provided in Articles 10 and 12.
SECTION 10.15. Table of Contents; Headings. The table of
---------------------------
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
85
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
IRON AGE HOLDINGS CORPORATION
By /s/ Keith A. McDonough
---------------------------------
Name: Keith A. McDonough
------------------------------
Title: Vice President - Finance
-----------------------------
THE CHASE MANHATTAN BANK
By /s/ R. Lorenzen
---------------------------------
Name: R. Lorenzen
------------------------------
Title: Senior Trust Officer
-----------------------------
<PAGE>
APPENDIX A
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A.
PROVISIONS RELATING TO INITIAL DISCOUNT NOTES
AND EXCHANGE NOTES
1. Definitions.
-----------
1.1 Definitions. For the purposes of this Appendix A the
-----------
following terms shall have the meanings indicated below in this Section 1.1.
Terms defined in this Indenture (to which this Appendix A is attached) and not
otherwise defined in this Appendix A are used herein with the meanings so
defined.
"Agent Members" is defined in Section 2.1(b).
-------------
"Depository" means The Depository Trust Company, its nominees
----------
and their respective successors.
"Discount Notes" means the Initial Discount Notes and the
--------------
Exchange Notes, treated as a single class.
"Discount Notes Custodian" means the custodian with respect to
------------------------
a Global Discount Note (as appointed by the Depository), or any successor person
thereto and shall initially be the Trustee.
"Exchange Notes" means the 121/8% Senior Discount Notes due
--------------
2009 to be issued pursuant to this Indenture in connection with an Exchange
Offer pursuant to the Registration Agreement.
"Exchange Offer" means the offer by Holdings, pursuant to the
--------------
Registration Agreement, to certain Holders of Initial Discount Notes to issue
and deliver to such Holders, in exchange for the Initial Discount Notes, a like
aggregate principal amount of Exchange Notes registered under the Securities
Act.
"Global Discount Note" is defined in Section 2.1(a) of this
--------------------
Appendix A.
"Initial Purchasers" means Salomon Brothers Inc, SBC Warburg
------------------
Dillon Read Inc. and Banque Nationale de Paris.
<PAGE>
"Initial Discount Notes" means the 12 1/8% Senior Discount
----------------------
Notes due 2009, to be issued pursuant to this Indenture.
"Purchase Agreement" means the Purchase Agreement, dated as of
------------------
April 21, 1998, among Holdings and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in
---
Rule 144A.
"Registration Agreement" means the Registration Agreement,
----------------------
dated as of April 24, 1998, among Holdings and the Initial Purchasers, as
amended or supplemented from time to time.
"Rule 144A" means Rule 144A under the Securities Act.
---------
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Shelf Registration Statement" means the registration
----------------------------
statement issued by Holdings in connection with the offer and sale of Initial
Discount Notes pursuant to the Registration Agreement.
"Transfer Restricted Discount Notes" means certificated
----------------------------------
Discount Notes and Discount Notes that bear or are required to bear the legend
set forth in Section 2.3(g) hereto.
2. The Discount Notes.
------------------
2.1 Forms Generally. The Initial Discount Notes are being
---------------
offered and sold by Holdings pursuant to the Purchase Agreement.
(a) Global Discount Notes. Initial Discount Notes offered
---------------------
and sold to a QIB in reliance on Rule 144A, as provided in the Purchase
Agreement, shall be issued initially in the form of one or more permanent global
Discount Notes in definitive, fully registered form without interest coupons
with the global securities legend and restricted securities legend set forth in
Exhibit 1 hereto (each, a "Global Discount Note"), which shall be deposited on
--------------------
behalf of the purchasers of the Initial Discount Notes represented thereby with
the Trustee, as custodian for the Depository (or with such other custodian as
the Depository
2
<PAGE>
may direct), and registered in the name of Cede and Co., as nominee of the
Depository, duly executed by Holdings and authenticated by the Trustee as
provided in the Indenture. The aggregate principal amount of the Global Discount
Notes may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depository or its nominee as hereinafter
provided.
(b) Book-Entry Provisions for Global Discount Notes. This
-----------------------------------------------
Section 2.1(b) shall apply only to a Global Discount Note deposited with, or on
behalf of, the Depository.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(b) and pursuant to an order of Holdings, authenticate and
deliver initially one or more Global Discount Notes that (a) shall be registered
-
in the name of Cede and Co., as nominee of the Depository for such Global
Discount Note or Global Discount Notes, and (b) shall be delivered by the
-
Trustee to such Depository or pursuant to such Depository's instructions or held
by the Trustee as custodian for the Depository.
Members of, or participants in, the Depository ("Agent
-----
Members") shall have no rights under this Indenture with respect to any Global
- - -------
Discount Note held on their behalf by the Depository or by the Trustee as the
custodian of the Depository or under such Global Discount Note, and the
Depository may be treated by Holdings, the Trustee and any agent of Holdings or
the Trustee as the absolute owner of such Global Discount Note for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
Holdings, the Trustee or any agent of Holdings or the Trustee from giving effect
to any written certification, proxy or other authorization furnished by the
Depository or shall impair, as between the Depository and its Agent Members, the
operation of customary practices of the Depository governing the exercise of the
rights of a holder of a beneficial interest in any Global Discount Note.
(c) Certificated Discount Notes. Except as provided in this
---------------------------
Section 2.1 or in Section 2.3, owners of beneficial interests in Global Discount
Notes will not be entitled to receive physical delivery of certificated Discount
Notes. Purchasers of Initial Discount Notes who are not QIBs will receive
certificated Initial Discount Notes; provided, however, that upon transfer of
-------- -------
such certificated Discount Notes to a QIB, such certificated Discount Notes
will, unless the Global Discount Note has
3
<PAGE>
previously been exchanged, be exchanged for an interest in a Global Discount
Note pursuant to the provisions of Section 2.3.
2.2 Authentication. The Trustee shall authenticate and
--------------
deliver (1) Initial Discount Notes for original issue in an aggregate principal
-
amount at maturity of $45,140,000 and (2) Exchange Notes for issue only in an
-
Exchange Offer pursuant to the Registration Agreement, for a like principal
amount of Initial Discount Notes, in each case upon a written order of Holdings
signed by two Officers. Such order shall specify the amount of the Discount
Notes to be authenticated and the date on which the original issue of Discount
Notes is to be authenticated and whether the Discount Notes are to be Initial
Discount Notes or Exchange Notes. The aggregate principal amount of Discount
Notes outstanding at any time may not exceed $45,140,000, except as provided in
Section 2.07 of this Indenture.
2.3 Transfer and Exchange.
---------------------
(a) Transfer and Exchange of Certificated Discount Notes.
----------------------------------------------------
When certificated Discount Notes are presented to the Registrar with a request
(x) to register the transfer of such certificated Discount Notes or (y) to
- -
exchange such certificated Discount Notes for an equal principal amount of
certificated Discount Notes of other authorized denominations, the Registrar
shall register the transfer or make the exchange as requested if its reasonable
requirements for such transaction are met; provided, however, that the
-------- -------
certificated Discount Notes surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to Holdings and
the Registrar duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) are being transferred or exchanged pursuant to an
effective registration statement under the Securities Act, pursuant to
Section 2.3(b) or pursuant to clause (A), (B) or (C) below, and are
accompanied by the following additional information and documents, as
applicable:
(A) if such certificated Discount Notes are being delivered
to the Registrar by a Holder for
4
<PAGE>
registration in the name of such Holder, without
transfer, a certification from such Holder to that
effect (in substantially the form set forth on the
reverse of the Discount Note); or
(B) if such certificated Discount Notes are being
transferred to Holdings or to a QIB in accordance
with Rule 144A, a certification to that effect (in
substantially the form set forth on the reverse of
the Discount Note); or
(C) if such certificated Discount Notes are being
transferred (x) pursuant to an exemption from
-
registration in accordance with Rule 144 or
Regulation S under the Securities Act, or
(y) to an institutional "accredited investor"
-
within the meaning of Rules 501(a)(1), (2),
(3) or (7) under the Securities Act in a
transaction exempt from the registration
requirements of the Securities Act or (z)
-
pursuant to an exemption from registration
under the Securities Act provided by Rule 144
thereunder (if applicable), (i) a certification
-
to that effect (in substantially the form set
forth on the reverse of the Discount Note) and (ii)
--
if Holdings or the Registrar so requests, an opinion
of counsel or other evidence reasonably satisfactory
to it as to the compliance with the restrictions
contained in the legend set forth in Section
2.3(g)(i).
(b) Restrictions on Transfer of a Certificated Discount
---------------------------------------------------
Note for a Beneficial Interest in a Global Discount Note. A certificated
- - --------------------------------------------------------
Discount Note may not be exchanged for a beneficial interest in a Global
Discount Note except upon satisfaction of the requirements set forth below. Upon
receipt by the Trustee of a certificated Discount Note, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to the
Trustee, together with:
(i) a certification (in substantially the form set forth
on the reverse of the Discount Note) that such certificated Discount
Note is being transferred (A) to a QIB in accordance with Rule 144A or
-
(B) outside the United States in an offshore transaction
-
5
<PAGE>
within the meaning of Regulation S and in compliance with Rule 904
under the Securities Act; and
(ii) written instructions directing the Trustee to make, or
to direct the Discount Notes Custodian to make, an adjustment on its
books and records with respect to such Global Discount Note to reflect
an increase in the aggregate principal amount of the Discount Notes
represented by the Global Discount Note, such instructions to contain
information regarding the participant account of the Depositary to be
credited with such increase;
then the Trustee (A) shall cancel such certificated Discount Note and cause, or
-
direct the Discount Notes Custodian to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Discount
Notes Custodian, the aggregate principal amount of Discount Notes represented by
the Global Discount Note to be increased by the aggregate principal amount of
the certificated Discount Note to be exchanged and (B) shall credit or cause to
-
be credited to the account of the Person specified in such instructions a
beneficial interest in the Global Discount Note equal to the principal amount of
the certificated Discount Note so cancelled. If no Global Discount Notes are
then outstanding and the Global Discount Note has not been previously exchanged
pursuant to Section 2.4, Holdings shall issue and the Trustee shall
authenticate, upon written order of Holdings in the form of an Officers'
Certificate, a new Global Discount Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Discount Notes. The
----------------------------------------------
transfer and exchange of Global Discount Notes or beneficial interests therein
shall be effected through the Depository, in accordance with this Indenture
(including applicable restrictions on transfer set forth herein, if any) and the
procedures of the Depository therefor. A transferor of a beneficial interest in
a Global Discount Note shall deliver to the Registrar a written order given in
accordance with the Depositary's procedures containing information regarding the
participant account of the Depositary to be credited with a beneficial interest
in the Global Discount Note. The Registrar shall, in accordance with such
instructions instruct the Depositary to credit to the account of the Person
specified in such instructions the transferred beneficial interest in the Global
Discount Note and to debit the account of the Person making the transfer
6
<PAGE>
the transferred beneficial interest in the Global Discount Note.
(d) Transfer of a Beneficial Interest in a Global Discount
------------------------------------------------------
Note for a Certificated Discount Note.
- - -------------------------------------
(i) Any person having a beneficial interest in a Global
Discount Note that is being transferred or exchanged pursuant to an
effective registration statement under the Securities Act or pursuant
to clause (A), (B) or (C) below may upon request, and if accompanied by
the information specified below, exchange such beneficial interest for
a certificated Discount Note of the same aggregate principal amount.
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 Discount Note and upon receipt by the Trustee of a written
order or such other form of instructions as is customary for the
Depository or the Person designated by the Depository as having such a
beneficial interest in a Transfer Restricted Discount Note only, the
following additional information and documents:
(A) if such beneficial interest is being transferred
to the Person designated by the Depository as being the owner
of a beneficial interest in a Global Discount Note, a
certification from such Person to that effect (in
substantially the form set forth on the reverse of the
Discount Note); or
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A, a certification to that
effect (in substantially the form set forth on the reverse of
the Discount Note); or
(C) if such beneficial interest is being transferred
(x) pursuant to an exemption from registration in accordance
-
with Rule 144 or Regulation S under the Securities Act, or (y)
-
to an institutional "accredited investor" within the meaning
of Rules 501(a)(1), (2), (3) and (7) under the Securities Act
in a transaction exempt from the registration requirements of
the Securities Act, or (z) pursuant to an exemption from
-
registration under the Securities Act provided by
7
<PAGE>
Rule 144 thereof (if applicable): (i) a certification to that
-
effect (in substantially the form set forth on the reverse of
the Discount Note) and (ii) if Holdings or Registrar so
--
requests, an opinion of counsel or other evidence reasonably
satisfactory to them as to the compliance with the
restrictions contained in the legend set forth in Section
2.3(g)(i);
then the Trustee or the Custodian, at the direction of the Trustee,
will cause, in accordance with the standing instructions and procedures
existing between the Depository and the Custodian, the aggregate
principal amount of the Global Discount Note to be reduced on its books
and records and, following such reduction, Holdings will execute and
the Trustee will authenticate and make available for delivery to the
transferee a certificated Discount Note.
(ii) Certificated Discount Notes issued in exchange for a
beneficial interest in a Global Discount Note pursuant to this Section
2.3(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 make such certificated Discount Notes
available for delivery to the persons in whose names such Discount
Notes are so registered in accordance with the instructions of the
Depository.
(e) Authentication of Certificated Discount Notes in Absence
--------------------------------------------------------
of Depository. If at any time:
- - -------------
(i) the Depository for the Discount Notes notifies Holdings
that the Depository is unwilling or unable to continue as Depository
for the Global Discount Notes and a successor Depository for the Global
Discount Notes is not appointed by Holdings within 90 days after
delivery of such notice; or
(ii) Holdings, in its sole discretion, notifies the Trustee
in writing that it elects to cause the issuance of certificated
Discount Notes under this Indenture,
then Holdings will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of certificated Discount
Notes to the Persons
8
<PAGE>
designated by Holdings, will authenticate and make available for delivery
certificated Discount Notes, in an aggregate principal amount equal to the
principal amount of the Global Discount Notes, in exchange for the Global
Discount Notes.
Subject to the provisions of the preceding paragraph, the
registered Holder of a Global Discount Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Discount Notes.
In the event of the occurrence of either of the events
specified in clauses (i) and (ii) of this Section 2.3(e), Holdings will promptly
make available to the Trustee a reasonable supply of certificated Discount Notes
in definitive, fully registered form without interest coupons.
(f) Restrictions on Transfer and Exchange of Global Discount
--------------------------------------------------------
Notes. Notwithstanding any other provisions of this Appendix A (other than the
- - -----
provisions set forth in Section 2.4), a Global Discount 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.
(g) Legends.
-------
(i) Each Global Discount Note shall bear a legend
substantially the same as the Global Discount Notes legend reproduced in Exhibit
1 to this Appendix A. Except as permitted by the following clauses (ii), (iii)
and (iv), each Global Discount Note, each Discount Note certificate evidencing
the Global Discount Notes and the certificated Discount Notes (and all Discount
Notes issued in exchange therefor or in substitution thereof, as appropriate)
shall bear a legend substantially the same as the Restricted Discount Notes
Legend reproduced in Exhibit 1 to this Appendix A.
(ii) Upon any sale or transfer of a Transfer Restricted
Discount Note (including any Transfer Restricted Discount Note represented by a
Global Discount Note) pursuant to Rule 144 under the Securities Act:
(A) in the case of any Transfer Restricted Discount Note
that is a certificated Discount Note, the
9
<PAGE>
Registrar shall permit the Holder thereof to exchange such Transfer
Restricted Discount Note for a certificated Discount Note that does not
bear the legend set forth above and rescind any restriction on the
transfer of such Transfer Restricted Discount Note; and
(B) in the case of any Transfer Restricted Discount Note
that is represented by a Global Discount Note, the Registrar shall
permit the Holder thereof to exchange such Transfer Restricted Discount
Note for a certificated Discount Note that does not bear the legend set
forth above and rescind any restriction on the transfer of such
Transfer Restricted Discount Note, in either case, if the Holder
certifies in writing to the Registrar that its request for such
exchange was made in reliance on Rule 144 (such certification to be in
substantially the form set forth on the reverse of the Initial Discount
Note).
(iii) After a transfer of any Initial Discount Note during the
period of the effectiveness of a Shelf Registration Statement with respect to
such Initial Discount Note, all requirements pertaining to legends on such
Initial Discount Note will cease to apply, the requirements requiring any such
Initial Discount Note issued to certain Holders be issued in global form will
cease to apply, and an Initial Discount Note in certificated or global form
without legends will be available to the transferee of the Holder of such
Initial Discount Note upon exchange of such transferring Holder's certificated
Initial Discount Note. Upon the occurrence of any of the circumstances described
in this clause (iii), Holdings will deliver an Officers' Certificate to the
Trustee instructing the Trustee to issue Discount Notes without any inapplicable
legend.
(iv) Upon the consummation of an Exchange Offer with respect
to the Initial Discount Notes pursuant to which Holders of Initial Discount
Notes are offered Exchange Notes in exchange for their Initial Discount Notes,
all requirements pertaining to the Initial Discount Notes that Initial Discount
Notes issued to certain Holders be issued in global form will cease to apply,
and certificated Initial Discount Notes with the restricted securities legend
set forth in Exhibit 1 hereto will be available to Holders of Initial Discount
Notes that do not exchange their Initial Discount Notes, and Exchange Notes in
certificated or global form will be available to Holders that exchange their
Initial Discount Notes in such Exchange Offer. Upon the
10
<PAGE>
occurrence of any of the circumstances described in this clause (iv), Holdings
will deliver an Officers' Certificate to the Trustee instructing the Trustee to
issue Discount Notes without any inapplicable legends.
(h) Cancellation or Adjustment of Global Discount Note. At
--------------------------------------------------
such time as all beneficial interests in a Global Discount Note have either been
exchanged for Certificated Discount Notes, redeemed, repurchased or canceled,
such Global Discount Note shall be returned to the Depository for cancellation
or retained and canceled by the Trustee. At any time prior to such cancellation,
if any beneficial interest in a Global Discount Note is exchanged for
Certificated Discount Notes, repurchased or canceled, the principal amount of
Discount Notes represented by such Global Discount Note shall be reduced and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Discount Notes Custodian for such Global Discount Note) with respect to such
Global Discount Note, by the Trustee or the Discount Notes Custodian, to reflect
such reduction.
(i) Obligations with Respect to Transfers and Exchanges of
------------------------------------------------------
Discount Notes.
- - --------------
(i) To permit registrations of transfers and exchanges,
Holdings shall execute and the Trustee shall authenticate Certificated
Discount Notes and Global Discount Notes at the Registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange of Discount Notes, but Holdings may require
payment of a sum sufficient to cover any transfer tax, assessments or
similar governmental charge payable in connection therewith.
(iii) The Registrar shall not be required to register the
transfer or exchange of any Discount Note for a period beginning 15
days before the mailing of a notice of an offer to repurchase Discount
Notes or 15 days before an interest payment date.
(iv) Prior to the due presentation for registration of
transfer of any Discount Note, Holdings, the Trustee, the Paying Agent
or the Registrar may deem and treat the person in whose name a Discount
Note is registered as the absolute owner of such Discount Note for the
purpose of receiving payment of principal of, and interest and
liquidated damages, if any, on, such
11
<PAGE>
Discount Note and for all other purposes whatsoever, whether or not
such Discount Note is overdue, and none of Holdings, the Trustee, the
Paying Agent or the Registrar shall be affected by notice to the
contrary.
(v) All Discount Notes issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt
and shall be entitled to the same benefits under this Indenture as the
Discount Notes surrendered upon such transfer or exchange.
(j) No Obligation of the Trustee. (i) The Trustee shall
----------------------------
have no responsibility or obligation to any beneficial owner of a Global
Discount Note, a member of, or a participant in, the Depository or other Person
with respect to the accuracy of the records of the Depository or its nominee or
of any participant or member thereof, with respect to any ownership interest in
the Discount Notes or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depository) of any notice
(including any notice of redemption) or the payment of any amount, under or with
respect to such Discount Notes. All notices and communications to be given to
the Holders and all payments to be made to Holders under the Discount Notes
shall be given or made only to the registered Holders (which shall be the
Depository or its nominee in the case of a Global Discount Note). The rights of
beneficial owners in any Global Discount Note shall be exercised only through
the Depository subject to the applicable rules and procedures of the Depository.
The Trustee may rely and shall be fully protected in relying upon information
furnished by the Depository with respect to its members, participants and any
beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Discount Note (including any transfers between or among
Depository participants, members or beneficial owners in any Global Discount
Note) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and when
expressly required by, the terms of this Indenture, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
12
<PAGE>
EXHIBIT 1
to APPENDIX A
[FORM OF FACE OF INITIAL DISCOUNT NOTE]
Global Discount Notes Legend:
------ -------- ----- ------
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF
DTC AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL
BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
Restricted Discount Notes Legend:
---------- -------- ----- ------
THIS SECURITY WAS OFFERED AS PART OF A TRANSACTION THAT IS EXEMPT FROM
REGISTRATION, AND HAS NOT BEEN REGISTERED, UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO THE COMPANY, (2) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (WITHIN
THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) ACQUIRING FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (3) IN AN OFFSHORE TRANSACTION COMPLYING WITH
RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, BUT, IF SUCH
TRANSFER IS BEING EFFECTED BY ANY FOREIGN PURCHASER WHO HAS PURCHASED NOTES FROM
ANY PERSON OTHER THAN A QUALIFIED INSTITUTIONAL BUYER OR AN INSTITUTIONAL
ACCREDITED INVESTOR (WITHIN THE MEANING OF RULE 144A) PURSUANT TO THIS CLAUSE
(3) PRIOR TO THE EXPIRATION OF THE 40-DAY RESTRICTED PERIOD (WITHIN THE MEANING
OF RULE 903(C)(3) OF REGULATION S UNDER THE SECURITIES ACT), THE TRANSFEREE
SHALL HAVE CERTIFIED TO THE COMPANY AND THE TRUSTEE FOR THE NOTES THAT SUCH
TRANSFEREE IS A NON-U.S. PERSON (WITHIN THE MEANING OF REGULATION S) AND THAT
SUCH TRANSFEREE IS ACQUIRING THE NOTES IN AN
13
<PAGE>
OFFSHORE TRANSACTION, (4) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (5)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE) OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES, COMMONWEALTH AND TERRITORIES OF THE UNITED
STATES, THE DISTRICT OF COLUMBIA AND OTHER JURISDICTIONS. EACH HOLDER OF THIS
SECURITY IS REQUIRED TO NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE
RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE, IF THEN APPLICABLE. WITH RESPECT
TO ANY TRANSFER OF THIS SECURITY BY AN INSTITUTIONAL ACCREDITED INVESTOR, SUCH
HOLDER WILL DELIVER TO THE COMPANY AND THE TRUSTEE FOR THE SECURITIES SUCH
CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM
THAT THE TRANSFER BY IT COMPLIES WITH THE FOREGOING RESTRICTIONS.
14
<PAGE>
CUSIP No.
-----
12 1/8% Senior Discount Notes Due 2009
No. $
--------- ----------
IRON AGE HOLDINGS CORPORATION, a Delaware corporation, for
value received, hereby promises to pay to _______________________, or registered
assigns, the principal sum of __________________________ United States Dollars
on May 1, 2009.
Interest Payment Dates: May 1 and November 1, commencing
November 1, 1998.
Record Dates: April 15 and October 15.
Additional provisions of this Discount Note are set forth on
the other side of this Discount Note.
IRON AGE HOLDINGS CORPORATION
By
---------------------------------
Name:
------------------------------
Title:
-----------------------------
By
---------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE>
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the Discount Notes referred to in the within-mentioned
Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By
--------------------------------
Authorized Officer
2
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL DISCOUNT NOTE]
12 1/8% Senior Discount Notes due 2009
1. Interest.
(a) General. Iron Age Holdings Corporation, a Delaware
-------
corporation (such corporation, and its successors and assigns under the
Indenture hereinafter referred to, being herein called the "Company"), promises
-------
to pay interest on the principal amount of this Discount Note at the rate per
annum shown above. The Company will pay interest semiannually on May 1 and
November 1 of each year commencing on November 1, 1998. Interest on the Discount
Notes will accrue from the most recent date to which interest has been paid on
the Discount Notes or, if no interest has been paid, from the Issue Date.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal, Liquidated Damages
(as defined below) and premium, if any, and, to the extent lawful, overdue
installments of interest, at the same rate to the extent lawful.
(b) Liquidated Damages. The Holder of this Discount Note is
------------------
entitled to the benefits of a Registration Agreement, dated as of April 24, 1998
(as amended and in effect from time to time, the "Registration Agreement") among
----------------------
Holdings and the Initial Purchasers named therein.
Under the Registration Agreement, if (i) a Registration
-
Statement (as defined in the Registration Agreement) is not filed with the SEC
on or prior to 90 days after the Issue Date, (ii) the Exchange Offer
--
Registration Statement or a Shelf Registration Statement (each as defined in the
Registration Agreement), if applicable, is not declared effective on or prior to
150 days after the Issue Date, (iii) the Exchange Offer (as defined in the
---
Registration Agreement) is not consummated on or prior to 180 days after the
Issue Date or (iv) a Shelf Registration Statement is filed and declared
--
effective on or prior to 150 days after the Issue Date but shall thereafter
cease to be effective or usable (at any time that Holdings is obligated to
maintain the effectiveness thereof) in connection with resales of Discount Notes
or Exchange Discount Notes in accordance with and during the periods specified
herein (each such event referred to in clauses (i) through (iv), a "Registration
------------
Default"), Holdings shall be obligated to pay liquidated damages ("Liquidated
- - ------- ----------
Damages") to each holder of Transfer Restricted Securities, during the first
- - -------
90-day
<PAGE>
period immediately following the occurrence of such Registration Default, in an
amount equal to 5(cent) per week per $1,000 principal amount of the Discount
Notes constituting Transfer Restricted Securities held by such holder. The
amount of the Liquidated Damages shall increase an additional 5 (cents) per week
per $1,000 principal amount of the Discount Notes constituting Transfer
Restricted Securities for each subsequent 90-day period until the applicable
Registration Default has been cured, up to a maximum amount of Liquidated
Damages of 20 (cents) per week per $1,000 principal amount of Discount Notes
constituting Transfer Restricted Securities. All accrued Liquidated Damages
shall be paid to Holders in the same manner as interest payments on the Discount
Notes on semi-annual payment dates which correspond to interest payment dates
for the Discount Notes. Each obligation to pay Liquidated Damages shall be
deemed to accrue from and including the date of the applicable Registration
Default. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages shall cease.
The Company shall notify the Trustee immediately upon the
happening of each and every Registration Default. The Company shall pay
Liquidated Damages due on the Transfer Restricted Securities by depositing with
the Paying Agent (which may not be Holdings for these purposes), in trust, for
the benefit of the Holders thereof, prior to 10:00 a.m., New York City time, on
the next interest payment date specified by the Indenture and the Discount
Notes, sums sufficient to pay the Liquidated Damages then due. All accrued
Liquidated Damages shall be paid to Holders in the same manner as interest
payments on the Discount Notes on semi-annual payment dates which correspond to
interest payment dates for the Discount Notes. Each obligation to pay Liquidated
Damages shall be deemed to accrue from and including the date of the applicable
Registration Default. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages shall cease.
2. Method of Payment. The Company will pay interest and
-----------------
Liquidated Damages, if any, on the Discount Notes to the Persons who are
registered Holders of Discount Notes at the close of business on the April 15 or
October 15 immediately preceding the next May 1 or November 1 interest payment
date, as the case may be, even if Discount Notes are canceled after such record
date and on or before such interest payment date, except as provided in Section
2.10 of the Indenture with respect to defaulted interest. The Discount Notes
shall be payable as to principal, premium,
2
<PAGE>
interest and Liquidated Damages at the office or agency of Holdings maintained
for such purposes in the Borough of Manhattan, the City of New York (which
initially shall be the Corporate Trust Office of the Trustee in New York, New
York), except that, at the option of Holdings, payment of interest may be made
by check mailed to the address of each Holder as such address appears in the
Discount Note register. Holders must surrender Discount Notes to a Paying Agent
to collect principal payments. The Company will pay principal, interest and
Liquidated Damages, if any, in money of the United States that at the time of
payment is legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, The Chase
--------------------------
Manhattan Bank, a New York corporation (the "Trustee"), will act as Paying Agent
and Registrar. The Company may appoint and change any Paying Agent or Registrar
without notice to any Noteholder. The Company or any of its domestically
incorporated Subsidiaries may act as Paying Agent or Registrar.
4. Indenture. The Company issued the Discount Notes under an
---------
Indenture, dated as of April 24, 1998 (as amended or supplemented from time to
time in accordance with the terms thereof, the "Indenture"), between Holdings
---------
and the Trustee. The terms of the Discount Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date
of the Indenture (the "Act"). Capitalized terms defined in the Indenture and not
---
defined herein have the meanings ascribed thereto in the Indenture. The Discount
Notes are subject to all such terms, and Noteholders are referred to the
Indenture and the Act for a statement of those terms.
The Discount Notes are unsecured, senior obligations of
Holdings, limited to $45,140,000 aggregate principal amount at any time
outstanding. This Discount Note is one of the Initial Notes referred to in the
Indenture.
The Discount Notes include the Initial Notes and any Exchange
Discount Notes issued in exchange for the Initial Notes pursuant to the
Indenture and the Registration Agreement. The Initial Notes and the Exchange
Discount Notes are treated as a single class of securities under the Indenture.
The Indenture contains certain covenants that, among other things, limit (i) the
-
incurrence of additional indebtedness by Holdings or any Restricted Subsidiary,
(ii)
--
3
<PAGE>
the making of Restricted Payments by Holdings or any Restricted Subsidiary
(including certain investments and payments of dividends on, and redemptions of,
capital stock of Holdings or any Restricted Subsidiary), (iii) the creation of
---
consensual encumbrances and restrictions with respect to Restricted
Subsidiaries, (iv) sales of assets and subsidiary stock, (v) certain
-- -
transactions with affiliates, (vi) the issuance or sale of capital stock of
--
Restricted Subsidiaries, (vii) the creation of liens and (viii) consolidations,
--- ----
mergers and transfers of all or substantially all of Holdings' assets. However,
all of these covenants are subject to a number of significant exceptions and
qualifications.
5. Optional Redemption. Except as set forth in this
-------------------
paragraph 5, the Discount Notes will not be redeemable at the option of Holdings
prior to May 1, 2003. On and after such date, the Discount Notes will be
redeemable at the option of Holdings, in whole or in part, at any time or from
time to time at the following redemption prices (expressed in percentages of
principal amount), plus accrued and unpaid interest and Liquidated Damages, if
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest and Liquidated Damages, if any, due on
the relevant interest payment date), if redeemed during the 12-month period
commencing on May 1 of the years set forth below:
Period Redemption Price
------ ----------------
2003 106.063%
2004 104.042%
2005 102.021%
2006 and thereafter 100.000%
In addition, at any time and from time to time prior to May 1,
2001, Holdings may, at its option, redeem in the aggregate up to 35% of the
original principal amount of Discount Notes with the proceeds of one or more
Public Equity Offerings received by, or invested in, Holdings, following which
there is a Public Market, at a redemption price (expressed as a percentage of
principal amount) of 112.125% plus accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest and Liquidated Damages,
if any, due on the relevant interest payment date); provided, however, that at
-------- -------
4
<PAGE>
least 65% of the original principal amount of the Discount Notes must remain
outstanding after each such redemption.
6. Selection. If fewer than all the Discount Notes are to be
---------
redeemed, the Trustee shall select the Discount Notes to be redeemed pro rata or
by lot or by such other method that the Trustee in its sole discretion deems to
be fair and appropriate and that complies with applicable legal and securities
exchange requirements, if any. The Trustee shall make the selection from
outstanding Discount Notes not previously called for redemption. The Trustee may
select for redemption portions of the principal of Discount Notes that have
denominations larger than $1,000. Discount Notes and portions of them the
Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000.
Provisions of this Discount Note that apply to Discount Notes called for
redemption also apply to portions of Discount Notes called for redemption. The
Trustee shall notify Holdings promptly of the Discount Notes or portions of
Discount Notes to be redeemed.
7. Notice of Redemption. Notice of redemption will be mailed
--------------------
by first-class mail at least 30 days but not more than 60 days before the
redemption date to each Holder of Discount Notes to be redeemed at such Holder's
registered address. Discount Notes in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. If money sufficient to
pay the redemption price of, and accrued interest and Liquidated Damages, if
any, on, all Discount Notes (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Discount Notes (or such portions thereof) called for
redemption.
8. Change of Control. Upon the occurrence of a Change of
-----------------
Control, each Holder of Discount Notes will have the right to require Holdings
to repurchase all of such Holder's Discount Notes at a purchase price equal to
101% of the principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of repurchase (subject to the right of
Holders of record on the relevant record date to receive interest and Liquidated
Damages, if any, due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.
9. Denominations; Transfer; Exchange. The Discount Notes are
---------------------------------
in registered form, without coupons, in
5
<PAGE>
denominations of $1,000 and integral multiples of $1,000. A Holder may transfer
or exchange Discount Notes in accordance with the Indenture. Upon any transfer
or exchange, the Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes required by law or permitted by the Indenture. The Registrar need not
register the transfer or exchange of any Discount Notes selected for redemption
(except, in the case of a Discount Note to be redeemed in part, the portion of
the Discount Note not to be redeemed) or to transfer or exchange any Discount
Notes for a period of 15 days prior to a selection of Discount Notes to be
redeemed or 15 days before an interest payment date.
10. Persons Deemed Owners. The registered Holder of this
---------------------
Discount Note may be treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal,
---------------
interest or Liquidated Damages remains unclaimed for two years, the Trustee or
Paying Agent shall pay the money back to Holdings at its written request unless
an abandoned property law designates another Person. After any such payment,
Holders entitled to the money must look only to Holdings and not to the Trustee
for payment.
12. Discharge and Defeasance. Subject to certain conditions,
------------------------
Holdings at any time may terminate some or all of its obligations under the
Discount Notes and the Inden ture if Holdings deposits with the Trustee money or
U.S. Government Obligations for the payment of principal of and interest and
Liquidated Damages, if any, on, the Discount Notes to redemption or maturity, as
the case may be.
13. Amendment, Waiver. Subject to certain exceptions set
-----------------
forth in the Indenture, (i) the Indenture or the Discount Notes may be amended
-
with the written consent of the Holders of a majority in principal amount of the
Discount Notes then outstanding and (ii) any default or noncompliance with any
--
provision may be waived with the written consent of the Holders of a majority in
principal amount of the Discount Notes then outstanding. Subject to certain
exceptions set forth in the Indenture, without the consent of any Discount
Noteholder, Holdings and the Trustee may amend the Indenture or the Discount
Notes (a) to cure any ambiguity, omission, defect or inconsistency, (b) to
- -
provide for assumption by a successor of the obligations of Holdings under the
Indenture in accordance with Article 5 of the Indenture, (c) to provide for
-
uncertificated Discount
6
<PAGE>
Notes in addition to or in place of certificated Discount Note; provided,
--------
however, that the uncertificated Notes are issued in registered form for
- - -------
purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code, (d) to
-
add Guarantees with respect to the Discount Notes, (e) to secure the Discount
-
Notes, (f) to add to the covenants of Holdings for the benefit of the Holders or
-
to surrender any right or power conferred on Holdings in the Indenture, (g) to
-
comply with any requirement of the SEC in connection with the qualification of
the Indenture under the Act, or (h) to make any change that does not adversely
-
affect the rights of any Noteholder.
14. Defaults and Remedies. Under the Indenture, Events of
---------------------
Default include (i) a default in the payment of interest or Liquidated Damages
-
on any Discount Note when due (whether or not such payment is prohibited by
Articles 10 and 12 of the Indenture), (ii) a default in the payment of principal
--
of any Discount Note when due at its Stated Maturity, upon optional redemption,
upon required repurchase, upon declaration or otherwise (whether or not such
payment is prohibited by Articles 10 and 12 of the Indenture), (iii) the failure
---
by Holdings to comply with its obligations under Section 4.04 or 4.09 or Article
5 of the Indenture, (iv) the failure by Holdings to comply for 30 days after
--
notice with any of its obligations under Section 4.02, 4.03, 4.05, 4.06, 4.07,
4.08, 4.10 or 4.13 of the Indenture (other than a failure to purchase Discount
Notes when required under Section 4.06 of the Indenture), (v) the failure by
-
Holdings to comply for 60 days after notice with any of its agreements in the
Discount Notes or the Indenture (other than those referred to clauses (i), (ii),
(iii) and (iv) above), (vi) the failure by Holdings or any Material Subsidiary
--
to pay any Indebtedness within any applicable grace period after final maturity
or the acceleration of any such Indebtedness by the Holders thereof because of a
default, if the total amount of such Indebtedness unpaid or accelerated exceeds
$10 million and such failure continues for 10 Business Days after notice, (vii)
---
certain events of bankruptcy, insolvency or reorganization of Holdings or a
Material Subsidiary, (viii) the rendering of any judgment or decree for the
----
payment of money in excess of $10 million against Holdings or a Material
Subsidiary if such judgment or decree remains outstanding for a period of 60
days and it not discharged, waived or stayed within 10 Business Days after
notice, (ix) a Subsidiary Guaranty ceases to be in full force and effect (other
--
than in accordance with the terms of such Subsidiary Guaranty) or a Subsidiary
Guarantor denies
7
<PAGE>
or disaffirms its obligations under its Subsidiary Guaranty and such default
continues for 30 days or (x) the failure by any Subsidiary Guarantor to comply
-
with its obligations under any Subsidiary Guaranty to which such Subsidiary
Guarantor is a party, after any applicable grace period. However, a default
under clause (iv) or (v) will not constitute an Event of Default until the
Trustee or the Holders of 25% in principal amount of the outstanding Discount
Notes notify Holdings of the default and Holdings does not cure such default
within the time specified in clauses (iv)and (v) after receipt of such notice.
If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the outstanding Discount
Notes may declare all the Discount Notes to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Discount Notes being due and payable immediately upon the
occurrence of such Events of Default.
Noteholders may not enforce the Indenture or the Discount
Notes except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Discount Notes unless it receives reasonable indemnity or
security satisfactory to it. Subject to certain limitations, Holders of a
majority in principal amount of the Discount Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Noteholders notice
of any continuing Default (except a Default in payment of principal, interest or
Liquidated Damages) if a committee of its trust officers in good faith
determines that withholding notice is in the interest of the Holders.
15. Trustee Dealings with Holdings. Subject to certain
------------------------------
limitations imposed by the Act, the Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Discount
Notes and may otherwise deal with Holdings and its Affiliates with the same
rights it would have if it were not Trustee.
16. No Recourse Against Others. No director, officer,
--------------------------
employee or stockholder, as such, of Holdings shall have any liability for any
obligations of Holdings under the Discount Notes or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Discount Note, each Noteholder waives and releases all
such liability. The waiver and
8
<PAGE>
release are part of the consideration for the issue of the Discount Notes.
17. Governing Law. THIS NOTE SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO ITS CONFLICTS OF LAW RULES.
18. Authentication. This Discount Note shall not be valid
--------------
until an authorized signatory of the Trustee (or an authenticating agent acting
on its behalf) manually signs the certificate of authentication on the other
side of this Discount Note.
19. Abbreviations. Customary abbreviations may be used in the
-------------
name of a Noteholder or an assignee, such as TEN COM (=tenants in common), TEN
ENT (=tenants by the entirety), JT TEN (=joint tenants with rights of survi-
vorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform
Gift to Minors Act).
20. Holders' Compliance with Registration Agreement. Each
-----------------------------------------------
Holder of a Discount Note, by acceptance hereof, acknowledges and agrees to the
provisions of the Registration Agreement, including, without limitation, the
obligations of the Holders with respect to a registration of Discount Notes and
the indemnification by the Holders of Holdings to the extent provided therein.
21. CUSIP Numbers. Pursuant to a recommendation promulgated by
-------------
the Committee on Uniform Security Identification Procedures, Holdings has
caused CUSIP numbers to be printed on the Discount Notes and has directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Noteholders. No representation is made as to the accuracy of such numbers either
as printed on the Discount Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Noteholder upon written
request and without charge to the Noteholder a copy of the Indenture and/or the
Registration Agreement.
Requests may be made to:
Iron Age Holdings Corporation
Robinson Plaza Three,
Suite 400
Pittsburgh, Pennsylvania 15205
Attention: Chief Financial Officer
9
<PAGE>
ASSIGNMENT FORM
To assign this Discount Note, fill in the form below:
I or we assign and transfer this Discount Note to
- - --------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- - --------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint _________________________ agent to transfer this
Discount Note on the books of Holdings. The agent may substitute another to act
for him.
- - --------------------------------------------------------------------------
Date: ________________ Your Signature: ___________________________________
Signature Guarantee ______________________________________________________
(Signature must be guaranteed)
- - --------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Discount Note.
The signature(s) should be guaranteed by an eligible institution (banks,
stockbrokers, savings and loan associations and credit unions) with membership
in the Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guarantee medallion program as may be approved by the Registrar in
addition to or substitution for STAMP, pursuant to Rule 17AD-15 of the
Securities and Exchange Commission.
In connection with any transfer of any of the Discount Notes evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issu-
ance of such Discount Notes and the last date, if any, on which such Discount
Notes were owned by Holdings or any Affiliate of Holdings, the undersigned
confirms that such Discount Notes are being transferred in accordance with their
terms:
CHECK ONE BOX BELOW
(1) [_] to Holdings; or
<PAGE>
(2) [_] pursuant to an effective registration statement under the Securities
Act; or
(3) [_] inside the United States to a qualified institutional buyer within the
meaning of Rule 144A under the Securities Act that purchases for its own
account or for the account of a qualified institutional buyer to whom
notice is given that such transfer is being made in reliance on Rule
144A, in each case pursuant to and in compliance with Rule 144A under
the Securities Act; or
(4) [_] outside the United States in an offshore transaction (within the
meaning of Regulation S under the Securities Act of 1933) in compliance
with Rule 903 or 904 under the Securities Act, but, if such transfer is
being effected by any foreign purchaser who has purchased Discount Notes
or from any person other than a qualified institutional buyer or an
institutional accredited investor (within the meaning of Rule 144A under
the Securities Act) pursuant to this clause (4) prior to the expiration
of the 40-day restricted period (within the meaning of Rule 903(c)(3) of
Regulation S under the Securities Act), the transferee shall have
certified to Holdings and the Trustee for the Discount Notes that such
transferee is a non-U.S. person (within the meaning of Regulation S
under the Securities Act) and that such transferee is acquiring the
Discount Notes in an offshore transaction; or
(5) [_] to an institutional "accredited investor" (as defined in Schedule
501(a)(1), (2), (3) or (7) under the Securities Act) that has furnished
to the Trustee a signed letter containing certain representations and
agreements (the form of which letter can be obtained from the Trustee);
or
(6) [_] pursuant to another available exemption from registration under the
Securities Act, provided by Rule 144 thereunder.
Unless one of the boxes is checked, the Trustee may refuse to register any of
the Discount Notes evidenced by this certificate in the name of any person other
than the registered holder thereof; provided, however, that if box (4), (5) or
-------- -------
(6) is checked, the Trustee may require, prior
2
<PAGE>
to registering any such transfer of the Discount Notes, such legal opinions,
certifications and other information as Holdings or the Trustee may reasonably
request to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act, such as the exemption provided by Rule 144 under such Act.
Signature:
----------------------------------------------------
Signature Guarantee:
-------------------------------------------------
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible institution (banks,
stockbrokers, savings and loan associations and credit unions) with membership
in the Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guarantee medallion program as may be approved by the Registrar in
addition to or substitution for STAMP, pursuant to Rule 17AD-15 of the
Securities and Exchange Commission.
3
<PAGE>
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Discount Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" (within the meaning of Rule 144A under the
Securities Act) and is aware that the sale to it is being made in reliance on
Rule 144A under the Securities Act, and acknowledges that it has received such
information regarding Holdings as the undersigned has requested pursuant to Rule
144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated: -----------------------
---------------
NOTICE: To be executed by an executive officer
4
<PAGE>
[TO BE ATTACHED TO GLOBAL DISCOUNT NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL DISCOUNT NOTE
The following increases or decreases in this Global Discount Note have been
made:
<TABLE>
<CAPTION>
Date of Amount of Amount of Principal Signature of
Exchange Decrease in Increase in Amount of authorized
Principal Amount Principal this Global Signatory of
of this Global Amount of this Discount Trustee or
Discount Note Global Discount Note Custodian
Note Following
Such
Decrease or
Increase
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Discount Note purchased by Holdings pursuant
to Section 4.09 of the Indenture, check the box: [_]
If you want to elect to have only part of this Discount Note purchased by
Holdings pursuant to Section 4.09 of the Indenture, state the amount in
principal amount (must be an integral multiple of $1,000:
Date: Your Signature:
---------- --------------------------
(Sign exactly as your name appears
on the other side of this Discount Note.)
Signature Guarantee:
---------------------------------------
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible institution (banks,
stockbrokers, savings and loan associations and credit unions) with membership
in the Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guarantee medallion program as may be approved by the Registrar in
addition to or substitution for STAMP, pursuant to Rule 17AD-15 of the
Securities and Exchange Commission.
<PAGE>
EXHIBIT A
[FORM OF FACE OF EXCHANGE DISCOUNT NOTE]
CUSIP No.
-----
12 1/8% Senior Discount Notes Due 2009
No. $
----------- -------
IRON AGE HOLDINGS CORPORATION, a Delaware corporation, for
value received, hereby promises to pay to _______________________, or registered
assigns, the principal sum of __________________________ United States Dollars
on May 1, 2009.
Interest Payment Dates: May 1 and November 1,
commencing November 1, 1998.
Record Dates: April 15 and October 15.
Additional provisions of this Discount Note are set forth on
the other side of this Discount Note.
IRON AGE HOLDINGS CORPORATION
By
-----------------------------
Name:
-------------------------
Title:
By
------------------------------
Name:
-------------------------
Title:
<PAGE>
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the Discount Notes referred
to in the within-mentioned Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By
---------------------------------
Authorized Officer
2
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE DISCOUNT NOTE]
121/8% Senior Discount Notes due 2009
1. Interest.
--------
(a) General. Iron Age Holdings Corporation, a Delaware
-------
corporation (such corporation, and its successors and assigns under the
Indenture hereinafter referred to, being herein called the "Company"), promises
-------
to pay interest on the principal amount of this Discount Note at the rate per
annum shown above. The Company will pay interest semiannually on May 1 and
November 1 of each year commencing on November 1, 1998. Interest on the Discount
Notes will accrue from the most recent date to which interest has been paid on
the Discount Notes or, if no interest has been paid, from the Issue Date.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal, Liquidated Damages
(as defined below) and premium, if any, and, to the extent lawful, overdue
installments of interest, at the same rate to the extent lawful.
(b) Liquidated Damages. The Holder of this Discount Note is
------------------
entitled to the benefits of a Registration Agreement, dated as of April 24, 1998
(as amended and in effect from time to time, the "Registration Agreement") among
----------------------
Holdings and the Initial Purchasers named therein. Under the Registration
Agreement, the Holder of this Discount Note may be entitled to accrued but
unpaid liquidated damages ("Liquidated Damages").
------------------
2. Method of Payment. The Company will pay interest and
-----------------
Liquidated Damages, if any, on the Discount Notes to the Persons who are
registered Holders of Discount Notes at the close of business on the April 15 or
October 15 immediately preceding the next May 1 or November 1 interest payment
date, as the case may be, even if Discount Notes are canceled after such record
date and on or before such interest payment date, except as provided in Section
2.10 of the Indenture with respect to defaulted interest. The Discount Notes
shall be payable as to principal, premium, interest and Liquidated Damages at
the office or agency of Holdings maintained for such purposes in the Borough of
Manhattan, the City of New York (which initially shall be the Corporate Trust
Office of the Trustee in New York, New York), except that, at the option of
Holdings, payment of interest may be made by check mailed to the address of each
Holder as such address appears in the Discount Note
20558331.05
<PAGE>
register. Holders must surrender Discount Notes to a Paying Agent to collect
principal payments. The Company will pay principal, interest and Liquidated
Damages, if any, in money of the United States that at the time of payment is
legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, The Chase Manhattan
--------------------------
Bank, a New York corporation (the "Trustee"), will act as Paying Agent and
-------
Registrar. The Company may appoint and change any Paying Agent or Registrar
without notice to any Noteholder. The Company or any of its domestically
incorporated Subsidiaries may act as Paying Agent or Registrar.
4. Indenture. The Company issued the Discount Notes under an
Indenture, dated as of April 24, 1998 (as amended or supplemented from time to
time in accordance with the terms thereof, the "Indenture"), between Holdings
---------
and the Trustee. The terms of the Discount Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date
of the Indenture (the "Act"). Capitalized terms defined in the Indenture and not
---
defined herein have the meanings ascribed thereto in the Indenture. The Discount
Notes are subject to all such terms, and Noteholders are referred to the Inden
ture and the Act for a statement of those terms.
The Discount Notes are unsecured, senior obligations of
Holdings, limited to $45,140,000 aggregate principal amount at any time
outstanding. This Discount Note is one of the Exchange Notes referred to in the
Indenture.
The Discount Notes include the Initial Notes and any Exchange
Discount Notes issued in exchange for the Initial Notes pursuant to the
Indenture and the Registration Agreement. The Initial Notes and the Exchange
Discount Notes are treated as a single class of securities under the Indenture.
The Indenture contains certain covenants that, among other things, limit (i) the
-
incurrence of additional indebtedness by Holdings or any Restricted Subsidiary,
(ii) the making of Restricted Payments by Holdings or any Restricted Subsidiary
--
(including certain investments and payments of dividends on, and redemptions of,
capital stock of Holdings or any Restricted Subsidiary), (iii) the creation of
---
consensual encumbrances and restrictions with respect to Restricted
Subsidiaries, (iv) sales of assets and subsidiary stock, (v) certain
-- -
transactions with affiliates,
2
20558331.05
<PAGE>
(vi) the issuance or sale of capital stock of Restricted Subsidiaries, (vii) the
-- ---
creation of liens and (viii) consolidations, mergers and transfers of all or
----
substantially all of Holdings' assets. However, all of these covenants are
subject to a number of significant exceptions and qualifications.
5. Optional Redemption. Except as set forth in this paragraph
-------------------
5, the Discount Notes will not be redeemable at the option of Holdings prior to
May 1, 2003. On and after such date, the Discount Notes will be redeemable at
the option of Holdings, in whole or in part, at any time or from time to time at
the following redemption prices (expressed in percentages of principal amount),
plus accrued and unpaid interest and Liquidated Damages, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest and Liquidated Damages, if any, due on the
relevant interest payment date), if redeemed during the 12-month period
commencing on May 1 of the years set forth below:
Period Redemption Price
------ ----------------
2003 106.063%
2004 104.042%
2005 102.021%
2006 and thereafter 100.000%
In addition, at any time and from time to time prior to May 1,
2001, Holdings may, at its option, redeem in the aggregate up to 35% of the
original principal amount of Discount Notes with the proceeds of one or more
Public Equity Offerings received by, or invested in, Holdings, following which
there is a Public Market, at a redemption price (expressed as a percentage of
principal amount) of 112.125% plus accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest and Liquidated Damages,
if any, due on the relevant interest payment date); provided, however, that at
-------- -------
least 65% of the original principal amount of the Discount Notes must remain
outstanding after each such redemption.
6. Selection. If fewer than all the Discount Notes are to be
---------
redeemed, the Trustee shall select the Discount Notes to be redeemed pro rata or
by lot or by such other method that the Trustee in its sole discretion deems to
be fair and appropriate and that complies with applicable
3
20558331.05
<PAGE>
legal and securities exchange requirements, if any. The Trustee shall make the
selection from outstanding Discount Notes not previously called for redemption.
The Trustee may select for redemption portions of the principal of Discount
Notes that have denominations larger than $1,000. Discount Notes and portions of
them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Discount Note that apply to Discount Notes called for
redemption also apply to portions of Discount Notes called for redemption. The
Trustee shall notify Holdings promptly of the Discount Notes or portions of
Discount Notes to be redeemed.
7. Notice of Redemption. Notice of redemption will be mailed
--------------------
by first-class mail at least 30 days but not more than 60 days before the
redemption date to each Holder of Discount Notes to be redeemed at such Holder's
registered address. Discount Notes in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. If money sufficient to
pay the redemption price of, and accrued interest and Liquidated Damages, if
any, on, all Discount Notes (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Discount Notes (or such portions thereof) called for
redemption.
8. Change of Control. Upon the occurrence of a Change of
-----------------
Control, each Holder of Discount Notes will have the right to require Holdings
to repurchase all of such Holder's Discount Notes at a purchase price equal to
101% of the principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of repurchase (subject to the right of
Holders of record on the relevant record date to receive interest and Liquidated
Damages, if any, due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.
9. Denominations; Transfer; Exchange. The Discount Notes
---------------------------------
are in registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder may transfer or exchange Discount Notes in
accordance with the Indenture. Upon any transfer or exchange, the Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes required by law or
permitted by the Indenture. The Registrar need not register the transfer or
exchange of any Discount Notes selected for
4
20558331.05
<PAGE>
redemption (except, in the case of a Discount Note to be redeemed in part, the
portion of the Discount Note not to be redeemed) or to transfer or exchange any
Discount Notes for a period of 15 days prior to a selection of Discount Notes to
be redeemed or 15 days before an interest payment date.
10. Persons Deemed Owners. The registered Holder of this
---------------------
Discount Note may be treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal,
---------------
interest or Liquidated Damages remains unclaimed for two years, the Trustee or
Paying Agent shall pay the money back to Holdings at its written request unless
an abandoned property law designates another Person. After any such payment,
Holders entitled to the money must look only to Holdings and not to the Trustee
for payment.
12. Discharge and Defeasance. Subject to certain conditions,
------------------------
Holdings at any time may terminate some or all of its obligations under the
Discount Notes and the Inden ture if Holdings deposits with the Trustee money or
U.S. Government Obligations for the payment of principal of and interest and
Liquidated Damages, if any, on, the Discount Notes to redemption or maturity, as
the case may be.
13. Amendment, Waiver. Subject to certain excep tions set
-----------------
forth in the Indenture, (i) the Indenture or the Discount Notes may be amended
-
with the written consent of the Holders of a majority in principal amount of the
Discount Notes then outstanding and (ii) any default or noncompliance with any
--
provision may be waived with the written consent of the Holders of a majority in
principal amount of the Discount Notes then outstanding. Subject to certain
exceptions set forth in the Indenture, without the consent of any Discount
Noteholder, Holdings and the Trustee may amend the Indenture or the Discount
Notes (a) to cure any ambiguity, omission, defect or inconsistency, (b) to
provide for assumption by a successor of the obligations of Holdings under the
Indenture in accordance with Article 5 of the Indenture, (c) to provide for
uncertificated Discount Notes in addition to or in place of certificated
Discount Notes; provided, however, that the uncertificated Notes are issued in
-------- -------
registered form for purposes of Section 163(f) of the Code, or in a manner such
that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code,
(d) to add Guarantees with respect to the Discount Notes, (e) to secure the
Discount Notes, (f) to add to the covenants of Holdings for the benefit of the
Holders or to surrender any
5
20558331.05
<PAGE>
right or power conferred on Holdings in the Indenture, (g) to comply with any
requirement of the SEC in connection with the qualification of the Indenture
under the Act, or (h) to make any change that does not adversely affect the
-
rights of any Noteholder.
14. Defaults and Remedies. Under the Indenture, Events of
---------------------
Default include (i) a default in the payment of interest or Liquidated Damages
-
on any Discount Note when due (whether or not such payment is prohibited by
Articles 10 and 12 of the Indenture), (ii) a default in the payment of principal
--
of any Discount Note when due at its Stated Maturity, upon optional redemption,
upon required repurchase, upon declaration or otherwise (whether or not such
payment is prohibited by Articles 10 and 12 of the Indenture), (iii) the failure
---
by Holdings to comply with its obligations under Section 4.04 or 4.09 or Article
5 of the Indenture, (iv) the failure by Holdings to comply for 30 days after
--
notice with any of its obligations under Section 4.02, 4.03, 4.05, 4.06, 4.07,
4.08, 4.10 or 4.13 of the Indenture (other than a failure to purchase Discount
Notes when required under Section 4.06 of the Indenture), (v) the failure by
-
Holdings to comply for 60 days after notice with any of its agreements in the
Discount Notes or the Indenture (other than those referred to clauses (i), (ii),
(iii) and (iv) above), (vi) the failure by Holdings or any Material Subsidiary
--
to pay any Indebtedness within any applicable grace period after final maturity
or the acceleration of any such Indebtedness by the Holders thereof because of a
default, if the total amount of such Indebtedness unpaid or accelerated exceeds
$10 million and such failure continues for 10 Business Days after notice, (vii)
---
certain events of bankruptcy, insolvency or reorganization of Holdings or a
Material Subsidiary, (viii) the rendering of any judgment or decree for the
----
payment of money in excess of $10 million against Holdings or a Material
Subsidiary if such judgment or decree remains outstanding for a period of 60
days and it not discharged, waived or stayed within 10 Business Days after
notice, (ix) a Subsidiary Guaranty ceases to be in full force and effect (other
--
than in accordance with the terms of such Subsidiary Guaranty) or a Subsidiary
Guarantor denies or disaffirms its obligations under its Subsidiary Guaranty and
such default continues for 30 days or (x) the failure by any Subsidiary
-
Guarantor to comply with its obligations under any Subsidiary Guaranty to which
such Subsidiary Guarantor is a party, after any applicable grace period.
However, a default under clause (iv) or (v) will not constitute an Event of
Default until the Trustee or the Holders of 25% in principal amount of the
outstanding
6
20558331.05
<PAGE>
Discount Notes notify Holdings of the default and Holdings does not cure such
default within the time specified in clauses (iv)and (v) after receipt of such
notice.
If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the outstanding Discount
Notes may declare all the Discount Notes to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Discount Notes being due and payable immediately upon the
occurrence of such Events of Default.
Noteholders may not enforce the Indenture or the Discount
Notes except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Discount Notes unless it receives reasonable indemnity or
security satisfactory to it. Subject to certain limitations, Holders of a
majority in principal amount of the Discount Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Noteholders notice
of any continuing Default (except a Default in payment of principal, interest or
Liquidated Damages) if a committee of its trust officers in good faith
determines that withholding notice is in the interest of the Holders.
15. Trustee Dealings with Holdings. Subject to certain
------------------------------
limitations imposed by the Act, the Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Discount
Notes and may otherwise deal with Holdings and its Affiliates with the same
rights it would have if it were not Trustee.
16. No Recourse Against Others. No director, officer, employee
--------------------------
or stockholder, as such, of Holdings shall have any liability for any
obligations of Holdings under the Discount Notes or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Discount Note, each Noteholder waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Discount Notes.
17. Governing Law. THIS NOTE SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO ITS CONFLICTS OF LAW RULES.
18. Authentication. This Discount Note shall not
--------------
be valid until an authorized signatory of the Trustee (or an
7
20558331.05
<PAGE>
authenticating agent acting on its behalf) manually signs the certificate of
authentication on the other side of this Discount Note.
19. Abbreviations. Customary abbreviations may be used in the
-------------
name of a Noteholder or an assignee, such as TEN COM (=tenants in common),
TEN ENT (=tenants by the entirety), JT TEN (=joint tenants with rights of survi-
vorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform
Gift to Minors Act).
20. Holders' Compliance with Registration Agreement. Each
------------------------------------------------
Holder of a Discount Note, by acceptance hereof, acknowledges and agrees to the
provisions of the Registration Agreement, including, without limitation, the
obligations of the Holders with respect to a registration of Discount Notes and
the indemnification by the Holders of Holdings to the extent provided therein.
21. CUSIP Numbers. Pursuant to a recommendation promulgated by
-------------
the Committee on Uniform Security Identification Procedures, Holdings has
caused CUSIP numbers to be printed on the Discount Notes and has directed the
Trustee to use CUSIP numbers in notices of redemption as a convenience to
Noteholders. No representation is made as to the accuracy of such numbers either
as printed on the Discount Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Noteholder upon written
request and without charge to the Noteholder a copy of the Indenture and/or the
Registration Agreement.
Requests may be made to:
Iron Age Holdings Corporation
Robinson Plaza Three,
Suite 400
Pittsburgh, Pennsylvania 15205
Attention: Chief Financial Officer
8
20558331.05
<PAGE>
ASSIGNMENT FORM
To assign this Discount Note, fill in the form below:
I or we assign and transfer this Discount Note to
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint _________________________ agent to transfer this
Discount Note on the books of Holdings. The agent may substitute another to act
for him.
Date: ________________ Your Signature:__________________________________________
Signature Guarantee_____________________________________________________________
(Signature must be guaranteed)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Discount Note.
The signature(s) should be guaranteed by an eligible institution (banks,
stockbrokers, savings and loan associations and credit unions) with membership
in the Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guarantee medallion program as may be approved by the Registrar in
addition to or substitution for STAMP, pursuant to Rule 17AD-15 of the
Securities and Exchange Commission.
20558331.05
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Discount Note purchased by
Holdings pursuant to Section 4.09 of the Indenture, check
the box: [ ]
If you want to elect to have only part of this Discount Note purchased by
Holdings pursuant to Section 4.09 of the Inden ture, state the amount in
principal amount (must be an integral multiple of $1,000:
Date: __________ Your Signature:__________________________
(Sign exactly as your name appears
on the other side of this Discount
Note.)
Signature Guarantee: _______________________________________
The signature(s) should be guaranteed by an eligible institution (banks,
stockbrokers, savings and loan associations and credit unions) with membership
in the Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guarantee medallion program as may be approved by the Discount Note
Registrar in addition to or substitution for STAMP, pursuant to Rule 17AD-15 of
the Securities and Exchange Commission.
20559331.05
<PAGE>
Exhibit 4.2
IRON AGE HOLDINGS CORPORATION
$45,140,000
12 1/8% Senior Discount Notes Due 2009
REGISTRATION AGREEMENT
New York, New York
April 24, 1998
Salomon Brothers Inc
SBC Warburg Dillon Read Inc.
Banque Nationale de Paris
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Iron Age Holdings Corporation, a Delaware corporation ("Holdings"),
--------
proposes to issue and sell to the purchasers listed above (the "Initial
-------
Purchasers"), upon the terms set forth in a purchase agreement of even date
- - ----------
herewith (the "Purchase Agreement"), $45,140,000 in aggregate principal amount
------------------
at maturity of its 12 1/8% Senior Discount Notes due 2009 (the "Discount Notes")
--------------
(the "Initial Placement"). As an inducement to the Initial Purchasers to enter
-----------------
into the Purchase Agreement and in satisfaction of a condition to your
obligations thereunder, Holdings agrees with the Initial Purchasers, for the
benefit of (i) the Initial Purchasers, (ii) the holders from time to time
- --
(including the Initial Purchasers) of the Discount Notes and (iii) the holders
---
from time to time (including the Initial Purchasers) of the Exchange Notes (as
defined below) (in cases (ii) and (iii) collectively, the "Holders"), as
-------
follows:
1. Definitions. Capitalized terms used herein without definition
-----------
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement,
1
<PAGE>
the following capitalized defined terms shall have the following meanings:
"Accreted Value" means, with respect to any Discount Note, as of a
--------------
date of determination: (i) prior to May 1, 2003, the sum of (x) the initial
- -
offering price of such Discount Note and (y) the portion of the excess of the
-
principal amount of such Discount Note over such initial offering price which
shall have been accreted thereon through such date, such amount to be so
accreted on a daily basis at a rate per annum of 12 1/8% of the initial offering
price of such Discount Note, computed on the basis of a 360-day year of twelve
30-day months from the Issue Date through the date of determination, compounded
semi-annually on each May 1 and November 1, commencing November 1, 1998; (ii) on
--
or after May 1, 2003, 100% of the principal amount thereof.
"Affiliate" of any specified person means any other person which,
---------
directly or indirectly, is in control of, is controlled by, or is under common
control with, such specified person. For purposes of this definition, control
of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Discount Notes" has the meaning set forth in the preamble hereto.
--------------
"Exchange Notes" means debt securities of Holdings identical in all
--------------
material respects to the Discount Notes (except that the transfer restrictions
relating to the Discount Notes shall be eliminated), to be issued under the
Indenture or the Exchange Notes Indenture and that would be registered under the
Securities Act.
"Exchange Notes Indenture" means an indenture between Holdings and the
------------------------
Exchange Notes Trustee, identical in all material respects with the Indenture
(except that the
2
<PAGE>
transfer restrictions relating to the Discount Notes shall be eliminated).
"Exchange Notes Trustee" means a bank or trust company reasonably
----------------------
satisfactory to Holdings and the Initial Purchasers, as trustee with respect to
the Exchange Notes under the Exchange Notes Indenture.
"Exchange Offer" means the proposed offer to the Holders of Transfer
--------------
Restricted Securities to issue and deliver to such Holders, in exchange for such
Transfer Restricted Securities, a like principal amount at maturity of the
Exchange Notes.
"Exchange Offer Registration Period" means the period set forth in
----------------------------------
Section 2(c)(ii) hereof.
"Exchange Offer Registration Statement" means a registration statement
-------------------------------------
of Holdings on an appropriate form under the Securities Act with respect to the
Exchange Offer, all amendments and supplements to such registration state
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Exchanging Dealer" means any Holder (which may be an Initial
-----------------
Purchaser) which is a broker-dealer, electing to exchange Discount Notes
acquired for its own account as a result of market-making activities or other
trading activities, for Exchange Notes.
"Holders" has the meaning set forth in the preamble hereto.
-------
"Holders' Information" means any information included in any
--------------------
Registration Statement in reliance upon or in conformity with written
information furnished to Holdings by or on behalf of any Holder specifically for
use therein.
3
<PAGE>
"Holdings" has the meaning set forth in the preamble hereto.
--------
"Indenture" means the Indenture relating to the Discount Notes, dated
---------
as of April 24, 1998, between Holdings and The Chase Manhattan Bank, as trustee,
as the same may be amended from time to time in accordance with the terms
thereof.
"Initial Placement" has the meaning set forth in the preamble hereto.
-----------------
"Issue Date" means the date on which the Discount Notes are originally
----------
issued.
"Liquidated Damages" has the meaning set forth in Section 7(a) hereof.
------------------
"Losses" has the meaning set forth in Section 6(d) hereof.
------
"Majority Holders" means the holders of a majority of the aggregate
----------------
principal amount at maturity of Discount Notes registered under a Registration
Statement.
"Managing Underwriters" means the investment banker or investment
---------------------
bankers and manager or managers that shall administer an underwritten offering.
"Prospectus" means the prospectus included in any Registration
----------
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Discount Notes or the Exchange Notes,
covered by such Registration Statement, and all amendments and supplements to
the Prospectus, including post-effective
4
<PAGE>
amendments, and all material incorporated by reference therein.
"Purchase Agreement" has the meaning set forth in the preamble hereto.
------------------
"Registration Default" has the meaning set forth in Section 7 hereof.
--------------------
"Registration Statement" means any Exchange Offer Registration
----------------------
Statement or Shelf Registration Statement that covers any of the Discount Notes
or the Exchange Notes pursuant to the provisions of this Agreement, amendments
and supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Shelf Registration" means a registration effected pursuant to Section
------------------
3 hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(b)
-------------------------
hereof.
"Shelf Registration Statement" means a "shelf" registration statement
----------------------------
of Holdings pursuant to the pro visions of Section 3 hereof which covers some
or all of the Discount Notes or Exchange Notes, as applicable, on an appropriate
form under Rule 415 under the Securities Act, or any similar rule that may be
adopted by the SEC, amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Transfer Restricted Security" means each Discount Note until (i) the
---------------------------- -
date on which such Discount Note has been exchanged for a freely transferable
Exchange Note in the Exchange Offer, (ii) the date on which such Discount Note
--
has been effectively registered under the Securities Act and
5
<PAGE>
disposed of in accordance with a Shelf Registration Statement or (iii) the date
---
on which such Discount Note is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act.
"Trustee" means the trustee with respect to the Discount Notes under
-------
the Indenture.
"underwriter" means any underwriter of Discount Notes in connection
-----------
with an offering thereof under a Shelf Registration Statement.
2. Exchange Offer; Resales of Exchange Notes by Exchanging Dealers;
----------------------------------------------------------------
Private Exchange. (a) Holdings shall (i) prepare and, on or prior to 90 days
- - ---------------- -
after the Issue Date, shall file with the SEC the Exchange Offer Registration
Statement with respect to the Exchange Offer under the Securities Act and (ii)
--
use its reasonable best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act on or prior to 150
days after the Issue Date.
(b) As promptly as practicable after the Exchange Offer Registration
Statement is declared effective by the SEC but in any event on or prior to 180
days after the Issue Date, Holdings shall offer to holders of Transfer
Restricted Securities who are not prohibited by any law or policy of the SEC
from participating in the Exchange Offer the opportunity to exchange their
Transfer Restricted Securities for Exchange Notes. For each Discount Note
surrendered to Holdings pursuant to the Exchange Offer, the Holder of such
Discount Note shall receive an Exchange Note having a principal amount at
maturity equal to that of the surrendered Discount Note. Principal on the
Exchange Notes will accrete in the same manner as for the Discount Notes. Cash
interest on each Exchange Note shall accrue from the last cash interest payment
date on which cash interest was paid on the Discount Note surrendered in
exchange thereof
6
<PAGE>
or, if no interest has been paid on such Discount Note, from May 1, 2003.
(c) In connection with the Exchange Offer, Holdings shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration State ment, together with an appropriate
letter of trans mittal and related documents;
(ii) keep the Exchange Offer open for not less than 30 days (or
longer, if required by applicable law) after the date on which notice of
the Exchange Offer is mailed to the Holders;
(iii) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York; and
(iv) comply in all respects with all laws that are applicable to the
Exchange Offer.
(d) As soon as practicable after the close of the Exchange Offer,
Holdings shall:
(i) accept for exchange all Discount Notes tendered and not validly
withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Discount Notes so
accepted for exchange; and
(iii) cause the Trustee or the Exchange Notes Trustee, as the case may
be, promptly to authenticate and deliver to each Holder of Discount Notes
Exchange Notes equal in principal amount at maturity to the Discount Notes
of such Holder so accepted for exchange.
7
<PAGE>
(e) The Initial Purchasers and Holdings acknowledge that, pursuant to
interpretations by the SEC's staff of Section 5 of the Securities Act, and in
the absence of an applicable exemption therefrom, each Exchanging Dealer is
required to deliver a Prospectus in connection with a sale of any Exchange Notes
received by such Exchanging Dealer pursuant to the Exchange Offer in exchange
for Discount Notes acquired for its own account as a result of market-making
activities or other trading activities. Accordingly, Holdings shall:
(i) include the information set forth in (1) Annex A hereto on the
-
cover of the Exchange Offer Registration Statement, (2) Annex B hereto in
-
the forepart of the Exchange Offer Registration Statement in a section
setting forth details of the Exchange Offer, (3) Annex C hereto in the
-
underwriting or plan of distribution section of the Prospectus forming a
part of the Exchange Offer Registration Statement and (4) Annex D hereto in
-
the letter of transmittal delivered pursuant to the Exchange Offer; and
(ii) use its reasonable best efforts to keep the Exchange Offer
Registration Statement continuously effective under the Securities Act
during the Exchange Offer Registration Period for delivery by Exchanging
Dealers in connection with sales of Exchange Notes received pursuant to the
Exchange Offer, as contemplated by Section 4(h) below.
(f) In the event that any Initial Purchaser determines that it is not
eligible to participate in the Exchange Offer with respect to the exchange of
Discount Notes constituting any portion of an unsold allotment, at the request
of such Initial Purchaser, Holdings shall issue and deliver to such Initial
Purchaser or the party purchasing Exchange Notes registered under a Shelf
Registration Statement as contemplated by Section 3 hereof from such Initial
Purchaser, in exchange for such Discount Notes, a like principal amount at
maturity of Exchange
8
<PAGE>
Notes. Holdings shall use its reasonable best efforts to cause the CUSIP Service
Bureau to issue the same CUSIP number for such Exchange Notes as for Exchange
Notes issued pursuant to the Exchange Offer.
3. Shelf Registration. If, (i) because of any change in law or
------------------ -
applicable interpretations thereof by the staff of the SEC, Holdings is not
permitted to effect the Exchange Offer as contemplated by Section 2 hereof, (ii)
--
for any other reason the Exchange Offer Registration Statement is not declared
effective on or prior to 150 days after the Issue Date or the Exchange Offer is
not consummated on or prior to 180 days after the Issue Date, (iii) the Initial
---
Purchasers so request with respect to Discount Notes not eligible to be
exchanged for Exchange Notes in the Exchange Offer or the Initial Purchasers do
not receive freely tradeable Exchange Notes in the Exchange Offer, (iv) any
--
applicable law or interpretations do not permit any Holder of Discount Notes to
participate in the Exchange Offer, (v) any Holder (other than an Initial
-
Purchaser) of Discount Notes is not eligible to participate in the Exchange
Offer or such Holder does not receive freely tradeable Exchange Notes in the
Exchange Offer other than by reason of such Holder being an affiliate of
Holdings (it being understood that the requirement that a participating broker-
dealer deliver the Prospectus contained in the Exchange Offer Registration
Statement in connection with the sales of Exchange Notes shall not result in
such Exchange Notes being not "freely tradeable") or (vi) Holdings so elects,
--
then the following provisions shall apply:
(a) Holdings shall, at its cost, as promptly as practical, file with
the SEC a Shelf Registration Statement relating to the offer and sale of
Transfer Restricted Securities by the Holders from time to time in
accordance with the methods of distribution elected by such Holders and set
forth in such Shelf Registration Statement, and thereafter shall use its
reasonable best efforts after the date of each such filing to cause such
Shelf Registration Statement to be
9
<PAGE>
declared effective under the Securities Act; provided, however, that with
-------- -------
respect to Exchange Notes received by an Initial Purchaser in exchange for
Transfer Restricted Securities constituting any portion of an unsold
allotment, Holdings may, if permitted by current interpretations by the
staff of the SEC, file a post-effective amendment to the Exchange Offer
Registration Statement containing the information required by Regulation
S-K Items 507 and/or 508, as applicable, in satisfaction of its obligations
under this paragraph (a) with respect thereto, and any such Exchange Offer
Registration Statement, as so amended, shall be referred to herein as, and
governed by the provisions herein applicable to, a Shelf Registration
Statement.
(b) If applicable, Holdings shall use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective in order to
permit the Prospectus forming part thereof to be usable by Holders for a
period of two years after the Issue Date (in any such case, such period
being called the "Shelf Registration Period"). Holdings shall be deemed
-------------------------
not to have used its reasonable best efforts to keep the Shelf Registration
Statement effective during the requisite period if it voluntarily takes any
action that would result in Holders of Transfer Restricted Securities
covered thereby not being able to offer and sell such Transfer Restricted
Securities during that period, unless such action (i) is required by
-
applicable law or (ii) is taken by Holdings in good faith and for valid
--
business reasons (not including avoidance of Holdings' obligations
hereunder), including the acquisition or divestiture of assets, so long as
Holdings promptly thereafter complies with the requirements of Section 4(k)
hereof, if applicable.
4. Registration Procedures. In connection with any Shelf
-----------------------
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
10
<PAGE>
(a) Holdings shall furnish to the Initial Purchasers, prior to the
filing thereof with the SEC, a copy of any Shelf Registration Statement and
any Exchange Offer Registration Statement, and each amendment thereof and
each amendment or supplement, if any, to the Prospectus included therein
and shall use its best efforts to reflect in each such document, when so
filed with the SEC, such comments as the Initial Purchasers reasonably may
propose.
(b) Holdings shall ensure that (i) any Registration Statement and
-
any amendment thereto and any Prospectus forming part thereof and any
amendment or supplement thereto complies in all material respects with the
Securities Act and the rules and regulations thereunder, (ii) any
--
Registration Statement and any amendment thereto (in either case, other
than with respect to Holders' Information) does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any Prospectus forming part of
---
any Registration Statement, and any amendment or supplement to such
Prospectus (in either case, other than with respect to Holders'
Information), does not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements, in
light of the circumstances under which they were made, not misleading.
(c) (1) Holdings shall advise the Initial Purchasers and, in the
case of a Shelf Registration Statement, the Holders of Transfer Restricted
Securities covered thereby, and, if requested by the Initial Purchasers or
any such Holder, confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto has
been filed with the SEC and
11
<PAGE>
when such Registration Statement or any post-effective amendment
thereto has become effective; and
(ii) of any request by the SEC for amendments or supplements to
the Registration Statement or the Prospectus included therein or for
additional information (which advice shall be accompanied by an
instruction to suspend the use of such Prospectus until the requisite
changes have been made).
(2) Holdings shall advise the Initial Purchasers and, in the case of
a Shelf Registration Statement, the Holders of Discount Notes covered
thereby, and, in the case of an Exchange Offer Registration Statement, any
Exchanging Dealer which has provided in writing to Holdings a telephone or
facsimile number and address for notices, and, if requested by the Initial
Purchasers or any such Holder or Exchanging Dealer, confirm such advice in
writing:
(i) of the issuance by the SEC of any stop order suspending the
effectiveness of such Registration Statement or the initiation of any
proceedings for that purpose (which advice shall be accompanied by an
instruction to suspend the use of such Prospectus until the requisite
changes have been made);
(ii) of the receipt by Holdings of any notification with respect
to the suspension of the qualification of the Discount Notes or
Exchange Notes included therein for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose (which
advice shall be accompanied by an instruction to suspend the use of
such Prospectus until the requisite changes have been made); and
12
<PAGE>
(iii) of the happening of any event that requires the making of
any changes in such Registration Statement or the Prospectus included
therein so that, as of such date, the statements therein are not
misleading and do not omit to state a material fact required to be
stated therein or necessary to make the statements therein (in the
case of such Prospectus, in light of the circumstances under which
they were made) not misleading (which advice shall be accompanied by
an instruction to suspend the use of such Prospectus until the
requisite changes have been made).
(d) Holdings shall use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.
(e) Holdings shall furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration
Statement, without charge, at least one conformed copy of such Shelf
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if any such Holder so requests in
writing, all exhibits (including those, if any, incorporated by reference).
(f) Holdings shall, during the Shelf Registration Period, deliver to
each Holder of Transfer Restricted Securities included within the coverage
of any Shelf Registration Statement, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such
Holder may reasonably request; and Holdings consents to the use of such
Prospectus or any amendment or supplement thereto by each of the selling
Holders of Transfer Restricted Securities in connection with the
13
<PAGE>
offering and sale of the Transfer Restricted Securities covered by such
Prospectus or any amendment or supplement thereto.
(g) Holdings shall furnish to each Exchanging Dealer which so
requests, without charge, at least one conformed copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, any documents incorporated by
reference therein, and, if any such Exchange Dealer so requests in writing,
all exhibits (including those, if any, incorporated by reference).
(h) Holdings shall, if required under applicable securities laws,
upon prior written request, make available without charge for a period of
90 days after the consummation of the Exchange Offer as many copies of the
Prospectus included in the Exchange Offer Registration Statement and any
amendment or supplement thereto as any Exchanging Dealer may reasonably
request for delivery by such Exchanging Dealer in connection with a resale
of Exchange Notes received by it pursuant to the Exchange Offer; and
Holdings consents to the use of such Prospectus or any amendment or
supplement thereto by any such Exchanging Dealer, as aforesaid.
(i) Prior to the effective date of any Registration Statement,
Holdings shall use its reasonable best efforts to register or qualify, or
cooperate with the Holders of Discount Notes or Exchange Notes included
therein and their respective counsel in connection with the registration or
qualification of, such Discount Notes or Exchange Notes for offer and sale
under the securities or blue sky laws of such jurisdictions as any such
Holder reasonably requests in writing and do any and all other acts or
things necessary or advisable to enable the offer and sale in such
jurisdictions of the Discount Notes or Exchange Notes covered by such
Registration Statement; provided, however, that
-------- -------
14
<PAGE>
Holdings shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which
would subject it to general service of process or to taxation in any such
jurisdiction where it is not then so subject.
(j) Holdings shall cooperate with the holders of Discount Notes or
Exchange Notes to facilitate the timely preparation and delivery of
certificates representing Discount Notes or Exchange Notes to be sold
pursuant to any Registration Statement free of any restrictive legends and
in such denominations and registered in such names as the Holders thereof
may request in writing prior to sales of Discount Notes or Exchange Notes
pursuant to such Registration Statement.
(k) Upon the occurrence of any event contemplated by Section
4(c)(1)(ii), 4(c)(2)(i), 4(c)(2)(ii) or 4(c)(2)(iii) hereof during the
period in which Holdings is required to maintain an effective Registration
Statement, Holdings shall promptly prepare and file with the SEC a post-
effective amendment to the applicable Registration Statement or an
amendment or supplement to the related Prospectus or file any other
required document so that, as thereafter delivered by a Holder to
purchasers of the Discount Notes or Exchange Notes included therein, such
Prospectus shall not include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(l) Not later than the effective date of any Registration Statement,
Holdings shall provide a CUSIP number for the Discount Notes or Exchange
Notes to be sold pursuant to such Registration Statement, and provide the
applicable trustee with printed certificates for such Discount Notes or
Exchange Notes, in a form eligible for deposit with The Depository Trust
Company.
15
<PAGE>
(m) Holdings shall use its best efforts to comply with all applicable
rules and regulations of the SEC and shall make generally available to its
securityholders as soon as practicable after the effective date of the
applicable Registration Statement an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act.
(n) Holdings shall cause the Indenture or the Exchange Notes
Indenture, as the case may be, to be qualified under the Trust Indenture
Act in a timely manner.
(o) Holdings may require each Holder of Transfer Restricted
Securities to be sold pursuant to any Shelf Registration Statement to
furnish to Holdings such information regarding such Holder and the
distribution of such Transfer Restricted Securities as may be required by
law to be included in such Registration Statement, and Holdings may exclude
from such registration the Transfer Restricted Securities of any Holder
that fails to furnish such information within a reasonable time after
receiving such request.
(p) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon, receipt of
any notice from Holdings pursuant to Section 4(c)(1)(ii), 4(c)(2)(i),
4(c)(2)(ii) or 4(c)(2)(iii),such Holder will discontinue disposition of
such Transfer Restricted Securities until such Holder's receipt of copies
of the supplemental or amended prospectus contemplated by Section 4(k) or
until advised in writing by Holdings that the use of the applicable
Prospectus may be resumed.
(q) In the case of any Shelf Registration Statement, Holdings shall
enter into such customary
16
<PAGE>
agreements (including, if requested, an underwriting agreement in customary
form) and take such other actions as the Majority Holders or the Managing
Underwriters, if any, shall reasonably request in order to facilitate the
registration or the disposition of Discount Notes or Exchange Notes,
pursuant to such Shelf Registration Statement.
(r) In the case of any Shelf Registration Statement, Holdings shall
(i) make reasonably available for inspection by the Holders of the Discount
-
Notes or Exchange Notes to be sold thereunder, any underwriter
participating in any disposition of Discount Notes or Exchange Notes
pursuant to such Shelf Registration Statement, and any attorney, accountant
or other agent retained by such Holders or any such underwriter all
relevant financial and other records, pertinent corporate documents and
properties of Holdings and its subsidiaries; (ii) use reasonable best
--
efforts to cause Holdings' officers, directors and employees to supply all
relevant information reasonably requested by such Holders or any such
underwriter, attorney, accountant or agent in connection with any such
Shelf Registration Statement as is customary for similar due diligence
examinations; provided, however, that any information that is designated in
-------- -------
writing by Holdings, in good faith, as confidential at the time of delivery
of such information shall be kept confidential by the Holders or any such
underwriter, attorney, accountant or agent, unless such disclosure is made
in connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a third
party without an accompanying obligation of confidentiality; (iii) make
---
such representations and warranties to the Holders of Discount Notes
registered thereunder and the underwriters, if any, in form, substance and
scope as are customarily made by issuers to underwriters in primary
underwritten offerings and covering matters, including, but not limited to,
those set forth in the
17
<PAGE>
Purchase Agreement; (iv) obtain opinions of counsel to Holdings and updates
--
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Managing Underwriters, if any) addressed to
each selling Holder and the underwriters, if any, covering such matters as
are customarily covered in opinions requested in underwritten offerings;
(v) obtain "cold comfort" letters and updates thereof from the independent
-
certified public accountants of Holdings (and, if necessary, any other
independent certified public accountants of any subsidiary of Holdings or
of any business acquired by Holdings for which financial statements and
financial data are, or are required to be, included in such Shelf
Registration Statement), addressed to each selling Holder of Discount Notes
registered thereunder and the underwriters, if any, in customary form and
covering matters of the type customarily covered in "cold comfort" letters
in connection with primary underwritten offerings; and (vi) deliver such
--
documents and certificates as may be reasonably requested by the Majority
Holders and the Managing Underwriters, if any, including those to evidence
compliance with Section 4(k) and with any customary conditions contained in
the underwriting agreement or other agreement entered into by Holdings. The
foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of this
Section 4(r) shall be performed at (A) the effectiveness of such Shelf
-
Registration Statement and each post-effective amendment thereto and (B)
-
each closing under any underwriting or similar agreement as and to the
extent required thereunder.
(s) In the case of any Exchange Offer Registration Statement,
Holdings shall (i) make reasonably available for inspection by each Initial
-
Purchaser, and any attorney, accountant or other agent retained by such
Initial Purchaser, all relevant financial and other records, pertinent
corporate documents and properties of Holdings and its subsidiaries; (ii)
--
use
18
<PAGE>
reasonable best efforts to cause Holdings' officers, directors and
employees to supply all relevant information reasonably requested by such
Initial Purchaser or any such attorney, accountant or agent in connection
with any such Exchange Offer Registration Statement as is customary for
similar due diligence examinations; provided, however, that any information
-------- -------
that is designated in writing by Holdings, in good faith, as confidential
at the time of delivery of such information shall be kept confidential by
such Initial Purchaser or any such attorney, accountant or agent, unless
such disclosure is made in connection with a court proceeding or required
by law, or such information becomes available to the public generally or
through a third party without an accompanying obligation of
confidentiality; (iii) make such representations and warranties to such
---
Initial Purchaser, in form, substance and scope as are customarily made
by issuers to underwriters in primary underwritten offerings and covering
matters, including, but not limited to, those set forth in the Purchase
Agreement; (iv) obtain opinions of counsel to Holdings and updates thereof
--
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to such Initial Purchaser and its counsel)
addressed to such Initial Purchaser, covering such matters as are
customarily covered in opinions requested in underwritten offerings; (v)
-
obtain "cold comfort" letters and updates thereof from the independent
certified public accountants of Holdings (and, if necessary, any other
independent certified public accountants of any subsidiary of Holdings or
of any business acquired by Holdings for which financial statements and
financial data are, or are required to be, included in such Exchange Offer
Registration Statement), addressed to such Initial Purchaser, in customary
form and covering matters of the type customarily covered in "cold comfort"
letters in connection with primary underwritten offerings, or if requested
by such Initial Purchaser or its counsel in
19
<PAGE>
lieu of a "cold comfort" letter, an agreed-upon procedures letter under
Statement on Auditing Standards No. 35, covering matters requested by such
Initial Purchaser or its counsel; and (vi) deliver such documents and
--
certificates as may be reasonably requested by such Initial Purchaser or
its counsel, including those to evidence compliance with Section 4(k) and
with conditions customarily contained in underwriting agreements. The
foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of this
Section 4(s) shall be performed at the close of the Exchange Offer and the
effective date of any post-effective amendment to the Exchange Offer
Registration Statement.
5. Registration Expenses. Holdings shall bear all expenses incurred
---------------------
in connection with the performance of its obligations under Sections 2, 3 and 4
hereof and, in the event of any Shelf Registration Statement, shall reimburse
the Holders for the reasonable fees and disbursements of one firm or counsel
designated by the Majority Holders to act as counsel for the Holders in
connection therewith, and, in the case of any Exchange Offer Registration
Statement, shall reimburse the Initial Purchasers for the reasonable fees and
disbursements of one firm or counsel acting in connection therewith.
6. Indemnification and Contribution. (a) In connection with any
--------------------------------
Registration Statement, Holdings agrees to indemnify and hold harmless each
Holder of Discount Notes or Exchange Notes covered thereby (including each
Initial Purchaser and, with respect to any Prospectus delivery as contemplated
in Section 4(h) hereof, each Exchanging Dealer), the directors, officers,
employees and agents of each such Holder and each person who controls any such
Holder within the meaning of either the Securities Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or
20
<PAGE>
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
such Registration Statement, or in any Prospectus forming a part thereof, or in
any amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
-------- -------
that Holdings shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission in any of
such documents in reliance upon and in conformity with written information
furnished to Holdings by or on behalf of any such Holder specifically for
inclusion therein. This indemnity agreement shall be in addition to any
liability which the Company may otherwise have.
(b) Each Holder of Discount Notes or Exchange Notes covered by a
Registration Statement (including each Initial Purchaser and, with respect to
any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging
Dealer) severally and not jointly agrees to indemnify and hold harmless
Holdings, the directors, officers, employees and agents of Holdings and each
other person who controls Holdings within the meaning of either the Securities
Act or the Exchange Act to the same extent as the foregoing indemnity from
Holdings to each such Holder, but only with reference to written information
relating to such Holder furnished to Holdings by or on behalf of such Holder
specifically for inclusion in the documents referred to in the foregoing
indemnity, and agrees to reimburse each such indemnified party, as incurred, for
any legal or other
21
<PAGE>
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action. This indemnity
agreement shall be in addition to any liability which any such Holder may
otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against the indemnifying party under
this Section 6, notify the indemnifying party in writing of the commencement
thereof; but the failure so to notify the indemnifying party (i) shall not
-
relieve the indemnifying party from liability under paragraph (a) or (b) above
unless and to the extent such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) shall not, in any
--
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
-------- -------
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel (and local counsel) if (i) the use of
-
counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the actual or
--
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal
22
<PAGE>
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
---
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
--
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party shall not, without the prior
written consent of the indemnified parties, settle, compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, agrees to contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which such indemnified party may be subject in such
------
proportion as is appropriate to reflect the relative benefits received by such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, from the Initial Placement and the applicable Registration Statement which
resulted in such Losses; provided, however, that in no case shall any Initial
-------- -------
Purchaser or any subsequent Holder of any Discount Note or Exchange Note be
responsible, in the aggregate, for any amount in excess of the purchase discount
or commission applicable to such Discount Note, or in the case of an Exchange
Note, applicable to the Discount Note which was
23
<PAGE>
exchangeable into such Exchange Note, as set forth on the cover page of the
Final Memorandum, nor shall any underwriter be responsible for any amount in
excess of the underwriting discount or commission applicable to the Discount
Notes or Exchange Notes purchased by such underwriter under the applicable
Registration Statement which resulted in such Losses. If the allocation provided
by the immediately preceding sentence is unavailable for any reason, the
indemnifying party and the indemnified party shall contribute in such proportion
as is appropriate to reflect not only such relative benefits but also the
relative fault of such indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by Holdings shall be deemed to be equal to the total net
proceeds from the Initial Placement (before deducting expenses) as set forth on
the cover page of the Final Memorandum. Benefits received by the Initial
Purchasers shall be deemed to be equal to the total purchase discounts and
commissions as set forth on the cover page of the Final Memorandum, and benefits
received by any other Holders shall be deemed to be equal to the value of
receiving Discount Notes or Exchange Notes, as applicable, registered under the
Securities Act. Benefits received by any underwriter shall be deemed to be equal
to the total underwriting discounts and commissions, as set forth on the cover
page of the Prospectus forming a part of the Registration Statement which
resulted in such Losses. Relative fault shall be determined by reference to
whether any alleged untrue statement of material fact or omission to state a
material fact relates to information provided by the indemnifying party, on the
one hand, or by the indemnified party, on the other hand. The parties agree that
it would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the pro visions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f)
24
<PAGE>
of the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section
6, each person who controls a Holder within the meaning of either the Securities
Act or the Exchange Act and each director, officer, employee and agent of such
Holder shall have the same rights to contribution as such Holder, and each
person who controls Holdings within the meaning of either the Securities Act or
the Exchange Act and each officer and director of Holdings shall have the same
rights to contribution as Holdings, subject in each case to the applicable
terms and conditions of this paragraph (d).
(e) The provisions of this Section 6 shall remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
Holdings or any of the officers, directors or controlling persons referred to in
Section 6 hereof, and shall survive the sale by a Holder of Discount Notes
covered by a Registration Statement.
7. Liquidated Damages. (a) If (i) a Registration Statement is not
------------------ -
filed with the SEC on or prior to 90 days after the Issue Date, (ii) the
--
Exchange Offer Registration Statement or a Shelf Registration Statement, if
applicable, is not declared effective on or prior to 150 days after the Issue
Date, (iii) the Exchange Offer is not consummated on or prior to 180 days after
---
the Issue Date or (iv) a Shelf Registration Statement is filed and declared
--
effective on or prior to 150 days after the Issue Date but shall thereafter
cease to be effective or usable (at any time that Holdings is obligated to
maintain the effectiveness thereof) in connection with resales of Discount
Notes or Exchange Notes in accordance with and during the periods specified
herein (each such event referred to in clauses (i) through (iv), a "Registration
------------
Default"), Holdings shall be obligated to pay liquidated damages ("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 5 cent per week per $1,000 of the Accreted Value
25
<PAGE>
of the Discount Notes constituting Transfer Restricted Securities held by such
Holder. The amount of the Liquidated Damages shall increase an additional 5
cents per week per $1,000 of the Accreted Value of the Discount Notes
constituting Transfer Restricted Securities for each subsequent 90-day period
until the applicable Registration Default has been cured, up to a maximum amount
of Liquidated Damages of 20 cents per week per $1,000 of the Accreted Value of
Discount Notes constituting Transfer Restricted Securities.
(b) Holdings shall notify the Trustee under the Indenture immediately
upon the happening of each and every Registration Default. Holdings shall pay
Liquidated Damages in arrears due on the Transfer Restricted Securities by
depositing with the paying agent (which may not be Holdings for these purposes),
in trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York
City time, on the next Liquidated Damages payment date specified below, sums
sufficient to pay the Liquidated Damages then due. All accrued Liquidated
Damages shall be paid to Holders on May 1 and November 1 of each year during
which such Liquidated Damages are payable, commencing on the first such date to
occur after the obligation to pay Liquidated Damages arises. Each obligation to
pay Liquidated Damages shall be deemed to accrue from and including the date of
the applicable Registration Default. Following the cure of all Registration
Defaults, the accrual of Liquidated Damages shall cease.
8. Miscellaneous. (a) No Inconsistent Agreements. Holdings has
------------- --------------------------
not, as of the date hereof, entered into, nor shall it, on or after the date
hereof, enter into, any agreement with respect to the Discount Notes or the
Exchange Notes that is inconsistent with the rights granted to the Holders
herein or otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and
26
<PAGE>
waivers or consents to departures from the provisions hereof may not be given,
unless Holdings has obtained the written consent of the Holders of at least a
majority of the then outstanding aggregate principal amount at maturity of
Discount Notes (or, after the consummation of any Exchange Offer in accordance
with Section 2 hereof, of Exchange Notes); provided, however, that, with respect
-------- -------
to any matter that directly or indirectly affects the rights of any Initial
Purchaser hereunder, Holdings shall obtain the written consent of each such
Initial Purchaser against which such amendment, qualification, supplement,
waiver or consent is to be effective. Notwithstanding the foregoing (except the
foregoing proviso), a waiver or consent to departure from the provisions hereof
with respect to a matter that relates exclusively to the rights of Holders whose
Discount Notes are being sold pursuant to a Registration Statement and that does
not directly or indirectly affect the rights of other Holders may be given by
the Majority Holders, determined on the basis of Discount Notes being sold
rather than registered under such Registration Statement.
(c) Notices. All communications hereunder shall be in writing and
-------
effective only on receipt, and shall be mailed, delivered or sent by fax and
confirmed:
(1) if to a Holder, at the most current address or fax number given by
such Holder to Holdings in accordance with the provisions of this Section
8(c), which address or fax number initially is, with respect to each
Holder, the address or fax number of such Holder maintained by the
Registrar under the Indenture, with a copy in like manner to Salomon
Brothers Inc;
(2) if to you, initially at the respective addresses or fax number set
forth in the Purchase Agreement; and
(3) if to Holdings, initially at its address or fax number set forth
in the Purchase Agreement.
27
<PAGE>
The Initial Purchasers or Holdings by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
(d) 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 the need for an express assignment or any consent by Holdings
thereto, subsequent Holders of Discount Notes and/or Exchange Notes. Holdings
hereby agrees to extend the benefits of this Agreement to any Holder of
Discount Notes and/or Exchange Notes and any such Holder may specifically
enforce the provisions of this Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
(f) Headings. The section headings herein are for convenience only
--------
and shall not affect the construction hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS
CONFLICTS OF LAW RULES.
(h) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
28
<PAGE>
(i) Discount Notes Held by Holdings, etc. Whenever the consent or
-------------------------------------
approval of Holders of a specified percentage of principal amount at maturity
of Discount Notes or Exchange Notes is required hereunder, Discount Notes or
Exchange Notes, as applicable, held by Holdings or its Affiliates (other than
subsequent Holders of Discount Notes or Exchange Notes if such subsequent
Holders are deemed to be Affiliates solely by reason of their holdings of such
Discount Notes or Exchange Notes) shall not be counted in determining whether
such consent or approval was given by the Holders of such required percentage.
29
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between Holdings and you.
Very truly yours,
IRON AGE HOLDINGS CORPORATION
By: /s/ Keith McDonough
-------------------------------
Name: Keith McDonough
Title: Vice President - Finance
Accepted in New York, New York
April 24, 1998
SALOMON BROTHERS INC
By: /s/ R. H. Ivers
----------------------
Name: R. H. Ivers
-----------------
Title: Managing Director
----------------
SBC WARBURG DILLON READ INC.
By: /s/ Douglas W. Lehrman
----------------------
Name: Douglas W. Lehrman
-----------------
Title: Managing Director
----------------
By: /s/ Michael J. Cerminaro
----------------------
Name: Michael J. Cerminaro
-----------------
Title: Director
----------------
BANQUE NATIONALE DE PARIS
By: /s/ [UNKNOWN SIGNATURE] /s/ [UNKNOWN SIGNATURE]
---------------------- -----------------------
Name:
-----------------
Title:
----------------
30
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Discount Notes where
such Exchange Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities. Holdings has agreed that,
starting on the Expiration Date (as defined herein) and ending on the close of
business on the ninetieth day 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."
31
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Discount Notes, where such Discount Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
32
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
--------------------
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Discount Notes where such Discount Notes were acquired as a result
of market-making activities or other trading activities. Holdings has agreed
that, starting on the Expiration Date and ending on the close of business on the
ninetieth day after the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until __________, ___, all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.
Holdings will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of Exchange Notes and any commissions or concessions received by any
33
<PAGE>
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, Holdings 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. Holdings has agreed to pay all expenses incident
to the Exchange Offer (including the expenses of one counsel for the Holders of
the Discount Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the Holders of the Discount Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
[If applicable, add information required by Regulation S-K Items 507
and/or 508.]
34
<PAGE>
ANNEX D
Rider A
-------
CHECK HERE AND COMPLETE THE INFORMATION BELOW 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:
------------------------------
------------------------------
Rider B
-------
The undersigned represents that (i) any Exchange Notes to be received
-
by the undersigned shall be acquired in the ordinary course of its business,
(ii) the undersigned has no arrangement or understanding with any person to
--
participate in the distribution of the Exchange Notes and (iii) the undersigned
---
is not an "affiliate" (as defined in Rule 405 under the Securities Act) of
Holdings, or, if it is an affiliate, it shall comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Discount Notes, it represents that the
Discount Notes to be exchanged for Exchange Notes were acquired by it as a
result of market-making activities or other trading activities and acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
35
<PAGE>
Exhibit 5.1
June 16, 1998
Iron Age Holdings Corporation
Robinson Plaza Three, Ste. 400
Pittsburgh, PA 15205
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Iron Age Holdings Corporation, a Delaware
corporation ("Holdings") in connection with a Registration Statement on Form S-4
(the "Registration Statement") to be filed by Holdings with the Securities and
Exchange Commission relating to (i) the proposed issuance by Holdings of up to
$45,140,000 aggregate principal amount at maturity of its new 12 1/8% Senior
Discount Notes due 2009 registered under the Securities Act of 1933, as amended
(the "Securities Act") (the "Exchange Notes"), in exchange for a like principal
amount at maturity of Holdings' outstanding 12 1/8% Senior Discount Notes due
2009, which have not been so registered (the "Original Notes") (the "Exchange
Offer").
The Exchange Notes will be issued under an Indenture dated as of April 24,
1998 (the "Indenture") between Holdings and The Chase Manhattan Bank, as
indenture trustee.
We have examined and relied upon the information set forth in the
Registration Statement and such other documents and records as we have deemed
necessary. In addition, as to questions of fact material to our opinions, we
have relied upon certificates of officers of Holdings and public officials.
In the course of our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than Holdings, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof on such
parties.
<PAGE>
Iron Age Holdings Corporation -2- June 16, 1968
We express no opinion as to the laws of any jurisdiction other than those
of The Commonwealth of Massachusetts, the General Corporation Law of the State
of Delaware and the federal laws of the United States of America. We call your
attention to the fact that each of the Indenture and the Exchange Notes provides
that it is to be governed by the internal laws of the State of New York. We are
of the opinion that a Massachusetts court or a federal court sitting in
Massachusetts would, under conflict of law principles observed by the courts of
Massachusetts, give effect to such provisions. For purposes of the opinion
provided herein, we have assumed with your permission that the Indenture and the
Exchange Notes provide that they are to be governed by and construed in
accordance with the domestic substantive laws of The Commonwealth of
Massachusetts.
Based upon the foregoing, we are of the opinion that:
The Exchange Notes have been duly authorized by all requisite corporate
action of Holdings and, when executed and authenticated in the manner provided
for in the Indenture and delivered against surrender and cancellation of a like
aggregate principal amount of Original Notes as contemplated in the Registration
Agreement, dated April 24, 1998, among Holdings and the Initial Purchasers named
therein, the Exchange Notes will constitute valid and binding obligations of
Holdings entitled to the benefits of the Indenture and enforceable against
Holdings in accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles (regardless of whether considered in a proceeding in equity
or at law).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" contained in the Prospectus included therein.
It is understood that this opinion is to be used only in connection with
the Exchange Offer while the Registration Statement is in effect.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
<PAGE>
EXHIBIT 10.1
$65,000,000
CREDIT AGREEMENT
Dated as of April 24, 1998
Among
IRON AGE CORPORATION
as Borrower
-- --------
and
IRON AGE HOLDINGS CORPORATION
as Parent Guarantor
-- ------ ---------
and
THE INITIAL LENDERS NAMED HEREIN
and
BANQUE NATIONALE DE PARIS
as Agent, Initial Issuing Bank and Swing Line Bank
-- ----- ------- ------- ---- --- ----- ---- ----
<PAGE>
T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01. Certain Defined Terms............................................... 1
1.02. Computation of Time Periods; Other Definitional Provisions.......... 27
1.03. Accounting Terms.................................................... 27
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
2.01. The Advances........................................................ 28
2.02. Making the Advances................................................. 29
2.03. Issuance of and Drawings and Reimbursement Under Letters
of Credit.......................................................... 31
2.04. Repayment of Advances............................................... 32
2.05. Termination or Reduction of the Commitments......................... 34
2.06. Prepayments......................................................... 35
2.07. Interest............................................................ 38
2.08. Fees................................................................ 38
2.09. Conversion of Advances.............................................. 39
2.10. Increased Costs, Etc................................................ 40
2.11. Payments and Computations........................................... 41
2.12. Taxes............................................................... 42
2.13. Sharing of Payments, Etc............................................ 44
2.14. Use of Proceeds..................................................... 45
2.15. Evidence of Debt.................................................... 45
ARTICLE III
CONDITIONS OF LENDING
3.01. Conditions Precedent to Initial Extension of Credit................. 46
3.02. Conditions Precedent to Each Borrowing, Swing Line Advance
and Issuance of Letters of Credit.................................. 52
3.03. Determinations Under Section 3.01................................... 52
</TABLE>
<PAGE>
ii
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Borrower and the
Parent Guarantor................................................... 53
ARTICLE V
COVENANTS OF THE BORROWER AND THE PARENT GUARANTOR
5.01. Affirmative Covenants............................................... 59
5.02. Negative Covenants.................................................. 64
5.03. Reporting Requirements.............................................. 73
5.04. Financial Covenants................................................. 77
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default................................................... 80
6.02. Actions in Respect of the Letters of Credit upon Default............ 82
ARTICLE VII
PARENT GUARANTY
7.01. Guaranty............................................................ 83
7.02. Guaranty Absolute................................................... 83
7.03. Waiver.............................................................. 84
7.04. Payments Free and Clear of Taxes, Etc............................... 84
7.05. Continuing Guaranty; Assignments.................................... 86
7.06. Subrogation......................................................... 86
ARTICLE VIII
THE AGENT
8.01. Authorization and Action............................................ 87
8.02. Agent's Reliance, Etc............................................... 87
8.03. BNP and Affiliates.................................................. 88
8.04. Lender Party Credit Decision........................................ 88
8.05. Indemnification..................................................... 88
8.06. Successor Agents.................................................... 89
</TABLE>
<PAGE>
iii
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
ARTICLE IX
MISCELLANEOUS
9.01. Amendments, Etc..................................................... 90
9.02. Notices, Etc........................................................ 91
9.03. No Waiver; Remedies................................................. 91
9.04. Costs and Expenses.................................................. 92
9.05. Right of Setoff..................................................... 93
9.06. Binding Effect...................................................... 93
9.07. Assignments and Participations...................................... 94
9.08. Execution in Counterparts........................................... 96
9.09. No Liability of the Issuing Bank.................................... 96
9.10. Jurisdiction, Etc................................................... 97
9.11. Governing Law....................................................... 97
9.12. WAIVER OF JURY TRIAL................................................ 97
</TABLE>
<PAGE>
iv
SCHEDULES
- - ---------
Schedule I - Commitments and Applicable Lending Offices
Schedule II - Employment/Non-Compete Agreements
Schedule III - Retirement Benefit Plan Payees
Schedule 3.01(i) - Surviving Debt
Schedule 3.01(k)(xxiii) - Blocked Accounts
Schedule 4.01(a) - Investor Group and Share Ownership
Schedule 4.01(b) - Subsidiaries
Schedule 4.01(d) - Authorizations, Approvals, Actions, Notices and
Filings
Schedule 4.01(l) - Plans, Multiemployer Plans and Welfare Plans
Schedule 4.01(u) - Environmental Matters
Schedule 4.01(z) - Open Years
Schedule 4.01(ff) - Existing Debt
Schedule 4.01(gg) - Owned Real Property
Schedule 4.01(hh) - Leased Real Property
Schedule 4.01(ii) - Investments
Schedule 4.01(jj) - Intellectual Property
Schedule 5.02(a)(iii) - Existing Liens
<PAGE>
v
EXHIBITS
- - --------
Exhibit A-1 - Form of Working Capital Note
Exhibit A-2 - Form of Acquisition Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Security Agreement
Exhibit E - Form of Mortgage
Exhibit F - Form of Intercompany Subordination Agreement
Exhibit G - Form of Intellectual Property Security Agreement
Exhibit H - Form of Canadian Security Agreement
Exhibit I - Form of Subsidiary Guaranty
Exhibit J - Form of Borrowing Base Certificate
Exhibit K - Form of Opinion of Special Counsel to the Loan Parties
Exhibit L - Form of Opinion of Local Counsel to the Lender Parties
Exhibit M-1 - Form of Borrower Solvency Certificate
Exhibit M-2 - Form of Parent Guarantor Solvency Certificate
Exhibit O - Form of Assignment of Life Insurance Policy
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of April 24, 1998 among Iron Age
Corporation, a Delaware corporation (the "Borrower"), Iron Age Holdings
--------
Corporation, a Delaware corporation (the "Parent Guarantor"), the banks,
----------------
financial institutions and other institutional lenders listed on the signature
pages hereof as the Initial Lenders (the "Initial Lenders"), Banque Nationale de
---------------
Paris ("BNP"), as the swing line bank (the "Swing Line Bank"), and as agent
--- ---------------
(together with any successor appointed pursuant to Article VIII, the "Agent")
-----
for the Lender Parties (as hereinafter defined), and BNP, as initial issuing
bank (the "Initial Issuing Bank").
--------------------
PRELIMINARY STATEMENTS:
(1) Fenway Fund (as hereinafter defined) and certain investors listed
on Part I of Schedule 4.01(a) (the "Investor Group") own all of the outstanding
--------------
capital stock of the Parent Guarantor. The Parent Guarantor owns directly all
of the outstanding capital stock of the Borrower.
(2) The Borrower has requested that the Lender Parties lend to the
Borrower up to $65,000,000 in order to refinance certain existing indebtedness
of the Borrower and to pay transaction fees and expenses in connection therewith
and the other transactions contemplated hereby (collectively, the "Refinancing")
-----------
and to provide working capital for the Borrower and its Subsidiaries (as
hereinafter defined) and for other general corporate purposes permitted under
this Agreement, including, subject to certain terms and conditions as
hereinafter provided, acquisitions.
(3) The Lender Parties have indicated their willingness to agree to
lend such amounts on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
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):
"Acquisition Advance" has the meaning specified in Section 2.01(d).
-------------------
"Acquisition Borrowing" means a borrowing consisting of simultaneous
---------------------
Acquisition Advances of the same Type made by the Acquisition Lenders.
"Acquisition Commitment" means, with respect to any Acquisition Lender
----------------------
at any time, the amount set forth opposite such Lender's name on Schedule I
hereto under the caption "Acquisition
<PAGE>
2
Commitment" or, if such Lender has entered into one or more Assignment and
Acceptances, the amount set forth for such Lender in the Register
maintained by the Agent pursuant to Section 9.07(d) as such Lender's
"Acquisition Commitment", as such amount may be reduced at or prior to such
time pursuant to Section 2.05.
"Acquisition Facility" means, at any time, the aggregate amount of the
--------------------
Acquisition Lenders' Acquisition Commitments at such time.
"Acquisition Lender" means any Lender that has an Acquisition
------------------
Commitment.
"Acquisition Note" means a promissory note of the Borrower payable to
----------------
the order of any Acquisition Lender, in substantially the form of Exhibit
A-2 hereto, evidencing the indebtedness of the Borrower to such Lender
resulting from the Acquisition Advances made by such Lender.
"Acquisition Reduction Amount" has the meaning specified in Section
----------------------------
2.06(b)(vi).
"Advance" means an Acquisition Advance, a Working Capital Advance, a
-------
Letter of Credit Advance or a Swing Line Advance.
"Affiliate" means, as to any Person, any other Person that, directly
---------
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 5% or more of the
Voting Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
Voting Stock, by contract or otherwise.
"Agent" has the meaning specified in the recital of parties to this
-----
Agreement.
"Agent Indemnified Costs" has the meaning specified in Section
-----------------------
8.05(a).
"Agent's Account" means the account of the Agent maintained by the
---------------
Agent at the Federal Reserve Bank of New York, 33 Liberty Street, New York,
New York 10048, ABA No. 026007689, for further credit to Account No.
750420-701-03, or such other account maintained by the Agent and designated
by the Agent in a written notice to the Lender Parties and the Borrower.
"Applicable Lending Office" means, with respect to each Lender Party,
-------------------------
such Lender Party's Domestic Lending Office in the case of a Base Rate
Advance and such Lender Party's Eurodollar Lending Office in the case of a
Eurodollar Rate Advance.
"Applicable Margin" means a percentage per annum determined by
-----------------
reference to the ratio of (i) Funded Debt of the Borrower and its
Subsidiaries as of such date to (ii) Consolidated EBITDA of the Parent
Guarantor and its Subsidiaries for the four fiscal quarters ended on or
most recently prior to such date as set forth below:
<PAGE>
3
<TABLE>
<CAPTION>
====================================================================================
Funded Debt to EBITDA Base Rate Eurodollar Rate
Ratio Advances Advances
------------------------------------------------------------------------------------
<S> <C> <C>
Level I
-------
less than 4.50 : 1.00 0.250% 1.750%
-----------------------------------------------------------------------------------
Level II
--------
greater than or equal to 4.50 :
1.00 but less than 5.25 : 1.00 0.500% 2.000%
-----------------------------------------------------------------------------------
Level III
---------
greater than or equal to 5.25 :
1.00 but less than 6.00 : 1.00 0.750% 2.250%
-----------------------------------------------------------------------------------
Level IV
--------
greater than or equal to 1.000% 2.500%
6.00 : 1.00
===================================================================================
</TABLE>
The Applicable Margin for each Advance shall be determined by reference to
the ratio in effect from time to time; provided, however, that (A) no
-------- -------
change in the Applicable Margin shall be effective until three Business
Days after the date on which the Agent receives the financial statements
required to be delivered pursuant to Section 5.03(b) or 5.03(c), as the
case may be, and a certificate of the chief financial officer of the
Borrower demonstrating such ratio and (B) the Applicable Margin shall be at
Level IV for so long as the Borrower has not submitted to the Agent the
information described in clause (A) of this proviso as and when required
under Section 5.03(b) or 5.03(c), as the case may be; and provided further
-------- -------
that, until the financial statements for the period ended October 31, 1998
are delivered, the Applicable Margin shall be at least Level III; and
provided further that the Applicable Margin in effect immediately after an
-------- -------
Investment by the Borrower permitted by Section 5.02(f)(xvii) shall be at
the Level described above based on the Leverage Ratio described in the
certificate required to be delivered pursuant to Section 5.02(f)(xvii)(5).
"Application Date" has the meaning specified in Section 2.06(b)(viii).
----------------
"Appropriate Lender" means, at any time, with respect to (a) either
------------------
the Acquisition Facility or the Working Capital Facility, a Lender that has
a Commitment with respect to such Facility at such time and (b) the Letter
of Credit Facility, (i) the Issuing Bank and (ii) if the other Working
Capital Lenders have made Letter of Credit Advances pursuant to Section
2.03(c) that are outstanding at such time, each such other Working Capital
Lender and (c) the Swing Line Advances, (i) the Swing Line Bank and (ii) if
the other Working Capital Lenders have made Swing Line Advances pursuant to
Section 2.02(b) that are outstanding at such time, each such other Working
Capital Lender.
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender Party and an Eligible Assignee and accepted by the Agent,
in accordance with Section 9.07 and in substantially the form of Exhibit C
hereto.
"Assignment of Life Insurance Policy" means an assignment of the key
-----------------------------------
man life insurance policy on Donald R. Jensen assigned by the Borrower to
the Agent for the benefit of the Secured Parties in accordance with Section
5.01(d) and in substantially the form of Exhibit O hereto.
<PAGE>
4
"Available Amount" of any Letter of Credit means, at any time, the
----------------
maximum amount available to be drawn under such Letter of Credit at such
time (assuming compliance at such time with all conditions to drawing).
"Base Rate" means a fluctuating interest rate per annum in effect from
---------
time to time, which rate per annum shall at all times be equal to the
higher of:
(a) the rate of interest announced publicly by BNP in New York,
New York, from time to time, as its prime rate (and such term shall
not be construed to be its best or most favorable rate); and
(b) 1/2 of 1% per annum above the Federal Funds Rate.
"Base Rate Advance" means an Advance that bears interest as provided
-----------------
in Section 2.07(a)(i).
"Blocked Account Bank" has the meaning specified in Section 6 of the
--------------------
Security Agreement.
"Blocked Account Letter" means each blocked account letter, in
----------------------
substantially the form of Exhibit A to the Security Agreement, entered into
by the Borrower, the Agent and a Blocked Account Bank.
"BNP" has the meaning specified in the recital of parties to this
---
Agreement.
"Borrower" has the meaning specified in the recital of parties to this
--------
Agreement.
"Borrower's Account" means the account of the Borrower maintained by
------------------
the Borrower with BNP at BNP's office at 499 Park Avenue, New York, New
York 10022, Account No. 202905-001-28, or such other account as the
Borrower and the Agent may from time to time designate as the "Borrower's
Account".
"Borrowing" means an Acquisition Borrowing, a Working Capital
---------
Borrowing or a Swing Line Borrowing.
"Borrowing Base Certificate" means a certificate in substantially the
--------------------------
form of Exhibit J hereto, duly certified by the chief financial officer of
the Borrower.
"Business Day" means a day of the year on which banks are not required
------------
or authorized by law to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings are
carried on in the London interbank market.
"Canadian Security Agreement" has the meaning specified in Section
---------------------------
3.01(k)(xx).
"Capital Expenditures" means, for any Person for any period, the sum
--------------------
of, without duplication, (a) all cash expenditures made, directly or
indirectly, by such Person or any of its Subsidiaries during such period
for equipment, fixed assets, real property or improvements, or for
replacements or
<PAGE>
5
substitutions therefor or additions thereto, that have been or should be,
in accordance with GAAP, reflected as additional property, plant or
equipment on a Consolidated balance sheet of such Person plus (b) the
aggregate principal amount of all Debt (including Obligations under
Capitalized Leases) assumed or incurred in connection with any such
expenditures.
"Capitalized Leases" means all leases that have been or should be, in
------------------
accordance with GAAP, recorded as capitalized leases.
"Carryover Amount" has the meaning specified in Section 5.04(d).
----------------
"Cash Equivalents" means any of the following, to the extent owned by
----------------
the Borrower free and clear of all Liens other than Liens created under the
Collateral Documents and having a maturity of not greater than 180 days
from the date of acquisition thereof: (a) readily marketable direct
obligations of the Government of the United States or any agency or
instrumentality thereof or obligations unconditionally guaranteed by the
full faith and credit of the Government of the United States, (b) insured
certificates of deposit of or time deposits or repurchase agreements with
any commercial bank that is a Lender Party or a member of the Federal
Reserve System, which issues (or the parent of which issues) commercial
paper rated as described in clause (c) below, is organized under the laws
of the United States or any State thereof and has combined capital and
surplus of at least $1,000,000,000, (c) commercial paper in an aggregate
amount of no more than $250,000 per issuer outstanding at any time, issued
by any corporation organized under the laws of any state of the United
States and rated at least "Prime-1" (or the then equivalent grade) by
Moody's Investors Service, Inc. or "A-1" (or the then equivalent grade) by
Standard & Poor's Ratings Services or (d) money market or mutual funds that
invest solely in Cash Equivalents of the types described in clauses (a),
(b) and (c) above.
"CERCLA" means the Comprehensive Environmental Response, Compensation
------
and Liability Act of 1980, as amended from time to time.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
-------
and Liability Information System maintained by the U.S. Environmental
Protection Agency.
"Collateral" means all "Collateral" and "Intellectual Property
---------- ---------- ---------------------
Collateral" referred to in the Collateral Documents and all other property
----------
that is or is intended to be subject to any Lien in favor of the Agent for
the benefit of the Secured Parties.
"Collateral Documents" means the Security Agreement, the Intellectual
--------------------
Property Security Agreement, the Canadian Security Agreement, the Mortgage
and any other agreement that creates or purports to create a Lien in favor
of the Agent for the benefit of the Secured Parties.
"Commitment" means an Acquisition Commitment, a Working Capital
----------
Commitment, a Letter of Credit Commitment or a Swing Line Commitment.
"Commitment Date" shall have the meaning specified in Section
---------------
2.06(b)(viii).
<PAGE>
6
"Consolidated" refers, with respect to any Person, to the
------------
consolidation of accounts of such Person and its Subsidiaries in accordance
with GAAP.
"Conversion", "Convert" and "Converted" each refer to a conversion of
---------- ------- ---------
Advances of one Type into Advances of the other Type pursuant to Section
2.09 or 2.10.
"Conversion Date" means the last day of the calendar month in the
---------------
month that is the 36th month following the month in which the Initial
Extension of Credit occurred.
"Current Assets" of any Person means all assets of such Person that
--------------
would, in accordance with GAAP, be classified as current assets of a
company conducting a business the same as or similar to that of such
Person, after deducting adequate reserves in each case in which a reserve
is proper in accordance with GAAP.
"Current Liabilities" of any Person means (a) all Debt of such Person
-------------------
that by its terms is payable on demand or matures within one year after the
date of determination other than Funded Debt and (b) all other items
(including, without limitation, taxes accrued as estimated) that in
accordance with GAAP would be classified as current liabilities of a
company conducting a business the same as or similar to that of such
Person.
"Debt" of any Person means, without duplication, (a) all indebtedness
----
of such Person for borrowed money, (b) all Obligations, contingent or
otherwise, of such Person for the deferred purchase price of property or
services (other than trade payables not overdue by more than 60 days
incurred in the ordinary course of such Person's business), (c) all
Obligations, contingent or otherwise, of such Person evidenced by notes,
bonds, debentures or other similar instruments, (d) all Obligations,
contingent or otherwise, of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of
the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all Obligations,
contingent or otherwise, of such Person as lessee under Capitalized Leases,
(f) all Obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities, (g) all Obligations,
contingent or otherwise, of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any capital stock of or
other ownership or profit interest in such Person or any other Person or
any warrants, rights or options to acquire such capital stock, valued, in
the case of Redeemable Preferred Stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, (h)
----
all Obligations, contingent or otherwise, of such Person in respect of
Hedge Agreements (other than for purposes of calculating the financial
covenants in Section 5.04), (i) all Debt of others referred to in clauses
(a) through (h) above or clause (j) below guaranteed directly or indirectly
in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (1) to pay or purchase such
Debt or to advance or supply funds for the payment or purchase of such
Debt, (2) to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the debtor
to make payment of such Debt or to assure the holder of such Debt against
loss, (3) to supply funds to or in any other manner invest in the debtor
(including any agreement to pay for property or services irrespective of
whether such property is received or such services are rendered) or (4)
otherwise to assure a creditor against loss, and (j) all Debt referred to
in
<PAGE>
7
clauses (a) through (i) above and other payment obligations of another
Person secured by (or for which the holder of such Debt has an existing
right, contingent or otherwise, to be secured by) any Lien on property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the
payment of such Debt.
"Default" means any Event of Default or any event that would
-------
constitute an Event of Default but for the requirement that notice be given
or time elapse or both.
"Discount Note Documents" means (i) the Discount Note Indenture and
-----------------------
(ii) any other agreements, indentures and instruments delivered in
connection with the issuance of the Discount Notes.
"Discount Note Indenture" means the Indenture dated as of April 24,
-----------------------
1998 among the Parent Guarantor and The Chase Manhattan Bank, as trustee.
"Discount Notes" means the Senior Discount Notes due 2009 of the
--------------
Parent Guarantor in an aggregate initial principal amount of $25,000,000
issued pursuant to the Discount Note Indenture.
"Domestic Lending Office" means, with respect to any Lender Party, the
-----------------------
office of such Lender Party specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and Acceptance
pursuant to which it became a Lender Party, as the case may be, or such
other office of such Lender Party as such Lender Party may from time to
time specify to the Borrower and the Agent.
"EBITDA" means, for any period, the sum, determined on a Consolidated
------
basis, of (a) net income (or net loss) measured on a first-in, first-out
method of accounting, (b) Interest Expense, (c) income tax expense, (d)
depreciation expense, (e) amortization expense, (f) extraordinary or
unusual losses deducted in calculating net income less extraordinary or
----
unusual gains added in calculating net income, (g) to the extent deducted
in calculating net income (or net loss), non-cash expenses associated with
any stock based compensation, (h) the management fee paid under the Fenway
Management Agreement, and (i) a one-time bonus to certain members of
management of the Borrower not to exceed $2,300,000 in the aggregate to be
paid on or before December 31, 1999, in each case determined in accordance
with GAAP for such period; provided that, for purposes of determining the
--------
Leverage Ratio and the Senior Leverage Ratio for each month ending prior to
one year after the date of the Initial Extension of Credit, EBITDA shall be
the amount for such month as set forth on Schedule II hereto.
"Eligible Assignee" means (a) with respect to any Facility (other than
-----------------
the Letter of Credit Facility): (i) a Lender; (ii) an Affiliate of a
Lender; (iii) a commercial bank organized under the laws of the United
States, or any state thereof, and having a combined capital and surplus of
at least $500,000,000; (iv) a savings and loan association or savings bank
organized under the laws of the United States, or any state thereof, and
having a combined capital and surplus of at least $500,000,000; (v) a
commercial bank organized under the laws of any other country that is a
member of the OECD or has concluded special lending arrangements with the
International Monetary Fund associated with its General Arrangements to
Borrow or a political subdivision of any such country,
<PAGE>
8
and having a combined capital and surplus of at least $500,000,000, so long
as such bank is acting through a branch or agency located in the United
States; (vi) a finance company, insurance company or other financial
institution or fund (whether a corporation, partnership, trust or other
entity) that is engaged in making, purchasing or otherwise investing in
commercial loans in the ordinary course of its business and having a
combined capital and surplus of at least $250,000,000; and (vii) any other
Person approved by the Agent and, so long as no Default has occurred and is
continuing at the time any assignment is effected pursuant to Section 9.07,
the Borrower and, with respect to any Eligible Assignee that becomes a
Working Capital Lender, the Issuing Bank, any such approval not to be
unreasonably withheld or delayed and (b) with respect to the Letter of
Credit Facility, a Person that is an Eligible Assignee under subclause
(iii) or (v) of clause (a) of this definition and is approved by the Agent
and, so long as no Default has occurred and is continuing at the time any
assignment is effected pursuant to Section 9.07, the Borrower, such
approval not to be unreasonably withheld or delayed; provided, however,
-------- -------
that neither any Loan Party nor any Affiliate of a Loan Party shall qualify
as an Eligible Assignee under this definition.
"Eligible Canadian Inventory" means Eligible Inventory of IA Canada.
---------------------------
"Eligible Canadian Receivables" means Eligible Receivables of IA
-----------------------------
Canada.
"Eligible Collateral" means, collectively, Eligible Inventory and
-------------------
Eligible Receivables.
"Eligible Inventory" means any Inventory owned by the Borrower, Falcon
------------------
or IA Canada free and clear of all Liens (other than Permitted Liens and
Liens in favor of the Secured Parties securing the Secured Obligations)
other than the following:
(a) Inventory consisting of "perishable agricultural
commodities" within the meaning of the Perishable Agricultural
Commodities Act of 1930, as amended, and the regulations thereunder,
or on which a Lien has arisen or may arise in favor of agricultural
producers under comparable state or local laws;
(b) Inventory aggregating more than $500,000 at any single
location and located on leaseholds as to which the lessor has not
entered into a consent and agreement providing the Agent with the
right to receive notice of default, the right to repossess such
Inventory at any time and such other rights as may be acceptable to
the Agent;
(c) Inventory that is obsolete, unusable or otherwise
unavailable for sale;
(d) Inventory with respect to which the representations and
warranties set forth in Section 8 of the Security Agreement applicable
to Inventory are not true and correct;
(e) Inventory consisting of promotional, marketing, packaging or
shipping materials and supplies exclusive of boxes containing shoes or
boots;
<PAGE>
9
(f) Inventory that fails to meet in any material respect all
standards imposed by any governmental agency, or department or
division thereof, having regulatory authority over such Inventory or
its use or sale;
(g) Inventory that is subject to any licensing, patent, royalty,
trademark, trade name or copyright agreement with any third party from
whom any Loan Party or any of its Subsidiaries has received written
notice of a material dispute in respect of any such agreement;
(h) Inventory located outside the United States, Puerto Rico or
Canada, other than as permitted under paragraph (i) below;
(i) Inventory that is not in the possession of or under the sole
control of the Borrower, Falcon or IA Canada, other than (i) up to
$4,000,000 at any one time outstanding of Inventory in transit to the
Borrower, Falcon or IA Canada by common carrier, which Inventory is
owned by the Borrower, Falcon or IA Canada free and clear of all Liens
(other than Liens imposed by such common carrier in the ordinary
course of business in respect of the shipping of such Inventory) and
insured in accordance with Section 11(a) of the Security Agreement or
Section 1.9 of the Canadian Security Agreement with the Agent named as
loss payee under such insurance policy and (ii) any Inventory of the
Borrower or Falcon located on any customer's premises; provided that
--------
such Inventory must be segregated from all inventory of such customer
and must be clearly identifiable as Inventory of the Borrower or
Falcon; provided further that any such Inventory on consignment on any
-------- -------
customer's premises must also be subject to UCC-1 protective filings;
(j) Inventory consisting of work in progress; and
(k) Inventory in respect of which the Security Agreement or the
Canadian Security Agreement, after giving effect to the related
filings of financing statements that have then been made, if any, does
not or has ceased to create a valid and perfected first priority lien
or security interest in favor of the Agent for the benefit of the
Secured Parties securing the Secured Obligations and as to which no
other Liens exist, other than Permitted Liens.
The value of such Eligible Inventory shall be its book value determined in
accordance with the "first-in, first-out" method of accounting for
inventory and in accordance with GAAP unless the Agent determines, in its
reasonable commercial judgment based on a liquidation analysis by an
independent asset appraiser of nationally recognized standing acceptable to
the Agent, that such Eligible Inventory shall be valued at a lower value.
"Eligible Receivables" means any Receivables owned by the Borrower,
--------------------
Falcon or IA Canada free and clear of all Liens (other than Permitted Liens
and Liens in favor of the Secured Parties securing the Secured Obligations)
other than the following:
(a) Receivables that do not arise out of the sale of goods or
the rendering of services in the ordinary course of the Borrower's,
Falcon's or IA Canada's business;
<PAGE>
10
(b) Receivables on terms other than those normal or customary in
the Borrower's, Falcon's or IA Canada's business;
(c) Receivables owing (i) from any Loan Party or any of its
Subsidiaries or (ii) from any other Person that is an Affiliate of the
Borrower, Falcon or IA Canada other than Receivables owing by such
Affiliate which arose pursuant to transactions on terms which were
fair and reasonable and no less favorable to the Borrower, Falcon or
IA Canada, as the case may be, than those which would have been
obtained in a comparable arm's length transaction with a Person not an
Affiliate;
(d) Receivables (i) more than 90 days past original invoice date
(but excluding up to $1,500,000 of Receivables not more than 180 days
past original invoice date) or (ii) more than 60 days past the date
due;
(e) Solely with respect to Receivables owned by Falcon or IA
Canada, Receivables owing from, as determined as of January 31, 1998
and thereafter on the first Business Day of each fiscal quarter ended
January 31, April 30, July 31 and October 31, any Person (i) from
which an aggregate amount of more than 25% of the Receivables owing
are (A) more than 60 days past due or (B) in dispute or (ii) from
which an aggregate amount of 25% or less of the Receivables owing are
(A) more than 60 days past due or (B) in dispute, except that, with
respect to this clause (ii), only to the extent of those Receivables
which are more than 60 days past due and are in dispute;
(f) Receivables owing from any Person to the extent such Person
has asserted any claim, demand or liability, whether by action, suit,
counterclaim or other judicial or arbitral proceeding against any Loan
Party or any of its Subsidiaries; provided, however, that solely for
-------- -------
the purposes of this paragraph (f), the term "Person" shall mean the
invoiced division that is the contractual obligor of such Receivable;
(g) Receivables owing from any Person that shall take or be the
subject of any action or proceeding of a type described in Section
6.01(f);
(h) Receivables representing any manufacturer's or supplier's
credits, discounts, incentive plans or similar arrangements entitling
any Loan Party to discounts on future purchases therefrom;
(i) Receivables arising out of sales to account debtors outside
the United States, Puerto Rico or Canada, unless backed by a letter of
credit issued by a bank organized under the laws of the United States,
or any state thereof, and having a combined capital and surplus of at
least $500,000,000;
(j) Receivables arising out of sales on a bill-and-hold,
guaranteed sale, sale-or-return, sale on approval or consignment basis
or subject to any right of return, setoff or charge-back; and
<PAGE>
11
(k) Receivables in respect of which the Security Agreement or
the Canadian Security Agreement, after giving effect to the related
filings of financing statements that have then been made, if any, does
not or has ceased to create a valid and perfected first priority lien
on or security interest in favor of the Agent for the benefit of the
Secured Parties securing the Secured Obligations and as to which no
other Liens exist, other than Permitted Liens.
The value of such Eligible Receivables shall be their book value
(disregarding any reserves) determined in accordance with GAAP, unless the
Agent determines in its reasonable commercial judgment, based on a
liquidation analysis by an independent asset appraiser of nationally
recognized standing acceptable to the Agent, that such Eligible Receivables
shall be valued at a lower value.
"Employment/Non-Compete Agreement" means each of the Employment/Non-
--------------------------------
Compete Agreements set forth on Schedule II hereto.
"Environmental Action" means any action, suit, demand, demand letter,
--------------------
claim, notice of non-compliance or violation, notice of liability or
potential liability, investigation, proceeding, consent order or consent
agreement relating in any way to any Environmental Law, any Environmental
Permit or Hazardous Material or arising from alleged injury or threat to
health, safety or the environment, including, without limitation, (a) by
any governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages and (b) by any governmental
or regulatory authority or third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
-----------------
statute, law, ordinance, rule, regulation, code, order, writ, judgment,
injunction, decree or judicial or agency interpretation, policy or guidance
relating to pollution or protection of the environment, health, safety or
natural resources, including, without limitation, those relating to the
use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
--------------------
number, license or other authorization required under any Environmental
Law.
"Equivalent" in U.S. dollars of any foreign currency on any date means
----------
the equivalent in U.S. dollars of such foreign currency determined by using
the quoted spot rate for an equivalent amount at which BNP's principal
office in New York City offers to exchange U.S. dollars for such foreign
currency in New York City prior to 11:00 A.M. (New York City time) on such
date as is required pursuant to the terms of this Agreement, and the
"Equivalent" in any foreign currency of U.S. dollars means the equivalent
----------
in such foreign currency of U.S. dollars determined by using the quoted
spot rate for an equivalent amount at which BNP's principal office in
London offers to exchange such foreign currency for U.S. dollars in New
York City prior to 11:00 A.M. (New York City time) on such date as is
required pursuant to the terms of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
<PAGE>
12
"ERISA Affiliate" means any Person that for purposes of Title IV of
---------------
ERISA is a member of the controlled group of any Loan Party, or is under
common control with any Loan Party, within the meaning of Section 414 of
the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable event,
-----------
within the meaning of Section 4043 of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event has been
waived by the PBGC; or (ii) the requirements of subsection (1) of Section
4043(b) of ERISA (without regard to subsection (2) of such Section) are met
with respect to a contributing sponsor, as defined in Section 4001(a)(13)
of ERISA, of a Plan, and an event described in paragraph (9), (10), (11),
(12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur
with respect to such Plan within the following 30 days; (b) the application
for a minimum funding waiver with respect to a Plan; (c) the provision by
the administrator of any Plan of a notice of intent to terminate such Plan,
pursuant to Section 4041(a)(2) of ERISA (including any such notice with
respect to a plan amendment referred to in Section 4041(e) of ERISA); (d)
the cessation of operations at a facility of any Loan Party or any ERISA
Affiliate in the circumstances described in Section 4062(e) of ERISA; (e)
the withdrawal by any Loan Party or any ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial employer,
as defined in Section 4001(a)(2) of ERISA; (f) the conditions for
imposition of a lien under Section 302(f) of ERISA shall have been met with
respect to any Plan; (g) the adoption of an amendment to a Plan requiring
the provision of security to such Plan, pursuant to Section 307 of ERISA;
or (h) the institution by the PBGC of proceedings to terminate a Plan
pursuant to Section 4042 of ERISA, or the occurrence of any event or
condition described in Section 4042 of ERISA that constitutes grounds for
the termination of, or the appointment of a trustee to administer, such
Plan.
"Eurocurrency Liabilities" has the meaning specified in Regulation D
------------------------
of the Board of Governors of the Federal Reserve System, as in effect from
time to time.
"Eurodollar Lending Office" means, with respect to any Lender Party,
-------------------------
the office of such Lender Party specified as its "Eurodollar Lending
Office" opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender Party, as the case may be
(or, if no such office is specified, its Domestic Lending Office), or such
other office of such Lender Party as such Lender Party may from time to
time specify to the Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for all Eurodollar
---------------
Rate Advances comprising part of the same Borrowing, an interest rate per
annum equal to the rate per annum obtained by dividing (a) the average of
the respective rates per annum (rounded upward to the next whole multiple
of 1/16th of 1%) posted by each of the principal London offices of banks
posting rates as displayed on the Telerate screen, page 3750 or such other
page as may replace such page on such service for the purpose of displaying
the London interbank offered rate of major banks for deposits in U.S.
dollars, at approximately 11:00 A.M. (London time) two Business Days before
the first day of such Interest Period for deposits in an amount
substantially equal to BNP's Eurodollar Rate Advance comprising part of
such Borrowing to be outstanding during such Interest Period (or, if BNP
shall not have such a Eurodollar Rate Advance, $1,000,000) and for a period
equal to such Interest Period by (b) a percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage for such Interest Period.
<PAGE>
13
"Eurodollar Rate Advance" means an Advance that bears interest as
-----------------------
provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for all
----------------------------------
Eurodollar Rate Advances comprising part of the same Borrowing means the
reserve percentage applicable two Business Days before the first day of
such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for a
member bank of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities
(or with respect to any other category of liabilities that includes
deposits by reference to which the interest rate on Eurodollar Rate
Advances is determined) having a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
-----------------
"Excess Cash Flow" means, for any period, without duplication, the sum
----------------
of (a) Consolidated pretax income (or pretax loss) of the Parent Guarantor
and its Subsidiaries for such period less (b) Consolidated income tax
----
expense of the Parent Guarantor and its Subsidiaries for such period plus
----
(c) an amount equal to the aggregate amount of all noncash charges deducted
in arriving at Consolidated net income (or loss) of the Parent Guarantor
and its Subsidiaries for each such period plus (d) an amount (whether
----
positive or negative) equal to the change in Consolidated Current
Liabilities of the Parent Guarantor and its Subsidiaries during such period
plus (e) the Carryover Amount (if any) from the immediately prior period
----
not used in the current period less (f) an amount equal to the aggregate
----
amount of all noncash credits included in arriving at such Consolidated net
income (or loss) of the Parent Guarantor and its Subsidiaries less (g) an
----
amount (whether positive or negative) equal to the change in Consolidated
Current Assets (excluding cash and Cash Equivalents) of the Parent
Guarantor and its Subsidiaries during such period less (h) an amount equal
----
to the amount of all Capital Expenditures of the Parent Guarantor and its
Subsidiaries paid in cash during such period to the extent permitted by
this Agreement less (i) an amount equal to the aggregate amount of all
----
regularly scheduled principal payments of Funded Debt of the Parent
Guarantor and its Subsidiaries made during such period, and, from and after
the Conversion Date, any optional prepayments of the Acquisition Advances,
made during such period in accordance with Section 2.06(a) less (j) any
----
amounts included in Net Cash Proceeds to be prepaid under Section
2.06(b)(ii) to the extent included in pre-tax income less (k) the Carryover
----
Amount for the current period less (l) an amount equal to the cash cost of
----
any Hedge Agreements required pursuant to Section 5.01(n) less (m) an
----
amount equal to all Restricted Acquisitions to the extent made in cash (but
only to the extent that such amount is not funded by Borrowings under the
Acquisition Facility).
"Existing Debt" means Debt of the Borrower outstanding immediately
-------------
before the effectiveness of this Agreement.
"Extraordinary Receipt" means any cash received by or paid to or for
---------------------
the account of any Person not in the ordinary course of business,
including, without limitation, indemnity payments, tax refunds, pension
plan reversions, proceeds of insurance (including, without limitation, the
key man life insurance referred to in Section 5.01(d), but excluding
proceeds of business interruption insurance to
<PAGE>
14
the extent such proceeds constitute compensation for lost earnings, and
excluding proceeds of any key man life insurance policy used to repurchase
stock or options of Donald R. Jensen as permitted pursuant to Section
5.02(g)(ii) or loans to Donald R. Jensen permitted pursuant to Section
5.02(f)(xv)), condemnation awards (and payments in lieu thereof), and any
purchase price adjustment received in connection with any purchase and sale
agreement; provided, however, that an Extraordinary Receipt shall not
-------- -------
include cash receipts received from proceeds of insurance or condemnation
awards to the extent that such proceeds in respect of loss or damage to
equipment, fixed assets or real property are applied (or in respect of
which expenditures were previously incurred) to replace or repair the
equipment, fixed assets or real property in respect of which such proceeds
were received in accordance with the terms of the Loan Documents, so long
as such application is made (or such expenditures were incurred) within six
months after the occurrence of such damage or loss covered by such
insurance proceeds or within six months after the receipt of such
condemnation award, as the case may be.
"Facility" means the Acquisition Facility, the Working Capital
--------
Facility, the Swing Line Facility or the Letter of Credit Facility.
"Falcon" means Falcon Shoe Mfg. Co., a Maine corporation and a wholly-
------
owned subsidiary of the Borrower.
"Federal Funds Rate" means, for any period, a fluctuating interest
------------------
rate per annum equal for each day during such period (i) to the rate
published by the Telerate service on page five of its daily report as the
"ASK" rate as of 10:00 A.M. (New York City time) for such day (or, if such
day is not a Business Day, for the immediately preceding Business Day) or
(ii) if the Telerate service shall cease to publish or otherwise shall not
publish such rates for any day that is a Business Day, to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the
average of the quotations for such day for such transactions received by
the Agent from three Federal funds brokers of recognized standing selected
by it.
"Fenway Fund" means Fenway Partners Capital Fund, L.P.
-----------
"Fenway Management Agreement" means the Management Agreement dated
---------------------------
February 26, 1997 between the Borrower and Fenway Partners, Inc., a
Delaware corporation.
"Fiscal Year" means a fiscal year of the Parent Guarantor and its
-----------
Consolidated Subsidiaries ending on the last Saturday in January of any
calendar year.
"Fixed Charge Coverage Ratio" means the ratio of (a) Consolidated
---------------------------
EBITDA for the Parent Guarantor and its Subsidiaries for a Rolling Period
less the sum of (i) Capital Expenditures of the Parent Guarantor and its
----
Subsidiaries paid in cash during such Rolling Period and (ii) income taxes
of the Parent Guarantor and its Subsidiaries that have been paid in cash
during such Rolling Period to (b) the sum of (i) Interest Expense of the
Parent Guarantor and its Subsidiaries for such Rolling
<PAGE>
15
Period and (ii) regularly scheduled principal payments of Funded Debt of
the Parent Guarantor and its Subsidiaries made during such Rolling Period.
"Foreign Subsidiary" means any direct or indirect Subsidiary of the
------------------
Parent Guarantor that is organized under the laws of a jurisdiction other
than the United States or any state thereof or the District of Columbia.
"Funded Debt" of any Person means Debt (other than Debt in respect of
-----------
the Borrower's obligation created upon the Borrower's exercise of its right
to purchase employee options or stock after the termination of such
employee) of such Person that by its terms matures more than one year after
the date of creation or matures within one year from such date but is
renewable or extendible, at the option of such Person, to a date more than
one year after such date or arises under a revolving credit or similar
agreement that obligates the lender or lenders to extend credit during a
period of more than one year after such date, including, without
limitation, all amounts of Funded Debt of such Person required to be paid
or prepaid within one year after the date of determination.
"GAAP" has the meaning specified in Section 1.03.
----
"Guaranteed Obligations" has the meaning specified in Section 7.01.
----------------------
"Guarantor" means the Parent Guarantor and the Subsidiary Guarantors.
---------
"Hazardous Materials" means (a) petroleum or petroleum products, by-
-------------------
products or breakdown products, radioactive materials, asbestos-containing
materials, polychlorinated biphenyls and radon gas and (b) any other
chemicals, materials or substances designated, classified or regulated as
hazardous or toxic or as a pollutant or contaminant under any Environmental
Law.
"Hedge Agreements" means interest rate swap, cap or collar agreements,
----------------
interest rate future or option contracts, currency swap agreements,
currency future or option contracts and other hedging agreements.
"Hedge Bank" means any Lender Party or any of its Affiliates in its
----------
capacity as a party to a Secured Hedge Agreement.
"IAIC" means Iron Age Investment Company, a Delaware corporation and a
----
wholly-owned Subsidiary of the Borrower.
"IA Canada" means Iron Age Canada, Ltd., a Canadian corporation and a
---------
wholly-owned Subsidiary of the Borrower.
"IAC U.S. Operations" means the Borrower and all of its Subsidiaries
-------------------
other than Foreign Subsidiaries.
"Indemnified Party" has the meaning specified in Section 9.04(b).
-----------------
<PAGE>
16
"Independent Shoe Distributorship Acquisition" means the purchase or
--------------------------------------------
acquisition of all or substantially all of the assets or stock of the shoe
distributorship business of an independently owned shoe distributorship.
"Information Memorandum" means the Offering Memorandum dated April 21,
----------------------
1998 relating to the Senior Subordinated Notes.
"Initial Extension of Credit" means the earlier to occur of the
---------------------------
initial Borrowing hereunder and the initial issuance of a Letter of Credit
hereunder.
"Initial Issuing Bank" has the meaning specified in the recital of
--------------------
parties to this Agreement.
"Initial Lenders" has the meaning specified in the recital of parties
---------------
to this Agreement.
"Insufficiency" means, with respect to any Plan, the amount, if any,
-------------
of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA.
"Intellectual Property Security Agreement" has the meaning specified
----------------------------------------
in Section 3.01(k)(xix).
"Intercompany Subordinated Debt Documents" means the Intercompany
----------------------------------------
Subordination Agreement, all documents required to be delivered pursuant to
Section 5.02(b)(i)(G) and all other agreements, indentures and instruments
delivered in connection with the issuance of such Debt.
"Intercompany Subordination Agreement" has the meaning set forth in
------------------------------------
Section 3.01(k)(xxvi).
"Interest Coverage Ratio" means the ratio of (a) Consolidated EBITDA
-----------------------
of the Parent Guarantor and its Subsidiaries for a Rolling Period to (b)
Interest Expense of the Parent Guarantor and its Subsidiaries for such
Rolling Period.
"Interest Expense" means, with respect to any Person for any period,
----------------
the amount by which (a) interest expense (including the interest component
on obligations under Capitalized Leases but excluding, to the extent
included in interest expense, (i) paid-in-kind interest, (ii) the
amortization of any non-cash interest expense relating to commitment fees
payable by such Person on the date of the Initial Extension of Credit,
(iii) the accretion of the original issue discount created upon the
issuance of the Discount Notes, and (iv) the underwriting fee, agency fee,
reimbursement expenses, including legal fees, and other similar amounts
incurred in connection with this Agreement, the Discount Notes and the
Senior Subordinated Notes), whether paid or accrued, on all Debt of such
Person and its Subsidiaries for such period, including, without limitation
and without duplication, (A) interest expense in respect of Debt resulting
from Advances, (B) interest expense in respect of Subordinated Debt (other
than paid-in-kind interest) and (C) any net payment payable in connection
with Hedge Agreements less any net credits received in connection with
----
Hedge Agreements exceeds (b) interest income, whether paid or accrued, of
such Person for such period.
"Interest Period" means, for each Eurodollar Rate Advance comprising
---------------
part of the same Borrowing, the period commencing on the date of such
Eurodollar Rate Advance or the date of the
<PAGE>
17
Conversion of any Base Rate Advance into such Eurodollar Rate Advance, and
ending on the last day of the period selected by the Borrower pursuant to
the provisions below and, thereafter, each subsequent period commencing on
the last day of the immediately preceding Interest Period and ending on the
last day of the period selected by the Borrower pursuant to the provisions
below. The duration of each such Interest Period shall be one, two, three
or six months, as the Borrower may, upon notice received by the Agent not
later than 1:00 P.M. (New York City time) on the third Business Day prior
to the first day of such Interest Period, select; provided, however, that:
-------- -------
(a) the Borrower may not select any Interest Period with respect
to any Eurodollar Rate Advance under a Facility that ends after any
principal repayment installment date for such Facility unless, after
giving effect to such selection, the aggregate principal amount of
Base Rate Advances and of Eurodollar Rate Advances having Interest
Periods that end on or prior to such principal repayment installment
date for such Facility shall be at least equal to the aggregate
principal amount of Advances under such Facility due and payable on or
prior to such date;
(b) Interest Periods commencing on the same date for Eurodollar
Rate Advances comprising part of the same Borrowing shall be of the
same duration;
(c) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding
Business Day; provided, however, that, if such extension would cause
-------- -------
the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on
the immediately preceding Business Day; and
(d) whenever the first day of any Interest Period occurs on a
day of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months
in such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Inventory" means all Inventory referred to in Section 1(b) of the
---------
Security Agreement.
"Investment" in any Person means any loan or advance to such Person,
----------
any purchase or other acquisition of any capital stock or other ownership
or profit interest, warrants, rights, options, obligations or other
securities or the assets comprising a business or an operating division of
a business of such Person, any capital contribution to such Person or any
other direct or indirect investment in such Person, including, without
limitation, any arrangement pursuant to which the investor incurs Debt of
the types referred to in clause (i) or (j) of the definition of "Debt" in
----
respect of such Person.
"Investor Group" has the meaning specified in the Preliminary
--------------
Statements.
<PAGE>
18
"Issuing Bank" means the Initial Issuing Bank and any other Working
------------
Capital Lender approved as an Issuing Bank by the Agent and each Eligible
Assignee to which a Letter of Credit Commitment hereunder has been assigned
pursuant to Section 9.07.
"Issuing Bank Indemnified Costs" has the meaning specified in Section
------------------------------
8.05(b).
"L/C Cash Collateral Account" has the meaning specified in the
---------------------------
Security Agreement.
"L/C Related Documents" has the meaning specified in Section
---------------------
2.04(c)(ii)(A).
"Lender Party" means any Lender, the Issuing Bank or the Swing Line
------------
Bank.
"Lenders" means the Initial Lenders and each Person that shall become
-------
a Lender hereunder pursuant to Section 9.07 for so long as such Initial
Lender or Person shall be a party to this Agreement.
"Letter of Credit Advance" means an advance made by the Issuing Bank
------------------------
or any Working Capital Lender pursuant to Section 2.03(c).
"Letter of Credit Agreement" has the meaning specified in Section
--------------------------
2.03(a).
"Letter of Credit Commitment" means, with respect to the Issuing Bank
---------------------------
at any time, the amount set forth opposite the Issuing Bank's name on
Schedule I hereto under the caption "Letter of Credit Commitment" or, if
the Issuing Bank has entered into an Assignment and Acceptance, set forth
for the Issuing Bank in the Register maintained by the Agent pursuant to
Section 9.07(d) as the Issuing Bank's "Letter of Credit Commitment", as
such amount may be reduced at or prior to such time pursuant to Section
2.05.
"Letter of Credit Facility" means, at any time, an amount equal to the
-------------------------
amount of the Issuing Bank's Letter of Credit Commitment at such time.
"Letters of Credit" has the meaning specified in Section 2.01(c).
-----------------
"Leverage Ratio" means the ratio of (a) Funded Debt (other than (i)
--------------
contingent obligations of the type described in clause (f) or (h) in the
definition of "Debt" and (ii) Seller Subordinated Debt) of the Borrower and
----
its Subsidiaries as of the last day of a Rolling Period to (b) an amount
equal to Consolidated EBITDA of the Parent Guarantor and its Subsidiaries
for the most recently completed Rolling Period for which financial
statements have been provided; provided that such Consolidated EBITDA shall
--------
include the Pro Forma EBITDA of or attributable to any Restricted
Acquisition or any Independent Shoe Distributorship Acquisition for such
Rolling Period.
"Lewiston Lease" has the meaning specified in Section 3.01(k)(ix).
--------------
<PAGE>
19
"Lien" means any lien, security interest or other charge or
----
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on
title to real property.
"Loan Documents" means (a) for purposes of this Agreement and the
--------------
Notes and any amendment, supplement or modification hereof or thereof, (i)
this Agreement, (ii) the Notes, (iii) the Collateral Documents, (iv) each
Letter of Credit Agreement, and (v) the Subsidiary Guaranty and (b) for all
other purposes other than for purposes of this Agreement and the Notes, (i)
this Agreement, (ii) the Notes, (iii) the Collateral Documents, (iv) each
Letter of Credit Agreement, (v) the Subsidiary Guaranty, (vi) each Secured
Hedge Agreement, (vii) each agreement entered into between any Loan Party
and the Agent or the Issuing Bank with respect to the payment of fees or
other amounts relating to the Facilities, (viii) the Blocked Account
Letters, and (ix) any other agreement, document or instrument issued
pursuant to or in connection with any of the foregoing and, in each case,
as amended and restated, supplemented or otherwise modified from time to
time.
"Loan Parties" means the Borrower, the Parent Guarantor, the
------------
Subsidiary Guarantors and each Subsidiary of the Borrower that may become a
guarantor or collateral grantor pursuant to Section 5.01(m).
"Loan Value" means an amount equal to the sum of the percentage of the
----------
value of each item of Eligible Collateral of up to the following amounts:
(a) with respect to Eligible Inventory (other than Eligible
Canadian Inventory), up to 50% of the value of such Inventory;
(b) with respect to Eligible Canadian Inventory, up to 50% of the
U.S. dollar Equivalent of the value of such Inventory;
(c) with respect to Eligible Receivables (other than Eligible
Canadian Receivables), up to 80% of the value of such Receivables; and
(d) with respect to Eligible Canadian Receivables, up to 80% of
the U.S. dollar Equivalent of the value of such Receivables;
provided, however, that the Agent may, in its reasonable commercial
-------- -------
judgment based on an audit or field examination and on its analysis of
changes in any Loan Party's operations or credit and collection experience
arising after the date hereof that may dilute the value of Eligible
Collateral, revise from time to time the percentage of the value of any
individual item of Eligible Collateral that shall be used in determining
Loan Value; provided further that the Loan Value of the sum of the Eligible
-------- -------
Canadian Inventory and the Eligible Canadian Receivables shall not exceed
the amount owing from IA Canada to the Borrower under the intercompany note
to the extent permitted pursuant to Section 5.02(b)(i)(G) at such time.
"Margin Stock" has the meaning specified in Regulation U.
------------
<PAGE>
20
"Material Adverse Change" means any material adverse change in the
-----------------------
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or the other Loan Parties and their
Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or the other Loan Parties and their
Subsidiaries taken as a whole, (b) the rights and remedies of the Agent or
any Lender Party under any Transaction Document or (c) the ability of any
Loan Party to perform its Obligations under any Transaction Document to
which it is or is to be a party.
"Mortgage" has the meaning specified in Section 3.01(k)(viii).
--------
"Mortgage Policy" has the meaning specified in Section
---------------
3.01(k)(viii)(A).
"Multiemployer Plan" means a multiemployer plan, as defined in Section
------------------
4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate 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.
"Multiple Employer Plan" means a single employer plan, as defined in
----------------------
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Loan Party or any ERISA Affiliate and at least one Person other than the
Loan Parties and the ERISA Affiliates or (b) was so maintained and in
respect of which any Loan Party or any ERISA Affiliate could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or were
to be terminated.
"Net Cash Proceeds" means, with respect to any sale, lease, transfer
-----------------
or other disposition of any asset or the sale or issuance of any Debt or
capital stock or other ownership or profit interest, any securities
convertible into or exchangeable for capital stock or other ownership or
profit interest (including, without limitation, any capital contribution)
or any warrants, rights, options or other securities to acquire capital
stock or other ownership or profit interest by any Person, or any
Extraordinary Receipt received by or paid to or for the account of any
Person, the aggregate amount of cash received from time to time (whether as
initial consideration or through payment or disposition of deferred
consideration) by or on behalf of such Person in connection with such
transaction after deducting therefrom only (without duplication) (a)
brokerage commissions, underwriting fees and discounts, legal fees,
finder's fees and other similar transaction fees and commissions, (b) the
amount of taxes payable in connection with or as a result of such
transaction and (c) the amount of any Debt secured by a Lien on such asset
that, by the terms of the agreement or instrument governing such Debt, is
required to be repaid upon such disposition, in each case to the extent,
but only to the extent, that the amounts so deducted are properly
attributable to such transaction or to the asset that is the subject
thereof and are, in the case of clauses (a) and (c), at the time of receipt
of such cash, actually paid to a Person that is not an Affiliate of such
Person or any Loan Party or any Affiliate of any Loan Party and, in the
case of clause (b), on the earlier of the dates on which the tax return
covering such taxes is filed or required to be filed; provided, however,
-------- -------
that in the case of taxes that are deductible under clause (b) above but
for the fact that at the time of receipt of such cash, such taxes have not
been actually paid or are not then payable, such Person may deduct an
amount (the "Reserved Amount")
---------------
<PAGE>
21
equal to the amount reserved in accordance with GAAP as a reasonable
estimate for such taxes, other than taxes for which such Loan Party or such
Subsidiary is indemnified; provided further, however, that at the time such
-------- ------- -------
taxes are paid, an amount equal to the amount, if any, by which the
Reserved Amount exceeds the amount actually so paid, the amount of such
excess shall constitute "Net Cash Proceeds."
"Note" means an Acquisition Note or a Working Capital Note.
----
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
-------------------
"Notice of Issuance" has the meaning specified in Section 2.03(a).
------------------
"Notice of Swing Line Borrowing" has the meaning specified in Section
------------------------------
2.02(b).
"NPL" means the National Priorities List under CERCLA.
---
"Obligation" means, with respect to any Person, any payment,
----------
performance or other obligation of such Person of any kind, including,
without limitation, any liability of such Person on any claim, whether or
not the right of any creditor to payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
disputed, undisputed, legal, equitable, secured or unsecured, and whether
or not such claim is discharged, stayed or otherwise affected by any
proceeding referred to in Section 6.01(f). Without limiting the generality
of the foregoing, the Obligations of the Loan Parties under the Loan
Documents include (a) the obligation to pay principal, interest, Letter of
Credit commissions, charges, expenses, fees, attorneys' fees and
disbursements, indemnities and other amounts payable by such Loan Party
under any Loan Document and (b) the obligation of such Loan Party to
reimburse any amount in respect of any of the foregoing that any Lender
Party, in its sole discretion, may elect to pay or advance on behalf of
such Loan Party.
"OECD" means the Organization for Economic Cooperation and
----
Development.
"Open Year" has the meaning specified in Section 4.01(z).
---------
"Other Taxes" has the meaning specified in Section 2.12(b).
-----------
"Parent Guarantor" has the meaning specified in the recital of parties
----------------
to this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"Permitted Encumbrances" has the meaning specified in the Mortgage.
----------------------
"Permitted Issuance" means the sale or issuance by the Parent
------------------
Guarantor or any of its Subsidiaries of any of its equity securities (a) to
Fenway Fund, or equally and ratably to the stockholders of the Parent
Guarantor listed on Schedule 4.01(a) hereto, (b) to issue compensatory
shares of common stock or to grant options, in each case, to management of
the Borrower and its Subsidiaries and (c) upon the exercise of options or
warrants on such common stock.
<PAGE>
22
"Permitted Liens" means such of the following as to which no
---------------
enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced: (a) Liens for taxes, assessments and governmental
charges or levies to the extent not required to be paid under Section
5.01(b) hereof; (b) Liens imposed by law, such as landlords',
materialmen's, mechanics', carriers', workmen's and repairmen's Liens and
other similar Liens arising in the ordinary course of business securing
obligations that (i) are not overdue for a period of more than 30 days
unless being contested in good faith and (ii) either individually or when
aggregated with all other Permitted Liens outstanding on any date of
determination, do not materially affect the use or value of the property to
which they relate; (c) pledges or deposits to secure obligations under
workers' compensation laws or similar legislation or to secure public or
statutory obligations; (d) easements, rights of way and other encumbrances
on title to real property that do not render title to the property
encumbered thereby unmarketable or materially adversely affect the use of
such property for its present purposes; (e) deposits or pledges to secure
performance of bids, tenders, contracts (other than for the payment of
borrowed money) or leases in the ordinary course of business of the
Borrower; (f) deposits or pledges to secure statutory obligations or surety
or appeal bonds or to secure indemnity or other similar bonds in the
ordinary course of business of the Borrower; and (g) Liens securing the
balance of PNC (travel expense) debit cards in an aggregate amount of
$250,000.
"Person" means an individual, partnership, corporation (including a
------
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
----
"Pledged Indebtedness" has the meaning specified in the Preliminary
--------------------
Statements to the Security Agreement.
"Pledged Shares" has the meaning specified in the Preliminary
--------------
Statements to the Security Agreement.
"Preferred Stock" means, with respect to any corporation, capital
---------------
stock issued by such corporation that is entitled to a preference or
priority over any other capital stock issued by such corporation upon any
distribution of such corporation's assets, whether by dividend or upon
liquidation.
"Pro Forma EBITDA" means, for any period, the sum of (i) EBITDA, (ii)
----------------
any adjustments certified by the chief financial officer of the Borrower
that would, in the reasonable determination of the Borrower, satisfy the
requirements of Rule 11-02(a) of Regulation S-X of the Securities Act of
1933, as amended, as if included in a registration statement filed with the
Securities and Exchange Commission and (iii) any other operating expense
reductions reasonably expected to result from any acquisition of stock or
assets of a related business, if such expected reductions are (1) set forth
in reasonable detail in a plan approved by and set forth in resolutions
adopted by the Board of Directors of the Borrower, and (2) limited to
operating expenses specified in such plan (and, if any reductions are set
forth in a range, the lowest amount of such range) that would otherwise
have resulted in the payment of cash within twelve months after the date of
consummation of such transaction, net of any
<PAGE>
23
operating expenses (other than extraordinary items, non-recurring or
temporary charges and other similar one-time expenses) reasonably expected
to be incurred to implement such plan (including, without limitation,
personnel, occupancy and transportation expenses), and that are to be paid
in cash during such twelve-month period, certified by the chief financial
officer of the Borrower.
"Pro Rata Share" of any amount means, with respect to any Working
--------------
Capital Lender at any time, the product of such amount times a fraction the
-----
numerator of which is the amount of such Lender's Working Capital
Commitment at such time (or, if the Commitments shall have been terminated,
the Working Capital Facility as in effect immediately prior to such
termination) and the denominator of which is the Working Capital Facility
at such time (or, if the Commitments shall have been terminated, the
Working Capital Facility as in effect immediately prior to such
termination).
"Receivables" means all Receivables referred to in Section 1(c) of the
-----------
Security Agreement.
"Redeemable" means, with respect to any capital stock or other
----------
ownership or profit interest, Debt or other right or Obligation, any such
right or Obligation that (a) the issuer has undertaken to redeem at a fixed
or determinable date or dates, whether by operation of a sinking fund or
otherwise, or upon the occurrence of a condition not solely within the
control of the issuer or (b) is redeemable at the option of the holder.
"Refinancing" has the meaning specified in the Preliminary Statements.
-----------
"Register" has the meaning specified in Section 9.07(d).
--------
"Regulation U" means Regulation U of the Board of Governors of the
------------
Federal Reserve System, as in effect from time to time.
"Related Documents" means the Fenway Management Agreement, the non-
-----------------
compete provisions of the Employment/Non-Compete Agreements, the
Intercompany Subordinated Debt Documents and the Subordinated Debt
Documents.
"Required Lenders" means at any time Lenders owed or holding at least
----------------
a majority of the sum of (a) the aggregate principal amount of the Advances
outstanding at such time, (b) the aggregate Available Amount of all Letters
of Credit outstanding at such time, (c) the aggregate unused Commitments
under the Acquisition Facilities at such time and (d) the aggregate Unused
Working Capital Commitments at such time. For purposes of this definition,
the aggregate principal amount of Swing Line Advances owing to the Swing
Line Bank and of Letter of Credit Advances owing to the Issuing Bank and
the Available Amount of each Letter of Credit shall be considered to be
owed to the Working Capital Lenders ratably in accordance with their
respective Working Capital Commitments.
"Responsible Officer" means any executive officer of the Borrower or
-------------------
the Parent Guarantor.
"Restricted Acquisitions" means Investments permitted by Section
-----------------------
5.02(f)(xvii), Independent Shoe Distributorship Acquisitions, and
acquisition of assets constituting a line of business.
<PAGE>
24
"Retail Leases" has the meaning specified in Section 3.01(k)(x).
-------------
"Rolling Period" means with respect to any fiscal month of any Person,
--------------
the consecutive 12 fiscal month period ending on the last day of such
fiscal month.
"Secured Hedge Agreements" means any Hedge Agreement required or
------------------------
permitted under Article V that is entered into by and between the Borrower
and any Hedge Bank.
"Secured Obligations" has the meaning specified in the Security
-------------------
Agreement.
"Secured Parties" means the Agent, the Lender Parties, the Hedge Banks
---------------
and the other Persons the Obligations owing to which are or are purported
to be secured by the Collateral under the terms of the Collateral
Documents.
"Security Agreement" has the meaning specified in Section
------------------
3.01(k)(vii).
"Seller Subordinated Debt" means Debt permitted under Section
------------------------
5.02(b)(i)(J) and 5.02(b)(ii)(B).
"Senior Leverage Ratio" means the ratio of (a) Funded Debt (other than
---------------------
(i) contingent obligations of the type described in clause (f) or (h) in
the definition of "Debt" and (ii) Subordinated Debt) of the Borrower and
----
its Subsidiaries as of the last day of a Rolling Period to (b) an amount
equal to Consolidated EBITDA of the Parent Guarantor and its Subsidiaries
for the most recently completed Rolling Period for which financial
statements have been provided; provided that such Consolidated EBITDA shall
--------
include the Pro Forma EBITDA of or attributable to any Restricted
Acquisition or Independent Shoe Distribution Acquisition for such Rolling
Period.
"Senior Subordinated Note Indenture" means the Indenture dated as of
----------------------------------
April 24, 1998 among the Borrower, certain of its Subsidiaries signatory
thereto and The Chase Manhattan Bank, as trustee.
"Senior Subordinated Notes" means the Senior Subordinated Notes due
-------------------------
2008 of the Borrower in an aggregate principal amount of $100,000,000
issued pursuant to the Senior Subordinated Note Indenture.
"Single Employer Plan" means a single employer plan, as defined in
--------------------
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
Loan Party or any ERISA Affiliate and no Person other than the Loan Parties
and the ERISA Affiliates or (b) was so maintained and in respect of which
any Loan Party or any ERISA Affiliate could have liability under Section
4069 of ERISA in the event such plan has been or were to be terminated.
"Solvent" and "Solvency" mean, with respect to any Person on a
------- --------
particular date, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the present
fair saleable value of the assets of such Person exceeds the amount that
will be required to pay the probable liabilities of such Person on its
debts as they become absolute and matured, (c) such Person does not intend
to, and
<PAGE>
25
does not believe that it will, incur debts or liabilities that will be
beyond such Person's ability to pay such debts and liabilities as they
mature and (d) such Person is not engaged in business or in a transaction,
and is not about to engage in business or in a transaction, for which such
Person's property would constitute an unreasonably small capital. The
amount of contingent liabilities at any time shall be computed as the
amount that, in the light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become
an actual or matured liability.
"Standby Letter of Credit" means any Letter of Credit issued under the
------------------------
Letter of Credit Facility, other than a Trade Letter of Credit.
"Subordinated Debt" means (i) the Senior Subordinated Notes, (ii) the
-----------------
Seller Subordinated Debt and (iii) any other Debt of the Borrower that is
subordinated to the Obligations of the Loan Parties under the Loan
Documents, and that otherwise contains terms and conditions satisfactory to
the Agent.
"Subordinated Debt Documents" means (i) the Senior Subordinated Note
---------------------------
Indenture and (ii) all other agreements, indentures and instruments
delivered in connection with the issuance of the Subordinated Debt.
"Subordination Agreement" means a subordination agreement
-----------------------
substantially in the form of Exhibit P hereto or in such other form as may
be satisfactory to the Agent.
"Subsidiary" of any Person means any corporation, partnership, joint
----------
venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon
the occurrence of any contingency), (b) the interest in the capital or
profits of such limited liability company, partnership or joint venture or
(c) the beneficial interest in such trust or estate is at the time directly
or indirectly owned or controlled by such Person, by such Person and one or
more of its other Subsidiaries or by one or more of such Person's other
Subsidiaries.
"Subsidiary Guarantors" means all Subsidiaries of the Parent Guarantor
---------------------
or the Borrower (including, without limitation, to the extent that no
adverse tax consequences would result therefrom, any Foreign Subsidiary)
and each other Subsidiary of either of them that shall be required to
execute and deliver a guaranty pursuant to Section 5.01(m).
"Subsidiary Guaranty" has the meaning specified in Section
-------------------
3.01(k)(xii).
"Surviving Debt" has the meaning specified in Section 3.01(i).
--------------
"Swing Line Advance" means an advance made by (a) the Swing Line Bank
------------------
pursuant to Section 2.01(b) or (b) any Working Capital Lender pursuant to
Section 2.02(b).
"Swing Line Bank" has the meaning specified in the recital of parties
---------------
to this Agreement.
<PAGE>
26
"Swing Line Borrowing" means a Borrowing consisting of a Swing Line
--------------------
Advance made by the Swing Line Bank.
"Swing Line Commitment" means, with respect to the Swing Line Bank at
---------------------
any time, the amount set forth opposite the Swing Line Bank's name on
Schedule I hereto under the caption "Swing Line Commitment" or, if the
Swing Line Bank has entered into an Assignment and Acceptance, set forth
for the Swing Line Bank in the Register maintained by the Agent pursuant to
Section 9.07(d) as the Swing Line Bank's "Swing Line Commitment", as such
amount may be reduced at or prior to such time pursuant to Section 2.05.
"Swing Line Facility" has the meaning specified in Section 2.01(b).
-------------------
"Taxes" has the meaning specified in Section 2.12(a).
-----
"Termination Date" means the earlier of April 24, 2004 and the date of
----------------
termination in whole of the Acquisition Commitments, the Letter of Credit
Commitments, the Working Capital Commitments and the Swing Line Commitments
pursuant to Section 2.05 or 6.01.
"Trade Letter of Credit" means any Letter of Credit that is issued
----------------------
under the Letter of Credit Facility for the benefit of a supplier of
Inventory to the Borrower or any of its Subsidiaries to effect payment for
such Inventory.
"Transaction Documents" means, collectively, the Loan Documents and
---------------------
the Related Documents.
"Type" refers to the distinction between Advances bearing interest at
----
the Base Rate and Advances bearing interest at the Eurodollar Rate.
"Unused Acquisition Commitment" means, with respect to any Acquisition
-----------------------------
Lender at any time prior to the Conversion Date, such Lender's Acquisition
Commitment at such time minus the aggregate principal amount of all
-----
Acquisition Advances made by such Lender and outstanding at such time.
"Unused Working Capital Commitment" means, with respect to any Working
---------------------------------
Capital Lender at any time, (a) such Lender's Working Capital Commitment at
such time minus (b) the sum of (i) the aggregate principal amount of all
-----
Working Capital Advances, Swing Line Advances and Letter of Credit Advances
made by such Lender (in its capacity as a Lender) and outstanding at such
time, plus (ii) such Lender's Pro Rata Share of (A) the aggregate Available
----
Amount of all Letters of Credit outstanding at such time, (B) the aggregate
principal amount of all Letter of Credit Advances made by the Issuing Bank
pursuant to Section 2.03(c) and outstanding at such time and (C) the
aggregate principal amount of all Swing Line Advances made by the Swing
Line Bank pursuant to Section 2.01(b) and outstanding at such time.
"Voting Stock" means capital stock issued by a corporation, or
------------
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for
<PAGE>
27
the election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the happening of
such a contingency.
"Welfare Plan" means a welfare plan, as defined in Section 3(1) of
------------
ERISA, that is maintained for employees of any Loan Party or in respect of
which any Loan Party could have a liability.
"Withdrawal Liability" has the meaning specified in Part I of Subtitle
--------------------
E of Title IV of ERISA.
"Working Capital Advance" has the meaning specified in Section
-----------------------
2.01(a).
"Working Capital Borrowing" means a Borrowing consisting of
-------------------------
simultaneous Working Capital Advances of the same Type made by the Working
Capital Lenders.
"Working Capital Commitment" means, with respect to any Working
--------------------------
Capital Lender at any time, the amount set forth opposite such Lender's
name on Schedule I hereto under the caption "Working Capital Commitment"
or, if such Lender has entered into one or more Assignment and Acceptances,
set forth for such Lender in the Register maintained by the Agent pursuant
to Section 9.07(d) as such Lender's "Working Capital Commitment", as such
amount may be reduced at or prior to such time pursuant to Section 2.05.
"Working Capital Facility" means, at any time, the aggregate amount of
------------------------
the Working Capital Lenders' Working Capital Commitments at such time.
"Working Capital Lender" means any Lender that has a Working Capital
----------------------
Commitment.
"Working Capital Note" means a promissory note of the Borrower payable
--------------------
to the order of any Working Capital Lender, in substantially the form of
Exhibit A-1 hereto, evidencing the aggregate indebtedness of the Borrower
to such Lender resulting from the Working Capital Advances made by such
Lender.
"Working Capital Reduction Amount" has the meaning specified in
--------------------------------
Section 2.06(b)(v).
SECTION 1.02. Computation of Time Periods; Other Definitional
-----------------------------------------------
Provisions. In this Agreement and the other Loan Documents, in the computation
- - ----------
of periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding". References in the Loan Documents to any agreement or contract
"as amended" shall mean and be a reference to such agreement or contract as
amended, amended and restated, supplemented or otherwise modified from time to
time in accordance with its terms to the extent permitted by this Agreement.
SECTION 1.03. Accounting Terms. All accounting terms not
----------------
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(f) ("GAAP").
----
<PAGE>
28
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
SECTION 2.01. The Advances. (a) The Working Capital Advances.
------------ ----------------------------
Each Working Capital Lender severally agrees, on the terms and conditions
hereinafter set forth, to make advances (each, a "Working Capital Advance") to
-----------------------
the Borrower from time to time on any Business Day during the period from the
date hereof until the Termination Date in an amount for each such Advance not to
exceed such Lender's Unused Working Capital Commitment at such time. Each
Working Capital Borrowing shall be in an aggregate amount of $500,000 or an
integral multiple of $100,000 in excess thereof (other than a Borrowing the
proceeds of which shall be used solely to repay or prepay in full outstanding
Letter of Credit Advances made by the Issuing Bank) and shall consist of Working
Capital Advances made simultaneously by the Working Capital Lenders ratably
according to their Working Capital Commitments. Within the limits of each
Working Capital Lender's Unused Working Capital Commitment in effect from time
to time, the Borrower may borrow under this Section 2.01(a), prepay pursuant to
Section 2.06(a) and reborrow under this Section 2.01(a).
(b) The Swing Line Advances. The Borrower may request the Swing
-----------------------
Line Bank to make, and the Swing Line Bank agrees (so long as its obligations
hereunder are not amended or modified without its consent), on the terms and
conditions hereinafter set forth, to make, advances (each a "Swing Line
----------
Advance") to the Borrower from time to time on any Business Day during the
- - -------
period from the date hereof until the Termination Date (i) in an aggregate
amount not to exceed at any time outstanding $3,000,000 (the "Swing Line
----------
Facility") and (ii) in an amount for each such Swing Line Borrowing not to
- - --------
exceed the aggregate of the Unused Working Capital Commitments of the Working
Capital Lenders on such Business Day. No Swing Line Advance shall be used for
the purpose of funding the payment of principal of any other Swing Line Advance.
Each Swing Line Borrowing shall be in an amount of $50,000 or an integral
multiple of $25,000 in excess thereof and shall consist of a Base Rate Advance.
Within the limits of the Swing Line Facility and within the limits referred to
in clause (ii) above, the Borrower may borrow under this Section 2.01(b), prepay
pursuant to Section 2.06(a) and reborrow under this Section 2.01(b).
(c) Letters of Credit. The Issuing Bank agrees, on the terms and
-----------------
conditions hereinafter set forth, to issue letters of credit (the "Letters of
----------
Credit") for the account of the Borrower from time to time on any Business Day
- - ------
during the period from the date hereof until 30 days before the Termination Date
in an aggregate Available Amount (i) for all Letters of Credit issued by such
Issuing Bank not to exceed at any time the lesser of (x) the Letter of Credit
Facility at such time and (y) the Issuing Bank's Letter of Credit Commitment at
such time and (ii) in an Available Amount for each such Letter of Credit not to
exceed the Unused Working Capital Commitments of the Working Capital Lenders at
such time. No Letter of Credit shall have an expiration date (including all
rights of the Borrower or the beneficiary to require renewal) later than the
earlier of (1) 10 days before the scheduled Termination Date and (2) (A) in the
case of a Standby Letter of Credit, one year after the date of issuance thereof
and (B) in the case of a Trade Letter of Credit, 120 days after the date of
issuance thereof. Within the limits of the Letter of Credit Facility, and
subject to the limits referred to above, the Borrower may request the issuance
of Letters of Credit under this Section 2.01(c), repay any Letter of Credit
Advances resulting from drawings thereunder pursuant to Section 2.03(c) and
request the issuance of additional Letters of Credit under this Section 2.01(c).
<PAGE>
29
(d) The Acquisition Advances. Subject to Section 2.14(b), each
------------------------
Acquisition Lender severally agrees, on the terms and conditions hereinafter set
forth, to make advances (each, an "Acquisition Advance") to the Borrower from
-------------------
time to time on any Business Day during the period from the date hereof until
the Conversion Date in an amount for each such Advance not to exceed such
Lender's Unused Acquisition Commitment at such time. Each Acquisition Borrowing
shall be in an aggregate amount of $1,000,000 or an integral multiple of
$100,000 in excess thereof and shall consist of Acquisition Advances made
simultaneously by the Acquisition Lenders ratably according to their Acquisition
Commitments. Amounts borrowed under this Section 2.01(d) and repaid pursuant to
Section 2.04 or prepaid pursuant to Section 2.06 may not be reborrowed.
SECTION 2.02. Making the Advances. (a) Except as otherwise
-------------------
provided in Section 2.02(b) or Section 2.03, each Borrowing shall be made on
notice, given not later than 1:00 P.M. (New York City time) on the third
Business Day prior to the date of the proposed Borrowing in the case of a
Borrowing consisting of Eurodollar Rate Advances, or the first Business Day
prior to the date of the proposed Borrowing in the case of a Borrowing
consisting of Base Rate Advances (except in the case of a Borrowing consisting
of Swing Line Advances, which may be made on notice given not later than 1:00
P.M. (New York City time) on the date of the proposed Borrowing), by the
Borrower to the Agent, which shall give to each Appropriate Lender prompt notice
thereof by telex or telecopier. Each such notice of a Borrowing (a "Notice of
---------
Borrowing") shall be in writing, or telex or telecopier, in substantially the
- - ---------
form of Exhibit B hereto, specifying therein the requested (i) date of such
Borrowing (which shall be a Business Day), (ii) Facility under which such
Borrowing is to be made, (iii) Type of Advances comprising such Borrowing, (iv)
aggregate amount of such Borrowing and (v) in the case of a Borrowing consisting
of Eurodollar Rate Advances, initial Interest Period for each such Advance. Each
Appropriate Lender shall, before 11:00 A.M. (New York City time) on the date of
such Borrowing, make available for the account of its Applicable Lending Office
to the Agent at the Agent's Account, in same day funds, such Lender's ratable
portion of such Borrowing in accordance with the respective Commitments under
the applicable Facility of such Lender and the other Appropriate Lenders. After
the Agent's receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article III, the Agent will make such funds available to
the Borrower by crediting the Borrower's Account; provided, however, that, in
-------- -------
the case of any Working Capital Borrowing, the Agent shall first make a portion
of such funds equal to the aggregate principal amount of any Letter of Credit
Advances made by the Issuing Bank and by any other Working Capital Lender and
outstanding on the date of such Working Capital Borrowing, plus interest accrued
----
and unpaid thereon to and as of such date, available to the Issuing Bank and
such other Working Capital Lenders for repayment of such Letter of Credit
Advances.
(b) Each Swing Line Borrowing shall be made on notice, given not
later than 1:00 P.M. (New York City time) on the date of the proposed Swing Line
Borrowing, by the Borrower to the Swing Line Bank and the Agent. Each such
notice of a Swing Line Borrowing (a "Notice of Swing Line Borrowing") shall be
------------------------------
by telephone, confirmed immediately in writing, or telex or telecopier,
specifying therein the requested (i) date of such Borrowing (which shall be a
Business Day), (ii) amount of such Borrowing and (iii) maturity of such
Borrowing (which maturity shall be no later than the seventh day after the
requested date of such Borrowing). The Swing Line Bank will make the amount set
forth in such Notice of Swing Line Borrowing available to the Agent at the
Agent's Account, in same day funds. After the Agent's receipt of such funds and
upon fulfillment of the applicable conditions set forth in Article III, the
Agent will make such funds available to the Borrower by crediting the Borrower's
Account. Upon written demand by the Swing Line Bank, with a copy of such demand
to the Agent, each other Working Capital Lender shall purchase from the Swing
Line
<PAGE>
30
Bank, and the Swing Line Bank shall sell and assign to each such other Working
Capital Lender, such other Working Capital Lender's Pro Rata Share of such
outstanding Swing Line Advance as of the date of such demand, by making
available for the account of its Applicable Lending Office to the Agent for the
account of the Swing Line Bank, by deposit to the Agent's Account, in same day
funds, an amount equal to the portion of the outstanding principal amount of
such Swing Line Advance to be purchased by such Working Capital Lender. The
Borrower hereby agrees to each such sale and assignment. Each Working Capital
Lender agrees to purchase its Pro Rata Share of an outstanding Swing Line
Advance on (i) the Business Day on which demand therefor is made by the Swing
Line Bank; provided that notice of such demand is given not later than 11:00
--------
A.M. (New York City time) on such Business Day or (ii) the first Business Day
next succeeding such demand if notice of such demand is given after such time.
Upon any such assignment by the Swing Line Bank to any other Working Capital
Lender of a portion of a Swing Line Advance, the Swing Line Bank represents and
warrants to such other Working Capital Lender that the Swing Line Bank is the
legal and beneficial owner of such interest being assigned by it, free and clear
of all liens, but makes no other representation or warranty and assumes no
responsibility with respect to such Swing Line Advance, the Loan Documents or
any Loan Party. If and to the extent that any Working Capital Lender shall not
have so made the amount of such Swing Line Advance available to the Agent, such
Working Capital Lender agrees to pay to the Agent forthwith on demand such
amount together with interest thereon, for each day from the date of demand by
the Swing Line Bank until the date such amount is paid to the Agent, at the
Federal Funds Rate. If such Working Capital Lender shall pay to the Agent such
amount for the account of the Swing Line Bank on any Business Day, such amount
so paid in respect of principal shall constitute a Swing Line Advance made by
such Working Capital Lender on such Business Day for purposes of this Agreement,
and the outstanding principal amount of the Swing Line Advance made by the Swing
Line Bank shall be reduced by such amount on such Business Day.
(c) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for
the initial Borrowing hereunder and for the period from the date of such initial
Borrowing to the earlier of (x) three months from such date and (y) the
completion of syndication of the Facilities (as shall be determined by the Agent
in its sole discretion and as specified by the Agent in a written notice to the
Borrower) or for any Borrowing if the aggregate amount of such Borrowing is less
than $1,000,000 or if the obligation of the Appropriate Lenders to make
Eurodollar Rate Advances shall then be suspended pursuant to Section 2.09 or
2.10 and (ii) with respect to Borrowings consisting of Eurodollar Rate Advances,
the Acquisition Advances and the Working Capital Advances may not be outstanding
as part of more than ten separate Borrowings in the aggregate.
(d) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. In the case of any Borrowing that the related Notice of Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall
indemnify each Appropriate Lender against any loss, cost or expense incurred by
such Lender as a result of any failure to fulfill on or before the date
specified in such Notice of Borrowing for such Borrowing the applicable
conditions set forth in Article III, including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Advance to be made by such Lender as part of such Borrowing
when such Advance, as a result of such failure, is not made on such date.
(e) Unless the Agent shall have received written notice from an
Appropriate Lender prior to the date of any Borrowing under a Facility under
which such Lender has a Commitment that such Lender will not make available to
the Agent such Lender's ratable portion of such Borrowing, the Agent may assume
<PAGE>
31
that such Lender has made such portion available to the Agent on the date of
such Borrowing in accordance with subsection (a), (b) or (c) of this Section
2.02, and the Agent may, in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent that such
Lender shall not have so made such ratable portion available to the Agent, such
Lender and the Borrower severally agree to pay or repay to the Agent forthwith
on demand such corresponding amount and to pay interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is paid or repaid to the Agent, at (i) in the case of the Borrower, the
interest rate applicable at such time under Section 2.07 to Advances comprising
such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If
such Lender shall pay to the Agent such corresponding amount, such amount so
paid shall constitute such Lender's Advance as part of such Borrowing for all
purposes hereunder.
(f) The failure of any Lender to make the Advance to be made by it
as part of any Borrowing shall not relieve any other Lender of its obligation,
if any, hereunder to make its Advance on the date of such Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Advance to be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Issuance of and Drawings and Reimbursement Under
------------------------------------------------
Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be
- - ----------------- --------------------
issued upon notice, given not later than 1:00 P.M. (New York City time) on the
fifth Business Day in the case of Standby Letters of Credit and two Business
Days' notice in the case of Trade Letters of Credit prior to the date of the
proposed issuance of such Letter of Credit, by the Borrower to the Issuing Bank,
which shall give to the Agent prompt notice thereof by telex or telecopier.
Each such notice of issuance of a Letter of Credit (a "Notice of Issuance")
------------------
shall be by telephone, confirmed immediately in writing, or telex or telecopier,
specifying therein the requested (A) date of such issuance (which shall be a
Business Day), (B) Available Amount of such Letter of Credit, (C) expiration
date of such Letter of Credit, (D) name and address of the beneficiary of such
Letter of Credit, (E) form of such Letter of Credit and (F) whether such Letter
of Credit is to be a Standby Letter of Credit or a Trade Letter of Credit, and
shall be accompanied by such application and agreement for letter of credit as
the Issuing Bank may specify to the Borrower for use in connection with such
requested Letter of Credit (a "Letter of Credit Agreement"). If the requested
--------------------------
form of such Letter of Credit is acceptable to the Issuing Bank in its sole
discretion, the Issuing Bank will, upon fulfillment of the applicable conditions
set forth in Article III, make such Letter of Credit available to the Borrower
at its office referred to in Section 9.02 or as otherwise agreed with the
Borrower in connection with such issuance. In the event and to the extent that
the provisions of any Letter of Credit Agreement shall conflict with this
Agreement, the provisions of this Agreement shall govern.
(b) Letter of Credit Reports. The Issuing Bank shall furnish (A) to
------------------------
the Agent on the first Business Day of each week a written report summarizing
the issuance and expiration dates of Letters of Credit issued during the
previous week and drawings during such week under all Letters of Credit, (B) to
each Working Capital Lender on the first Business Day of each fiscal quarter
ended January 31, April 30, July 31 and October 31, a written report summarizing
the issuance and expiration dates of Letters of Credit issued during the
preceding fiscal quarter and drawings during such fiscal quarter under all
Letters of Credit and (C) to the Agent and each Working Capital Lender on the
first Business Day of each calendar quarter a written report setting forth the
average daily aggregate Available Amount during the preceding calendar quarter
of all Letters of Credit.
<PAGE>
32
(c) Drawing and Reimbursement. The payment by the Issuing Bank of a
-------------------------
draft drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the Issuing Bank of a Letter of Credit Advance, which
shall be a Base Rate Advance, in the amount of such draft. In the event of any
drawing under a Letter of Credit, the Issuing Bank shall promptly notify the
Agent, and the Agent shall promptly notify each Working Capital Lender and each
Working Capital Lender shall purchase from the Issuing Bank, and the Issuing
Bank shall sell and assign to each such Working Capital Lender, such Working
Capital Lender's Pro Rata Share of such outstanding Letter of Credit Advance as
of the date of such purchase, by making available for the account of its
Applicable Lending Office to the Agent for the account of the Issuing Bank, by
deposit to the Agent's Account, in same day funds, an amount equal to the
portion of the outstanding principal amount of such Letter of Credit Advance to
be purchased by such Working Capital Lender. Promptly after receipt thereof,
the Agent shall transfer such funds to the Issuing Bank. The Borrower hereby
agrees to each such sale and assignment. Each Working Capital Lender agrees to
purchase its Pro Rata Share of an outstanding Letter of Credit Advance on (i)
the Business Day on which notice of the drawing under the related Letter of
Credit is given by the Issuing Bank; provided such notice is given not later
--------
than 1:00 P.M. (New York City time) on such Business Day or (ii) the first
Business Day next succeeding such demand if such notice is given after such
time. Upon any such assignment by the Issuing Bank to any other Working Capital
Lender of a portion of a Letter of Credit Advance, the Issuing Bank represents
and warrants to such other Working Capital Lender that the Issuing Bank is the
legal and beneficial owner of such interest being assigned by it, free and clear
of all liens, but makes no other representation or warranty and assumes no
responsibility with respect to such Letter of Credit Advance, the Loan Documents
or any Loan Party. If and to the extent that any Working Capital Lender shall
not have so made the amount of such Letter of Credit Advance available to the
Agent, such Working Capital Lender agrees to pay to the Agent forthwith on
demand such amount together with interest thereon, for each day from the date of
demand by the Issuing Bank until the date such amount is paid to the Agent, at
the Federal Funds Rate for its account or the account of the Issuing Bank, as
applicable. If such Working Capital Lender shall pay to the Agent such amount
for the account of the Issuing Bank on any Business Day, such amount so paid in
respect of principal shall constitute a Letter of Credit Advance made by such
Working Capital Lender on such Business Day for purposes of this Agreement, and
the outstanding principal amount of the Letter of Credit Advance made by the
Issuing Bank shall be reduced by such amount on such Business Day.
(d) Failure to Make Letter of Credit Advances. The failure of any
-----------------------------------------
Lender to make the Letter of Credit Advance to be made by it on the date
specified in Section 2.03(c) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Letter of Credit Advance to be made by such other Lender on such date.
SECTION 2.04. Repayment of Advances. (a) Working Capital Advances.
--------------------- ------------------------
The Borrower shall repay to the Agent for the ratable account of the Working
Capital Lenders on the Termination Date the aggregate outstanding principal
amount of the Working Capital Advances then outstanding.
(b) Swing Line Advances. The Borrower shall repay to the Agent, for
-------------------
the account of the Swing Line Bank and each other Working Capital Lender which
has made a Swing Line Advance to it, the outstanding principal amount of each
Swing Line Advance made by each of them on the earlier of the maturity date
specified in the applicable Notice of Swing Line Borrowing (which maturity shall
be no later than the seventh day after the requested date of such Borrowing) and
the Termination Date.
<PAGE>
33
(c) Letter of Credit Advances. (i) The Borrower shall repay to the
-------------------------
Agent for the account of the Issuing Bank and each other Working Capital Lender
that has made a Letter of Credit Advance to it the outstanding principal amount
of each Letter of Credit Advance made by each of them on the earlier of the
Termination Date and on demand.
(ii) The Obligations of the Borrower under this Agreement, any Letter
of Credit Agreement and any other agreement or instrument relating to any Letter
of Credit shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement, such Letter of Credit Agreement and
such other agreement or instrument under all circumstances, including, without
limitation, the following circumstances (subject, however, to the provisions of
Section 9.09);
(A) any lack of validity or enforceability of any Loan Document, any
Letter of Credit Agreement, any Letter of Credit or any other agreement or
instrument relating thereto (all of the foregoing being, collectively, the
"L/C Related Documents");
---------------------
(B) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrower in respect of
any L/C Related Document or any other amendment or waiver of or any consent
to departure from all or any of the L/C Related Documents;
(C) the existence of any claim, setoff, defense or other right that
the Borrower may have at any time against any beneficiary or any transferee
of a Letter of Credit (or any Persons for whom any such beneficiary or any
such transferee may be acting), the Issuing Bank or any other Person,
whether in connection with the transactions contemplated by the L/C Related
Documents or any unrelated transaction;
(D) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(E) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not strictly comply with
the terms of such Letter of Credit;
(F) any exchange, release or non-perfection of any Collateral or
other collateral, or any release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the Obligations of the
Borrower in respect of the L/C Related Documents; or
(G) any other similar circumstance or happening whatsoever,
including, without limitation, any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Borrower or a
guarantor.
(d) Acquisition Advances. The Borrower shall repay to the Agent for
--------------------
the ratable account of the Acquisition Lenders the aggregate outstanding
principal amount of the Acquisition Advances on the following dates in the
amounts indicated, determined as a percentage of the aggregate amount of
Acquisition Advances outstanding on the Conversion Date (after giving effect to
any prepayments required by Section
<PAGE>
34
2.06(b)(i) or (ii) and which amount shall be reduced as a result of the
application of further prepayments in accordance with the order of priority set
forth in the applicable paragraph of Section 2.06):
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
July 31, 2001 7.5%
October 31, 2001 7.5%
January 31, 2002 7.5%
April 30, 2002 7.5%
July 31, 2002 7.5%
October 31, 2002 7.5%
January 31, 2003 7.5%
April 30, 2003 7.5%
July 31, 2003 10.0%
October 31, 2003 10.0%
January 31, 2004 10.0%
April 30, 2004 10.0%
</TABLE>
provided, however, that the final principal installment of the Acquisition
- - -------- -------
Facility shall in any event be in an amount equal to the aggregate principal
amount of the Acquisition Advances then outstanding.
SECTION 2.05. Termination or Reduction of the Commitments. (a)
-------------------------------------------
Optional. The Borrower may, upon at least five Business Days' notice to the
- - --------
Agent, terminate in whole or reduce in part the unused portions of the Swing
Line Commitment, the Letter of Credit Commitment, the Unused Working Capital
Commitments and the Unused Acquisition Commitments; provided, however, that each
-------- -------
partial reduction of a Facility (i) shall be in an aggregate amount of
$1,000,000 or an integral multiple of $100,000 in excess thereof and (ii) shall
be made ratably among the Appropriate Lenders in accordance with their
Commitments with respect to such Facility.
(b) Mandatory. (i) The Working Capital Facility shall be
---------
automatically and permanently reduced on the date on which prepayment thereof is
required to be made pursuant to Section 2.06(b)(i) or (ii) by an amount equal to
the Working Capital Reduction Amount; provided that each such reduction of the
--------
Working Capital Facility shall be made ratably among the Working Capital Lenders
in accordance with their Working Capital Commitments.
(ii) The Letter of Credit Facility shall be automatically and
permanently reduced from time to time on the date of each reduction in the
Working Capital Facility by the amount, if any, by which the amount of the
Letter of Credit Facility exceeds the Working Capital Facility after giving
effect to such reduction of the Working Capital Facility.
(iii) The Swing Line Facility shall be automatically and permanently
reduced from time to time on the date of each reduction in the Working Capital
Facility by the amount, if any, by which the
<PAGE>
35
amount of the Swing Line Facility exceeds the Working Capital Facility after
giving effect to such reduction of the Working Capital Facility.
(iv) Prior to the Conversion Date, the Acquisition Facility shall be
automatically and permanently reduced on the date on which prepayment thereof is
required to be made pursuant to Section 2.06(b)(ii) by an amount equal to the
Acquisition Reduction Amount; provided that each such reduction of the
--------
Acquisition Facility shall be made ratably among the Acquisition Lenders in
accordance with their Acquisition Commitments. From and after the Conversion
Date, the Acquisition Commitments of the Acquisition Lenders shall be
automatically and permanently reduced, on a pro rata basis, by an amount equal
to the amount by which the aggregate Acquisition Facility Commitments
immediately prior to such reduction exceed the aggregate unpaid principal amount
of the Acquisition Advances then outstanding.
SECTION 2.06. Prepayments. (a) Optional. Except prior to the
----------- --------
Conversion Date with respect to Acquisition Advances, the Borrower may, upon at
least one Business Day's notice in the case of Base Rate Advances (except in the
case of Swing Line Advances, which shall be same day notice) and three Business
Days' notice in the case of Eurodollar Rate Advances, in each case to the Agent
(received not later than 1:00 P.M. (New York City time)) stating the proposed
date (which shall be a Business Day) and aggregate principal amount of the
prepayment, and if such notice is given the Borrower shall, prepay the
outstanding aggregate principal amount of the Advances comprising part of the
same Borrowing in whole or ratably in part, together with accrued interest to
the date of such prepayment on the aggregate principal amount prepaid unless
such prepayment is with respect to a Swing Line Advance or a Working Capital
Advance that is a Base Rate Advance; provided, however, that (x) each partial
-------- -------
prepayment (other than a prepayment of Swing Line Advances) shall be in an
aggregate principal amount of $500,000 or an integral multiple of $100,000 in
excess thereof (or, with respect to Swing Line Advances, shall be in an
aggregate principal amount of $50,000 or an integral multiple of $25,000 in
excess thereof) and (y) if any prepayment of a Eurodollar Rate Advance shall be
made other than on the last day of an Interest Period therefor, the Borrower
shall also pay any amounts owing pursuant to Section 9.04(c). Each such
prepayment of any Advances, shall be applied as follows:
(i) Prior to the Conversion Date, at the option of the Borrower to
prepay the Acquisition Facility as set forth in Section 2.06(b)(vi) or to
prepay the Working Capital Facility as set forth in Section 2.06(b)(v).
(ii) From and after the Conversion Date:
first, permanently to reduce the Acquisition Facility ratably to
-----
the principal installments thereof, and
second, to the extent that the Acquisition Facility has been
------
fully repaid and permanently reduced in full, to prepay the Working Capital
Facility as set forth in Section 2.06(b)(v).
(b) Mandatory. (i) From and after the Conversion Date, the
---------
Borrower shall, no later than the 30th day following the date on which it
delivers the financial statements referred to in Section 5.03(d) (but in any
event within 100 days after the end of each Fiscal Year), prepay an aggregate
principal amount of the
<PAGE>
36
Advances comprising part of the same Borrowings equal to 50% of the amount
of Excess Cash Flow for such Fiscal Year. Each such prepayment of any Advances
shall be applied as follows:
first, permanently to reduce the Acquisition Facility, ratably to the
-----
principal installments thereof, and
second, to the extent that the Acquisition Facility has been fully
------
repaid and permanently reduced in full, permanently to reduce the Working
Capital Facility as set forth in Section 2.06(b)(v).
(ii) The Borrower shall, on the date of receipt of the Net Cash
Proceeds by the Parent Guarantor or any of its Subsidiaries from (A) the sale,
lease, transfer or other disposition of any assets of the Parent Guarantor or
any of its Subsidiaries (other than any sale, lease, transfer or other
disposition of assets to the extent permitted pursuant to clause (i), (ii) or
(iii) of Section 5.02(e)), (B) the incurrence or issuance by the Parent
Guarantor or any of its Subsidiaries of any Debt (other than Debt incurred or
issued to the extent permitted pursuant to Section 5.02(b)), (C) the sale or
issuance by the Parent Guarantor or any of its Subsidiaries of any capital stock
(other than, so long as no Default has occurred and is continuing or would
result therefrom, and the Agent shall have received from the Borrower and the
Parent Guarantor a certificate to such effect, the proceeds of any such sale or
issuance from a Permitted Issuance) or other ownership or profit interest, any
securities convertible into or exchangeable for capital stock or other ownership
or profit interest or any warrants, rights or options to acquire capital stock
or other ownership or profit interest, or (D) any Extraordinary Receipt received
by or paid to or for the account of the Parent Guarantor or any of its
Subsidiaries and not otherwise included in clause (A), (B) or (C) above, prepay
an aggregate principal amount of the Advances comprising part of the same
Borrowings equal to the amount of such Net Cash Proceeds. Prior to the
Conversion Date, each such prepayment shall be applied as follows:
first, permanently to reduce the Acquisition Facility as set forth in
-----
Section 2.06(b)(vi), and
second, to the extent that the Acquisition Facility has been fully
------
repaid and permanently reduced in full, permanently to reduce the Working
Capital Facility as set forth in Section 2.06(b)(v).
From and after the Conversion Date, each such prepayment shall be applied as
follows:
first, to permanently to reduce the Acquisition Facility, ratably to
-----
the principal installments thereof, and
second, to the extent the Acquisition Facility has been fully repaid
------
and permanently reduced in full, permanently to reduce the Working Capital
Facility as set forth in Section 2.06(b)(v).
(iii) The Borrower shall, on each Business Day, prepay an aggregate
principal amount of the Working Capital Advances comprising part of the same
Borrowings, the Letter of Credit Advances, and the Swing Line Advances equal to
the amount by which (A) the sum of the aggregate principal amount of (x) the
Working Capital Advances, (y) the Letter of Credit Advances and (z) the Swing
Line Advances then outstanding plus the aggregate Available Amount of all
----
Letters of Credit then outstanding exceeds (B) the lesser of the Working Capital
Facility and the Loan Value of Eligible Collateral on such Business Day (as
determined based on the most recent Borrowing Base Certificate delivered to the
Lender Parties hereunder).
<PAGE>
37
(iv) The Borrower shall, on each Business Day, pay to the Agent for
deposit in the L/C Cash Collateral Account an amount sufficient to cause the
aggregate amount on deposit in such L/C Cash Collateral Account to equal the
amount by which the aggregate Available Amount of all Letters of Credit then
outstanding exceeds the Letter of Credit Facility on such Business Day.
(v) Prepayments of the Working Capital Facility made pursuant to
Section 2.06(b)(i), (ii) or (iii) shall be first applied to prepay Letter of
-----
Credit Advances then outstanding until such Letter of Credit Advances are paid
in full, second applied to prepay Swing Line Advances then outstanding until
------
such Swing Line Advances are paid in full, third applied to prepay Working
-----
Capital Advances then outstanding comprising part of the same Borrowings until
such Working Capital Advances are paid in full, and fourth deposited in the L/C
------
Cash Collateral Account to cash collateralize 105% of the Available Amount of
the Letters of Credit then outstanding. In the case of prepayments of the
Working Capital Facility required pursuant to Section 2.06(b)(i) or (ii), the
amount remaining (if any) after the prepayment in full of the Working Capital
Advances then outstanding and the cash collateralization of the aggregate
Available Amount of Letters of Credit then outstanding (the sum of such
prepayment amounts, cash collateralization amounts and the amount remaining (if
any) not required to prepay the Working Capital Advances being referred to
herein as the "Working Capital Reduction Amount") may be retained by the
--------------------------------
Borrower and the Working Capital Facility shall be permanently reduced as set
forth in Section 2.05(b)(i). Upon the drawing of any Letter of Credit for which
funds are on deposit in the L/C Cash Collateral Account, such funds shall be
applied to reimburse the Issuing Bank or the Working Capital Lenders, as
applicable.
(vi) Prior to the Conversion Date, prepayments of the Acquisition
Facility pursuant to Section 2.06(b)(ii) shall be applied to prepay Acquisition
Advances then outstanding comprising part of the same Borrowings until such
Acquisition Advances are paid in full and the amount remaining (if any) after
the prepayment in full of the Acquisition Advances then outstanding (the sum of
such prepayment amounts and the amount remaining (if any) not required to prepay
the Acquisition Advances being referred to herein as the "Acquisition Reduction
---------------------
Amount") shall be applied in accordance with Section 2.06(b)(v). In addition,
- - ------
the Acquisition Facility shall be permanently reduced as set forth in Section
2.05(b)(iv).
(vii) All prepayments under this Section 2.06(b), other than
prepayments of Swing Line Advances and Working Capital Advances that are Base
Rate Advances, shall be made together with accrued interest to the date of such
prepayment on the principal amount prepaid, together with any amounts owing
pursuant to Section 9.04(c).
(viii) Anything contained in this Section 2.06(b) to the contrary
notwithstanding, (A) if, following the occurrence of any "Asset Disposition" (as
such term is defined in the Discount Note Indenture and the Senior Subordinated
Note Indenture) by any Loan Party or any of its Subsidiaries, the Borrower shall
be required to commit by a particular date (a "Commitment Date") to apply or
---------------
cause its Subsidiaries to apply an amount equal to any of the "Net Proceeds" (as
such term is defined in the Discount Note Indenture and the Senior Subordinated
Note Indenture) thereof in a particular manner, or to apply by a particular date
(an "Application Date") an amount equal to such Net Available Cash at least 60
----------------
days before the applicable Commitment Date or Application Date, as the case may
be, or (B) if the Borrower at any other time shall have failed to apply or
commit or cause to be applied an amount equal to any such Net Available Cash,
and, within 60 days thereafter assuming no further application or commitment of
an amount equal to such Net Available Cash the Borrower would otherwise be
required to make an "Excess Proceeds Offer" (as such term is defined
<PAGE>
38
in the Discount Note Indenture and the Senior Subordinated Note Indenture) in
respect thereof, then in either such case the Borrower shall immediately apply
or cause to be applied an amount equal to such Net Available Cash to the payment
of Advances in the manner set forth in Section 2.06(b)(ii) in such amounts as
shall excuse the Borrower from making any such Excess Proceeds Offer.
SECTION 2.07. Interest. (a) Scheduled Interest. The Borrower
-------- ------------------
shall pay interest on the unpaid principal amount of each Advance owing to each
Lender from the date of such Advance until such principal amount shall be paid
in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a
------------------
Base Rate Advance, a rate per annum equal at all times to the sum of (A)
the Base Rate in effect from time to time plus (B) the Applicable Margin in
----
effect from time to time, payable in arrears quarterly on each April 30,
July 31, October 31 and January 31 during such periods, on the date of any
prepayment thereof to the extent required under Section 2.06 and on the
Termination Date, commencing April 30, 1998.
(ii) Eurodollar Rate Advances. During such periods as such Advance
------------------------
is a Eurodollar Rate Advance, a rate per annum equal at all times during
each Interest Period for such Advance to the sum of (A) the Eurodollar Rate
for such Interest Period for such Advance plus (B) the Applicable Margin,
----
payable in arrears on the last day of such Interest Period and, if such
Interest Period has a duration of more than three months, on each day that
occurs during such Interest Period every three months from the first day of
such Interest Period and on the date such Eurodollar Rate Advance shall be
Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the
----------------
continuance of any Event of Default, the Agent may, and upon the request of the
Required Lenders shall, require the Borrower to pay interest on (i) the unpaid
principal amount of each Advance owing to each Lender, payable in arrears on the
dates referred to in Section 2.07(a)(i) or (ii) and on demand, at a rate per
annum equal at all times to 2% per annum above the rate of interest otherwise
applicable with respect to such amount and (ii) to the fullest extent permitted
by law, the amount of any interest, fee or other amount payable under the Loan
Documents that is not paid when due, from the date such amount shall be due
until such amount shall be paid in full, payable in arrears on the date such
amount shall be paid in full and on demand, at a rate per annum equal at all
times to 2% per annum required to be paid, in the case of interest, on the Type
of Advance on which such interest has accrued pursuant to Section 2.07(a)(i) or
(ii), and, in all other cases, on Base Rate Advances pursuant to Section
2.07(a)(i); provided, however, that, following acceleration of the Advances,
-------- -------
interest shall accrue and be payable at the rate required by this Section
2.07(b), irrespective of whether requested by the Agent or the Required Lenders.
In addition, following a final judgment with respect to any Obligation of the
Loan Parties under the Loan Documents, interest shall accrue at the higher of
the statutory judgment rate or the rate specified in the preceding sentence,
payable on demand.
(c) Notice of Interest Rate. Promptly after receipt of a Notice of
-----------------------
Borrowing pursuant to Section 2.02(a), the Agent shall give notice to the
Borrower and each Appropriate Lender of the applicable interest rate determined
by the Agent for purposes of Section 2.06(a)(i) or (ii).
SECTION 2.08. Fees. (a) Commitment Fee. The Borrower shall pay to
---- --------------
the Agent for the account of the Lenders a commitment fee, from the date hereof
in the case of each Initial Lender and from the
<PAGE>
39
effective date specified in the Assignment and Acceptance pursuant to which it
became a Lender in the case of each other Lender until the Termination Date,
payable in arrears quarterly on each April 30, July 31, October 31, and January
31, commencing April 30, 1998, and on the Termination Date, at the rate of
0.4375% per annum on the average daily Unused Acquisition Commitment (prior to
the Conversion Date) of such Lender and on the average daily Unused Working
Capital Commitment of such Lender.
(b) Letter of Credit Fees, Etc. (i) The Borrower shall pay to the
--------------------------
Agent for the account of each Working Capital Lender a commission, payable in
arrears quarterly on each April 30, July 31, October 31 and January 31,
commencing April 30, 1998, and on the Termination Date, on such Lender's Pro
Rata Share of the average daily aggregate Available Amount during such quarter
of all Letters of Credit outstanding from time to time at the Applicable Margin
for Eurodollar Rate Advances under the Working Capital Facility.
(ii) The Borrower shall pay to the Issuing Bank, for its own
account, such commissions, issuance fees, fronting fees, transfer fees and other
fees and charges in connection with the issuance or administration of each
Letter of Credit as the Borrower and the Issuing Bank shall agree.
(c) Agent's Fees. The Borrower shall pay to the Agent, for its own
------------
account, such fees as may from time to time be agreed between the Borrower and
the Agent.
SECTION 2.09. Conversion of Advances. (a) Optional. The Borrower
---------------------- --------
may on any Business Day, upon notice given to the Agent not later than 1:00 P.M.
(New York City time) on the third Business Day prior to the date of the proposed
Conversion and subject to the provisions of Section 2.10, Convert all or any
portion of the Advances of one Type comprising the same Borrowing into Advances
of the other Type; provided, however, that (w) if any Conversion of Eurodollar
-------- -------
Rate Advances into Base Rate Advances is made other than on the last day of an
Interest Period for such Eurodollar Rate Advances, the Borrower shall also pay
any amounts owing pursuant to Section 9.04(c), (x) any Conversion of Base Rate
Advances into Eurodollar Rate Advances shall be in an amount not less than the
minimum amount specified in Section 2.02(c), (y) no Conversion of any Advances
shall result in more separate Borrowings than permitted under Section 2.02(c)
and (z) each Conversion of Advances comprising part of the same Borrowing under
any Facility shall be made ratably among the Appropriate Lenders in accordance
with their Commitments under such Facility. Each such notice of Conversion
shall, within the restrictions specified above, specify (i) the date of such
Conversion, (ii) the Advances to be Converted and (iii) if such Conversion is
into Eurodollar Rate Advances, the duration of the initial Interest Period for
such Advances. Each notice of Conversion shall be irrevocable and binding on
the Borrower.
(b) Mandatory. (i) On the date on which the aggregate unpaid
---------
principal amount of Eurodollar Rate Advances comprising any Borrowing shall be
reduced, by payment or prepayment or otherwise, to less than $1,000,000, such
Advances shall automatically Convert into Base Rate Advances.
(ii) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Agent shall forthwith so notify the Borrower and the Appropriate Lenders,
whereupon each such Eurodollar Rate Advance will automatically, on the last day
of the then existing Interest Period therefor, Convert into a Base Rate Advance.
<PAGE>
40
(iii) Upon the occurrence and during the continuance of any Event of
Default, (x) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(y) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.
SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i) the
--------------------
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender Party of agreeing to make
or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to
issue or of issuing or maintaining or participating in Letters of Credit or of
agreeing to make or of making or maintaining Letter of Credit Advances, then the
Borrower shall from time to time, upon demand by such Lender Party (with a copy
of such demand to the Agent), pay to the Agent for the account of such Lender
Party additional amounts sufficient to compensate such Lender Party for such
increased cost; provided, however, that a Lender Party claiming additional
-------- -------
amounts under this Section 2.10(a) agrees to use reasonable efforts (consistent
with its internal policy and legal and regulatory restrictions) to designate a
different Applicable Lending Office if the making of such a designation would
avoid the need for, or reduce the amount of, such increased cost that may
thereafter accrue and would not, in the reasonable judgment of such Lender
Party, be otherwise disadvantageous to such Lender Party. A certificate as to
computations of the amount of such increased cost, submitted to the Borrower by
such Lender Party, shall be conclusive and binding for all purposes, absent
manifest error.
(b) If any Lender Party determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender Party or any corporation controlling such Lender Party and that the
amount of such capital is increased by or based upon the existence of such
Lender Party's commitment to lend or to issue or participate in Letters of
Credit hereunder and other commitments of such type or the issuance or
maintenance of or participation in the Letters of Credit (or similar contingent
obligations), then, upon demand by such Lender Party (with a copy of such demand
to the Agent), the Borrower shall pay to the Agent for the account of such
Lender Party, from time to time as specified by such Lender Party, additional
amounts sufficient to compensate such Lender Party in the light of such
circumstances, to the extent that such Lender Party reasonably determines such
increase in capital to be allocable to the existence of such Lender Party's
commitment to lend or to issue or to participate in Letters of Credit hereunder
or to the issuance or maintenance of or participation in any Letters of Credit.
A certificate as to computations of such amounts submitted to the Borrower by
such Lender Party shall be conclusive and binding for all purposes, absent
manifest error.
(c) If, with respect to any Eurodollar Rate Advances under any
Facility, Lenders owed at least 50% of the then aggregate unpaid principal
amount thereof notify the Agent that the Eurodollar Rate for any Interest Period
for such Advances will not adequately reflect the cost to such Lenders of
making, funding or maintaining their Eurodollar Rate Advances for such Interest
Period, then the Agent shall forthwith so notify the Borrower and the
Appropriate Lenders, whereupon (i) each such Eurodollar Rate Advance under any
Facility will automatically, on the last day of the then existing Interest
Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the
Appropriate Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Agent shall notify the Borrower that such
Lenders have determined that the circumstances causing such suspension no longer
exist.
<PAGE>
41
(d) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder,
then, on notice thereof and demand therefor by such Lender to the Borrower
through the Agent, (i) such Lender's share of each Eurodollar Rate Advance under
each Facility under which such Lender has a Commitment will automatically, upon
such demand, Convert into a Base Rate Advance and (ii) the obligation of such
Lender to make, or to Convert Advances into, Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrower that such Lender has
determined that the circumstances causing such suspension no longer exist;
provided, however, that before making any such demand, such Lender agrees to use
- - -------- -------
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Eurodollar Lending Office if the making
of such a designation would allow such Lender or its Eurodollar Lending Office
to continue to perform its obligations to make Eurodollar Rate Advances or to
continue to fund or maintain Eurodollar Rate Advances and would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.
SECTION 2.11. Payments and Computations. (a) The Borrower shall
-------------------------
make each payment hereunder and under the Notes, irrespective of any right of
counterclaim or setoff, not later than 1:00 P.M. (New York City time) on the day
when due in U.S. dollars to the Agent at the Agent's Account in same day funds,
with payments being received by the Agent after such time being deemed to have
been received on the next succeeding Business Day. The Agent will promptly
thereafter cause like funds to be distributed (i) if such payment by the
Borrower is in respect of principal, interest, commitment fees or any other
Obligation then payable hereunder and under the Notes to more than one Lender
Party, to such Lender Parties for the account of their respective Applicable
Lending Offices ratably in accordance with the amounts of such respective
Obligations then payable to such Lender Parties and (ii) if such payment by the
Borrower is in respect of any Obligation then payable hereunder to one Lender
Party, to such Lender Party for the account of its Applicable Lending Office, in
each case to be applied in accordance with the terms of this Agreement. Upon
its acceptance of an Assignment and Acceptance and recording of the information
contained therein in the Register pursuant to Section 9.07(e), from and after
the effective date of such Assignment and Acceptance, the Agent shall make all
payments hereunder and under the Notes in respect of the interest assigned
thereby to the Lender Party assignee thereunder, and the parties to such
Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) If the Agent receives funds for application to the Obligations
under the Loan Documents under circumstances for which the Loan Documents do not
specify the Advances or the Facility to which, or the manner in which, such
funds are to be applied, the Agent may, but shall not be obligated to, elect to
distribute such funds to each Lender Party ratably in accordance with such
Lender Party's proportionate share of the principal amount of all outstanding
Advances and the Available Amount of all Letters of Credit then outstanding, in
repayment or prepayment of such of the outstanding Advances or other Obligations
owed to such Lender Party, and for application to such principal installments,
as the Agent shall direct.
(c) The Borrower hereby authorizes each Lender Party, if and to the
extent payment owed to such Lender Party is not made when due hereunder or, in
the case of a Lender, under the Note held by such Lender, to charge from time to
time against any or all of the Borrower's accounts with such Lender Party any
amount so due.
<PAGE>
42
(d) All computations of interest, fees and Letter of Credit
commissions shall be made by the Agent on the basis of a year of 360 days (other
than computations of interest on Base Rate Advances, which shall be made on the
basis of a year of 365 days), in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest, fees or commissions are payable. Each determination by the
Agent of an interest rate, fee or commission hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(e) Whenever any payment hereunder or under the Notes 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, and such extension of time shall in such case be
included in the computation of payment of interest or commitment fee, as the
case may be; provided, however, that if such extension would cause payment of
-------- -------
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(f) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to any Lender Party hereunder that
the Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each such
Lender Party on such due date an amount equal to the amount then due such Lender
Party. If and to the extent that the Borrower shall not have so made such
payment in full to the Agent, each such Lender Party shall repay to the Agent
forthwith on demand such amount distributed to such Lender Party together with
interest thereon, for each day from the date such amount is distributed to such
Lender Party until the date such Lender Party repays such amount to the Agent,
at the Federal Funds Rate.
SECTION 2.12. Taxes. (a) Any and all payments by the Borrower
-----
hereunder or under the Notes shall be made, in accordance with Section 2.11,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender Party and the Agent,
---------
taxes that are imposed on its overall net income by the United States and taxes
that are imposed on its overall net income (and franchise taxes in lieu thereof)
by the state or foreign jurisdiction under the laws of which such Lender Party
or the Agent (as the case may be) is organized or any political subdivision
thereof and, in the case of each Lender Party, taxes that are imposed on its
overall net income (and franchise taxes in lieu thereof) by the state or foreign
jurisdiction of such Lender Party's Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
-----
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Note to any Lender Party or the Agent,
(i) the sum payable by the Borrower shall be increased as may be necessary so
that after the Borrower and the Agent shall have made all required deductions
(including deductions applicable to additional sums payable under this Section
2.12) such Lender Party or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make all such deductions and (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other governmental
authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Notes
<PAGE>
43
or from the execution, delivery or registration of, performance under, or
otherwise with respect to, this Agreement or the Notes (hereinafter referred to
as "Other Taxes").
-----------
(c) The Borrower shall indemnify each Lender Party and the Agent for
and hold each of them harmless against the full amount of Taxes and Other Taxes,
and for the full amount of taxes of any kind imposed by any jurisdiction on
amounts payable under this Section 2.12, paid by such Lender Party or the Agent
(as the case may be) and any liability (including penalties, additions to tax,
interest and expenses) arising therefrom or with respect thereto. This
indemnification shall be made within 30 days from the date such Lender Party or
the Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower shall furnish to the Agent, at its address referred to in Section 9.02,
the original or a certified copy of a receipt evidencing such payment. In the
case of any payment hereunder or under the Notes by or on behalf of the Borrower
through an account or branch outside the United States or on behalf of the
Borrower by a payor that is not a United States person, if the Borrower
determines that no Taxes are payable in respect thereof, the Borrower shall
furnish, or shall cause such payor to furnish, to the Agent, at such address, an
opinion of counsel acceptable to the Agent stating that such payment is exempt
from Taxes. For purposes of this subsection (d) and subsection (e) of this
Section 2.12, the terms "United States" and "United States person" shall have
the meanings specified in Section 7701 of the Internal Revenue Code.
(e) Each Lender Party organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of this Agreement in the case of each Initial Lender or Initial Issuing
Bank, as the case may be, and on the date of the Assignment and Acceptance
pursuant to which it becomes a Lender Party in the case of each other Lender
Party, and from time to time thereafter if requested in writing by the Borrower
or the Agent (but only so long thereafter as such Lender Party remains lawfully
able to do so), provide the Agent and the Borrower with two (2) duly completed
copies of Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Lender Party is exempt from or is entitled to a reduced rate of United States
withholding tax on payments under this Agreement or the Notes. To the extent
that any such form becomes obsolete with respect to any Lender Party, such
Lender Party shall, upon the reasonable written request of the Borrower to such
Lender Party and the Agent (but only if such Lender Party is lawfully able to do
so) provide two (2) copies of either an updated or successor form to the
Borrower and the Agent. If the forms provided by a Lender Party at the time
such Lender Party first becomes a party to this Agreement indicate a United
States interest withholding tax rate in excess of zero, withholding tax at such
rate shall be considered excluded from Taxes unless and until such Lender Party
provides the appropriate forms certifying that a lesser rate applies, whereupon
withholding tax at such lesser rate only shall be considered excluded from Taxes
for periods governed by such forms; provided, however, that, if at the date of
-------- -------
the Assignment and Acceptance pursuant to which a Lender Party becomes a party
to this Agreement, the Lender Party assignor was entitled to payments under
subsection (a) of this Section 2.12 in respect of United States withholding tax
with respect to interest paid at such date, then, to such extent, the term
"Taxes" shall include (in addition to withholding taxes that may be imposed in
the future or other amounts otherwise includable in Taxes) United States
withholding tax, if any, applicable with respect to the Lender Party assignee on
such date. If any form or document referred to in this subsection (e) requires
the disclosure of information, other than information necessary to compute the
tax payable and information required on the date hereof by Internal Revenue
Service form 1001 or 4224, that the Lender Party reasonably considers to be
confidential, the Lender Party shall give
<PAGE>
44
notice thereof to the Borrower and shall not be obligated to include in such
form or document such confidential information.
(f) For any period with respect to which a Lender Party has failed to
provide the Borrower with the appropriate form described in subsection (e) of
this Section 2.12 (other than if the Borrower has failed to timely request with
reasonable notice any appropriate renewal, successor or any other form or if
such form otherwise is not required under subsection (e) of this Section 2.12),
such Lender Party shall not be entitled to indemnification under subsection (a)
or (c) of this Section 2.12 with respect to Taxes imposed by the United States;
provided, however, that should a Lender Party become subject to Taxes because of
- - -------- -------
its failure to deliver a form required hereunder, the Borrower shall take such
steps as such Lender Party shall reasonably request to assist such Lender Party
to recover such Taxes.
(g) If the Agent or any Lender Party, in its sole opinion, determines
that it has finally and irrevocably received or been granted a refund in respect
of any Taxes or Other Taxes as to which indemnification has been paid by the
Borrower pursuant to subsection (a) or (c) of this Section 2.12, it shall
promptly remit such refund to the Borrower, net of all out-of-pocket expenses of
the Agent or such Lender Party; provided, however, that the Borrower, upon the
-------- -------
request of the Agent or such Lender Party, agrees promptly to return such refund
to such party in the event such party is required to repay such refund to the
relevant taxing authority. The Agent or such Lender Party shall provide the
Borrower with a copy of any notice or assessment from the relevant taxing
authority (deleting any confidential information contained therein) requiring
payment of such refund. At the request and expense of the Borrower, the Agent
or any Lender Party, as the case may be, shall use commercially reasonably
efforts to seek a refund of any Taxes or Other Taxes as to which indemnification
has been paid by the Borrower pursuant to subsection (a) or (c) of this Section
2.12. Nothing contained herein shall impose an obligation on the Agent or any
Lender Party to disclose to any party any information regarding tax affairs and
computations.
(h) Any Lender Party claiming any additional amounts payable pursuant
to this Section 2.12 agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Eurodollar Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender Party, be otherwise disadvantageous to such Lender Party.
SECTION 2.13. Sharing of Payments, Etc. If any Lender Party shall
------------------------
obtain at any time any payment (whether voluntary, involuntary, through the
exercise of any right of setoff, or otherwise) (a) on account of Obligations due
and payable to such Lender Party hereunder or under the Notes at such time in
excess of its ratable share (according to the proportion of (i) the amount of
such Obligations due and payable to such Lender Party at such time to (ii) the
aggregate amount of the Obligations due and payable to all Lender Parties
hereunder and under the Notes at such time) of payments on account of the
Obligations due and payable to all Lender Parties hereunder and under the Notes
at such time obtained by all the Lender Parties at such time or (b) on account
of Obligations owing (but not due and payable) to such Lender Party hereunder or
under the Notes at such time in excess of its ratable share (according to the
proportion of (i) the amount of such Obligations owing to such Lender Party at
such time to (ii) the aggregate amount of the Obligations owing (but not due and
payable) to all Lender Parties hereunder and under the Notes at such time) of
payments on account of the Obligations owing (but not due and payable) to all
Lender Parties hereunder and under the Notes at such time obtained by all of the
Lender Parties at such time, such Lender Party shall forthwith purchase from the
<PAGE>
45
other Lender Parties such interests or participating interests in the
Obligations due and payable or owing to them, as the case may be, as shall be
necessary to cause such purchasing Lender Party to share the excess payment
ratably with each of them; provided, however, that if all or any portion of such
-------- -------
excess payment is thereafter recovered from such purchasing Lender Party, such
purchase from each other Lender Party shall be rescinded and such other Lender
Party shall repay to the purchasing Lender Party the purchase price to the
extent of such Lender Party's ratable share (according to the proportion of (i)
the purchase price paid to such Lender Party to (ii) the aggregate purchase
price paid to all Lender Parties) of such recovery together with an amount equal
to such Lender Party's ratable share (according to the proportion of (i) the
amount of such other Lender Party's required repayment to (ii) the total amount
so recovered from the purchasing Lender Party) of any interest or other amount
paid or payable by the purchasing Lender Party in respect of the total amount so
recovered. The Borrower agrees that any Lender Party so purchasing an interest
or participating interest from another Lender Party pursuant to this Section
2.13 may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of setoff) with respect to such interest or
participating interest as fully as if such Lender Party were the direct creditor
of the Borrower in the amount of such interest or participating interest.
SECTION 2.14. Use of Proceeds. The proceeds of the Advances and the
---------------
issuances of Letters of Credit shall be available (and the Borrower agrees that
it shall use such proceeds and Letters of Credit) solely as follows: (a) from
the Working Capital Advances to refinance certain existing indebtedness of the
Borrower, to pay transaction fees and expenses in connection therewith and the
other transactions contemplated hereby, and to provide working capital for the
Borrower and its Subsidiaries and for other general corporate purposes permitted
under this Agreement; and (b) from the Acquisition Advances on the terms
provided by Section 5.02(f)(xi), 5.02(f)(xvi) or 5.02(f)(xvii), as applicable.
SECTION 2.15. Evidence of Debt. (a) Each Lender shall maintain in
----------------
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Advance owing to
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder. The Borrower
agrees that, upon notice by any Lender Party to the Borrower (with a copy of
such notice to the Agent) to the effect that a Note is required or appropriate
in order for such Lender to evidence (whether for purposes of pledge,
enforcement or otherwise) the Advances owing to, or to be made by, such Lender
Party, the Borrower shall promptly execute and deliver to such Lender an
Acquisition Note and a Working Capital Note, as applicable, payable to the order
of such Lender Party in a principal amount equal to the Acquisition Commitment
or Revolving Credit Commitment, respectively, of such Lender Party. All
references to Notes in the Loan Documents shall mean Notes, if any, to the
extent issued hereunder.
(b) The Register maintained by the Agent pursuant to Section 9.07(d)
shall include a control account, and a subsidiary account for each Lender, in
which accounts (taken together) shall be recorded (i) the date and amount of
each Borrowing made hereunder, the Type of Advances comprising such Borrowing
and, if appropriate, the Interest Period applicable thereto, (ii) the terms of
each Assignment and Acceptance delivered to and accepted by it, (iii) the amount
of any principal or interest due and payable or to become due and payable from
the Borrower to each Lender Party hereunder, and (iv) the amount of any sum
received by the Agent from the Borrower hereunder and each Lender Party's share
thereof.
<PAGE>
46
(c) Entries made in good faith by the Agent in the Register pursuant
to subsection (b) of this Section 2.15, and by each Lender Party in its account
or accounts pursuant to subsection (a) of this Section 2.15, shall be prima
-----
facie evidence of the amount of principal and interest due and payable or to
- - -----
become due and payable from the Borrower to, in the case of the Register, each
Lender Party and, in the case of such account or accounts, such Lender Party,
under this Agreement, absent manifest error; provided, however, that the failure
-------- -------
of the Agent or such Lender Party to make an entry, or any finding that an entry
is incorrect, in the Register or such account or accounts shall not limit or
otherwise affect the obligations of the Borrower under this Agreement.
(d) References herein to the Notes shall mean and be references to
the Working Capital Notes and the Acquisition Notes, unless otherwise
specifically indicated, in each case to the extent issued hereunder.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Initial Extension of Credit.
---------------------------------------------------
The obligation of each Lender to make an Advance on the occasion of the Initial
Extension of Credit hereunder is subject to the satisfaction of the following
conditions precedent before or concurrently with the Initial Extension of
Credit:
(a) The Lender Parties shall be reasonably satisfied (i) that the
amount of committed equity and debt financing shall be sufficient to meet
the financing requirements of the Refinancing and the other transactions
contemplated thereby, (ii) with the terms and conditions of the Related
Documents and (iii) that the assets and earnings of the Loan Parties are
sufficient to support the Obligations of the Loan Parties under the Loan
Documents and the timely amortization of all Debt and other Obligations of
the Loan Parties.
(b) The Lender Parties shall be reasonably satisfied with the
corporate and legal structure and capitalization of the Loan Parties, both
before and after giving effect to the Refinancing, including, without
limitation, the terms and conditions of the charter, bylaws and each class
of capital stock of each of the Loan Parties and of each agreement or
instrument relating to such structure or capitalization.
(c) The Related Documents to be entered into in connection with the
Refinancing shall have been executed and delivered and shall be in full
force and effect, and before giving effect to the Refinancing and the other
transactions contemplated thereby, there shall have occurred no Material
Adverse Change since January 31, 1998.
(d) The Borrower shall have received at least $100,000,000 in gross
cash proceeds from the sale of the Senior Subordinated Notes and the Parent
Guarantor shall have received at least $25,000,000 in gross cash proceeds
from the sale of the Discount Notes.
<PAGE>
47
(e) The Series A Preferred Stock has been redeemed for an aggregate
redemption price not in excess of $17,800,000.
(f) There shall exist no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of their Subsidiaries pending or
threatened before any court, governmental agency or arbitrator that (i)
could be reasonably likely to have a Material Adverse Effect or (ii)
purports to affect the legality, validity or enforceability of any
Transaction Document or the consummation of the Refinancing or the
transactions contemplated hereby or thereby.
(g) All material governmental and third party consents and approvals
necessary in connection with the Refinancing and the other transactions
contemplated by the Transaction Documents shall have been obtained (without
the imposition of any conditions that are not reasonably acceptable to the
Lender Parties) and shall remain in effect, all applicable waiting periods
in connection with the Refinancing and the other transactions contemplated
by the Transaction Documents shall have expired without any action having
been taken by any competent authority, and no law or regulation shall be
applicable in the reasonable judgment of the Lender Parties, in each case
that restrains, prevents or imposes materially adverse conditions upon the
Refinancing and the other transactions contemplated by the Transaction
Documents or the rights of the Loan Parties or their Subsidiaries freely to
transfer or otherwise dispose of, or to create any Lien on, any properties
now owned or hereafter acquired by any of them.
(h) [intentionally omitted]
(i) Each of the senior secured credit facilities and the subordinated
notes referred to in Schedule 4.01(ff) and the other Existing Debt, other
than the Debt identified on Schedule 3.01(i) (the "Surviving Debt"), has
--------------
been prepaid, redeemed or defeased in full or otherwise satisfied and
extinguished and all such Surviving Debt shall be on terms and conditions
satisfactory to the Lender Parties.
(j) All accrued fees and expenses of the Agent and the Lender Parties
(including, without limitation, the accrued fees and expenses of counsel to
the Agent and of local counsel to the Lender Parties) shall have been paid.
(k) The Agent shall have received on or before the date of the
Initial Extension of Credit the following, each dated such day (unless
otherwise specified), in form and substance reasonably satisfactory to the
Agent (unless otherwise specified) and, except for the Notes, in sufficient
copies for each Lender Party:
(i) The Notes payable to the order of the Lenders to the
extent required by Section 2.15.
(ii) Certified copies of the resolutions of the Board of
Directors of the Borrower and each other Loan Party approving the
Refinancing, this Agreement, the Notes, each other Transaction
Document to which it is or is to be a party, and of all documents
evidencing other
<PAGE>
48
necessary corporate action and governmental approvals, if any, with respect
to the Refinancing, this Agreement, the Notes, each other Transaction
Document.
(iii) A copy of a certificate of the Secretary of State of the
jurisdiction of incorporation of each Loan Party, dated reasonably near the
date of the Initial Extension of Credit, in each case listing the charter
of such Person and each amendment thereto on file in his office and
certifying that (A) such charter is a true and correct copy thereof, (B)
such amendments are the only amendments to such charter on file in his
office, (C) such Person has paid all franchise taxes to the date of such
certificate and (D) such Person is duly incorporated and in good standing
under the laws of the jurisdiction of its incorporation.
(iv) A copy of a certificate of the Secretary of State of the
States of Maine, Pennsylvania and New York, as requested by the Agent,
dated reasonably near the date of the Initial Extension of Credit, stating
that the Borrower and each other Loan Party is duly qualified and in good
standing as a foreign corporation in such States and has filed all annual
reports required to be filed to the date of such certificate.
(v) A certificate of each of the Borrower, the Parent
Guarantor and each other Loan Party, signed on behalf of such Person by its
President, any Executive Vice President or any Vice President and its
Secretary, dated the date of the Initial Extension of Credit (the
statements made in which certificate shall be true on and as of the date of
the Initial Extension of Credit), certifying as to (A) the absence of any
amendments to the charter of such Person since the date of the Secretary of
State's certificate referred to in Section 3.01(k)(iii), (B) a true and
correct copy of the bylaws of such Person as in effect on the date on which
the resolutions referred to in Section 3.01(k)(ii) were adopted and on the
date of the Initial Extension of Credit, (C) the due incorporation and good
standing or valid existence of such Person as a corporation organized under
the laws of the jurisdiction of its incorporation and the absence of any
proceeding for the dissolution or liquidation of such Person, (D) the
completeness and accuracy of the representations and warranties contained
in the Loan Documents as though made on and as of the date of the Initial
Extension of Credit and (E) the absence of any event occurring and
continuing, or resulting from the Initial Extension of Credit, that
constitutes a Default.
(vi) A certificate of the Secretary of each of the Borrower,
the Parent Guarantor and each other Loan Party certifying the names and
true signatures of the officers of such Persons authorized to sign this
Agreement, the Notes, each other Transaction Document to which it is or is
to be a party and the other documents to be delivered hereunder and
thereunder.
(vii) A security agreement in substantially the form of Exhibit
D hereto (together with each other security agreement and security
agreement supplement delivered pursuant to Section 5.01(m), in each case as
amended, amended and restated, supplemented or otherwise modified from time
to time in accordance with its terms, and as permitted by this Agreement,
the "Security Agreement"), duly executed by each Loan Party, together with:
------------------
<PAGE>
49
(A) certificates representing the Pledged Shares
accompanied by undated stock powers executed in blank, and
instruments evidencing the Pledged Indebtedness indorsed in
blank,
(B) executed copies of proper financing statements, to be
filed under the Uniform Commercial Code of all jurisdictions that
the Agent may deem necessary or desirable in order to perfect and
protect the Liens created under the Collateral Documents,
covering the Collateral described in the Security Agreement,
(C) evidence of the completion of all other recordings
and filings of or with respect to the Security Agreement that the
Agent may deem reasonably necessary or desirable in order to
perfect and protect the Liens created thereby,
(D) evidence of the insurance required by the terms of
the Security Agreement,
(E) copies of the Assigned Agreements referred to in the
Security Agreement, together with a consent to such assignment,
in substantially the form of Exhibit C to the Security Agreement,
duly executed by each party to such Assigned Agreements other
than the Loan Parties,
(F) executed termination statements (Form UCC-3 or a
comparable form), in proper form to be duly filed on the date of
the Initial Extension of Credit under the Uniform Commercial Code
of all jurisdictions that the Agent may deem reasonably necessary
or desirable in order to terminate or amend existing Liens on the
Collateral described in the Security Agreement, and
(G) evidence that all other action that the Agent may
deem reasonably necessary or desirable in order to perfect and
protect the first priority Liens and security interests created
under the Security Agreement have been taken, including, without
limitation, delivery of Blocked Account Letters in form and
substance satisfactory to the Agent.
(viii) Mortgages in substantially the form of Exhibit E hereto
and covering the properties listed on Schedule 4.01(gg) (together with each
other mortgage delivered pursuant to Section 5.01(m), in each case as
amended, amended and restated, supplemented or otherwise modified from time
to time in accordance with their terms, and as permitted by this Agreement,
the "Mortgages"), duly executed by the appropriate Loan Party, together
----------
with such title insurance policies, surveys, insurance certificates and
other documents as the Agent may reasonably request.
(ix) A true and complete copy of the lease for the Lewiston,
Maine facility ("Lewiston Lease") and such other leases as the Agent may
--------------
reasonably request and any and all ancillary documents pertaining thereto
(including, but not limited to, all amendments,
<PAGE>
50
consents for alterations and documents recording variations and evidence of
commencement dates and expiration dates).
(x) A true and complete list of any and all retail store
leases ("Retail Leases") under which any Loan Party or any of its
-------------
Subsidiaries is the lessee in substantially the same form as shown on
Schedule 4.01(hh) hereto.
(xi) The Subordinated Debt Documents relating to the Senior
Subordinated Notes, including, without limitation, the Senior Subordinated
Note Indenture and the Discount Note Documents relating to the Discount
Notes, including, without limitation, the Discount Note Indenture.
(xii) A guaranty in substantially the form of Exhibit I hereto
(together with each other guaranty delivered pursuant to Section 5.01(m),
in each case as amended, amended and restated, supplemented or otherwise
modified from time to time in accordance with its terms, and as permitted
by this Agreement, the "Subsidiary Guaranty"), duly executed by each
-------------------
Subsidiary Guarantor.
(xiii) Certified copies of each of the Related Documents, duly
executed by each of the parties thereto and in form and substance
satisfactory to the Lender Parties, together with all agreements,
instruments and other documents delivered in connection therewith as the
Agent shall request.
(xiv) Such financial, business and other information regarding
the Parent Guarantor and its Subsidiaries as the Lender Parties shall have
reasonably requested, including, without limitation, information as to
possible contingent liabilities, tax matters, environmental matters,
obligations under Plans, Multiemployer Plans and Welfare Plans, collective
bargaining agreements and other arrangements with employees, audited annual
financial statements dated January 29, 1996, January 28, 1997 and January
27, 1998, interim financial statements dated March 7, 1998, the
Consolidated pro forma balance sheet of the Parent Guarantor and its
Subsidiaries and the Borrower and its Subsidiaries, in each case, taken as
a whole, after giving effect to the Refinancing and the other transactions
contemplated hereby and by the other Related Documents, dated as of March
7, 1998 and forecasts prepared by management of the Parent Guarantor in
form and substance reasonably satisfactory to the Lender Parties, of
balance sheets, income statements and cash flow statements on a monthly
basis for the first year following the date of the Initial Extension of
Credit and on an annual basis for each year thereafter until the scheduled
Termination Date.
(xv) Certificates and letters, in substantially the form of
Exhibits M-1, M-2 and N, respectively, attesting to the Solvency of the
Parent Guarantor and its Subsidiaries and the Borrower and its
Subsidiaries, in each case taken as a whole, after giving effect to the
Refinancing and the other transactions contemplated hereby and by the
Related Documents, from the chief financial officer of the Parent
Guarantor.
(xvi) [intentionally omitted]
<PAGE>
51
(xvii) A letter, in form and substance satisfactory to the Agent,
from the Parent Guarantor to Ernst & Young, LLP, its independent certified
public accountants, advising such accountants that, upon notice to the
Borrower from the Agent, the Agent and the Lender Parties have been
authorized to exercise all rights of the Parent Guarantor to require such
accountants to disclose to the Lenders any and all financial statements and
any other information of any kind that such accountants may have with
respect to the Parent Guarantor and its Subsidiaries and directing such
accountants to comply with any reasonable request of the Agent or any
Lender Party for such information.
(xviii) Evidence of insurance naming the Agent as additional
insured or loss payee, as the case may be, with such responsible and
reputable insurance companies or associations, and in such amounts and
covering such risks, as is satisfactory to the Lender Parties, including,
without limitation, business interruption insurance and product liability
insurance.
(xix) An intellectual property security agreement in
substantially the form of Exhibit G hereto (together with each other
intellectual property security agreement and security agreement supplement
delivered pursuant to Section 5.01(m), in each case as amended, amended and
restated, supplemented or otherwise modified from time to time in
accordance with its terms, and as permitted by this Agreement, the
"Intellectual Property Security Agreement"), duly executed by each Loan
----------------------------------------
Party, together with evidence that all action that the Agent may deem
necessary or desirable in order to perfect and protect the first priority
Liens and security interests created under the Intellectual Property
Security Agreement have been taken.
(xx) A Canadian security agreement in substantially the form of
Exhibit H hereto (as amended, amended and restated, supplemented or
otherwise modified from time to time in accordance with its terms, and as
permitted by this Agreement, the "Canadian Security Agreement"), duly
---------------------------
executed by IA Canada, together with evidence that all action that the
Agent may deem necessary or desirable in order to perfect and protect the
first priority liens and security interests created under the Canadian
Security Agreement has been taken.
(xxi) Landlord consent for the Lewiston, Maine warehouse
facilities in form and substance satisfactory to the Agent.
(xxii) The satisfaction and termination of the Existing Credit
Facilities.
(xxiii) Blocked Account Letters (as defined in the Security
Agreement) in form and substance satisfactory to the Agent entered into by
the Borrower and each other Loan Party covering all existing deposit
accounts as of the date of the Initial Extension of Credit (other than any
deposit account with a deposit balance at all times less than $250,000), as
listed on Schedule 3.01(k)(xxiii).
(xxiv) A favorable opinion of Ropes & Gray, special counsel for
the Loan Parties, in substantially the form of Exhibit K hereto.
<PAGE>
52
(xxv) Favorable opinions of local counsel to the Loan Parties,
in substantially the form of Exhibit L hereto.
(xxvi) An intercompany Subordination Agreement in substantially
the form of Exhibit F hereto (as amended, amended and restated,
supplemented or otherwise modified from time to time in accordance
with its terms, and as permitted by this Agreement, the "Intercompany
------------
Subordination Agreement"), duly executed by the Borrower.
-----------------------
(xxvii) A Borrowing Base Certificate certifying as to Inventory
and Receivable balances for the period ended April 4, 1998.
(xxviii) A Notice of Borrowing relating to the Initial Extension
of Credit.
SECTION 3.02. Conditions Precedent to Each Borrowing, Swing Line
--------------------------------------------------
Advance and Issuance of Letters of Credit. The obligation of each Appropriate
- - -----------------------------------------
Lender to make an Advance (other than a Letter of Credit Advance made by an
Issuing Bank or a Working Capital Lender pursuant to Section 2.03(c) and a Swing
Line Advance made by a Working Capital Lender pursuant to Section 2.02(b)) on
the occasion of each Borrowing (including the Initial Extension of Credit), and
the obligation of each Issuing Bank to issue a Letter of Credit (including the
initial issuance) of a Letter of Credit and the obligation of the Swing Line
Bank to make Swing Line Advances, shall be subject to the further conditions
precedent that on the date of such Borrowing (including a Swing Line Borrowing
made by the Swing Line Bank) issuance or Swing Line Borrowing (a) the following
statements shall be true (and each of the giving of the applicable Notice of
Borrowing (including a Swing Line Borrowing made by the Swing Line Bank), Notice
of Issuance and the acceptance by the Borrower of the proceeds of such Borrowing
or of such Letter of Credit shall constitute a representation and warranty by
the Borrower that both on the date of such notice and on the date of such
Borrowing or issuance such statements are true and correct):
(i) the representations and warranties contained in each Loan
Document are true and correct on and as of such date, both before and after
giving effect to such Borrowing or issuance and to the application of the
proceeds therefrom, as though made on and as of such date other than any
such representations or warranties that, by their terms, refer to a
specific date other than the date of such Borrowing or issuance, in which
case, as of such specific date;
(ii) no event has occurred and is continuing, or would result from
such Borrowing or issuance or from the application of the proceeds
therefrom, that constitutes a Default;
(iii) for each Acquisition Borrowing, such Borrowing shall be in
compliance with the terms set forth in Section 5.02(f)(xi), 5.02(f)(xvi) or
5.02(f)(xvii), as applicable, and, if requested by the Agent or the
Required Lenders, the Borrower will provide the Lender Parties with
certificates and letters of the type referred to in Section 3.01(k)(xv)
after giving effect to the application of proceeds from such Borrowing; and
(iv) for each Working Capital Advance or Swing Line Advance made by
the Swing Line Bank or issuance of any Letter of Credit, the sum of the
Loan Values of the Eligible Collateral (as determined based on the most
recent Borrowing Base Certificate delivered to the Lender Parties
<PAGE>
53
hereunder) exceeds the aggregate principal amount of Working Capital
Advances plus Swing Line Advances plus Letter of Credit Advances to be
---- ----
outstanding plus the aggregate Available Amount of all Letters of Credit
----
then outstanding after giving effect to such Advance or issuance,
respectively;
and (b) the Agent shall have received such other approvals, opinions or
documents as any Appropriate Lender Party through the Agent may reasonably
request.
SECTION 3.03. Determinations Under Section 3.01. For purposes of
---------------------------------
determining compliance with the conditions specified in Section 3.01, each
Lender Party shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lender Parties unless an
officer of the Agent responsible for the transactions contemplated by the Loan
Documents shall have received notice from such Lender Party prior to the Initial
Extension of Credit specifying such Lender Party's objection thereto, and, if
the Initial Extension of Credit consists of a Borrowing, such Lender Party shall
not have made available to the Agent such Lender Party's ratable portion of such
Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower and the
------------------------------------------------------
Parent Guarantor. The Borrower and the Parent Guarantor each represents and
- - ----------------
warrants as follows:
(a) Each Loan Party and each of its Subsidiaries (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which it
owns or leases property or in which the conduct of its business requires it
to so qualify or be licensed, except where the failure to so qualify or be
licensed could not be reasonably likely to have a Material Adverse Effect
and (iii) has all requisite corporate power and authority (including,
without limitation, all governmental licenses, permits and other approvals)
to own or lease and operate its properties and to carry on its business as
now conducted and as proposed to be conducted. All of the outstanding
common stock of the Parent Guarantor has been validly issued, is fully paid
and non-assessable and is owned by the Investor Group in the amounts and
types specified in Part I of Schedule 4.01(a) hereto free and clear of all
Liens. All of the outstanding preferred stock of the Parent Guarantor is
owned by the Investor Group in the amounts and types specified in Part I of
Schedule 4.01(a) hereto free and clear of all Liens. All of the
outstanding capital stock of the Borrower has been validly issued, is fully
paid and non-assessable and is owned by the Parent Guarantor in the amounts
and types specified in Part II of Schedule 4.01(a) hereto free and clear of
all Liens.
(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate
list of all Subsidiaries of each Loan Party, showing as of the date of the
Initial Extension of Credit (as to each such Subsidiary) the jurisdiction
of its incorporation, the number of shares of each class of capital stock
authorized, and the number outstanding, on the date of the Initial
Extension of Credit and the percentage of the outstanding shares of each
such class owned (directly or indirectly) by such Loan
<PAGE>
54
Party and the number of shares covered by all outstanding options,
warrants, rights of conversion or purchase and similar rights as of the
date of the Initial Extension of Credit. All of the outstanding capital
stock of all of each Loan Party's Subsidiaries has been validly issued, is
fully paid and non-assessable and is owned by such Loan Party or one or
more of its Subsidiaries free and clear of all Liens, except those created
under the Loan Documents. Each such Subsidiary (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which it
owns or leases property or in which the conduct of its business requires it
to so qualify or be licensed except where the failure to so qualify or be
licensed could not be reasonably likely to have a Material Adverse Effect
and (iii) has all requisite corporate power and authority (including,
without limitation, all governmental licenses, permits and other approvals)
to own or lease and operate its properties and to carry on its business as
now conducted and as proposed to be conducted.
(c) The execution, delivery and performance by each Loan Party of
each Transaction Document to which it is or is to be a party, and the
consummation of the Refinancing and the other transactions contemplated by
the Transaction Documents, are within such Loan Party's corporate powers,
have been duly authorized by all necessary corporate action, and do not (i)
contravene such Loan Party's charter or bylaws, (ii) violate any law, rule,
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination or award, (iii) conflict with or result
in the breach of, or constitute a default under, any contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument
binding on or affecting any Loan Party, any of its Subsidiaries or any of
their properties or (iv) except for the Liens created under the Loan
Documents, result in or require the creation or imposition of any Lien upon
or with respect to any of the properties of any Loan Party or any of its
Subsidiaries. No Loan Party or any of its Subsidiaries is in violation of
any such law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or in breach of any such contract, loan agreement,
indenture, mortgage, deed of trust, lease or other instrument, the
violation or breach of which could be reasonably likely to have a Material
Adverse Effect.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other
third party is required for (i) the due execution, delivery, recordation,
filing or performance by any Loan Party of any Transaction Document to
which it is or is to be a party, or for the consummation of the Refinancing
or the other transactions contemplated by the Transaction Documents, (ii)
the grant by any Loan Party of the Liens granted by it pursuant to the
Collateral Documents, (iii) the perfection or maintenance of the Liens
created under the Collateral Documents (including the first priority nature
thereof) other than in connection with the proper filing and recordation of
the Collateral Documents or (iv) the exercise by the Agent or any Lender
Party of its rights under the Loan Documents or the remedies in respect of
the Collateral pursuant to the Collateral Documents, except for the
authorizations, approvals, actions, notices and filings listed on Schedule
4.01(d) hereto, all of which have been duly obtained, taken, given or made
and are in full force and effect. All applicable waiting periods in
connection with the Refinancing and the other transactions contemplated by
the Transaction Documents have expired without any action having been taken
by any competent authority restraining, preventing or imposing materially
adverse conditions upon the Refinancing or the rights of the Loan Parties
or their Subsidiaries freely to transfer
<PAGE>
55
or otherwise dispose of, or to create any Lien on, any properties now owned
or hereafter acquired by any of them.
(e) This Agreement has been, and each other Transaction Document when
executed and delivered will have been, duly executed and delivered by each
Loan Party party thereto. This Agreement is, and each other Transaction
Document when delivered will be, the legal, valid and binding obligation of
each Loan Party party thereto, enforceable against such Loan Party in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating
to or limiting creditors' rights or by equitable principles generally.
(f) The Consolidated and consolidating balance sheets of the Parent
Guarantor and its Subsidiaries as at January 30, 1998 and the related
Consolidated and consolidating statements of income and a Consolidated
statement of cash flow of the Parent Guarantor and its Subsidiaries for the
fiscal year then ended, accompanied, as to such Consolidated financial
statements, by an unqualified opinion of Ernst & Young LLP, independent
public accountants, and the Consolidated and consolidating balance sheets
of the Parent Guarantor and its Subsidiaries as at March 7, 1998 and the
related Consolidated and consolidating statements of income and a
Consolidated statement of cash flow of the Parent Guarantor and its
Subsidiaries for the one month then ended, as to all such financial
statements, duly certified by the chief financial officer of the Parent
Guarantor, copies of which have been furnished to each Lender Party, fairly
present, subject, in the case of said balance sheet as at March 7, 1998,
and said statements of income and cash flow for the one month then ended,
to year-end audit adjustments, the Consolidated financial condition of the
Parent Guarantor and its Subsidiaries as at such dates and the results of
operations of the Parent Guarantor and its Subsidiaries for the periods
ended on such dates, all in accordance with generally accepted accounting
principles applied on a consistent basis. Since January 30, 1998 there has
been no Material Adverse Change.
(g) The Consolidated forecasted balance sheets, statements of income
and statements of cash flow of the Parent Guarantor and its Subsidiaries
delivered to the Lender Parties pursuant to Section 3.01(k)(xiv) or 5.03
were prepared in good faith on the basis of the assumptions stated therein,
which assumptions were fair in light of conditions existing at the time of
delivery of such forecasts and at the time of the Initial Extension of
Credit, and represented the Parent Guarantor's best estimate of its future
financial performance.
(h) Neither the Information Memorandum nor any other information,
exhibit or report (excluding any financial projections), taken as a whole,
furnished by or on behalf of any Loan Party or any of its Subsidiaries to
the Agent or any Lender Party in connection with the negotiation of the
Loan Documents or pursuant to the terms of the Loan Documents contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements made therein not misleading in light of
the circumstances under which such information was provided and on the date
of the Initial Extension of Credit.
(i) There is no action, suit, investigation, litigation or proceeding
affecting any Loan Party or any of its Subsidiaries, including any
Environmental Action, pending or, to the knowledge of any Loan Party,
threatened before any court, governmental agency or arbitrator that (i)
could be
<PAGE>
56
reasonably likely to have a Material Adverse Effect or (ii) purports to
affect the legality, validity or enforceability of the Refinancing or any
Transaction Document or the consummation of the transactions contemplated
by the Transaction Documents.
(j) No proceeds of any Advance or drawings under any Letter of Credit
will be used to acquire any equity security of a class that is registered
pursuant to Section 12 of the Securities Exchange Act of 1934.
(k) No Loan Party is engaged in the business of extending credit for
the purpose of purchasing or carrying Margin Stock, and no proceeds of any
Advance or drawings under any Letter of Credit will be used to purchase or
carry any Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any Margin Stock.
(l) Set forth on Schedule 4.01(l) hereto is a complete and accurate
list as of the end of the immediately preceding fiscal quarter of all
Plans, Multiemployer Plans and Welfare Plans.
(m) No ERISA Event has occurred or is reasonably expected to occur
with respect to any Plan.
(n) As of the last annual actuarial valuation date, the funded
current liability percentage, as defined in Section 302(d)(8) of ERISA, of
each Plan exceeds 90%, and there has been no material adverse change in the
funding status of any such Plan since such date.
(o) Schedule B (Actuarial Information) to the most recent annual
report (Form 5500 Series) for each Plan, copies of which have been filed
with the Internal Revenue Service and furnished to the Lender Parties, is
complete and accurate and fairly presents the funding status of such Plan,
and since the date of such Schedule B there has been no material adverse
change in such funding status.
(p) Neither any Loan Party nor any ERISA Affiliate has incurred or is
reasonably expected to incur any Withdrawal Liability to any Multiemployer
Plan.
(q) Neither any Loan Party nor any ERISA Affiliate has been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning of Title IV of
ERISA, and no such Multiemployer Plan is reasonably expected to be in
reorganization or to be terminated, within the meaning of Title IV of
ERISA.
(r) Except as set forth in the financial statements referred to in
this Section 4.01 and in Section 5.03, the Loan Parties and their
respective Subsidiaries have no material liability with respect to
"expected post retirement benefit obligations" within the meaning of
Statement of Financial Accounting Standards No. 106.
(s) To the knowledge of the Borrower, neither the business nor the
properties of any Loan Party or any of its Subsidiaries are affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or
other
<PAGE>
57
casualty (whether or not covered by insurance) that could be reasonably
likely to have a Material Adverse Effect.
(t) The operations and properties of each Loan Party and each of its
Subsidiaries comply in all material respects with all applicable
Environmental Laws and Environmental Permits, all past claims of non-
compliance with such Environmental Laws and Environmental Permits have been
resolved without ongoing obligations or costs, and no circumstances exist
that could be reasonably likely to (i) form the basis of an Environmental
Action against any Loan Party or any of its Subsidiaries or any of their
respective properties that could be reasonably likely to have a Material
Adverse Effect or (ii) cause any such property to be subject to any
material restrictions on ownership, occupancy, use or transferability under
any Environmental Law.
(u) None of the properties currently or, to the knowledge of the Loan
Parties and their Subsidiaries, formerly owned or operated by any Loan
Party or any of its Subsidiaries is listed or, to the knowledge of the
Borrower and the Parent Guarantor, proposed for listing on the NPL or on
the CERCLIS or any analogous foreign, state or local list or, to the
knowledge of the Borrower and the Parent Guarantor, is adjacent to any such
property; except as disclosed on Schedule 4.01(u) hereto, there are no and,
to the knowledge of the Borrower and the Parent Guarantor, never have been
any underground or aboveground storage tanks or any surface impoundments,
septic tanks, pits, sumps or lagoons in which Hazardous Materials are being
or have been treated, stored or disposed of on any property currently owned
or operated by any Loan Party or any of its Subsidiaries or, to the best
knowledge of the Borrower and the Parent Guarantor, on any property
formerly owned or operated by any Loan Party or any of its Subsidiaries;
there is no asbestos or asbestos-containing material on any property
currently owned or operated by any Loan Party or any of its Subsidiaries;
and Hazardous Materials have not been released, discharged or disposed of
on any property currently or, to the knowledge of the Borrower and the
Parent Guarantor, formerly owned or operated by any Loan Party or any of
its Subsidiaries in a manner reasonably likely to result in a Material
Adverse Effect.
(v) Neither any Loan Party nor any of its Subsidiaries is
undertaking, and has not completed, either individually or together with
other potentially responsible parties, any investigation or assessment or
remedial or response action relating to any actual or threatened release,
discharge or disposal of Hazardous Materials at any site, location or
operation, either voluntarily or pursuant to the order of any governmental
or regulatory authority or the requirements of any Environmental Law, and
all Hazardous Materials generated, used, treated, handled or stored at, or
transported to or from, any property currently or, to the knowledge of the
Borrower and the Parent Guarantor, formerly owned or operated by any Loan
Party or any of its Subsidiaries have been disposed of in a manner not
reasonably likely to result in material liability to any Loan Party or any
of its Subsidiaries.
(w) To the knowledge of the Loan Parties and their Subsidiaries,
neither any Loan Party nor any of its Subsidiaries is a party to any
indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction that could be
reasonably likely to have a Material Adverse Effect.
(x) The Collateral Documents create a valid and, once properly filed
or recorded, perfected first priority security interest in the Collateral
securing the payment of the Secured
<PAGE>
58
Obligations, and all filings and other actions necessary or desirable to
perfect and protect such security interest have been (or, promptly
following the closing, will be) duly taken. The Loan Parties are the legal
and beneficial owners of the Collateral free and clear of any Lien, except
for the Liens and security interests created or permitted under the Loan
Documents and Permitted Liens.
(y) Each Loan Party and each of its Subsidiaries and Affiliates has
filed, has caused to be filed or has been included in all tax returns
(federal, state, material local and foreign) required to be filed and has
paid all taxes shown thereon to be due (other than as permitted under
Section 5.01(b)), together with applicable interest and penalties.
(z) Set forth on Schedule 4.01(z) hereto is a complete and accurate
list, as of the date of the Initial Extension of Credit, of each taxable
year of each Loan Party and each of its Subsidiaries and Affiliates for
which federal income tax returns have been filed and for which the
expiration of the applicable statute of limitations for assessment or
collection has not occurred by reason of extension or otherwise (an "Open
----
Year").
----
(aa) There is no unpaid amount, as of the date of the Initial
Extension of Credit, of adjustments to the federal income tax liability of
each Loan Party and each of its Subsidiaries and Affiliates proposed by the
Internal Revenue Service with respect to Open Years. No issues have been
raised by the Internal Revenue Service in respect of Open Years that, in
the aggregate, could have a Material Adverse Effect.
(bb) There is no unpaid amount, as of the date of the Initial
Extension of Credit, of adjustments to the state, local and foreign tax
liability of any Loan Party or any of its Subsidiaries or Affiliates
proposed by any state, local and foreign taxing authorities (other than
amounts arising from adjustments to federal income tax returns, if any, or
adjustments being contested in good faith). No issues have been raised by
such taxing authorities that, in the aggregate, could have a Material
Adverse Effect.
(cc) The Parent Guarantor and each of its Subsidiaries have, as of the
date of the Initial Extension of Credit, no net operating loss
carryforwards for U.S. federal income tax purposes.
(dd) Neither any Loan Party nor any of its Subsidiaries is an
"investment company", or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended. Neither the
making of any Advances, nor the issuance of any Letters of Credit, nor the
application of the proceeds or repayment thereof by the Borrower, nor the
consummation of the other transactions contemplated hereby will violate any
provision of such Act or any rule, regulation or order of the Securities
and Exchange Commission thereunder.
(ee) Each Loan Party is, individually and together with its
Subsidiaries, Solvent.
(ff) Set forth on Schedule 4.01(ff) hereto is a complete and accurate
list of all Existing Debt (other than Surviving Debt), showing as of the
date of the Initial Extension of Credit the principal amount outstanding
thereunder, the maturity date thereof and the amortization schedule
therefor.
<PAGE>
59
(gg) Set forth on Schedule 4.01(gg) hereto is a complete and accurate
list of all real property owned by any Loan Party or any of its
Subsidiaries, showing as of the date of the Initial Extension of Credit the
street address, county or other relevant jurisdiction, state, record owner
and book and fair value thereof. Each Loan Party or such Subsidiary has
good, marketable and insurable fee simple title to such real property, free
and clear of all Liens, other than Liens created or permitted by the Loan
Documents. To the best knowledge of the Loan Parties, all of the
improvements located on the properties listed on Schedule 4.01(gg) hereto
lie entirely within the boundaries of such properties, and none of such
improvements violate any minimum set-back requirements, other dimensional
regulations or restrictions of record.
(hh) Set forth on Schedule 4.01(hh) hereto is a complete and accurate
list of all leases of real property under which any Loan Party or any of
its Subsidiaries is the lessee, showing as of the date of the Initial
Extension of Credit the street address, county or other relevant
jurisdiction, state, lessor, lessee, expiration date and annual rental cost
thereof. Each such lease is the legal, valid and binding obligation of the
lessor thereof, enforceable in accordance with its terms and neither any
Loan Party nor any of its Subsidiaries has given nor received any notice of
default or termination thereunder.
(ii) Set forth on Schedule 4.01(ii) hereto is a complete and accurate
list of all Investments held by any Loan Party or any of its Subsidiaries,
showing as of the date of the Initial Extension of Credit the amount,
obligor or issuer and maturity, if any, thereof.
(jj) Set forth on Schedule 4.01(jj) hereto is a complete and accurate
list of all patents, trademarks, trade names, service marks and copyrights,
and all applications therefor and licenses thereof, of each Loan Party and
each of its Subsidiaries, showing as of the date of the Initial Extension
of Credit the jurisdiction in which registered, the registration number,
the date of registration and the expiration date.
(kk) IAIC does not conduct any business and has no material assets
other than passive investment assets held on a basis consistent with past
practices.
ARTICLE V
COVENANTS OF THE BORROWER AND THE PARENT GUARANTOR
SECTION 5.01. Affirmative Covenants. So long as any Obligation of
---------------------
any Loan Party under or in respect of any Loan Document shall remain unpaid, any
Letter of Credit shall be outstanding, any Secured Hedge Agreement shall be in
effect or any Lender Party shall have any Commitment hereunder, the Borrower and
the Parent Guarantor shall:
(a) Compliance with Laws, Etc. Comply, and cause each of their
-------------------------
Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA and the Racketeer Influenced and Corrupt
Organizations Chapter of the Organized Crime Control Act of 1970.
<PAGE>
60
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of their
----------------
Subsidiaries to pay and discharge, before the same shall become delinquent,
(i) all taxes, assessments and governmental charges or levies imposed upon
any of them or upon any of their property and (ii) all lawful claims that,
if unpaid, might by law become a Lien upon any of their property; provided,
--------
however, that neither the Borrower nor the Parent Guarantor nor any of
-------
their respective Subsidiaries shall be required to pay or discharge any
such tax, assessment, charge or claim that is being contested in good faith
and by proper proceedings and as to which appropriate reserves are being
maintained, unless and until any Lien resulting therefrom attaches to any
of their property and becomes enforceable against their other creditors.
(c) Compliance with Environmental Laws. Comply, and cause each of
----------------------------------
their Subsidiaries and all lessees and other Persons operating or occupying
their properties to comply, in all material respects, with all applicable
Environmental Laws and Environmental Permits; obtain and renew and cause
each of their Subsidiaries to obtain and renew all Environmental Permits
necessary for its operations and properties; and conduct, and cause each of
their Subsidiaries to conduct, any investigation, study, sampling and
testing, and undertake any cleanup, removal, remedial or other action
necessary to remove and clean up all Hazardous Materials from any of their
properties, in accordance with the requirements of all Environmental Laws;
provided, however, that neither the Borrower nor the Parent Guarantor nor
--------- -------
any of their respective Subsidiaries shall be required to undertake any
such cleanup, removal, remedial or other action to the extent that its
obligation to do so is being contested in good faith and by proper
proceedings and appropriate reserves are being maintained with respect to
such circumstances.
(d) Maintenance of Insurance. Maintain, and cause each of their
------------------------
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks
as is customarily carried by companies engaged in similar businesses as the
Borrower and owning similar properties in the same general areas in which
the Borrower, the Parent Guarantor or such Subsidiary operates; and
maintain key man life insurance on Donald R. Jensen in an amount not less
than $8,000,000 (which amount may be reduced by $2,000,000 on April 27,
1999 and on each anniversary thereafter), for the period from the date such
insurance was obtained until the earlier of (i) the Termination Date or
(ii) the later of the date that Donald R. Jensen ceases to be (x) an
employee of the Borrower of the Parent Guarantor or (y) the chairman of the
board of directors of the Borrower or the Parent Guarantor, with an
insurance carrier and pursuant to an insurance policy reasonably
satisfactory to the Agent, which policy shall at all times be subject to an
Assignment of Life Insurance Policy to the Agent for the benefit of the
Secured Parties.
(e) Preservation of Corporate Existence, Etc. Preserve and maintain,
----------------------------------------
and cause each of their Subsidiaries to preserve and maintain, its
corporate existence, rights (charter and statutory), material permits,
material licenses, material approvals, material privileges and franchises;
provided, however, that the Borrower may consummate any merger or
-------- -------
consolidation permitted under Section 5.02(d).
(f) Visitation Rights. At any reasonable time and from time to time,
-----------------
upon reasonable prior notice, permit the Agent or any of the Lender Parties
or any agents or representatives thereof, to examine and make copies of and
abstracts from the records and books of account of, and visit the
<PAGE>
61
properties of, the Parent Guarantor or any of its Subsidiaries, and to
discuss the affairs, finances and accounts of the Parent Guarantor or any
of its Subsidiaries with any of their officers or directors and with their
independent certified public accountants.
(g) Preparation of Environmental Reports. At the request of the
------------------------------------
Agent at the following times: (i) upon the occurrence and during the
continuance of an Event of Default, (ii) upon the acquisition of real
property by any Loan Party or any of its Subsidiaries (in which case the
Agent's request shall be limited to the real property being acquired) and
(iii) at any time when the Lender Parties have reason to believe that a
condition exists or an event has occurred with respect to any properties
owned or operated by the Borrower or any Subsidiary that may result in
material liability pursuant to any Environmental Law, use commercially
reasonable efforts to provide to the Lender Parties within 60 days after
such request, at the expense of the Borrower, a Phase I environmental site
assessment report for any of its or its Subsidiaries' properties described
in such request which, if requested by the Required Lenders, may present
significant liability or potential liability pursuant to an Environmental
Law, prepared by an environmental consulting firm acceptable to the Agent
(and, if based upon the recommendation of such environmental consulting
firm, a Phase II environmental site assessment report) indicating the
presence or absence of Hazardous Materials and the estimated cost of any
compliance, removal or remedial action in connection with any Hazardous
Materials on such properties; without limiting the generality of the
foregoing, if the Agent determines at any time that a material risk exists
that any such report will not be provided within the time period referred
to above, the Agent may retain an environmental consulting firm to prepare
such report at the expense of the Borrower, and each of the Borrower and
the Parent Guarantor hereby grants and agrees to cause any Subsidiary that
owns any property described in such request to grant at the time of such
request, to the Agent, the Lender Parties, such firm and any agents or
representatives thereof an irrevocable non-exclusive license, subject to
the rights of tenants, to enter onto their respective properties to
undertake such an assessment.
(h) Keeping of Books. Keep, and cause each of their Subsidiaries to
----------------
keep, proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of
the Borrower, the Parent Guarantor and each such Subsidiary in accordance
with generally accepted accounting principles.
(i) Maintenance of Properties, Etc. Maintain and preserve, and cause
------------------------------
each of their Subsidiaries to maintain and preserve, all of their
properties that are reasonably required in the conduct of their business in
good working order and condition, ordinary wear and tear excepted.
(j) Compliance with Terms of Leaseholds. Make all payments and
-----------------------------------
otherwise perform all obligations in respect of all leases of real property
to which the Parent Guarantor or any of its Subsidiaries is a party, keep
such leases in full force and effect and not allow such leases to lapse or
be terminated or any rights to renew such leases to be forfeited or
canceled, notify the Agent of any material default by any party with
respect to such leases and cooperate with the Agent in all respects to cure
any such default, and cause each of their Subsidiaries to do so; provided,
--------
however, that the Borrower may engage in good faith disputes with landlords
-------
of and lease real property (other than the property subject to the Lewiston
Lease), and may, in its reasonable discretion, terminate the leases for
such real property if such termination would not have a Material Adverse
Effect; provided further that
-------- -------
<PAGE>
62
the Borrower may engage in good faith disputes with the landlord of the
property subject to the Lewiston Lease and may, in its reasonable
discretion, terminate the lease for such real property so long as, in each
case, such disputes or termination is not reasonably likely to have a
material adverse effect on the business, condition (financial or
otherwise), operations, performance, properties or prospects of Falcon
taken as a whole.
(k) Performance of Related Documents. Perform and observe all of the
--------------------------------
terms and provisions of each Related Document and each other material
agreement to be performed or observed by the Parent Guarantor or any of its
Subsidiaries, maintain each such Related Document in full force and effect,
enforce such Related Document in accordance with its terms, take all such
action to such end as may be from time to time requested by the Agent and,
upon request of the Agent, make to each other party to each such Related
Document such demands and requests for information and reports or for
action as the Borrower or the Parent Guarantor is entitled to make under
such Related Document.
(l) Transactions with Affiliates. Conduct, and cause each of their
----------------------------
Subsidiaries to conduct, all transactions otherwise permitted under the
Loan Documents with any of their Affiliates on terms that are fair and
reasonable and no less favorable to the Parent Guarantor or any of its
Subsidiaries than it would obtain in a comparable arm's-length transaction
with a Person not an Affiliate. Nothing herein is intended or shall be
construed to (a) limit the performance by the Borrower or any of its
Affiliates of obligations under the Fenway Management Agreement so long as
no Default shall have occurred and be continuing or (b) restrict the
ability of the Loan Parties to enter into any transaction not prohibited
hereby in the ordinary course of business and which would not have a
Material Adverse Effect.
(m) Covenant to Give Security and Guaranties. (i) At such time as
----------------------------------------
any new direct or indirect Subsidiaries of any Loan Party are formed or
acquired by such Loan Party and at the expense of the Borrower, within 10
days after such formation or acquisition, cause each such Subsidiary
(including, without limitation, to the extent that no adverse tax
consequences would result therefrom, any Foreign Subsidiary) and cause each
direct and indirect parent (other than the Borrower, but, including,
without limitation, to the extent that no adverse tax consequences would
result therefrom, any Foreign Subsidiary) of such Subsidiary, if it has not
already done so, to duly execute and deliver to the Agent a guaranty or
guaranty supplement, in form and substance satisfactory to the Agent,
guaranteeing all of the other Loan Parties' Obligations under the Loan
Documents;
(ii) At such time as any new direct or indirect Subsidiaries of any
Loan Party are formed or acquired by such Loan Party and at the expense of
the Borrower, within 10 days after such formation or acquisition, duly
execute and deliver, and cause each such Subsidiary (other than any Foreign
Subsidiary) and each direct and indirect parent of such Subsidiary, if it
has not already done so, to duly execute and deliver, to the Agent,
security agreements (pledging the capital stock of its Subsidiaries) and
pledge agreements (granting a security interest in Collateral),
respectively, as specified by and in form and substance satisfactory to the
Agent, securing payment of all Obligations of the Loan Parties, such
Subsidiary or such parent, as the case may be, under the Loan Documents and
constituting Liens on all such properties; such pledge shall cover not more
than 66% of the outstanding capital stock of any Foreign Subsidiary if it
is directly owned by a Loan Party and not cover any of the outstanding
capital stock of such Foreign Subsidiary if it is indirectly owned;
<PAGE>
63
(iii) Upon the reasonable request of the Agent and at the expense of
the Borrower, (A) within 10 days after such request, furnish to the Agent a
description of the real and personal properties of the Borrower and the
Parent Guarantor and their Subsidiaries in detail satisfactory to the
Agent, (B) within 15 days after such request, use commercially reasonable
efforts to duly execute and deliver, and cause each such Subsidiary, and
cause each direct and indirect parent of such Subsidiary (including,
without limitation, to the extent that no adverse tax consequences would
result therefrom, a Foreign Subsidiary) to duly execute and deliver to the
Agent mortgages, pledges, assignments and other security agreements, as
specified by and in form and substance reasonably satisfactory to the
Agent, securing payment of all the Obligations of the Loan Parties under
the Loan Documents and constituting Liens on all such properties, (C)
within 30 days after such request, take whatever action, and cause each
such Subsidiary, and cause each direct and indirect parent of such
Subsidiary (including, without limitation, to the extent that no adverse
tax consequences would result therefrom, a Foreign Subsidiary) to take
whatever action (including, without limitation, the recording of mortgages,
the filing of Uniform Commercial Code financing statements, the giving of
notices and the endorsement of notices on title documents) may be necessary
or advisable in the reasonable opinion of the Agent to vest in the Agent
(or in any representative of the Agent designated by it) valid and
subsisting Liens on the properties purported to be subject to the
mortgages, pledges, assignments and security agreements delivered pursuant
to this Section 5.01(m)(iii), enforceable against all third parties in
accordance with their terms, (D) within 60 days after such request, deliver
to the Agent, upon the request of the Agent in its reasonable discretion, a
signed copy of a favorable opinion, addressed to the Agent and the other
Secured Parties, of counsel for the Loan Parties reasonably acceptable to
the Agent as to the matters contained in clauses (i) and (ii) of this
Section 5.01(m) and subclauses (B) and (C) of this Section 5.01(m)(iii), as
to such guaranties, guaranty supplements, mortgages, pledges, assignments
and security agreements being legal, valid and binding obligations of each
such Loan Party enforceable in accordance with their terms and as to such
other matters as the Agent may reasonably request, (E) as promptly as
practicable after such request, deliver, upon the request of the Agent in
its reasonable discretion, to the Agent with respect to real property
acquired after the date hereof by the Loan Parties, surveys meeting the
criteria specified in Section 3.01(k)(viii)(B) and the Mortgage Policy and
(F) at any time and from time to time promptly execute and deliver any and
all further instruments and documents and take all such other action as the
Agent may deem reasonably necessary or desirable in obtaining the full
benefits of, or in perfecting and preserving the Liens of, such guaranties,
guaranty supplements, mortgages, pledges, assignments and security
agreements;
(iv) At any time and from time to time, promptly execute and deliver
and cause each of their Subsidiaries to promptly execute and deliver any
and all further instruments and documents and take all such other action as
the Agent may deem reasonably necessary or desirable in obtaining the full
benefits of, or in perfecting and preserving the Liens of, the guaranties,
mortgages, pledges, assignments and security agreements referred to in
clauses (i), (ii) and (iii) above; and
(v) At the time of any loan to Donald R. Jensen in accordance with
Section 5.02(f)(xv) and at the expense of the Borrower, duly execute and
deliver to the Agent a pledge agreement pledging all of Donald R. Jensen's
stock of the Parent Guarantor, as specified by and in form and substance
reasonably satisfactory to the Agent, securing payment of all obligations
of Donald R. Jensen under the promissory note evidencing such loan and
constituting Liens on all such stock.
<PAGE>
64
(n) [intentionally omitted].
(o) Syndication. Take all actions which the Agent may reasonably
-----------
request to assist it in forming a syndicate acceptable to it including, but
not limited to: (i) making senior management of the Loan Parties and
representatives of the Loan Parties and the Investor Group available to
participate in informational meetings with potential lenders at such times
and places as the Agent may reasonably request; and (ii) timely providing
the Agent with all information reasonably deemed necessary by the Agent to
successfully complete the syndication, including, without limitation, a
summary of the operating prospects (including financial projections) of the
Parent Guarantor and its Subsidiaries.
(p) Maintenance of Accounts. Maintain and cause each of their
-----------------------
Subsidiaries to maintain Blocked Accounts (as defined in the Security
Agreement) on terms and conditions satisfactory to the Lender Parties.
(q) Further Assurances. (i) Promptly upon request by the Agent, or
------------------
any Lender Party through the Agent, correct any material defect or error
that may be discovered in any Loan Document or in the execution,
acknowledgment, filing or recordation thereof, and
(ii) Promptly upon request by the Agent, or any Lender Party through
the Agent, do, execute, acknowledge, deliver, record, re-record, file, re-
file, register and re-register any and all such further acts, deeds,
conveyances, pledge agreements, mortgages, deeds of trust, trust deeds,
assignments, financing statements and continuations thereof, termination
statements, notices of assignment, transfers, certificates, assurances and
other instruments as the Agent, or any Lender Party through the Agent, may
reasonably require from time to time in order to (A) carry out more
effectively the purposes of the Loan Documents, (B) to the fullest extent
permitted by applicable law, subject any Loan Party's or any of its
Subsidiaries' properties, assets, rights or interests to the Liens now or
hereafter intended to be covered by any of the Collateral Documents, (C)
perfect and maintain the validity, effectiveness and priority of any of the
Collateral Documents and any of the Liens intended to be created thereunder
and (D) assure, convey, grant, assign, transfer, preserve, protect and
confirm more effectively unto the Agent and the Lender parties the rights
granted or now or hereafter intended to be granted to the Agent and the
Lender Parties under any Loan Document or under any other instrument
executed in connection with any Loan Document to which any Loan Party or
any of its Subsidiaries is or is to be a party.
SECTION 5.02. Negative Covenants. So long as any Obligation of any
------------------
Loan Party under or in respect of any Loan Document shall remain unpaid, any
Letter of Credit shall be outstanding, any Secured Hedge Agreement shall be in
effect or any Lender Party shall have any Commitment hereunder, neither the
Borrower nor the Parent Guarantor shall, at any time:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit
----------
any of their Subsidiaries to create, incur, assume or suffer to exist, any
Lien on or with respect to any of their properties of any character
(including, without limitation, accounts) whether now owned or hereafter
acquired, or sign or file or suffer to exist, or permit any of their
Subsidiaries to sign or file or suffer to exist, under the Uniform
Commercial Code of any jurisdiction, a financing statement that names the
Borrower or the Parent Guarantor or any of their Subsidiaries as debtor, or
sign or suffer to exist, or permit any of their
<PAGE>
65
Subsidiaries to sign or suffer to exist, any security agreement authorizing
any secured party thereunder to file such financing statement, or assign,
or permit any of their Subsidiaries to assign, any accounts or other right
to receive income; excluding, however, from the operation of the foregoing
--------- -------
restrictions the following:
(i) Liens created under the Loan Documents;
(ii) Permitted Liens;
(iii) Liens existing on the date hereof and described on
Schedule 5.02(a)(iii) hereto;
(iv) Liens arising in connection with Capitalized Leases
permitted under Section 5.02(b)(i)(C); provided that no such Lien
--------
shall extend to or cover any Collateral or assets other than the
assets subject to such Capitalized Leases;
(v) purchase money Liens upon or in real property or equipment
acquired or held by the Borrower or any of its Subsidiaries in the
ordinary course of business to secure the purchase price of such
property or equipment or to secure Debt incurred solely for the
purpose of financing the acquisition of any such property or equipment
to be subject to such Liens, or Liens existing on any such property or
equipment at the time of acquisition (other than any such Liens
created in contemplation of such acquisition that do not secure the
purchase price), or extensions, renewals or replacements of any of the
foregoing for the same or a lesser amount; provided, however, that no
-------- -------
such Lien shall extend to or cover any property other than the
property or equipment being acquired, and no such extension, renewal
or replacement shall extend to or cover any property not theretofore
subject to the Lien being extended, renewed or replaced; and provided
--------
further that the aggregate principal amount of the Debt secured by
-------
Liens permitted by this clause (v) shall not exceed the amount
permitted under Section 5.02(b)(i)(D) at any time outstanding and that
any such Debt shall not otherwise be prohibited by the terms of the
Loan Documents;
(vi) the filing of financing statements solely as a
precautionary measure in connection with operating leases permitted
under Section 5.02(c);
(vii) the replacement, extension or renewal of any Lien
permitted by clause (iii) of this Section 5.02(a) upon or in the same
property theretofore subject thereto or the replacement, extension or
renewal (without increase in the amount or change in any direct or
contingent obligor) of the Debt secured thereby; and
(viii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with any Borrower or any
Subsidiary of such Borrower or becomes a Subsidiary of such Borrower;
provided that such Liens were not created in contemplation of such
--------
merger, consolidation or investment and do not extend to any assets
other than those of the Person merged into or consolidated with such
Borrower or such Subsidiary or acquired by such Borrower or such
Subsidiary.
<PAGE>
66
(b) Debt. Create, incur, assume or suffer to exist, or permit any of
----
its Subsidiaries to create, incur, assume or suffer to exist, any Debt
other than:
(i) in the case of the Borrower, the Parent Guarantor and their
Subsidiaries,
(A) Debt under the Loan Documents,
(B) Debt of the Borrower under the Senior Subordinated
Notes and Debt of the Subsidiary Guarantors consisting of
guaranties of the Senior Subordinated Notes to the extent
required by the Senior Subordinated Note Indenture,
(C) Capitalized Leases not to exceed in the aggregate,
together with Debt permitted under Section 5.02(b)(i)(D),
$3,500,000 at any time outstanding,
(D) Debt secured by Liens permitted by Section 5.02(a)(v)
not to exceed in the aggregate, together with Debt permitted
under Section 5.02(b)(i)(C), $3,500,000 at any time outstanding,
(E) Surviving Debt,
(F) indorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business,
(G) intercompany Debt; provided that such Debt (w) shall
--------
constitute Pledged Indebtedness, (x) shall be evidenced by
promissory notes in form and substance satisfactory to the Agent
and such promissory notes shall be pledged as security for the
Obligations under the Loan Documents of the holder thereof and
delivered to the Agent pursuant to the terms of the Security
Agreement, (y) shall, with respect to Debt of the Borrower, be
subordinated to the Obligations of the Borrower under the Loan
Documents on terms no less favorable to the Lender Parties than
are set forth on Exhibit F hereto and (z) shall, with respect to
Debt of the Borrower to IAIC, be on a basis consistent with past
practice,
(H) additional unsecured Debt in an aggregate amount not to
exceed $1,000,000 at any time outstanding,
(I) of any Person that becomes a Subsidiary of the Borrower
after the date hereof in accordance with the terms of Section
5.02(f)(xi), 5.02(f)(xvi) or 5.02(f)(xvii) that is existing at
the time such Person becomes a Subsidiary of the Borrower (other
than Debt incurred solely in contemplation of such Person
becoming a Subsidiary of the Borrower); provided that such Debt
--------
shall be subordinated to the Obligations of the Loan Parties
under the Loan Documents pursuant to a Subordination Agreement,
<PAGE>
67
(J) Subordinated Debt incurred in connection with management
stock repurchases to the extent the redemption price exceeds that
amount permitted under 5.02(g)(ii); provided that such
--------
Subordinated Debt shall mature not earlier than two years
following the scheduled Termination Date, shall not bear cash
interest until such date, shall contain subordination terms no
less favorable to the Lender Parties than are set forth on Exhibit
F hereto and shall otherwise be on terms acceptable to the Agent,
(K) Debt of the Parent Guarantor in respect of the Parent
Guarantor's obligation to purchase employee options or stock after
the termination of such employee, and
(L) Debt of the Parent Guarantor under the Discount Notes.
(ii) in the case of the Borrower,
(A) Debt in respect of Hedge Agreements designed to hedge
against fluctuations in interest rates or foreign exchange rates
incurred in the ordinary course of business and consistent with
prudent business practice in an aggregate notional amount not to
exceed $75,000,000 for all Hedge Agreements at any time
outstanding, less, in all cases, the aggregate notional amount of
----
any Hedge Agreements that constitute Investments made under
Section 5.02(f)(vii) at such time,
(B) Seller Subordinated Debt incurred in connection with any
Investment permitted by Section 5.02(f)(xi) or 5.02(f)(xvii) or
any Independent Shoe Distributorship Acquisition permitted under
Section 5.02(f)(xvi); provided that such Seller Subordinated Debt
--------
shall mature not earlier than two years following the scheduled
Termination Date, shall not bear cash interest until such date,
shall contain subordination terms no less favorable to the Lender
Parties than are set forth on Exhibit F hereto and shall otherwise
be on terms acceptable to the Agent, and
(C) Debt of the Borrower with respect to retiree benefit
plans to the persons listed on Schedule III hereto in an aggregate
amount not to exceed $562,000 and no more than $68,400 in any
fiscal year.
(c) Lease Obligations. Create, incur, assume or suffer to exist, or
-----------------
permit any of their Subsidiaries to create, incur, assume or suffer to
exist, any obligations as lessee (i) for the rental or hire of real or
personal property in connection with any sale and leaseback transaction, or
(ii) for the rental or hire of other real or personal property of any kind
under leases or agreements to lease (including, without limitation,
Capitalized Leases) having an original term of one year or more that would
cause the direct and contingent liabilities of the Parent Guarantor and its
Subsidiaries, on a Consolidated basis, in respect of all such obligations
to exceed $5,000,000 payable in any period of 12 consecutive months.
<PAGE>
68
(d) Mergers, Etc. Merge into or consolidate with any Person or permit
------------
any Person to merge into it, or permit any of their Subsidiaries to do so,
except that:
(i) any Subsidiary of the Borrower may merge into or
consolidate with the Borrower or any other wholly-owned U.S.
Subsidiary of the Borrower; provided that, in the case of any such
--------
merger or consolidation, the Person formed by such merger or
consolidation shall be the Borrower or a wholly-owned U.S. Subsidiary
of the Borrower, and
(ii) in connection with any acquisition permitted under Section
5.02(f), any Subsidiary of the Borrower may merge into or consolidate
with any other Person or permit any other Person to merge into or
consolidate with it; provided that the Person surviving such merger
--------
shall be a wholly-owned Subsidiary of the Borrower.
(e) Sales, Etc., of Assets. Sell, lease, transfer or otherwise dispose
----------------------
of, or permit any of their Subsidiaries to sell, lease, transfer or
otherwise dispose of, any assets, or grant any option or other right to
purchase, lease or otherwise acquire any assets other than Inventory to be
sold in the ordinary course of its business, except:
(i) sales of Inventory (including, without limitation, sales
of obsolete Inventory) in the ordinary course of its business,
(ii) in a transaction authorized by subsection (d) of this
Section 5.02,
(iii) sales or trade-ins of used equipment for fair value in the
ordinary course of business for cash or like assets in an aggregate
amount not to exceed $350,000 in any Fiscal Year, and
(iv) the sale of any asset by the Borrower or any Subsidiary
(other than a bulk sale of Inventory and a sale of Receivables other
than delinquent accounts for collection purposes only) so long as (A)
the purchase price paid to the Borrower or such Subsidiary for such
asset shall be no less than the fair market value of such asset at the
time of such sale, (B) not less than 80% of the purchase price for
such asset shall be paid to the Borrower or such Subsidiary in cash
and (C) the aggregate purchase price paid to the Borrower and all of
its Subsidiaries for such asset and all other assets sold by the
Borrower and such Subsidiaries after the date hereof pursuant to this
clause (iv) shall not exceed $3,000,000.
(f) Investments. Make or hold, or permit any of their Subsidiaries to
-----------
make or hold, any Investment other than:
(i) loans and advances by the Borrower outstanding on the date
hereof to Falcon and additional loans and advances to Falcon;
(ii) loans and advances by the Borrower outstanding on the date
hereof to IA Canada and additional loans and advances by the Borrower
to IA Canada in an aggregate
<PAGE>
69
amount, together with Investments permitted by clause (xvii) of this
Section 5.02(f) in entities organized under the laws of Canada, not to
exceed $5,000,000 at any one time outstanding;
(iii) loans and advances by the Borrower outstanding on the date
hereof to Iron Age de Mexico S.A. de C.V. and additional loans and
advances by the Borrower to Iron Age de Mexico S.A. de C.V. in an
aggregate amount not to exceed $1,500,000 at any one time outstanding;
(iv) loans and advances to employees in the ordinary course of
the business of the Borrower as presently conducted in an aggregate
principal amount not to exceed $250,000 at any time outstanding;
(v) Investments by the Borrower and its Subsidiaries in demand
deposit accounts maintained in the ordinary course of business with
any Person of the type referred to in clause (i), (ii), (iii), (iv) or
(v) of the definition of "Eligible Assignee";
-----------------
(vi) Investments by the Borrower in Cash Equivalents in an
aggregate amount not to exceed at any time outstanding $2,500,000;
(vii) Investments by the Borrower in respect of Hedge Agreements
designed to hedge against fluctuations in interest rates or foreign
exchange rates incurred in the ordinary course of business and
consistent with prudent business practice;
(viii) Investments existing on the date hereof and described on
Schedule 4.01(ii) hereto;
(ix) Debt of the Borrower and its Subsidiaries permitted by
Section 5.02(b)(i)(G);
(x) stock or other securities acquired in the ordinary course
of business of the Borrower in connection with the satisfaction or
enforcement of Debt or claims due to the Borrower or as security for
any such Debt or claim;
(xi) additional Investments by the Borrower in wholly-owned U.S.
Subsidiaries (including those permitted by Section 5.02(p)); provided,
--------
however, that the aggregate outstanding amount of equity Investments
-------
pursuant to this clause (xi) shall not exceed $10,000,000; and
provided further that any such additional Investments that are for
-------- -------
Restricted Acquisitions shall meet all of the conditions set forth in
clause (xvii) of this Section 5.02(f);
(xii) loans and advances to management of the Borrower and the
Parent Guarantor to finance any required equity investments of such
management in the Parent Guarantor in the ordinary course of the
business in an aggregate principal amount not to exceed $300,000 at
any time outstanding;
(xiii) Investments in joint ventures in an amount not to exceed
$1,000,000;
<PAGE>
70
(xiv) Investments in IAIC solely on a basis consistent with past
practice;
(xv) commencing no earlier than February 1, 2002, loans to
Donald R. Jensen in an amount not to exceed $3,500,000; provided that
--------
the sum of the aggregate amount of such loans plus the aggregate
----
amount of all stock options and stock repurchased in accordance with
Section 5.02(g)(ii) may not exceed $3,500,000; provided further that
-------- -------
no loan to Donald R. Jensen may be made in accordance with this clause
(xv) unless all of Donald R. Jensen's stock of the Parent Guarantor
has been pledged pursuant to Section 5.01(m)(v);
(xvi) for Independent Shoe Distributorship Acquisitions not to
exceed $1,500,000 in the aggregate in any Fiscal Year; and
(xvii) any Investment by the Borrower either directly or through a
wholly-owned U.S. Subsidiary or Canadian Subsidiary in a Restricted
Acquisition; provided that amounts invested pursuant to this clause
--------
(xvii) in entities organized under the laws of Canada, together with
loans and advances permitted by clause (ii) of this Section 5.02(f),
shall not exceed the amount set forth in such clause (ii); provided
--------
further that:
-------
(1) both before and after giving effect to such
Investment, no Default shall have occurred and be continuing,
(2) such Investment shall be substantially in the same
lines of business or lines of business related thereto in which
the Borrower or its Subsidiaries is engaged on the date hereof,
(3) such Subsidiary shall have complied with the terms
and conditions of Section 5.01(m),
(4) both before and after giving effect to any such
Investment, the Borrower shall be in pro forma compliance with
Section 5.04(a) for the Rolling Period immediately prior to the
date such Investment was made; provided that, for purposes of
--------
determining such compliance, the applicable ratio shall be
determined as though such Rolling Period ended on the next
following Rolling Period,
(5) immediately prior to the making of such Investment,
the Borrower delivers to the Agent a certificate of its chief
financial officer certifying as to compliance with the Leverage
Ratio limits set forth in paragraph (4) of this Section
5.02(f)(xvii) and showing all calculations necessary to determine
such compliance, and
(6) the Agent has received (i) the most recent audited
and unaudited financial statements, including all pro forma
adjustments, for such business or operating division, (ii) the pro
forma combined balance sheet of the Parent Guarantor and its
Subsidiaries and such business or operating division, in each case
as of the
<PAGE>
71
most recently ended Rolling Period, and (iii) a schedule of Pro
Forma EBITDA for such business or operating division on a monthly
basis for the latest Rolling Period.
(g) Restricted Payments. Declare or pay any dividends, purchase,
-------------------
redeem, retire, defease or otherwise acquire for value any of its capital
stock or any warrants, rights or options to acquire such capital stock, now
or hereafter outstanding, return any capital to its stockholders as such,
make any distribution of assets, capital stock (other than dividends
constituting shares of its common stock), warrants, rights, options,
obligations or securities to its stockholders as such, or permit any of
their Subsidiaries to do any of the foregoing or permit any of their
Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for
value any capital stock of the Borrower or any warrants, rights or options
to acquire such capital stock or to issue or sell any capital stock or any
warrants, rights or options to acquire such capital stock, other than:
(i) any Subsidiary of the Borrower may declare and pay cash
dividends to the Borrower or to a wholly-owned U.S. Subsidiary of the
Borrower,
(ii) so long as no Default shall have occurred and be continuing
or would result therefrom, to repurchase management stock options or
stock in the event a manager is no longer employed by the Borrower in
an aggregate amount not to exceed $3,500,000; provided that the
--------
Borrower may declare and pay cash dividends for such purposes limited
to (A) the repurchase of up to $250,000 in the aggregate in any Fiscal
Year for the first five Fiscal Years following the date of the Initial
Extension of Credit and (B) thereafter, only to repurchase the stock
options or stock of Donald R. Jensen; provided further that the sum of
-------- -------
(x) the aggregate amount of such repurchases of stock options or stock
under this paragraph (ii) plus (y) the aggregate amount of all loans
----
made to Donald R. Jensen in accordance with Section 5.02(f)(xv) may
not exceed $3,500,000; provided further that the Borrower may also use
-------- -------
for any such repurchase up to $2,000,000 of any proceeds of key man
life insurance received on or about the time of such repurchase,
(iii) so long as no Default shall have occurred and be continuing
or would result therefrom, to issue paid-in-kind dividends on
preferred stock,
(iv) so long as no Default shall have occurred and be continuing
or would result therefrom, to pay the Borrower's and its Subsidiaries'
ratable shares of taxes so long as the Borrower shall have received
such Subsidiaries' ratable share of taxes,
(v) so long as no Default shall have occurred and be continuing
or would result therefrom, to pay reasonable legal fees and
accountants' fees incurred in the ordinary course of business,
(vi) [intentionally omitted],
(vii) so long as no Default shall have occurred and be continuing
or would result therefrom, to pay fees in accordance with the terms of
Section 2 of the Fenway Management Agreement; provided, however, that
-------- -------
in the event of an acquisition of another business
<PAGE>
72
contemplated by Section 2(d) of the Fenway Management Agreement and
with respect to any management fees payable pursuant to Section
2(b)(v) of the Fenway Management Agreement, the amount of such
management fee shall not exceed 1/4 of 1% of net sales for the
immediately preceding Fiscal Year,
(viii) a one-time special dividend to be paid to the stockholders
of the Parent Guarantor on the date of the Initial Extension of Credit
in an aggregate a mount not to exceed $17,800,000, and
(ix) to pay fees and expenses, including, without limitation,
legal fees, incurred in connection with the Refinancing, and the other
transactions contemplated by this Agreement, the Loan Documents, the
Discount Note Documents and the Subordinated Debt Documents.
(h) Change in Nature of Business. Make, or permit any of their
----------------------------
Subsidiaries to make, any material change in the nature of its business as
carried on at the date hereof.
(i) Amendments to Constitutive Documents. Amend, or permit any of its
------------------------------------
Subsidiaries to amend, its certificate of incorporation, bylaws or other
constitutive documents in a manner materially adverse to the interests of
the Secured Parties.
(j) Accounting Changes. Make or permit, or permit any of their
------------------
Subsidiaries to make or permit, any change in (i) accounting policies or
reporting practices, except as permitted or required by generally accepted
accounting principles or (ii) Fiscal Year; provided, however, promptly upon
-------- -------
making or permitting any change in accounting policies or reporting
practices in accordance with clause (i) of this Section 5.02(j), the
Borrower or the Parent Guarantor shall provide the Agent with a detailed
reconciliation on an ongoing basis reflecting such change.
(k) Prepayments, Etc., of Debt. (i) Prepay, redeem, purchase, defease
--------------------------
or otherwise satisfy prior to the scheduled maturity thereof in any manner,
or make any payment in violation of any subordination terms of, any Debt,
other than (x) the prepayment of the Advances in accordance with the terms
of this Agreement, and (y) if both before and after giving effect to any
such prepayment, redemption, purchase, defeasance or other satisfaction, no
Default has occurred or would result therefrom, regularly scheduled or
required repayments or redemptions of Surviving Debt, or (ii) amend, modify
or change in any manner any term or condition of any Surviving Debt, any
Subordinated Debt or the Discount Notes, or permit any of their
Subsidiaries to do any of the foregoing other than to prepay any Debt
payable to the Borrower.
(l) Amendment, Etc., of Related Documents. Cancel or terminate any
-------------------------------------
Related Document or consent to or accept any cancellation or termination
thereof, amend, modify or change in any manner any term or condition of any
Related Document or any such agreement or give any consent, waiver or
approval thereunder, waive any default under or any breach of any term or
condition of any Related Document or any such agreement, agree in any
manner to any other amendment, modification or change of any term or
condition of any Related Document or any such agreement or take any other
action in connection with any Related Document or any such agreement that
would impair the value
<PAGE>
73
of the interest or rights of any Loan Party thereunder or that would impair
the rights or interests of the Agent or any Lender Party, or permit any of
their Subsidiaries to do any of the foregoing.
(m) Negative Pledge. Enter into or suffer to exist, or permit any of
---------------
their Subsidiaries to enter into or suffer to exist, any agreement
prohibiting or conditioning the creation or assumption of any Lien upon any
of its property or assets other than (i) in favor of the Secured Parties or
(ii) in connection with (A) any Surviving Debt, (B) any Subordinated Debt,
(C) the Discount Notes and (D) any Debt secured by purchase money Liens and
Capitalized Leases, in each case, to the extent permitted under Sections
5.02(b)(i)(C) and (D), respectively, and solely to the extent such
agreement is limited to the property covered by such Liens.
(n) Partnerships. Become a general partner in any general or limited
------------
partnership or joint venture, or permit any of their Subsidiaries to do so,
other than as permitted pursuant to Section 5.02(f)(xiii).
(o) Other Transactions. Engage, or permit any of their Subsidiaries
------------------
to engage, in any transaction involving commodity options or futures
contracts or any similar speculative transactions (including, without
limitation, take-or-pay contracts), except for Hedge Agreements permitted
under Sections 5.02(b)(ii)(A) and 5.02(f)(vii).
SECTION 5.03. Reporting Requirements. So long as any Obligation of
----------------------
any Loan Party under or in respect of any Loan Document shall remain unpaid, any
Letter of Credit shall be outstanding, any Secured Hedge Agreement shall be in
effect or any Lender Party shall have any Commitment hereunder, the Parent
Guarantor and the Borrower shall furnish to the Agent and the Lender Parties:
(a) Default Notice. As soon as possible and in any event within two
--------------
Business Days after any officer of any Loan Party obtains knowledge of the
occurrence of each Default or any event, development or occurrence
reasonably likely to have a Material Adverse Effect continuing on the date
of such statement, a statement of the chief financial officer of the Parent
Guarantor setting forth the details of such Default, event, development or
occurrence and the action that the Parent Guarantor has taken and proposes
to take with respect thereto.
(b) Monthly Financials. As soon as available and in any event within
------------------
35 days after the end of each month (other than for each month on which a
fiscal quarter is also ending, in which event such financials shall be
delivered within 50 days), commencing with the month ended April 30, 1998,
Consolidated and consolidating balance sheets of the Parent Guarantor and
its Subsidiaries, the Borrower and its Subsidiaries and the IAC U.S.
Operations, in each case as of the end of such month and Consolidated and
consolidating statements of income and Consolidated statements of cash flow
of the Parent Guarantor and its Subsidiaries, the Borrower and its
Subsidiaries and the IAC U.S. Operations, in each case for the period
commencing at the end of the previous month and ending with the end of such
month and Consolidated and consolidating statements of income and
Consolidated statements of cash flow of the Parent Guarantor and its
Subsidiaries, the Borrower and its Subsidiaries and the IAC U.S.
Operations, in each case for the period commencing at the end of the
previous Fiscal Year and ending with the end of such month, setting forth
in each case in comparative form the corresponding figures for the
corresponding month and Fiscal Year-to-date period of the preceding
<PAGE>
74
Fiscal Year and the corresponding figures for the corresponding month and
Fiscal Year-to-date period of the current annual forecast previously
delivered pursuant to Section 5.03(e), all in reasonable detail and duly
certified by the chief financial officer of the Parent Guarantor, together
with (i) a certificate of the chief financial officer of the Parent
Guarantor stating that no Default has occurred and is continuing or, if a
Default has occurred and is continuing, a statement as to the nature
thereof and the action that the Parent Guarantor has taken and proposes to
take with respect thereto, (ii) a schedule in form satisfactory to the
Agent of the computations used by the Parent Guarantor in determining
compliance with the covenants contained in Sections 5.04(a) through (e),
(iii) in the event of any change from GAAP in the generally accepted
accounting principles used in the preparation of such financial statements,
a statement of reconciliation conforming such financial statements to GAAP,
and (iv) copies of any presentations to the board of directors of the
Parent Guarantor.
(c) Quarterly Financials. As soon as available and in any event
--------------------
within 50 days after the end of each fiscal quarter of each Fiscal Year,
Consolidated and consolidating balance sheets of the Parent Guarantor and
its Subsidiaries, the Borrower and its Subsidiaries and the IAC U.S.
Operations, in each case as of the end of such fiscal quarter and
Consolidated and consolidating statements of income and a Consolidated
statement of cash flow of the Parent Guarantor and its Subsidiaries, the
Borrower and its Subsidiaries and the IAC U.S. Operations, in each case for
the period commencing at the end of the previous fiscal quarter and ending
with the end of such fiscal quarter and Consolidated and consolidating
statements of income and a Consolidated statement of cash flow of the
Parent Guarantor and its Subsidiaries, the Borrower and its Subsidiaries
and the IAC U.S. Operations, in each case for the period commencing at the
end of the previous Fiscal Year and ending with the end of such fiscal
quarter, setting forth in each case in comparative form the corresponding
figures for the corresponding period and Fiscal Year-to-date period of the
preceding Fiscal Year, all in reasonable detail and duly certified (subject
to year-end audit adjustments) by the chief financial officer of the Parent
Guarantor as having been prepared in accordance with generally accepted
accounting principles consistent with those applied in the most recent
annual audit, together with (i) a certificate of the chief financial
officer of the Parent Guarantor stating that no Default has occurred and is
continuing or, if a Default has occurred and is continuing, a statement as
to the nature thereof and the action that the Parent Guarantor has taken
and proposes to take with respect thereto, (ii) a schedule in form
satisfactory to the Agent of the computations used by the Parent Guarantor
in determining compliance with the covenants contained in Sections 5.04(a)
through (e), (iii) in the event of any change from GAAP in the generally
accepted accounting principles used in the preparation of such financial
statements, a statement of reconciliation conforming such financial
statements to GAAP and (iv) copies of any presentations to the board of
directors of the Parent Guarantor.
(d) Annual Financials. As soon as available and in any event within
-----------------
90 days after the end of each Fiscal Year, a copy of the annual audit
report for such year for the Parent Guarantor and its Subsidiaries,
including therein Consolidated balance sheets of the Parent Guarantor and
its Subsidiaries as of the end of such Fiscal Year and Consolidated
statements of income and a Consolidated statement of cash flow of the
Parent Guarantor and its Subsidiaries, in each case for the period
commencing at the end of the previous Fiscal Year and ending with the end
of such Fiscal Year, in each case accompanied by an unqualified opinion of
Ernst & Young, LLP or other independent public accountants of recognized
standing reasonably acceptable to the Required Lenders, and consolidating
balance sheets of the Parent Guarantor and its Subsidiaries as of the end
of such Fiscal
<PAGE>
75
Year and consolidating statements of income of the Parent Guarantor and its
Subsidiaries for such Fiscal Year, all in reasonable detail and duly
certified by the chief financial officer of the Parent Guarantor as having
been prepared in accordance with GAAP, together with (i) a certificate of
such accounting firm to the Lender Parties stating that in the course of
the regular audit of the business of the Parent Guarantor and its
Subsidiaries, which audit was conducted by such accounting firm in
accordance with generally accepted auditing standards, such accounting firm
has obtained no knowledge that a Default under Section 5.04 has occurred
and is continuing, or if, in the opinion of such accounting firm, a Default
under Section 5.04 has occurred and is continuing, a statement as to the
nature thereof, (ii) a schedule in form satisfactory to the Agent of the
computations used by such accounting firm in determining, as of the end of
such Fiscal Year, compliance with the covenants contained in Sections
5.04(a) through (e), (iii) a certificate of the chief financial officer of
the Parent Guarantor stating that no Default has occurred and is continuing
or, if a default has occurred and is continuing, a statement as to the
nature thereof and the action that the Parent Guarantor has taken and
proposes to take with respect thereto, (iv) in the event of any change from
GAAP in the generally accepted accounting principles used in the
preparation of such financial statements, a statement of reconciliation
conforming such financial statements to GAAP and (v) copies of any
presentations to the board of directors of the Parent Guarantor.
(e) Annual Forecasts. As soon as available and in any event no later
----------------
than the end of each Fiscal Year, forecasts prepared by management of the
Parent Guarantor, in form satisfactory to the Agent, of Consolidated
balance sheets, income statements and cash flow statements on a monthly
basis for the Fiscal Year following such Fiscal Year then ended.
(f) ERISA Events and ERISA Reports. (i) Promptly and in any event
------------------------------
within 10 days after any Loan Party or any ERISA Affiliate knows or has
reason to know that any ERISA Event has occurred, a statement of the chief
financial officer of the Parent Guarantor describing such ERISA Event and
the action, if any, that such Loan Party or such ERISA Affiliate has taken
and proposes to take with respect thereto and (ii) on the date any records,
documents or other information must be furnished to the PBGC with respect
to any Plan pursuant to Section 4010 of ERISA, a copy of such records,
documents and information.
(g) Plan Terminations. Promptly and in any event within two Business
-----------------
Days after receipt thereof by any Loan Party or any ERISA Affiliate, copies
of each notice from the PBGC stating its intention to terminate any Plan or
to have a trustee appointed to administer any Plan.
(h) Actuarial Reports. Promptly and in any event within 30 days after
-----------------
receipt thereof by any Loan Party or any ERISA Affiliate, a copy of the
annual actuarial valuation report of each Plan the funded current liability
percentage (as defined in Section 302(d)(8) of ERISA) of which is less than
90% or the unfunded current liability of which exceeds $250,000.
(i) Plan Annual Reports. Promptly and in any event within 30 days
-------------------
after the filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
with respect to each Plan.
<PAGE>
76
(j) Multiemployer Plan Notices. Promptly and in any event within five
--------------------------
Business Days after receipt thereof by any Loan Party or any ERISA
Affiliate from the sponsor of a Multiemployer Plan, copies of each notice
concerning (i) the imposition of Withdrawal Liability by any such
Multiemployer Plan, (ii) the reorganization or termination, within the
meaning of Title IV of ERISA, of any such Multiemployer Plan or (iii) the
amount of liability incurred, or that may be incurred, by such Loan Party
or any ERISA Affiliate in connection with any event described in clause (i)
or (ii) of this Section 5.03(j).
(k) Litigation. Promptly and in any event within 30 days after the
----------
commencement thereof, notice of all actions, suits, investigations,
litigation and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting any Loan Party or any of its Subsidiaries of the type described
in Section 4.01(i).
(l) Securities Reports. Promptly and in any event within 30 days
------------------
after the sending or filing thereof, copies of all proxy statements,
financial statements and reports that any Loan Party or any of its
Subsidiaries sends to its stockholders, and copies of all regular, periodic
and special reports, and all registration statements, that any Loan Party
or any of its Subsidiaries files with the Securities and Exchange
Commission or any governmental authority that may be substituted therefor,
or with any national securities exchange.
(m) Creditor Reports. Promptly and in any event within 30 days after
----------------
the furnishing thereof, copies of any statement or report furnished to any
other holder of the securities of any Loan Party or of any of its
Subsidiaries (including, without limitation, the holders of the Senior
Subordinated Notes) pursuant to the terms of any indenture, loan or credit
or similar agreement and not otherwise required to be furnished to the
Lender Parties pursuant to any other clause of this Section 5.03.
(n) Agreement Notices. Promptly and in any event within 30 days after
-----------------
receipt thereof, copies of all notices, requests and other documents
received by any Loan Party or any of its Subsidiaries under or pursuant to
any Related Document or indenture, loan or credit or similar agreement
regarding or related to any breach or default by any party thereto or any
other event that could materially impair the value of the interests or the
rights of any Loan Party or any of its Subsidiaries or otherwise have a
Material Adverse Effect, and copies of any amendment, modification or
waiver of any provision of any Related Agreement or indenture, loan or
credit or similar agreement and, from time to time upon request by the
Agent, such information and reports regarding the Related Documents as the
Agent may reasonably request.
(o) Revenue Agent Reports. Within 10 days after receipt, copies of
---------------------
all Revenue Agent Reports (Internal Revenue Service Form 886), or other
written proposals of the Internal Revenue Service, that propose, determine
or otherwise set forth positive adjustments to the Federal income tax
liability of the affiliated group (within the meaning of Section 1504(a)(1)
of the Internal Revenue Code) of which the Borrower is a member aggregating
$250,000 or more.
(p) Environmental Conditions. Promptly after the assertion or
------------------------
occurrence thereof, notice of any Environmental Action against or of any
condition or occurrence on any property of any Loan Party or any of its
Subsidiaries that results in a material noncompliance by any Loan Party or
any of
<PAGE>
77
its Subsidiaries with any Environmental Law or Environmental Permit that
(i) could be reasonably expected to have a Material Adverse Effect or (ii)
cause any property described in the Mortgages to be subject to any
restrictions on ownership, occupancy, use or transferability under any
Environmental Law.
(q) Real Property. Within 30 days after the end of each Fiscal Year,
-------------
a report supplementing Schedules 4.01(gg) and 4.01(hh) hereto, including an
identification of all real and leased property disposed of by the Parent
Guarantor or any of its Subsidiaries during such Fiscal Year, a list and
description (including the street address, county or other relevant
jurisdiction, state, record owner, book value thereof, and in the case of
leases of property, lessor, lessee, expiration date and annual rental cost
thereof) of all real property acquired or leased during such Fiscal Year
and a description of such other changes in the information included in such
Schedules as may be necessary for such Schedules to be accurate and
complete.
(r) Insurance. As soon as available and in any event within 30 days
---------
after the end of each Fiscal Year, a report summarizing the insurance
coverage (specifying type, amount and carrier) in effect for the Parent
Guarantor and its Subsidiaries and containing such additional information
as any Lender Party (through the Agent) may reasonably specify.
(s) Borrowing Base Certificate. As soon as available and in any event
--------------------------
within 30 days after the end of each month, a Borrowing Base Certificate,
as at the end of such month, certified by the chief financial officer of
the Parent Guarantor.
(t) Other Information. Such other information respecting the
-----------------
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party or any of its Subsidiaries as any
Lender Party (through the Agent) may from time to time reasonably request.
(u) Collateral Report. As soon as available and in any event within
-----------------
30 days after the end of each month, a report prepared by the chief
financial officer of the Borrower, in form and substance satisfactory to
the Agent (and, if the Agent so requests, in a form capable of being
processed by the Agent's computers), setting forth (i) the aging of all
Receivables and Inventory and (ii) such other information reasonably
requested by the Agent.
(v) Leases. (i) Promptly after the occurrence thereof, notification
------
to the Agent of (A) any event constituting a default under the Lewiston
Lease, and (B) any material adverse change affecting the premises demised
under the Lewiston Lease and (ii) on a quarterly basis, notification to the
Agent of any change in the list of retail leases shown on Schedule 4.01(hh)
hereto.
SECTION 5.04. Financial Covenants. So long as any Obligation of any
-------------------
Loan Party under or in respect of any Loan Document shall remain unpaid, any
Letter of Credit shall be outstanding, any Secured Hedge Agreement shall be in
effect or any Lender Party shall have any Commitment hereunder, the Parent
Guarantor shall:
(a) Leverage Ratio. Maintain a Leverage Ratio for each Rolling Period
--------------
set forth below of not more than the amount set forth below for such
Rolling Period:
<PAGE>
78
<TABLE>
<CAPTION>
ROLLING PERIOD ENDING CLOSEST TO RATIO
-------------------------------- -----
<S> <C>
July 31, 1998 6.25 : 1.00
October 31, 1998 6.25 : 1.00
January 31, 1999 6.25 : 1.00
April 30, 1999 6.25 : 1.00
July 31, 1999 6.25 : 1.00
October 31, 1999 6.25 : 1.00
January 31, 2000 6.00 : 1.00
April 30, 2000 6.00 : 1.00
July 31, 2000 5.75 : 1.00
October 31, 2000 5.75 : 1.00
January 31, 2001 5.50 : 1.00
April 30, 2001 5.50 : 1.00
July 31, 2001 5.50 : 1.00
October 31, 2001 5.25 : 1.00
January 31, 2002 5.25 : 1.00
April 30, 2002 5.00 : 1.00
July 31, 2002 5.00 : 1.00
October 31, 2002 4.75 : 1.00
January 31, 2003 4.75 : 1.00
April 30, 2003 4.50 : 1.00
July 31, 2003 4.50 : 1.00
October 31, 2003 4.25 : 1.00
January 31, 2004 4.25 : 1.00
</TABLE>
(b) Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage
---------------------------
Ratio for each Rolling Period of not less than 1.10 for such Rolling
Period.
(c) Interest Coverage Ratio. Maintain an Interest Coverage Ratio for
-----------------------
each Rolling Period set forth below of not less than the amount set forth
below for such Rolling Period:
<PAGE>
79
<TABLE>
<CAPTION>
ROLLING PERIOD ENDING CLOSEST TO RATIO
-------------------------------- -----
<S> <C>
July 31, 1998 1.60 : 1.00
October 31, 1998 1.60 : 1.00
January 31, 1999 1.60 : 1.00
April 30, 1999 1.60 : 1.00
July 31, 1999 1.75 : 1.00
October 31, 1999 1.75 : 1.00
January 31, 2000 1.75 : 1.00
April 30, 2000 1.75 : 1.00
July 31, 2000 1.75 : 1.00
October 31, 2000 1.75 : 1.00
January 31, 2001 1.75 : 1.00
April 30, 2001 1.75 : 1.00
July 31, 2001 2.00 : 1.00
October 31, 2001 2.00 : 1.00
January 31, 2002 2.00 : 1.00
April 30, 2002 2.00 : 1.00
July 31, 2002 2.00 : 1.00
October 31, 2002 2.00 : 1.00
January 31, 2003 2.00 : 1.00
April 30, 2003
and thereafter 1.75 : 1.00
</TABLE>
(d) Capital Expenditures. Not make, or permit any of its Subsidiaries
--------------------
to make, any Capital Expenditures that would cause the aggregate of all
such Capital Expenditures made by the Parent Guarantor and its Subsidiaries
in any Fiscal Year set forth below to exceed the amount set forth below for
such Fiscal Year:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------
<S> <C>
1999 $3,000,000
2000 $3,000,000
2001 $3,500,000
2002 $3,500,000
2003 $4,000,000
2004 $4,000,000
</TABLE>
provided, however, that if, at the end of any Fiscal Year (the "Prior
-------- ------- -----
Fiscal Year") set forth above, the amount specified above for such Fiscal
-----------
Year exceeds the amount of Capital Expenditures made by the
<PAGE>
80
Parent Guarantor and its Subsidiaries during such Fiscal Year (the amount
of such excess from such prior Fiscal Year being the "Excess Amount"), the
-------------
Parent Guarantor and its Subsidiaries shall be entitled to make additional
Capital Expenditures in the succeeding Fiscal Year in an amount (such
amount being referred to herein as the "Carryover Amount") equal to the
----------------
Excess Amount for such prior Fiscal Year; provided further, however, that
-------- ------- -------
such Carryover Amount may only be used in such succeeding Fiscal Year and
may only be used after utilization of the amount allocated above in this
Section 5.04(d) for such succeeding Fiscal Year.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
-----------------
("Events of Default") shall occur and be continuing:
-----------------
(a) (i) the Borrower shall fail to pay any principal of any Advance
when the same becomes due and payable, or (ii) the Borrower or any other
Loan Party shall fail to pay any interest on any Advance or make any other
payment under any Loan Document within two Business Days of when the same
becomes due and payable; or
(b) any representation or warranty made by any Loan Party (or any of
its officers) under or in connection with any Loan Document shall prove to
have been incorrect in any material respect when made; or
(c) any Loan Party shall fail to perform or observe any term, covenant
or agreement contained in Section 2.14, 5.01(e), (f), (g), (l), (m) or (n),
5.02, 5.03 or 5.04; or
(d) any Loan Party shall fail to perform or observe any other term,
covenant or agreement contained in any Loan Document on its part to be
performed or observed if such failure shall remain unremedied for 20 days
after the date on which a Responsible Officer of the Borrower becomes aware
of such failure; or
(e) any Loan Party or any of its Subsidiaries shall fail to pay any
principal of, premium or interest on or any other amount payable in respect
of any Debt that is outstanding in a principal or notional amount of at
least $1,000,000 either individually or in the aggregate (but excluding
Debt outstanding hereunder) of such Loan Party or such Subsidiary, as the
case may be, when the same shall become due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Debt; or any other event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and shall continue after
the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or
to permit the acceleration of, the maturity of such Debt or otherwise to
cause, or to permit the holder thereof to cause, such Debt to mature; or
any such Debt shall be declared to be due and payable or required to be
prepaid or redeemed (other than by a
<PAGE>
81
regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case prior to the stated maturity
thereof; or
(f) any Loan Party or any of its Subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against any Loan Party or any of its Subsidiaries seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or other similar official
for it or for any substantial part of its property and, in the case of any
such proceeding instituted against it (but not instituted by it) that is
being diligently contested by it in good faith, either such proceeding
shall remain undismissed or unstayed for a period of 45 days or any of the
actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or any substantial part of its
property) shall occur; or any Loan Party or any of its Subsidiaries shall
take any corporate action to authorize any of the actions set forth above
in this subsection (f); or
(g) any judgment or order for the payment of money in excess of
$1,000,000 (to the extent not fully paid or discharged) shall be rendered
against any Loan Party or any of its Subsidiaries and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 20 consecutive days
during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(h) any non-monetary judgment or order shall be rendered against
any Loan Party or any of its Subsidiaries that could reasonably be likely
to have a Material Adverse Effect, and there shall be any period of 20
consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
or
(i) any provision of any Loan Document after delivery thereof
pursuant to Section 3.01, 5.01(m) or 5.01(q) shall for any reason cease to
be valid and binding on or enforceable against any Loan Party party to such
Loan Document, or any such Loan Party shall so state in writing; or
(j) any Collateral Document after delivery thereof pursuant to
Section 3.01, 5.01(m) or 5.01(q) shall for any reason (other than pursuant
to the terms thereof) cease to create a valid and perfected first priority
lien on and security interest in the Collateral purported to be covered
thereby; or
(k) (i) the Fenway Fund shall cease to be the record and beneficial
owner of in excess of 50% of the number of shares of fully diluted common
stock of the Parent Guarantor issued and outstanding; or (ii) any Person or
two or more Persons acting in concert, other than the Investor Group, shall
have acquired by contract or otherwise, or shall have entered into a
contract or arrangement that, upon consummation, will result in its or
their acquisition of the power to exercise, directly or
<PAGE>
82
indirectly, a controlling influence over the management or policies of the
Parent Guarantor; or (iii) the Parent Guarantor shall cease to own 100% of
the capital stock of the Borrower; or
(l) any ERISA Event shall have occurred with respect to a Plan and
the sum (determined as of the date of occurrence of such ERISA Event) of
the Insufficiency of such Plan and the Insufficiency of any and all other
Plans with respect to which an ERISA Event shall have occurred and then
exist (or the liability of the Loan Parties and the ERISA Affiliates
related to such ERISA Event) exceeds $1,000,000; or
(m) any Loan Party or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan in an amount that, when aggregated
with all other amounts required to be paid to Multiemployer Plans by the
Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined
as of the date of such notification), exceeds $1,000,000 or requires
payments exceeding $250,000 per annum; or
(n) any Loan Party 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, and as a result of such reorganization or termination the aggregate
annual contributions of the Loan Parties and the ERISA Affiliates to all
Multiemployer Plans that are then in reorganization or being terminated
have been or will be increased over the amounts contributed to such
Multiemployer Plans for the plan years of such Multiemployer Plans
immediately preceding the plan year in which such reorganization or
termination occurs by an amount exceeding $250,000;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
Commitments of each Lender Party and the obligation of each Lender to make
Advances (other than Letter of Credit Advances by the Issuing Bank or a Working
Capital Lender pursuant to Section 2.03(c) and Swing Line Advances by a Working
Capital Lender pursuant to Section 2.02(b)) and of the Issuing Bank to issue
Letters of Credit to be terminated, whereupon the same shall forthwith
terminate, and (ii) shall at the request, or may with the consent, of the
Required Lenders, by notice to the Borrower, declare the Notes, all interest
thereon and all other amounts payable under this Agreement and the other Loan
Documents to be forthwith due and payable, whereupon the Notes, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however, that in the
-------- -------
event of an actual or deemed entry of an order for relief with respect to any
Loan Party or any of its Subsidiaries under the Federal Bankruptcy Code, (x) the
Commitments of each Lender Party and the obligation of each Lender to make
Advances (other than Letter of Credit Advances by the Issuing Bank or a Working
Capital Lender pursuant to Section 2.03(c) and Swing Line Advances by a Working
Capital Lender pursuant to Section 2.02(b)) and of the Issuing Bank to issue
Letters of Credit shall automatically be terminated and (y) the Notes, all such
interest and all such amounts shall automatically become and be due and payable,
without presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by the Borrower; and provided further that the Agent and
-------- -------
the Lenders shall not have the right to declare the Notes and the other amounts
payable under this Agreement and the other Loan Documents to be forthwith due
and payable solely as a result of the occurrence and continuance of an Event of
Default under Section 6.01(o) until the date that is at least 45 days after the
date on which notice of the occurrence and continuance of such Event of Default
shall have been given by the Agent or the Required Lenders to the Borrower (it
being understood
<PAGE>
83
and agreed that the suspension of the rights of acceleration of the Lender
Parties set forth in this proviso shall in no way limit or otherwise affect any
of the other consequences provided for in the Loan Documents of, or any of the
other rights and remedies afforded to the Agent or any of the Lender Parties as
a result of, the occurrence and continuance of such Event of Default).
SECTION 6.02. Actions in Respect of the Letters of Credit upon
------------------------------------------------
Default. If any Event of Default shall have occurred and be continuing, the
- - -------
Agent may, irrespective of whether it is taking any of the actions described in
Section 6.01 or otherwise, make demand upon the Borrower to, and forthwith upon
such demand the Borrower shall, pay to the Agent on behalf of the Lender Parties
in same day funds at the Agent's office designated in such demand, for deposit
in the L/C Cash Collateral Account, an amount equal to the aggregate Available
Amount of all Letters of Credit then outstanding. If at any time the Agent
determines that any funds held in the L/C Cash Collateral Account are subject to
any right or claim of any Person other than the Agent and the Lender Parties or
that the total amount of such funds is less than the aggregate Available Amount
of all Letters of Credit, the Borrower shall, forthwith upon demand by the
Agent, pay to the Agent, as additional funds to be deposited and held in the L/C
Cash Collateral Account, an amount equal to the excess of (a) such aggregate
Available Amount over (b) the total amount of funds, if any, then held in the
L/C Cash Collateral Account that the Agent determines to be free and clear of
any such right and claim.
ARTICLE VII
PARENT GUARANTY
SECTION 7.01. Guaranty. The Parent Guarantor hereby unconditionally
--------
and irrevocably guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all Obligations of each Loan Party
now or hereafter existing under or in respect of the Loan Documents, whether for
principal, interest, fees, expenses or otherwise (such Obligations being the
"Guaranteed Obligations"), and agrees to pay any and all expenses (including,
- - -----------------------
without limitation, reasonable counsel fees and expenses) incurred by the Agent
or the Lender Parties in enforcing any rights under this Guaranty. Without
limiting the generality of the foregoing, the Parent Guarantor's liability shall
extend to all amounts that constitute part of the Guaranteed Obligations and
would be owed by any Loan Party to the Agent or any Lender Party under the Loan
Documents but for the fact that such Obligations are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving any Loan Party.
SECTION 7.02. Guaranty Absolute. The Parent Guarantor guarantees
-----------------
that the Guaranteed Obligations will be paid strictly in accordance with the
terms of the Loan Documents, regardless of any law, rule, regulation or order
now or hereafter in effect in any jurisdiction affecting any of such terms or
the rights of the Agent or the Lenders with respect thereto. The Obligations of
the Parent Guarantor under this Guaranty are independent of the Guaranteed
Obligations or any other Obligations of any Loan Party under the Loan Documents,
and a separate action or actions may be brought and prosecuted against the
Parent Guarantor to enforce this Guaranty, irrespective of whether any action is
brought against the Borrower or whether the Borrower is joined in any such
action or actions. The liability of the Parent Guarantor under this Guaranty
shall be irrevocable, absolute and unconditional irrespective of, and the Parent
Guarantor hereby irrevocably waives any defenses it may now or hereafter have in
any way relating to, any or all of the following:
<PAGE>
84
(a) any lack of validity or enforceability of any Loan Document or
any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Guaranteed Obligations or any other
Obligations of any other Loan Party under the Loan Documents, or any other
amendment or waiver of or any consent to departure from any Loan Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to the Borrower, the
Parent Guarantor or any of their Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(d) any manner of application of the Collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of sale
or other disposition of any Collateral for all or any of the Guaranteed
Obligations or any other Obligations of any other Loan Party under the Loan
Documents or any other assets of the Borrower, the Parent Guarantor or any
of their Subsidiaries ;
(e) any change, restructuring or termination of the corporate
structure or existence of the Borrower, the Parent Guarantor or any of
their Subsidiaries; or
(f) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by the Agent or any Lender Party that might otherwise
constitute a defense available to, or a discharge of, the Borrower, the
Parent Guarantor or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Agent or any Lender Party upon the
insolvency, bankruptcy or reorganization of the Borrower, the Parent Guarantor
or any of their Subsidiaries or otherwise, all as though such payment had not
been made.
SECTION 7.03. Waiver. The Parent Guarantor hereby waives
------
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Guaranteed Obligations and this Guaranty and any requirement that the
Agent or any Lender Party protect, secure, perfect or insure any Lien or any
property subject thereto or exhaust any right or take any action against the
Borrower or any other Person or any Collateral. The Parent Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by the Loan Documents and that the waiver
set forth in this Section 7.03 is knowingly made in contemplation of such
benefits.
SECTION 7.04. Payments Free and Clear of Taxes, Etc. (a) Any and
-------------------------------------
all payments made by the Parent Guarantor hereunder shall be made, in accordance
with Section 2.11, free and clear of and without deduction for any and all
present or future Taxes. If the Parent Guarantor shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to any Lender
Party or the Agent, (i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including
<PAGE>
85
deductions applicable to additional sums payable under this Section 7.04) such
Lender Party or the Agent, as the case may be, receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Parent
Guarantor shall make such deductions and (iii) the Parent Guarantor shall pay
the full amount deducted to the relevant taxation authority or other authority
in accordance with applicable law.
(b) In addition, the Parent Guarantor agrees to pay any present or
future Other Taxes.
(c) The Parent Guarantor shall indemnify each Lender Party and the
Agent for the full amount of Taxes and Other Taxes, and for the full amount of
taxes of any kind imposed by any jurisdiction on amounts payable under this
Section 7.04, paid by such Lender Party or the Agent, as the case may be, and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto. This indemnification shall be made within 30 days from
the date such Lender Party or the Agent, as the case may be, makes written
demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Parent Guarantor shall furnish to the Agent, at its address referred to in
Section 9.02, appropriate evidence of payment thereof. If any Taxes are payable
in respect of any payment hereunder by the Parent Guarantor through an account
or branch outside the United States or on behalf of the Parent Guarantor by a
payor that is not a United States Person, the Parent Guarantor shall furnish, or
shall cause such payor to furnish, to the Agent a certificate from each
appropriate taxing authority or authorities, or an opinion of counsel acceptable
to the Agent, in either case stating that such payment is exempt from or not
subject to Taxes.
(e) Each Lender Party organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of this Agreement, in the case of each Initial Lender or Initial
Issuing Bank, as the case may be, and on the date of the Assignment and
Acceptance pursuant to which it became a Lender Party, in the case of each other
Lender Party, and from time to time thereafter if requested in writing by the
Parent Guarantor or the Agent (but only so long thereafter as such Lender Party
remains lawfully able to do so), provide the Agent and the Parent Guarantor with
two (2) duly completed copies of Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Lender Party is exempt from or is entitled to a reduced
rate of United States withholding tax on payments under or in respect of this
Agreement and the Notes. To the extent that any such form becomes obsolete with
respect to any Lender Party, such Lender Party shall, upon the reasonable
written request of the Parent Guarantor to such Lender Party and the Agent (but
only if such Lender Party is lawfully able to do so) provide two (2) copies of
either an updated or successor form to the Parent Guarantor and the Agent. If
the form provided by a Lender Party at the time such Lender Party first becomes
a party to this Agreement indicates a United States interest withholding tax
rate in excess of zero, withholding tax at such rate shall be considered
excluded from Taxes unless and until such Lender Party provides the appropriate
form certifying that a lesser rate applies, whereupon withholding tax at such
lesser rate only shall be considered excluded from Taxes for periods governed by
such form; provided, however, that, if at the date of the Assignment and
-------- -------
Acceptance pursuant to which a Lender Party becomes a party to this Agreement,
the Lender Party assignor was entitled to payments under subsection (a) of this
Section 7.04 in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender Party assignee on such date. If any form
or document referred to in this subsection (e) requires the disclosure of
information,
<PAGE>
86
other than information necessary to compute the tax payable and information
required on the date hereof by Internal Revenue Service form 1001 or 4224, that
such Lender Party reasonably considers to be confidential, such Lender Party
shall give notice thereof to the Parent Guarantor and shall not be obligated to
include in such form or document such confidential information.
(f) For any period with respect to which a Lender Party has failed
to provide the Parent Guarantor with the appropriate form described in
subsection (e) of this Section 7.04 (other than if the Parent Guarantor has
failed to timely request with reasonable notice any appropriate renewal,
successor or any other form or if such form otherwise is not required under
subsection (e) of this Section 7.04), such Lender Party shall not be entitled to
indemnification under subsection (a) or (c) of this Section 7.04 with respect to
Taxes imposed by the United States; provided, however, that should a Lender
-------- -------
Party become subject to Taxes because of its failure to deliver a form required
hereunder, the Parent Guarantor shall take such steps as such Lender Party shall
reasonably request to assist such Lender Party to recover such Taxes.
(g) Without prejudice to the survival of any other agreement of the
Parent Guarantor hereunder, the agreements and obligations of the Parent
Guarantor contained in this Section 7.04 shall survive the payment in full of
the Guaranteed Obligations and all other amounts payable under this Guaranty.
(h) If the Agent or any Lender Party, in its sole opinion,
determines that it has finally and irrevocably received or been granted a refund
in respect of any Taxes or Other Taxes as to which indemnification has been paid
by the Parent Guarantor pursuant to subsection (a) or (c) of this Section 7.04,
it shall promptly remit such refund to the Parent Guarantor, net of all out-of-
pocket expenses of the Agent or such Lender Party; provided, however, that the
-------- -------
Parent Guarantor, upon the request of the Agent or such Lender Party, agrees
promptly to return such refund to such party in the event such party is required
to repay such refund to the relevant taxing authority. The Agent or such Lender
Party shall provide the Parent Guarantor with a copy of any notice or assessment
from the relevant taxing authority (deleting any confidential information
contained therein) requiring payment of such refund. At the request and expense
of the Parent Guarantor, the Agent or any Lender Party, as the case may be,
shall use commercially reasonable efforts to seek a refund of any Taxes or Other
Taxes as to which indemnification has been paid by the Parent Guarantor pursuant
to subsection (a) or (c) of this Section 7.04. Nothing contained herein shall
impose an obligation on the Agent or any Lender Party to disclose to any party
any information regarding tax affairs and computations.
(i) Any Lender Party claiming any additional amounts payable
pursuant to this Section 7.04 agrees to use reasonable efforts (consistent with
its internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Eurodollar Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender Party, be otherwise disadvantageous to such Lender Party.
SECTION 7.05. Continuing Guaranty; Assignments. This Guaranty is a
--------------------------------
continuing guaranty and shall (a) remain in full force and effect until the
later of (i) the cash payment in full of the Guaranteed Obligations and all
other amounts payable under or in respect of this Guaranty and (ii) the
Termination Date, (b) be binding upon the Parent Guarantor, its successors and
assigns and (c) inure to the benefit of and be enforceable by the Lender
Parties, the Agent and their successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), any Lender Party may assign
or otherwise transfer all or any portion of its rights and obligations hereunder
(including, without limitation, all or any portion of its Commitment, the
<PAGE>
87
Advances owing to it and the Note or Notes held by it) to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Lender herein or otherwise, in each case as provided in
Section 9.07.
SECTION 7.06. Subrogation. The Parent Guarantor shall not exercise
-----------
any rights that it may now or hereafter acquire against the Borrower or any
other insider guarantor that arise from the existence, payment, performance or
enforcement of the Parent Guarantor's Obligations under or in respect of this
Agreement or any other Loan Document, including, without limitation, any right
of subrogation, reimbursement, exoneration, contribution or indemnification and
any right to participate in any claim or remedy of the Agent or any Lender Party
against the Borrower or any other insider guarantor or any Collateral, whether
or not such claim, remedy or right arises in equity or under contract, statute
or common law, including, without limitation, the right to take or receive from
the Borrower or any other insider guarantor, directly or indirectly, in cash or
other property or by setoff or in any other manner, payment or security on
account of such claim, remedy or right, unless and until all of the Obligations
and all other amounts payable under this Guaranty shall have been paid in full
in cash and the Commitments shall have expired or terminated. If any amount
shall be paid to the Parent Guarantor in violation of the preceding sentence at
any time prior to the later of (i) the payment in full in cash of the Guaranteed
Obligations and all other amounts payable under this Guaranty and (ii) the
Termination Date, such amount shall be held in trust for the benefit of the
Agent and the Lender Parties and shall forthwith be paid to the Agent to be
credited and applied to the Guaranteed Obligations and all other amounts payable
under this Guaranty, whether matured or unmatured, in accordance with the terms
of the Loan Documents, or to be held as collateral for any Guaranteed
Obligations or other amounts payable under this Guaranty thereafter arising. If
(i) the Parent Guarantor shall make payment to the Agent or any Lender Party of
all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed
Obligations and all other amounts payable under this Guaranty shall be paid in
full in cash and (iii) the Termination Date shall have occurred, the Agent and
the Lender Parties shall, at the Parent Guarantor's request and expense, execute
and deliver to the Parent Guarantor appropriate documents, without recourse and
without representation or warranty, necessary to evidence the transfer by
subrogation to the Parent Guarantor of an interest in the Guaranteed Obligations
resulting from such payment by the Parent Guarantor.
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action. Each Lender Party (in its
------------------------
capacities as a Lender, a Swing Line Bank (if applicable), the Issuing Bank (if
applicable) and a potential Hedge Bank) hereby appoints and authorizes the Agent
to take such action as Agent on its behalf and to exercise such powers and
discretion under this Agreement and the other Loan Documents as are delegated to
the Agent by the terms hereof and thereof, together with such powers and
discretion as are reasonably incidental thereto. As to any matters not
expressly provided for by the Loan Documents (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lender Parties and all holders of Notes;
provided, however, that the Agent shall not be required to take any action that
- - -------- -------
exposes the Agent to personal liability or that is contrary to this Agreement or
applicable law. The Agent agrees to give
<PAGE>
88
to each Lender Party prompt notice of each notice given to it by the Borrower
pursuant to the terms of this Agreement.
SECTION 8.02. Agent's Reliance, Etc. Neither the Agent nor any of
---------------------
its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with the Loan
Documents, except for its or their own gross negligence or willful misconduct.
Without limiting the generality of the foregoing, the Agent: (a) may treat the
payee of any Note as the holder thereof until the Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee of such
Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section
9.07; (b) may consult with legal counsel (including counsel for any Loan Party),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes no
warranty or representation to any Lender Party and shall not be responsible to
any Lender Party for any statements, warranties or representations (whether
written or oral) made in or in connection with the Loan Documents; (d) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of any Loan Document on the part of
any Loan Party or to inspect the property (including the books and records) of
any Loan Party; (e) shall not be responsible to any Lender Party for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of, or the perfection or priority of any lien or security interest created or
purported to be created under or in connection with, any Loan Document or any
other instrument or document furnished pursuant thereto; and (f) shall incur no
liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram,
telecopy or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 8.03. BNP and Affiliates. With respect to its Commitments,
------------------
the Advances made by it and the Notes issued to it, BNP shall have the same
rights and powers under the Loan Documents as any other Lender Party and may
exercise the same as though it were not the Agent; and the term "Lender Party"
or "Lender Parties" shall, unless otherwise expressly indicated, include BNP in
its individual capacity. BNP and its affiliates may accept deposits from, lend
money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, any Loan
Party, any of its Subsidiaries and any Person who may do business with or own
securities of any Loan Party or any such Subsidiary, all as if BNP were not the
Agent and without any duty to account therefor to the Lender Parties.
SECTION 8.04. Lender Party Credit Decision. Each Lender Party
----------------------------
acknowledges that it has, independently and without reliance upon the Agent or
any other Lender Party and based on the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender Party also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender Party and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement.
SECTION 8.05. Indemnification. (a) Each Lender Party severally
---------------
agrees to indemnify the Agent (to the extent not promptly reimbursed by the
Borrower) from and against such Lender Party's ratable share (determined as
provided below) of any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against the Agent in any way relating to or arising out of the Loan Documents or
any
<PAGE>
89
action taken or omitted by the Agent under the Loan Documents (collectively, the
"Agent Indemnified Costs"); provided, however, that no Lender Party shall be
----------------------- -------- -------
liable for any portion of the Agent Indemnified Costs resulting from the Agent's
gross negligence or willful misconduct as found in a final, non-appealable
judgment by a court of competent jurisdiction. Without limiting the generality
of the foregoing, each Lender Party agrees to reimburse the Agent promptly upon
demand for its ratable share of any costs and expenses (including, without
limitation, reasonable fees and expenses of counsel) payable by the Borrower
under Section 9.04, to the extent that the Agent is not promptly reimbursed for
such costs and expenses by the Borrower. For purposes of this Section 8.05(a),
the Lender Parties' respective ratable shares of any amount shall be determined,
at any time, according to the sum of (a) the aggregate principal amount of the
Advances outstanding at such time and owing to the respective Lender Parties and
(b) their respective Unused Working Capital Commitments and Unused Acquisition
Commitments at such time. In the case of any investigation, litigation or
proceeding giving rise to any Agent Indemnified Costs, this Section 8.05(a)
shall apply whether any such investigation, litigation or proceeding is brought
by the Agent, any Lender, any other Lender Party or a third party. The failure
of any Lender Party to reimburse the Agent promptly upon demand for its ratable
share of any amount required to be paid by the Lender Party to the Agent as
provided herein shall not relieve any other Lender Party of its obligation
hereunder to reimburse the Agent for its ratable share of such amount, but no
Lender Party shall be responsible for the failure of any other Lender Party to
reimburse the Agent for such other Lender Party's ratable share of such amount.
(b) Each Lender severally agrees to indemnify the Issuing Bank (to
the extent not promptly reimbursed by the Borrower) from and against such
Lender's ratable share (determined as provided below) of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Issuing Bank in any way
relating to or arising out of the Loan Documents or any action taken or omitted
by the Issuing Bank under the Loan Documents (collectively, the "Issuing Bank
------------
Indemnified Costs"); provided, however, that no Lender shall be liable for any
- - ----------------- -------- -------
portion of the Issuing Bank Indemnified Costs resulting from the Issuing Bank's
gross negligence or willful misconduct as found in a final non-appealable
judgment by a court of competent jurisdiction. Without limiting the generality
of the foregoing, each Lender agrees to reimburse the Issuing Bank promptly upon
demand for its ratable share of any costs and expenses (including, without
limitation, reasonable fees and expenses of counsel) payable by the Borrower
under Section 9.04, to the extent that the Issuing Bank is not promptly
reimbursed for such costs and expenses by the Borrower. For purposes of this
Section 8.05(b), the Lender Parties' respective ratable shares of any amount
shall be determined, at any time, according to the sum of (a) the aggregate
principal amount of the Advances outstanding at such time and owing to the
respective Lender Parties, (b) their respective Pro Rata Shares of the aggregate
Available Amount of all Letters of Credit outstanding at such time and (c) their
respective Unused Working Capital Commitments and Unused Acquisition Commitments
at such time. In the case of any investigation, litigation or proceeding giving
rise to Issuing Bank Indemnified Costs, this Section 8.05(b) shall apply whether
any such investigation, litigation or proceeding is brought by the Issuing Bank,
any Lender, any other Lender Party or a third party. The failure of any Lender
Party to reimburse the Issuing Bank promptly upon demand for its ratable share
of any amount required to be paid by the Lender Parties to the Issuing Bank as
provided herein shall not relieve any other Lender Party of its obligation
hereunder to reimburse the Issuing Bank for its ratable share of such amount,
but no Lender Party shall be responsible for the failure of any other Lender
Party to reimburse the Issuing Bank for such other Lender Party's ratable share
of such amount.
<PAGE>
90
(c) Without prejudice to the survival of any other agreement of any
Lender Party hereunder, the agreement and obligations of each Lender Party
contained in this Section 8.05(c) shall survive the payment in full of
principal, interest and all other amounts payable hereunder and under the other
Loan Documents.
SECTION 8.06. Successor Agents. The Agent may resign at any time by
----------------
giving written notice thereof to the Lender Parties and the Borrower and may be
removed at any time with or without cause by the Required Lenders. Upon any
such resignation or removal, the Required Lenders, and so long as no Default has
occurred and is continuing, with the consent of the Borrower (which consent
shall not be unreasonably withheld or delayed), shall have the right to appoint
a successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
the retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lender Parties, appoint a successor Agent, which shall be a commercial bank
organized under the laws of the United States or of any state thereof and having
a combined capital and surplus of at least $250,000,000. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent and upon the execution
and filing or recording of such financing statements, or amendments thereto, and
such amendments or supplements to the Mortgages, and such other instruments or
notices, as may be necessary or desirable, or as the Required Lenders may
request, in order to continue the perfection of the Liens granted or purported
to be granted by the Collateral Documents, such successor Agent shall succeed to
and become vested with all the rights, powers, discretion, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under the Loan Documents. If within 45 days after
written notice is given of the retiring Agent's resignation or removal under
this Section 8.06 no successor Agent shall have been appointed and shall have
accepted such appointment, then on such 45/th/ day (i) the retiring Agent's
resignation or removal shall become effective, (ii) the retiring Agent shall
thereupon be discharged from its duties and obligations under the Loan Documents
and (iii) the Required Lenders shall thereafter perform all duties of the
retiring Agent under the Loan Documents until such time, if any, as the Required
Lenders appoint a successor Agent as provided above. After any retiring Agent's
resignation or removal hereunder as Agent shall become effective, the provisions
of this Article VIII shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
---------------
provision of this Agreement or the Notes or any other Loan Document, nor consent
to any departure by the Borrower or any other Loan Party therefrom, shall in any
event be effective unless the same shall be in writing and signed (or, in the
case of the Collateral Documents, consented to) by the Required Lenders, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that (a) no
-------- -------
amendment, waiver or consent shall, unless in writing and signed by all of the
Lenders, do any of the following at any time: (i) waive any of the conditions
specified in Section 3.01 or, in the case of the Initial Extension of Credit,
Section 3.02, (ii) change the percentage of (x) the Commitments, (y) the
aggregate unpaid principal amount of the Advances or (z) the aggregate Available
Amount of outstanding Letters of Credit that, in each case, shall be required
for the Lenders or any of them to take any action
<PAGE>
91
hereunder, (iii) release all or substantially all of the Collateral in any
transaction or series of related transactions or permit the creation,
incurrence, assumption or existence of any Lien on all or substantially all of
the Collateral in any transaction or series of related transactions to secure
any Obligations other than Obligations owing to the Secured Parties under the
Loan Documents or (iv) amend this Section 9.01 and (b) no amendment, waiver or
consent shall, unless in writing and signed by the Required Lenders and each
Lender that has a Commitment under the Acquisition Facility or the Working
Capital Facility if affected by such amendment, waiver or consent, (i) increase
the Commitments of such Lender or subject such Lender to any additional
obligations, (ii) reduce the principal of, or interest on, the Notes held by
such Lender or any fees or other amounts payable hereunder to such Lender, (iii)
postpone any scheduled date fixed for any payment of principal of, or interest
on, the Notes held by such Lender or any fees or other amounts payable hereunder
to such Lender or (iv) change the order of application of any prepayment set
forth in Section 2.06 in any manner that materially affects such Lender;
provided further that no amendment, waiver or consent shall, unless in writing
- - -------- -------
and signed by the Swing Line Bank or the Issuing Bank, in addition to the
Lenders required above to take such action, affect the rights or obligations of
the Swing Line Bank or the Issuing Bank under this Agreement; and provided
--------
further that no amendment, waiver or consent shall, unless in writing and signed
- - -------
by the Agent in addition to the Lenders required above to take such action,
affect the rights or duties of the Agent under this Agreement or the other Loan
Documents.
(b) Each Lender Party grants (x) to the Agent the right to purchase
all (but not less than all) of such Lender Party's Commitments and Advances
owing to it and the Notes held by it and all of its rights and obligations
hereunder and under the other Loan Documents at a price equal to the aggregate
amount of outstanding Advances owed to such Lender Party (together with all
accrued and unpaid interest and fees owed to such Lender), and (y) so long as no
Default has occurred and is continuing, to the Borrower the right to cause an
assignment of all (but not less than all) of such Lender Party's Commitments and
Advances owing to it and the Notes held by it and all of its rights and
obligations hereunder and under the other Loan Documents, which right may be
exercised by the Agent or the Borrower, as the case may be, if such Lender Party
refuses to execute any amendment, waiver or consent which requires the written
consent of all the Lenders and to which the Required Lenders, the Agent and the
Borrower have agreed. Each Lender Party agrees that if the Agent or the
Borrower, as the case may be, exercises its option hereunder, it shall promptly
execute and deliver all agreements and documentation necessary to effectuate
such assignment as set forth in Section 9.07.
SECTION 9.02. Notices, Etc. All notices and other communications
------------
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered
by an overnight courier of nationally recognized standing, if to the Borrower or
the Parent Guarantor, each at its address at Robinson Plaza Three, Suite 400,
Pittsburgh, PA 15205, Attention: Chief Financial Officer, telecopier number
(412)787-8112; if to any Initial Lender or any Initial Issuing Bank, at its
Domestic Lending Office specified opposite its name on Schedule I hereto; if to
any other Lender Party, at its Domestic Lending Office specified in the
Assignment and Acceptance pursuant to which it became a Lender Party; and if to
the Agent, at its address at 499 Park Avenue, New York, New York 10022,
Attention: Structured Finance Group, telecopier number (212) 418-8269; or, as to
each party, at such other address as shall be designated by such party in a
written notice to the other parties. All such notices and communications shall,
when mailed, telegraphed, telecopied, telexed or sent by courier, be effective
when deposited in the mails, delivered to the telegraph company, transmitted by
telecopier, confirmed by telex answerback or delivered to the overnight courier,
respectively, except that notices and communications to the Agent pursuant to
Article II,
<PAGE>
92
III or VIII shall not be effective until received by the Agent. Delivery by
telecopier of an executed counterpart of any amendment or waiver of any
provision of this Agreement or the Notes or of any Exhibit hereto to be executed
and delivered hereunder shall be effective as delivery of a manually executed
counterpart thereof.
SECTION 9.03. No Waiver; Remedies. No failure on the part of any
-------------------
Lender Party or the Agent to exercise, and no delay in exercising, any right
hereunder or under any Note 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 9.04. Costs and Expenses. (a) The Borrower hereby agrees
------------------
to pay on demand (i) all costs and expenses of the Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents (including, without limitation, (A) all due diligence,
collateral review, syndication (including printing, distribution and bank
meetings), transportation, computer, duplication, appraisal, audit, insurance,
consultant, asset appraisal, search, filing and recording fees and expenses and
(B) all other out-of-pocket expenses incurred by the Agent, including, without
limitation, the reasonable fees and expenses of counsel for the Agent with
respect thereto, with respect to advising the Agent as to its rights and
responsibilities, or the perfection, protection or preservation of rights or
interests, under the Loan Documents, with respect to negotiations with any Loan
Party or with other creditors of any Loan Party or any of its Subsidiaries
arising out of any Default or any events or circumstances that may give rise to
a Default and with respect to presenting claims in or otherwise participating in
or monitoring any bankruptcy, insolvency or other similar proceeding involving
creditors' rights generally and any proceeding ancillary thereto) and (ii) all
costs and expenses of the Agent and the Lender Parties in connection with the
enforcement of the Loan Documents, whether in any action, suit or litigation,
any bankruptcy, insolvency or other similar proceeding affecting creditors'
rights generally (including, without limitation, the reasonable fees and
expenses of counsel for the Agent and each Lender Party with respect thereto).
(b) Each of the Borrower and the Parent Guarantor agrees to
indemnify and hold harmless the Agent, each Lender Party and each of their
Affiliates and their officers, directors, employees, agents, advisors and other
representatives (each, an "Indemnified Party") from and against any and all
-----------------
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of, or in connection with the preparation for
a defense of, any investigation, litigation or proceeding arising out of,
related to or in connection with (i) the Facilities, the actual or proposed use
of the proceeds of the Advances or the Letters of Credit, the Loan Documents or
any of the transactions contemplated thereby, including, without limitation, the
Refinancing and any acquisition or proposed acquisition by the Parent Guarantor
or any of its Subsidiaries or (ii) the actual or alleged presence of Hazardous
Materials on any property of any Loan Party or any of its Subsidiaries or any
Environmental Action relating in any way to any Loan Party or any of its
Subsidiaries, or any of their respective properties, except to the extent such
claim, damage, loss, liability or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct. In the case of an
investigation, litigation or other proceeding to which the indemnity in this
Section 9.04(b) applies, such indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by any Loan Party, its
directors, shareholders or creditors or an Indemnified Party or any Indemnified
Party is otherwise a party thereto and whether or not the transactions
contemplated hereby are
<PAGE>
93
consummated. Each of the Borrower and the Parent Guarantor also agrees not to
assert any claim against the Agent, any Lender Party or any of their Affiliates,
or any of their respective officers, directors, employees, agents, advisors and
other representatives, on any theory of liability, for special, indirect,
consequential (as opposed to direct) or punitive damages arising out of or
otherwise relating to the Facilities, the actual or proposed use of the proceeds
of the Advances or the Letters of Credit, the Loan Documents or any of the
transactions contemplated thereby, including, without limitation, the
Refinancing and any acquisition or proposed acquisition by the Parent Guarantor
or any of its Subsidiaries.
(c) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance is made by the Borrower to or for the account of a
Lender Party other than on the last day of the Interest Period for such Advance,
as a result of a payment or Conversion pursuant to Section 2.06, 2.09(b)(i) or
2.10(d), acceleration of the maturity of the Notes pursuant to Section 6.01 or
for any other reason or by an Eligible Assignee to a Lender Party other than on
the last day of the Interest Period for such Advance upon an assignment of
rights and obligations under this Agreement pursuant to Section 9.07 as a result
of a demand by the Borrower pursuant to Section 9.07(a), the Borrower shall,
upon demand by such Lender Party (with a copy of such demand to the Agent), pay
to the Agent for the account of such Lender Party any amounts required to
compensate such Lender Party for any additional losses, costs or expenses that
it may reasonably incur as a result of such payment, including, without
limitation, any loss (excluding, however, loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender Party to fund or maintain such Advance.
(d) If any Loan Party fails to pay when due any costs, expenses or
other amounts payable by it under any Loan Document, including, without
limitation, fees and expenses of counsel and indemnities, such amount may be
paid on behalf of such Loan Party by the Agent or any Lender Party, in its sole
discretion.
(e) Without prejudice to the survival of any other agreement of any
Loan Party hereunder or under any other Loan Document, the agreements and
obligations of the Borrower contained in Sections 2.10 and 2.12 and this Section
9.04 shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under any of the other Loan Documents.
SECTION 9.05. Right of Setoff. Upon (a) the occurrence and during
---------------
the continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender Party and each of its respective Affiliates is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and otherwise apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender Party or such Affiliate to or for the credit or the
account of the Borrower or the Parent Guarantor, as the case may be, against any
and all of the Obligations of the Borrower or the Parent Guarantor, as the case
may be, now or hereafter existing under or in respect of this Agreement and the
Note or Notes (if any) held by such Lender Party, irrespective of whether such
Lender Party shall have made any demand under this Agreement or such Note or
Notes and although such obligations may be unmatured. Each Lender Party agrees
promptly to notify the Borrower after any such setoff and application; provided,
--------
however, that the failure to give such notice shall not affect the validity of
- - -------
such setoff and application. The rights of each Lender Party and its respective
Affiliates under this Section 9.05 are in addition to other rights and remedies
(including, without limitation, other rights of setoff) that such Lender Party
and its respective Affiliates may have.
<PAGE>
94
SECTION 9.06. Binding Effect. This Agreement shall become effective
--------------
when it shall have been executed by the Borrower, the Parent Guarantor and the
Agent and when the Agent shall have been notified by each Initial Lender and the
Initial Issuing Bank that such Initial Lender and the Initial Issuing Bank has
executed it and thereafter shall be binding upon and inure to the benefit of the
Borrower, the Parent Guarantor, the Agent and each Lender Party and their
respective successors and assigns, except that neither the Borrower nor the
Parent Guarantor shall have the right to assign its respective rights or
obligations hereunder or any interest herein without the prior written consent
of the Lender Parties.
SECTION 9.07. Assignments and Participations. (a) Each Lender may
------------------------------
and, so long as no Default has occurred and is continuing, if demanded by the
Borrower (following a demand by such Lender pursuant to Section 2.10, 2.12 or
7.04) shall upon at least 5 Business Days' notice to such Lender and the Agent,
assign to one or more Eligible Assignees all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment or Commitments, the Advances owing to it and the Note
or Notes held by it); provided, however, that (i) each such assignment shall be
-------- -------
of a uniform, and not a varying, percentage of all rights and obligations under
and in respect of one or more Facilities, (ii) except in the case of an
assignment to a Person that, immediately prior to such assignment, was a Lender
or an assignment of all of a Lender's rights and obligations under this
Agreement, the aggregate amount of the Commitments of the assigning Lender being
assigned to such Eligible Assignee pursuant to such assignment (determined as of
the date of the Assignment and Acceptance with respect to such assignment) shall
in no event be less than $5,000,000 and shall be in an integral multiple of
$500,000, (iii) each such assignment shall be to an Eligible Assignee, (iv) each
such assignment made as a result of a demand by the Borrower pursuant to this
Section 9.07(a) shall be arranged by the Borrower after consultation with the
Agent and shall be either an assignment of all of the rights and obligations of
the assigning Lender under this Agreement or an assignment of a portion of such
rights and obligations made concurrently with another such assignment or other
such assignments that together cover all of the rights and obligations of the
assigning Lender under this Agreement, (v) no Lender shall be obligated to make
any such assignment as a result of a demand by the Borrower pursuant to this
Section 9.07(a) unless and until such Lender shall have received one or more
payments from either the Borrower or one or more Eligible Assignees in an
aggregate amount at least equal to the aggregate outstanding principal amount of
the Advances owing to such Lender, together with accrued interest thereon to the
date of payment of such principal amount and all other amounts payable to such
Lender under or in respect of this Agreement, (vi) no such assignments shall be
permitted without the consent of the Agent until the Agent shall have notified
the Lender Parties that syndication of the Commitments hereunder has been
completed, (vii) so long as no Default has occurred and is continuing at the
time of such proposed assignment, no such assignment shall be permitted without
the consent of the Borrower (such consent not to be unreasonably withheld or
delayed), and (viii) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with any Note or Notes subject to such
assignment and a processing and recordation fee of $3,000.
(b) Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in such Assignment and Acceptance, (x)
the assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, have the rights and obligations of a Lender or Issuing Bank, as
the case may be, hereunder and (y) the Lender or Issuing Bank assignor
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all or
<PAGE>
95
the remaining portion of an assigning Lender's or Issuing Bank's rights and
obligations under this Agreement, such Lender or Issuing Bank shall cease to be
a party hereto).
(c) By executing and delivering an Assignment and Acceptance, each
Lender Party assignor thereunder and each assignee thereunder confirm to and
agree with each other and the other parties thereto and hereto as follows: (i)
other than as provided in such Assignment and Acceptance, such assigning Lender
Party makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or any other Loan Document or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of, or the
perfection or priority of any Lien or security interest created or purported to
be created under or in connection with, this Agreement or any other Loan
Document or any other instrument or document furnished pursuant hereto or
thereto; (ii) such assigning Lender Party makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or any other Loan Party or the performance or observance by any Loan
Party of any of its obligations under any Loan Document or any other instrument
or document furnished pursuant thereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in Section 4.01 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such assigning Lender Party
or any other Lender Party and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Agent to take such action as Agent on its behalf and to exercise such powers and
discretion under the Loan Documents as are delegated to the Agent by the terms
hereof, together with such powers and discretion as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender or Issuing Bank, as the case may be.
(d) The Agent shall maintain at its address referred to in Section
9.02 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Lender
Parties and the Commitment under each Facility of, and principal amount of the
Advances owing under each Facility to, each Lender Party from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for
--------
all purposes, absent manifest error, and the Borrower, the Agent and the Lender
Parties may treat each Person whose name is recorded in the Register as a Lender
Party hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender Party at any reasonable
time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee, together with any Note or Notes subject
to such assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit C hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower. In the case of
any assignment by a Lender, within five Business Days after its receipt of such
notice, the Borrower, at its own expense, shall execute and deliver to the Agent
in exchange for the surrendered Note or Notes a new Note to the order of such
Eligible Assignee in an amount equal to the Commitment assumed by it under the
applicable Facility pursuant to such Assignment and Acceptance and, if the
assigning Lender has retained a Commitment hereunder under such Facility, a new
Note
<PAGE>
96
to the order of the assigning Lender in an amount equal to the Commitment
retained by it hereunder. Such new Note or Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Note or Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of Exhibit A-1 or A-
2 hereto, as the case may be.
(f) The Issuing Bank may assign to an Eligible Assignee all of its
rights and obligations under the undrawn portion of its Letter of Credit
Commitment at any time.
(g) Each Lender Party may sell participations in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Note or Notes (if any) held by it) to any Person other than any Loan Party
or any of its Subsidiaries or Affiliates; provided, however, that (i) such
-------- -------
Lender Party's obligations under this Agreement (including, without limitation,
its Commitments) shall remain unchanged, (ii) such Lender Party shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender Party shall remain the holder of any such Note
for all purposes of this Agreement, (iv) the Borrower, the Agent and the other
Lender Parties shall continue to deal solely and directly with such Lender Party
in connection with such Lender Party's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
right to approve any amendment or waiver of any provision of any Loan Document,
or any consent to any departure by any Loan Party therefrom, except to the
extent that such amendment, waiver or consent would reduce the principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation, postpone any date fixed for
any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or release all or substantially all of the Collateral.
(h) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender
Party by or on behalf of the Borrower.
(i) Notwithstanding any other provision set forth in this
Agreement, any Lender Party may at any time create a security interest in all or
any portion of its rights under this Agreement (including, without limitation,
the Advances owing to it and the Note or Notes held by it) in favor of any
Federal Reserve Bank in accordance with Regulation A of the Board of Governors
of the Federal Reserve System.
SECTION 9.08. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different 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. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.09. No Liability of the Issuing Bank. The Borrower
--------------------------------
assumes all risks of the acts or omissions of any beneficiary or transferee of
any Letter of Credit with respect to its use of such Letter of Credit. Neither
the Issuing Bank nor any of its officers or directors shall be liable or
responsible for: (a) the use that may be made of any Letter of Credit or any
acts or omissions of any beneficiary or transferee in connection therewith; (b)
the validity, sufficiency or genuineness of documents, or of any endorsement
thereon,
<PAGE>
97
even if such documents should prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (c) payment by the Issuing Bank against
presentation of documents that do not comply with the terms of a Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (d) any similar circumstances whatsoever
in making or failing to make payment under any Letter of Credit, except that the
------
Borrower shall have a claim against the Issuing Bank, and the Issuing Bank shall
be liable to the Borrower, to the extent of any direct, but not consequential,
damages suffered by the Borrower that the Borrower proves were caused by (i) the
Issuing Bank's willful misconduct or gross negligence as determined in a final,
non-appealable judgment by a court of competent jurisdiction in determining
whether documents presented under any Letter of Credit comply with the terms of
the Letter of Credit or (ii) the Issuing Bank's willful failure to make lawful
payment under a Letter of Credit after the presentation to it of a draft and
certificates strictly complying with the terms and conditions of the Letter of
Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
SECTION 9.10. Jurisdiction, Etc. (a) Each of the parties hereto
-----------------
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or any of the other Loan Documents to which it is a party, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement
shall affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement or any of the other Loan Documents in the
courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any of the
other Loan Documents to which it is a party in any New York State or federal
court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
SECTION 9.11. Governing Law. This Agreement and the Notes shall be
-------------
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 9.12. WAIVER OF JURY TRIAL. TO THE EXTENT IT MAY LAWFULLY
--------------------
DO SO, EACH OF THE LOAN PARTIES, THE AGENT AND THE LENDER PARTIES IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING
<PAGE>
98
TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES OR THE ACTIONS OF THE AGENT OR ANY
LENDER PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
<PAGE>
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.
IRON AGE CORPORATION,
as Borrower
By /s/ Keith A. McDonough
------------------------------------
Name: Keith A. McDonough
Title: Executive Vice President
IRON AGE HOLDINGS CORPORATION,
as Parent Guarantor
By /s/ Keith A. McDonough
------------------------------------
Name: Keith A. McDonough
Title: Vice President - Finance
BANQUE NATIONALE DE PARIS,
as Agent
By /s/ Alan Mustacchi
------------------------------------
Name: Alan Mustacchi
Title: VP
By /s/ Paul P. Barnes
------------------------------------
Name: Paul P. Barnes
Title: AVP
Initial Lenders
---------------
BANQUE NATIONALE DE PARIS
By /s/ Alan Mustacchi
------------------------------------
Name: Alan Mustacchi
Title: VP
By /s/ Paul P. Barnes
------------------------------------
Name: Paul P. Barnes
Title: AVP
<PAGE>
Initial Issuing Bank
--------------------
BANQUE NATIONALE DE PARIS
By /s/ Alan Mustacchi
------------------------------------
Name: ALAN MUSTACCHI
Title: VP
By /s/ Paul P. Barnes
------------------------------------
Name: Paul P. Barnes
Title: AVP
<PAGE>
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
NAME OF LENDER: BANQUE NATIONALE DE PARIS
Working Capital Commitment: $ 30,000,000.00
Acquisition Facility Commitment: $ 35,000,000.00
Letter of Credit Commitment: $ 2,000,000.00
Swing Line Commitment: $ 3,000,000.00
DOMESTIC LENDING OFFICE:
Banque Nationale de Paris
499 Park Avenue
New York, NY 10022
Credit Operations
- - ------ ----------
Attn: Alan Mustacchi/Stephen Kovacs Attn: Julia Posada
Tel: (212) 418-8231/(212) 425-9435 Tel: (212) 415-9878
Fax: (212) 418-8269 or 838-7590 Fax: (212) 415-9805
EURODOLLAR LENDING OFFICE:
Banque Nationale de Paris
499 Park Avenue
New York, NY 10022
Credit Operations
- - ------ ----------
Attn: Alan Mustacchi/Stephen Kovacs Attn: Julia Posada
Tel: (212) 418-8231/(212) 415-9435 Tel: (212) 415-9878
Fax: (212) 418-8269 or 838-7590 Fax: (212) 415-9805
<PAGE>
SCHEDULE II
-----------
EMPLOYMENT/NON-COMPETE AGREEMENTS
---------------------------------
Employment Agreement dated January 23, 1991 between Kenneth J. Kubacki and Iron
Age Investment Company.
Employment Agreement dated November 20, 1995 between William J. Mills, Iron Age
Corporation and Iron Age Holdings Corporation.
Employment Agreement dated November 20, 1995 between Keith A. McDonough, Iron
Age Corporation and Iron Age Holdings Corporation.
Employment Agreement dated October 20, 1995 between Donald H. Stella, Iron Age
Corporation and Iron Age Holdings Corporation.
Employment Agreement dated August 1, 1994 between Theodore C. Johanson and
Falcon Shoe Mfg. Co.
Non-Competition Agreement dated August 1, 1994 between Theodore C. Johanson and
Falcon Shoe Mfg. Co.
Employment Agreement dated February 26, 1997 between Donald R. Jensen, Iron Age
Corporation and Iron Age Holdings Corporation.
Consulting Agreement dated February 1, 1998 between Max W. Rush and Iron Age
Corporation.
Employment Agreement dated April 6, 1998 between Dennis Downs and Iron Age
Canada Ltd.
Employment Agreement dated April 7, 1998 between Andrew Tersigni and Iron Age
Canada Ltd.
<PAGE>
SCHEDULE III
------------
RETIREMENT BENEFIT PLAN PAYEES
------------------------------
The following individuals have the right to the following annual cash payments
until their death (or, if later, the death of their surviving spouse):
Mrs. James H. Childs $ 48,000
Mr. James Powers $ 2,400
--------
$ 50,400
========
<PAGE>
SCHEDULE 3.01(H)
----------------
SURVIVING DEBT
--------------
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT*
----------- ------
<S> <C>
Capital Lease Obligations $ 754,000
Retiree Benefits
Mrs. James H. Childs, Mr. James Power $ 269,000
Hanley Deferred Compensation $ 247,000
----------
$ 516,000
Deferred Income Taxes, Net $6,309,000
Accounts Payable Overdue by more than 60 days $ 0
Other Notes Payable $ 208,000
TOTAL $7,787,000
===== ==========
</TABLE>
______________________
*As of 1/31/98
<PAGE>
SCHEDULE 3.01(K)(XXIII)
-----------------------
BLOCKED ACCOUNTS
----------------
BANK NAME AND ADDRESS ACCOUNT NUMBER
- - --------------------- --------------
Iron Age Holdings Corporation
- - -----------------------------
PNC Bank of Delaware 56-4173-3320
300 Delaware Avenue Ste. 327
Wilmington, DE 19801
Iron Age Investment Co.
- - ----------------------
PNC Bank of Delaware Checking Acct:
300 Delaware Avenue. Ste. 327 56-4173-338
Wilmington, DE 19801
Falcon Shoe Mfg. Co.
- - -------------------
Key Bank of Maine 5020099
55 Libson Street
Lewiston, ME 04240
Iron Age Corporation
- - --------------------
PNC Bank 1001739581
Fifth Avenue and Wood Street 1001739602
Pittsburgh, PA 15265 1004405333
National Bank of Geneva 274718677
2 Seneca Street
P.O. Box 193
Geneva, NY 14456
Bath National Bank 536701423
184 Main Street 536701431
Penn Yan, NY 14527
<PAGE>
SCHEDULE 4.01(A)
----------------
PART I
------
IRON AGE HOLDINGS CORPORATION INVESTOR GROUP*
--------------------------------------------
<TABLE>
<CAPTION>
Number of Outstanding Shares of
-------------------------------
Owner Common Stock Series A
- - ----- ------------ --------
Preferred Stock
---------------
<S> <C> <C>
Fenway Partners Capital Fund, L.P. 87,374.192 0
Banque Nationale de Paris 924.994 0
FPIP, LLC 679.856 0
Natio vie Developpment 549.996 0
FPIP Trust, LLC 377.522 0
New York Life Insurance Company 6,545.55 1,000
American Home Assurance Company 3,272.78 500
---------- ---
Total Outstanding 99,624.89 1,500
----------------- ========== =====
</TABLE>
PART II
-------
IRON AGE HOLDINGS CORPORATION SHARE OWNERSHIP
---------------------------------------------
<TABLE>
<CAPTION>
================================================================================
TYPE OF # OF SHARES # OF
CORPORATION OUTSTANDING STOCK AUTHORIZED SHARES OWNED BY
----------- ----------------- ---------- --------
ISSUED
------
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Iron Age Corporation Common Stock 1000 1000 Iron Age
Holdings
Corporation
================================================================================
</TABLE>
_____________________________
* All of the stockholders of Iron Age Holdings Corporation have entered into
a Stockholders' Agreement dated February 26, 1997 ("Agreement") and the shares
listed below are subject to the terms of that Agreement.
<PAGE>
SCHEDULE 4.01(B)
----------------
SUBSIDIARIES *
------------
IRON AGE CORPORATION (IAC)
- - --------------------------
<TABLE>
<CAPTION>
================================================================================
JURIS. OF AUTHORIZED OUTSTANDING % OWNED
SUBSIDIARY INCORPORATION SHARES SHARES BY IAC
---------- ------------- ------ ------ ------
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Iron Age Investment Delaware 1,000 Shares of 1,000 100%
Company Common Stock
- - --------------------------------------------------------------------------------
Iron Age Canada, Ltd. Canada Unlimited 100 100%
Shares of
Common Stock
- - --------------------------------------------------------------------------------
Falcon Shoe Mfg. Co. Maine 14,000 Shares of 9,800 100%
Common Stock
- - --------------------------------------------------------------------------------
Iron Age de Mexico Mexico 100 Shares of 100 1%
Common Stock
================================================================================
</TABLE>
IRON AGE HOLDINGS CORPORATION (IAHC)
- - ------------------------------------
<TABLE>
<CAPTION>
================================================================================
JURIS. OF AUTHORIZED OUTSTANDING % OWNED
SUBSIDIARY INCORPORATION SHARES SHARES BY IAC
---------- ------------- ------ ------ ------
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Iron Age Corporation Delaware 1,000 Shares of 1,000 100%
Common Stock
================================================================================
</TABLE>
IRON AGE INVESTMENT COMPANY (IAIC)
- - ----------------------------------
<TABLE>
<CAPTION>
================================================================================
JURIS. OF AUTHORIZED OUTSTANDING % OWNED
SUBSIDIARY INCORPORATION SHARES SHARES BY IAC
---------- ------------- ------ ------ ------
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Iron Age de Mexico Mexico 100 Shares of 100 99%
Common Stock
================================================================================
</TABLE>
_____________________
*None of the subsidiaries has issued any options, warrants, rights of
conversions or purchase or similar rights.
<PAGE>
IRON AGE CANADA LTD.
- - --------------------
None
FALCON SHOE MFG. CO.
- - --------------------
None
IRON AGE DE MEXICO S.A. DE C.V.
- - -------------------------------
None
<PAGE>
SCHEDULE 4.01(D)
----------------
AUTHORIZATIONS, APPROVALS, ACTIONS, NOTICES AND FILINGS
-------------------------------------------------------
Termination of the Credit Agreement dated February 26, 1997, as amended, (the
"Existing Credit Agreement") by and among Iron Age Corporation (formerly IAH
Acquisition Corp.), Iron Age Holdings Corporation (formerly IA Holdings Corp.),
the Lender Parties party thereto and Banque Nationale de Paris as Issuing Bank
and as Agent for the Lender Parties.
<PAGE>
SCHEDULE 4.01(L)
----------------
PLANS, MULTIEMPLOYER PLANS AND WELFARE PLANS
--------------------------------------------
Iron Age Holdings Corporation 1997 Stock Option Plan.
Iron Age Corporation Profit Sharing Retirement Plan as amended through January
1, 1994, as further amended April 20, 1995.
Falcon Shoe Mfg. Co. Profit Sharing Plan dated July 15, 1991, as amended
November 21, 1994.
Falcon Shoe Mfg. Co. 401(k) Savings Plan dated December 27, 1993, as amended
March 10, 1994.
Knapp Shoes Inc. Cash Accumulation and Retirement Selection Plan.
Iron Age Corporation Group Annuity Contract dated January 24, 1995.
Iron Age Corporation Group Benefit Plans:
Long Term Disability Plan dated September 1, 1996.
Travel Accident Insurance Plan dated January 30, 1990.
Blue Cross/Blue Shield Medical Plan dated October 1, 1996.
Group Life/ADD Plan dated September 1, 1996.
Educational Assistance Plan dated January 1, 1992.
Prevailing Fee 100 Group Medial Plan dated March 1, 1994.
U.S. Healthcare HMO Plan dated October 1, 1987.
Blue Choice HMO Plan dated December 1, 1991.
Hospital/Medical/Surgical Plan of Puerto Rico dated November 1, 1996.
Cafeteria Plan dated August 1, 1993.
Falcon Shoe Mfg. Co. Welfare Benefit Plans:
Medical Group Subscriber Agreement.
LTD Contract dated April 7, 1993.
Group Life Contract dated August 10, 1993.
Weekly Indemnity Contract dated August 10, 1993.
Falcon Flex Plan dated July 1, 1994.
Iron Age Canada, Ltd. Group Insurance Policy dated December 7, 1993.
Hanley Deferred Compensation Letter dated August 1, 1994.
<PAGE>
SCHEDULE 4.01(U)
----------------
ENVIRONMENTAL MATTERS
---------------------
None.
<PAGE>
SCHEDULE 4.01(Z)
----------------
OPEN YEARS
----------
January 31, 1998
January 25, 1997
January 27, 1996
January 28, 1995
<PAGE>
SCHEDULE 4.01(FF)
-----------------
EXISTING DEBT
-------------
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT*
----------- ------
<S> <C>
Existing Credit Facility:
Working Capital Advance $ 22,000,000
Acquisition Advances $ 2,000,000
Term Note A $ 18,000,000
Term Note B $ 19,800,000
Term Note C $ 24,750,000
12 1/2% Senior Subordinated Notes due
February 26, 2006:
New York Life Insurance Company $ 10,000,000
American Home Assurance Company $ 5,000,000
TOTAL $116,550,000
- - ----- ------------
</TABLE>
______________________________
*Amount as of April 24, 1998
<PAGE>
SCHEDULE 4.01(GG)
-----------------
OWNED REAL PROPERTY
-------------------
GROSS BOOK VALUE FAIR MARKET VALUE
---------------- ------------------
Property at 240 North Avenue $2,463,281 Approx. $2,500,000
in the village of Penn Yan,
Yates County, New York
(owned by Iron Age
Corporation)
<PAGE>
SCHEDULE 4.01(HH)
-----------------
LEASED REAL PROPERTY
--------------------
[Attached]
<PAGE>
SCHEDULE 4.01(II)
-----------------
INVESTMENTS
-----------
SUBSIDIARY STOCK OF EACH LOAN PARTY
- - -----------------------------------
See Schedule 4.01(b)
INTERCOMPANY NOTES AMOUNT*
- - ------------------ ------
Iron Age Corporation:
--------------------
Note Receivable from Iron Age Canada Ltd. $ 990,000
Note Receivable from Iron Age Mexico $ 55,000
Iron Age Investment Company:
---------------------------
Note Receivable from Iron Age Corporation $36,550,000
-----------
TOTAL $37,595,000
===== ===========
________________________________
*As of 1/31/98
<PAGE>
SCHEDULE 4.01(JJ)
-----------------
INTELLECTUAL PROPERTY
---------------------
IRON AGE CORPORATION
U.S. TRADEMARKS
---------------
<TABLE>
<CAPTION>
================================================================================
TRADEMARK REGISTRATION NO. REGISTRATION DATE
- - --------- --------------- -----------------
- - --------------------------------------------------------------------------------
<S> <C> <C>
IRON AGE MAXIMUM & Design 1,671,179 1/7/92
- - --------------------------------------------------------------------------------
IRON AGE SPORTWORK II 1,677,695 3/3/92
- - --------------------------------------------------------------------------------
GRABBER 928,349 2/1/72
- - --------------------------------------------------------------------------------
FREEDOM TOE 1,276,282 5/1/84
- - --------------------------------------------------------------------------------
METAPRO 949,859 1/2/73
- - --------------------------------------------------------------------------------
SAFE-GARD 1,082,707 1/17/88
- - --------------------------------------------------------------------------------
IRON AGE & Design 1,212,263 10/12/82
- - --------------------------------------------------------------------------------
IRON AGE 634,888 9/25/56
- - --------------------------------------------------------------------------------
MIGHTY TOUGH 1,919,851 9/19/95
- - --------------------------------------------------------------------------------
MIGHTY TOUGH & Design 1,919,852 9/19/95
- - --------------------------------------------------------------------------------
IRON AGE PLUS 2,112,932 11/11/97
- - --------------------------------------------------------------------------------
ROUGH CREEK 2,082,503 7/22/97
- - --------------------------------------------------------------------------------
OIL RESISTANT GUARANTEED SHU- 780,371 11/17/64
LIFE SOLE
- - --------------------------------------------------------------------------------
KNAPP ATVS BUILT TO GO 1,919,898 9/19/95
ANYWHERE (Stylized Letters)
- - --------------------------------------------------------------------------------
KNAPP ATVS BUILT TO GO 1,967,884 4/16/96
ANYWHERE
- - --------------------------------------------------------------------------------
KNAPP ATVS U.S.A. 2000 SERIES 1,901,251 6/20/95
(Stylized Letters)
- - --------------------------------------------------------------------------------
KNAPP ATVS U.S.A. 2000 SERIES 1,905,063 7/11/95
- - --------------------------------------------------------------------------------
ATVS BY KNAPP 1,477,784 2/23/88
- - --------------------------------------------------------------------------------
TUF-SHOT 1,344,676 6/25/85
- - --------------------------------------------------------------------------------
TWO-SHOT 1,201,228 7/13/82
- - --------------------------------------------------------------------------------
KNAPP MASTER CRAFT CUSHIONED 1,133,194 4/15/80
COMFORT (and Design)
- - --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
- - --------------------------------------------------------------------------------
KNAPP SHOES & Design 785,262 2/16/65
- - --------------------------------------------------------------------------------
KNAPP FREE-WAY CUSHIONED SHOES 671,243 12/16/58
& Design
================================================================================
</TABLE>
U.S. SERVICE MARKS
------------------
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
SERVICE MARK REGISTRATION NO. REGISTRATION DATE
- - ------------ --------------- -----------------
- - --------------------------------------------------------------------------------
<S> <C> <C>
IRON AGE 1,966,512 4/9/96
- - --------------------------------------------------------------------------------
IRON AGE PLUS 2,120,443 12/9/97
================================================================================
</TABLE>
U.S. TRADEMARK APPLICATIONS
---------------------------
<TABLE>
<CAPTION>
================================================================================
TRADEMARK SERIAL NO. FILING DATE
- - --------- --------- -----------
- - --------------------------------------------------------------------------------
<S> <C> <C>
RUFFHIDES 74/491,094 2/15/94
- - --------------------------------------------------------------------------------
SPORTWORK 319,367 7/3/97
- - --------------------------------------------------------------------------------
ARMOR 75X-TRA LITE & Design 342,582 8/18/97
- - --------------------------------------------------------------------------------
SAFE-GARD 357,666 9/16/97
- - --------------------------------------------------------------------------------
HIGH-WIDE PROFILE II 418,663 1/9/98
- - --------------------------------------------------------------------------------
THE SOLES OF WORKING AMERICA 462,254 4/6/98
================================================================================
</TABLE>
U.S. SERVICE MARK APPLICATIONS
------------------------------
None.
FOREIGN TRADEMARKS
------------------
<TABLE>
<CAPTION>
================================================================================
TRADEMARK COUNTRY REGISTRATION NO. REGISTRATION DATE
- - --------- ------- --------------- -----------------
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
IRON AGE Benelux 488,506 12/7/90
- - --------------------------------------------------------------------------------
IRON AGE Canada 223,537 10/7/77
- - --------------------------------------------------------------------------------
IRON AGE Germany 1,022,860 11/27/80
- - --------------------------------------------------------------------------------
IRON AGE Denmark 2318-1981 9/4/81
- - --------------------------------------------------------------------------------
IRON AGE France 1,621,306 11/27/80
- - --------------------------------------------------------------------------------
IRON AGE United Kingdom 1,144,205 11/19/80
- - --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
- - --------------------------------------------------------------------------------
IRON AGE Mexico 419,038 3/8/92
- - --------------------------------------------------------------------------------
IRON AGE Norway 110,047 12/3/81
- - --------------------------------------------------------------------------------
IRON AGE Taiwan 434,908 3/16/89
- - --------------------------------------------------------------------------------
IRON AGE China 642,723 5/21/93
- - --------------------------------------------------------------------------------
IRON AGE Sweden 176,255 4/16/81
- - --------------------------------------------------------------------------------
IRON AGE Hong Kong 04875 12/30/93
- - --------------------------------------------------------------------------------
IRON AGE United Kingdom 1,512,133 9/9/92
- - --------------------------------------------------------------------------------
IRON AGE Japan 3338462 8/8/97
- - --------------------------------------------------------------------------------
IRON AGE Korea 386476 12/15/97
================================================================================
</TABLE>
FOREIGN SERVICE MARKS
---------------------
<TABLE>
<CAPTION>
================================================================================
SERVICE MARK COUNTRY REGISTRATION NO. REGISTRATION DATE
- - ------------ ------- --------------- -----------------
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
IRON AGE Korea 41362 2/19/98
================================================================================
</TABLE>
FOREIGN TRADEMARK APPLICATIONS
------------------------------
<TABLE>
<CAPTION>
================================================================================
TRADEMARK COUNTRY SERIAL NO. FILING DATE
- - --------- ------- --------- -----------
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
SPORTWORK Mexico 318,773 1/7/98
- - --------------------------------------------------------------------------------
ARMOR 75X-TRA Canada 322,891 1/20/98
LITE & Design
- - --------------------------------------------------------------------------------
KNAPP Canada 865,487 12/31/97
- - --------------------------------------------------------------------------------
SPORTWORK Canada 865,488 12/31/97
- - --------------------------------------------------------------------------------
SPORTWORK II & Canada 865,489 12/31/97
Design
- - --------------------------------------------------------------------------------
IRON AGE Philippines 102,856 9/20/95
- - --------------------------------------------------------------------------------
SAFE-GARD Canada 869,158 2/11/98
- - --------------------------------------------------------------------------------
SAFE-GARD Mexico 325,962 3/16/98
================================================================================
</TABLE>
<PAGE>
FOREIGN SERVICE MARK APPLICATIONS
---------------------------------
<TABLE>
<CAPTION>
================================================================================
SERVICE MARK COUNTRY SERIAL NO. FILING DATE
- - ------------ ------- --------- -----------
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
IRON AGE Philippines 102857 9/20/95
================================================================================
</TABLE>
IRON AGE INVESTMENT COMPANY
U.S. REGISTRATIONS
------------------
None.
FOREIGN SERVICE MARK REGISTRATIONS
----------------------------------
<TABLE>
<CAPTION>
================================================================================
SERVICE MARK COUNTRY REGISTRATION NO. REGISTRATION DATE
- - ------------ ------- ---------------- -----------------
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
IRON AGE Mexico 509304 10/31/95
- - --------------------------------------------------------------------------------
IRON AGE Canada TMA 473,865 3/26/97
================================================================================
</TABLE>
FALCON SHOE MFG. CO.
U.S. TRADEMARKS
---------------
<TABLE>
<CAPTION>
================================================================================
TRADEMARK REGISTRATION NO. REGISTRATION DATE
- - --------- --------------- -----------------
- - --------------------------------------------------------------------------------
<S> <C> <C>
DUNHAM 895,088 7/21/70
- - --------------------------------------------------------------------------------
DUNHAM TYROLEANS 740,975 11/20/62
- - --------------------------------------------------------------------------------
DUNHAM WAFFLE-STOMPERS 973,456 11/20/73
- - --------------------------------------------------------------------------------
GREAT FOOTWEAR FOR THE GREAT 1,119,327 5/29/79
OUTDOORS
- - --------------------------------------------------------------------------------
THE WAY OF NATURE. . .THRU THE 1,110,565 1/2/79
HANDS OF MAN
- - --------------------------------------------------------------------------------
RUGGARDS (Stylized) 419,794 3/5/46
- - --------------------------------------------------------------------------------
TRU-TRAK 1,437,386 4/21/87
- - --------------------------------------------------------------------------------
TRUKKERS 993,107 9/10/74
- - --------------------------------------------------------------------------------
DUNHAM DOUBLE COVERAGE TOES & 1,855,821 9/27/94
DESIGN
- - --------------------------------------------------------------------------------
DURAFLEX 843,731 2/6/68
- - --------------------------------------------------------------------------------
WIDE TRAK 2,030,521 1/14/97
- - --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
- - --------------------------------------------------------------------------------
ARMOR-TECH 2,051,944 4/15/97
================================================================================
</TABLE>
STATE REGISTRATION
------------------
<TABLE>
<CAPTION>
================================================================================
TRADEMARK STATE REGISTRATION NO. REGISTRATION DATE
- - --------- ----- --------------- -----------------
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
DUNHAM Vermont 4,553 3/29/73
================================================================================
</TABLE>
FOREIGN REGISTRATIONS
---------------------
<TABLE>
<CAPTION>
================================================================================
TRADEMARK COUNTRY REGISTRATION NO. REGISTRATION DATE
--------- ------- --------------- -----------------
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
DUNHAM Austria 142,074 5/21/92
- - --------------------------------------------------------------------------------
DUNHAM Canada 225,957 2/10/78
TYROLEANS
- - --------------------------------------------------------------------------------
DUNHAM'S Italy 586,393 12/29/92
- - --------------------------------------------------------------------------------
DUNHAM Japan 1,620,432 9/29/83
- - --------------------------------------------------------------------------------
DUNHAM Germany 2,027,548 1/5/93
- - --------------------------------------------------------------------------------
DUNHAM Spain 1,683,507 4/3/95
- - --------------------------------------------------------------------------------
DUNHAM Canada 460,625 8/2/96
- - --------------------------------------------------------------------------------
DUNHAM'S France 1,613,236 9/30/90
- - --------------------------------------------------------------------------------
DUNHAM'S Switzerland 383,406 7/19/91
================================================================================
</TABLE>
FOREIGN APPLICATIONS
--------------------
<TABLE>
<CAPTION>
================================================================================
TRADEMARK COUNTRY SERIAL NO. FILING DATE
- - --------- ------- --------- -----------
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
ARMOR-TECH Canada 801,437 1/10/96
================================================================================
</TABLE>
TRADEMARK APPLICATIONS TO BE FILED
----------------------------------
<TABLE>
<CAPTION>
================================================================================
TRADEMARK COUNTRY
- - --------- -------
- - --------------------------------------------------------------------------------
<S> <C>
THE SOLE OF WORKING AMERICA United States
- - --------------------------------------------------------------------------------
KNAPP United States
================================================================================
</TABLE>
<PAGE>
SCHEDULE 5.02(A)(III)
---------------------
EXISTING LIENS
--------------
Personal Property Liens
- - -----------------------
Amcom/Norwest Financial Leasing Inc. Security Agreement covering two leased
copiers.
CIT Group/Amplicon, Inc. Security Agreement covering leased equipment relating
to the Mobile Point-of-Sale (POS) System.
<PAGE>
Schedule 4.01(hh)
-----------------
Leased Real Property
--------------------
IRON AGE CORPORATION
ALL LOCATIONS WITH LEASE INFORMATION
[Lessee is Iron Age Corporation except where otherwise noted (see pp. 8&9)]
<TABLE>
<CAPTION>
LOCATION LOCATION Annual Expiration
Code (ADDRESS) ST COUNTY** Lessor Rent* Date
---- --------- -- -------- ------ ----- ----
<S> <C> <C> <C> <C> <C> <C>
170 Mobile, Al Mobile Unit AL Mobile Springdale Stores, Inc. $18,300.00 4/30/99
Yester Oaks Shopping Center
3696B Airport Blvd.
Mobile, AL 36608
164 Birmingham Mobile Unit AL Jefferson Birmingham Realty $20,400.00 8/31/02
660 University Blvd., Suite H Company
Birmingham, AL 35233
105 Phoenix Mobile Unit AZ Maricopa Westco Properties of Phoenix $12,068.52 8/31/02
2837 McDowell Road
Phoenix, AZ 85009
217 Tucson I/A Store AZ Pima Kackley Properties $ 8,656.20 12/14/98
2628 East 22nd Street
Tucson, AZ 85713
106 San Jose Mobile CA Santa Clara Gambord Trust Properties $28,200.00 12/31/01
1626 Old Bayshore Hwy.
San Jose, CA 95112
110 Los Angles Mobile Unit CA Orange VSW Investments $25,284.00 11/30/98
6475 Knott Avenue
Unit 4
Buena Park, CA 90040
166 Los Angeles Mobile Unit CA Los Angeles Crow-Copley-Commerce #1 Assoc. $25,505.28 10/14/99
3328 Garfield Ave.
Commerce, CA 90040
177 Los Angeles Knapp CA Los Angeles Commerce Properties $52,356.00 04/30/98
5380 E. Washington Blvd.
Los Angeles, CA 90504
178 Torrance, CA CA Los Angeles Floyd Sanger, Jr. $34,128.00 06/30/02
18533 Hawthorne Blvd.
Torrance, CA 90504
179 West Covina, CA CA Los Angeles Varney Center, Inc. $34,128.00 06/30/00
408 North Azusa Ave.
West Covina, CA 91790
172 Denver Mobile Unit CO Jefferson Wyatt Enterprises $13,332.00 4/30/01
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
4952 Ward Road
Wheat Ridge, CO 80033
173 Milford Mobile Unit CT New Haven 321 B.P.R. LLC $24,779.52 9/30/00
321 Boston Post Road
Milford, CT 06460
108 Mid-Atlantic Mobile Unit DE New Castle Airport Business Center VI $21,729.24 2/28/00
Airport Business Center
243 Quigley Blvd.
Suite J
New Castle, DE 19720
113 Tampa Mobile Unit FL Hillsborough Henry M. Ransone $14,058.00 12/31/03
5100 East Broadway
Tampa, FL 33169
131 Jacksonville Mobile Unit FL Duval St. Augustine Road Investments $10,255.20 5/31/01
Commerce Park
4541-7 Augustine Road
Jacksonville, FL 32207
134 Ft. Lauderdale Mobile Unit FL Broward PBP Venture Corp-Trammell $16,992.24 12/31/98
Cypress Creek Industrial Park
Suite 215
6600 N. W. 12th Avenue
Ft. Lauderdale, FL 33309
114 Jonesboro Mobile Unit GA Clayton B&B Management, Inc. $16,956.36 07/31/00
7681 Southlake Parkway
Suite 750
Jonesboro, GA 30326
121 Augusta Mobile Unit GA Richmond Meybohm Realty $10,500.00 5/31/99
Aarbour Crossing
3240 Peach Orchard Rd.
Augusta, GA 30906
196 Forest Park, GA GA Clayton F.P. Limited $ 9,799.92 month to month
4436 Jonesboro Road
Forest Park, GA 30050
107 Moline Mobile Unit IL Rock Island Kuang Lia Sung $15,000.00 7/31/98
South Park Plaza, Unit #1
4703 16th St.
Moline, IL 61265
132 Franklin Park Mobile Unit IL Cook Myers Industries $26,448.00 10/31/98
11125 Franklin Avenue
Franklin Park, IL 60131
185 Oaklawn, IL IL Cook Joaquin Martinez $26,400.00 12/02/99
8238 S. Cicero Ave.
Oaklawn, IL 60453
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
186 Melrose Park, IL IL Cook Lee Alport $18,759.96 07/31/00
2300 North Ave.
Melrose Park, IL 60160
160 Indianapolis Mobile Unit IN Marion F&R Realty Co. $12,600.00 5/31/00
5446 W. 86th Street
Indianapolis, IN 46268
158 Louisville Mobile Unit KY Jefferson DeLor Ltd. $24,269.16 4/30/01
3101 Fern Valley Road,
Suite 14
Louisville, KY 40213
156 Baton Rouge Mobile Unit LA E. Baton Lennar Partners $18,562.56 3/31/99
Southridge Center Rouge
88350 Florida Blvd., Ste. A1
Baton Rouge, LA 70809
102 Worcester Mobile Unit MA Worcester KRS Realty Trust d/b/a Heritage $21,735.00 8/31/98
Heritage Business Park
1200 Milbury St., Suite 7K
Worcester, MA 01607
139 Mansfield Mobile Unit MA Bristol Nancy Gray McNeeley $29,400.00 1/31/01
888 South Main St., Rt. 140
Mansfield, MA 02048
187 Brockton, MA MA Plymouth Stonehill Shoppes Inc. $44,313.00 10/31/01
Lambert's Rainbow Square
1285 Belmont Street
Brockton, MA 02401
153 Baltimore Mobile Unit MD Baltimore MIE Development $19,956.00 4/30/00
1667 Kneeht Ave., Ste. D (front)
Baltimore, MD 21227
117 Westbrook Mobile Unit ME Cumberland Portland Associates Trust $16,320.00 1/31/01
Bradlee's Plaza
11 Main Street
Westbrook, ME 04101
188 Lewiston, ME ME Androscoggin Equity Properties $ 4,800.00 12/31/99
80 Middle Street
Lewiston, ME 04240
135 Michigan Mobile Unit MI Oakland Madison Square $15,984.00 11/9/99
31036 John R. Street Ltd. Part.
Madison Heights, MI 48071
169 Kentwood Mobile Unit MI Kent Giant Development $15,000.00 2/28/00
4445-D Breton Ave., SE
Kentwood, MI 49508
183 Eastpointe, MI MI Macomb East Detroit Investment $24,000.00 6/30/99
20909 Gratiot Ave.
Eastpointe, MI 48021
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
184 Westland, MI MI Wayne Black & Decker (U.S.) $16,263.96 10/31/03
8047 Wayne Road
Westland, MI 48185
126 Minneapolis Mobile Unit MN Hennepin St. Croix Medical, Inc. $10,992.00 7/31/98
5155 E. River Rd., Suite 415
Minneapolis, MN 55421
115 Independence Mobile Unit MO Jackson Noland South Development Co. $13,151.16 1/31/00
4380 South Noland Road
South Noland Shopping Center
Independence, MO 64055
122 St. Louis Mobile Unit MO St. Louis Metro Park Joint Venture $23,400.00 2/28/00
11984 Dorsett Road
Maryland Heights, MO 63043
111 Charlotte Mobile Unit NC Mecklenburg Vinson Realty Co. $13,197.00 12/31/99
Stock Port Business Center
2900 Westinghouse Blvd - 112A
Charlotte, NC 28217
124 Greensboro Mobile Unit NC Guilford Joseph M. McDowell $18,000.00 6/30/99
701 Carnegie Place
Greensboro, NC 27409
159 Raleigh Mobile Unit NC Durham Highwoods/Forsyth Limited $21,299.52 5/31/01
Creekstone Crossing Ser Partner
Center
5400 S. Miami Blvd., Suite 104
Morrisville, NC 27560
195 Charlotte, NC NC Mecklenburg Varnadore Associates $17,499.96 05/31/98
3809 E. Independence Blvd.
Charlotte, NC 28205
101 New Jersey Mobile Unit NJ Middlesex AAA Budget Self Storage $24,375.00 10/14/02
1617 Stelton Road
Piscataway, NJ 00854
146 Parsippany Mobile Unit NJ Morris Susa Realty Corp. $29,712.00 1/31/01
325 Route 46 East
Pasrsippany, NJ 07054
175 Cherry Hill, NJ NJ Camden Robert Mark Associates $25,404.24 08/31/02
2121 Route 70 West
Cherry Hill, NJ 08002
193 Wayne, NJ NJ Passaic Construction Realty Co., Inc. $44,493.12 06/16/01
Willow Square
113 Rout 46
Wayne, NJ 07512
194 Union, NJ NJ Union Rondo Music, Inc. $32,721.96 11/30/00
1605 Route 22
Union, NJ 07083
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
157 Albuquerque Mobile Unit NM Bernalillo Southeast Candelaria Ltd. $16,380.00 03/31/99
2029 Candelaria N.E.
Albuquerque, NM 87107
005 Penn Yan Warehouse #2/ NY Yates Yates County IDA $31,800.00 2/28/99
Central Tractor
1 Keuka Business Park
Senecca Bldg.
Penn Yan, NY 14528
109 Vestal Mobile Unit NY Broome Hart Electronics Corp. $21,312.00 8/31/99
241 Vestal Parkway East
Vestal, NY 13850
141 Depew Mobile Unit NY Eric Dick Urban Plaza Associated $21,600.00 12/16/01
Dick Urban Plaza
502 Dick Road
Depew, NY 14043
165 Westbury Truck NY Nassua Ronrett Realty Company $23,970.72 09/30/01
9155 Merrick Ave.
Westbury, NY
168 Albany Mobile Unit NY Saratoga J. Eric King $30,658.56 03/05/03
76 Crossing Blvd.
Clifton Park, NY 12065
209 Penn Yan Store NY Yates Jean A. Jensen $19,200.00 9/30/00
130 Main Street
Penn Yan, NY 14527
180 Rochester, NY NY Monroe Milton Axelrod $21,600.00 06/30/01
2862 Q. Henrietts Road
Rochester, NY 14623
181 Cheektowaga, NY NY Erie M.S. Real Estate $21,675.00 month to month
1625 Walden Ave.
Cheektowaga, NY 14225
189 Elmhurst, NY NY Kings Leeann Associates $51,000.00 month to month
86-26 Queens Rd.
Elmhurst, NY 10704
190 Yonkers, NY NY Westchester Wyckoff Ind. Dev. Corp. $67,143.96 10/26/98
680 Central Park Ave.
Yonkers, NY 10704
191 Westbury, NY NY Nassau Ronret Realty Company $79,104.12 09/30/01
915 Merrick Ave.
Westbury, NY 11590
192 Brooklyn, NY NY Kings Juliana Investors $17,031.00 05/31/98
2381 Flatbush Ave.
Brooklyn, NY 11234
</TABLE>
-5-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
197 Bohemia, NY NY Suffolk Connetquot Associates $ 24,600.00 12/31/02
4629 Sunrise Highway
Bohemia, NY 11716
138 Bedford Mobile Unit OH Cuyahoga Meadowbrook Market Square $ 16,800.00 6/30/99
Meadowbrook Market Square
22137 Rockside Road
Bedford, OH 44146
155 Cincinnati Mobile Unit OH Hamilton Norwood Real Estate Partners $ 14,263.56 7/31/99
2300 Wall St., Suite P
Cincinnati, OH 45212
162 Columbus Mobile Unit OH Franklin Hartsook Real Estate Corp. $ 13,599.96 4/30/03
1850 Bethel Road
Columbus, OH 43220
136 Oklahoma City Mobile Unit OK Oklahoma Windsor Park Associates $ 12,600.00 6/30/00
2506 N. Meridian
Oklahoma City, OK 73107
163 Tulsa Mobile Unit OK Tulsa Security Square Shopping $ 14,400.00 9/30/99
10915 E. 31st Street
Tulsa, OK 74129
137 Portland Mobile Unit OR Multnomah Linda Hess $ 15,900.00 7/16/98
711 S. E. Stark Street
Portland, OR 97214
001 Iron Age PA Allegheny Joseph A. & Carolyn C. Massaro $255,023.41 9/30/99
Robinson Plaza Three,
Suite 400
Pittsburgh, PA 15205
5900 Baum Blvd. $ 100.00
Exhibition Floater
118 Pittsburgh Mobile Unit PA Allegheny Joseph Olszewski $ 48,000.00 5/31/03
4450 Steubenville Pike
Pittsburgh, PA 17402
147 York Mobile Unit PA York H.G. Rotz Associates, Inc. $ 17,700.00 9/30/00
2133 Industrial Highway
York, PA 17402
151 Erie Mobile Unit PA Erie Terra Erie Associates $ 7,200.00 9/30/98
Eastway Plaza
4245 Buffalo Road (Rt. 20)
Erie, PA 16510
125 Manati Mobile Unit PR Manati Ernesto Acosta Matos $ 24,000.00 3/31/00
Road #2, Kilometer 44.7
BO. Cantera #43, Suite 2
Manati, PR 00701
</TABLE>
-6-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
142 Caguas Mobile Unit PR Caguas Turabo Development, Inc. $ 22,500.00 5/14/01
State Road No. 189, Km. 4
Caguas, PR 00726
152 Ponce Mobile Unit PR Ponce Hilda Gonzales Logo $ 13,800.00 4/30/99
Las Americas Ave., #10
Ponce, PR 00731
119 Florence Mobile Unit SC Florence Joseph M. McDowell $ 10,800.00 6/30/99
795 North Cashue Drive
Florence, SC 29501
129 Spartanburg Mobile Unit SC Spartanburg Johnson Development Assoc. $ 9,600.00 5/31/00
Cleveland Village Shopping Cen
1564 Asheville Hwy. Suite 9
Spartanburg, SC 29303
145 Columbia Mobile Unit SC Richland McWill Partnership $ 30,000.00 11/30/06
1545 Burnette Drive
Columbia, SC 29210
100 Memphis Mobile Unit TN Shelby BICO Associates $ 16,020.00 9/30/99
3140 Teeehulahoma Rd.
Suite 12
Memphis, TN 38118
112 Nashville Mobile Unit TN Davidson Charles W. Hawkins III $ 17,100.00 4/30/00
331 Wilmington Road
Nashville, TN 37217
127 Knoxville Mobile Unit TN Knox West End Phasde I $ 11,199.96 9/17/00
156 West End Ave.
Farragut, TN 37922
143 Kingsport Mobile Unit TN Sullivan J. Fred Brooks $ 5,160.00 8/31/99
Wilcox Business Center
Unit 2, Bldg. 3
920 S. Wilcox Drive
Kingsport, TN 37660
230 Goodyear Tire & Rubber Co. TN Obion Williams Scotman $ 2,273.16 month to month
3260 Barbam Road
Union City, TN 38281
103 El Paso Mobile Unit TX El Paso Shirlee Z. Amstater $ 18,588.00 12/31/00
2914 East Yandell.
Suite 1
El Paso, TX 79903
120 Dallas Mobile Unit TX Dallas Sam Lewis $ 18,000.00 12/31/01
1000 Lupo Drive
Dallas, TX 75207
123 Houston Mobile Unit TX Harris T.T. Templin $ 24,000.00 12/31/00
9000 Emmott Road
Houston, TX 77040
</TABLE>
-7-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
128 San Antonio Mobile Unit TX Bexar N.P. Partners, Ltd. $ 16,860.00 5/31/99
3903 Fredericksburg Road
San Antonio, TX 782291
140 Longview Mobile Unit TX Greg Dell Thompson $ 12,000.00 10/31/05
1517 Pine Tree Road
Longview, TX 75604
144 Pasadena Mobile Unit TX Harris John O. Harris $ 11,880.00 9/30/98
4111 Fairmont Parkway
Suite 108
Pasadena, TX 77504
150 Austin Store TX Travis Kramer Center, Inc. $ 18,000.00 12/31/98
11055 Burnett Rd
Austin, TX 78758
130 Salt Lake City Mobile Unit UT Salt Lake Fulton Partnership $ 16,868.28 12/31/99
2284 South Redwood Rd.
West Valley City, UT 84119
104 Virginia Mobile Unit VA Bedford Edward McNally $ 16,800.00 6/30/00
Popular Forest Center
P.O. Box 1170, Route 5
Forest, VA 24551
176 Norfolk Mobile Unit VA Independent Northampton Corporate Park Assoc. $ 18,636.00 4//30/00
Northampton Business Center
5760 Northampton Blvd.
Suite 112
Virginia Beach, VA 23455
222 Goodyear VA Independent Williams Scotman $ 2,587.68 month to month
1435 Goodyear Blvd.
Danville, VA 24541
337 Hocchst Celanese Corporation VA GE Capital Modular Space $ 5,655.36 9/10/98
P.O. Box 440
Pairsburg, VA 24134
133 Seattle Mobile Unit WA King Cumberland Industrial Center $ 18,600.00 10/31/01
22030 68th Ave., South
Building A
Kent, WA 98032
116 Greendale Mobile Unit WI Milwaukee Megal Development Corp. $ 17,100.00 4/30/99
Unit D
7030 Industrial Loop
Greendale, WI 53129
229 Green Bay Store WI Brown Walnut Center Company $ 7,332.00 12/31/99
2979 Allied Street
Green Bay, WI 54304
161 Parkersburg WV Wood Jerome S. Glazer $ 6,600.00 7/31/99
202 Park Center Drive
Parkersburg, WV 26101
</TABLE>
-8-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Iron Age Canada, LTD CN Ontario Von-Land Corporation Limited C$50,151.96 6/30/01
475 North Rivermede Rd.,
Unit 2
Concord, ON L4K-3R2
122 Iron Age Canada, LTD CN Alberta Capital Ideas LTD C$10,500.00 1/31/01
Bay #204
255 28 Street S.E.
Calgary, Alberta
130 Iron Age Canada, LTD CN British Columbia Colliers C$32,432.28 04/30/02
11500 Bridgeport Road
Suite 105
Richmond, British Columbia V6X IT2
160 Iron Age Canada, LTD CN Ontario Associates Corporation of C $5,400.00 11/30/98
2500 Barton Street East North America and
Hamilton, Ontario L8E 4A2 Ongiara Properties, Inc. C$46,963.08 08/30/00
161 Iron Age Canada, LTD CN Ontario St. Catherines Equities Limited C$26,551.50 07/31/02
286 Bunting Road
St. Catherines, Ontario L2M 7S5
162 Iron Age Canada, LTD CN Ontario Jack & Percy Rosen C$35,310.00 month to month
353 Manitou Drive
Kitchener, Ontario N2C IL5
163 Iron Age Canada, LTD CN Ontario Enterprise Property Group C$18,877.20 05/31/00
304 Dunlop Street West
Unit A
Barrie, Ontario L4N 7L2
164 Iron Age Canada, LTD CN Ontario John and Paul Mobilos C$14,775.24 month to month
433 Simcoc Street South
South Simoce Plaza
Oshawa, Ontario L1H 4J5
165 Iron Age Canada, LTD CN Ontario John Tillney Warrington C$15,079.20 month to month
196 Rubidge Street
Peterborough, Ontario LIH 4J5
Iron Age Canada, LTD CN Ontario Comro Developments C$32,945.88 12/31/99
1790 Dundas Street East
Units 14 & 15'
London, Ontario N5W 3E5
Iron Age De Mexico S.A. MX Quimica Industrial Fronteriza N$184,833.60 12/31/99
DE C.V.
Cattetera Juaraz Porvenir 1568 9-B
Centro Comercial Satelite
Ciudad Juarez, Chihuahua
Falcon Shoe Manufacturing ME Androscoggin Roy Continental $216,917.28 03/31/99
Company
2 Cedar Street
Lewiston, ME 04204
</TABLE>
-9-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Falcon Shoe/Knapp ME Androscoggin Equity Properties $122,268.80 12/31/99
Manufacturing
80 Middle Street
Lewiston, ME 04210
Knapp Shoes (old MA Plymouth Concord Foods, Inc. $121,263.60 10/31/98
corporate offices)
One Knapp Centre
Brockton, MA 02401
</TABLE>
* Excludes CAM and Taxes
** County not included in lease
-10-
<PAGE>
EXHIBIT A-1 TO THE
CREDIT AGREEMENT
FORM OF WORKING CAPITAL NOTE
$ [__________] Dated: ________ __, ____
FOR VALUE RECEIVED, the undersigned, IRON AGE CORPORATION, a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY [to the order of]/1/
--------
____________________ [or its registered assigns]/2/ (the "Lender") for the
------
account of its Applicable Lending Office (as defined in the Credit Agreement
referred to below) the aggregate principal amount of the Working Capital
Advances (as defined below) owing to the Lender by the Borrower pursuant to the
Credit Agreement dated as of April 24, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"; terms defined
----------------
therein unless otherwise defined herein being used herein as therein defined)
among the Borrower, IRON AGE HOLDINGS CORPORATION, a Delaware corporation, as
Parent Guarantor, the Lender and certain other Lender Parties party thereto, and
Banque Nationale de Paris, as Agent, Swing Line Bank and Initial Issuing Bank on
the dates and in the amounts specified in the Credit Agreement.
The Borrower promises to pay to the Lender [or its registered
assigns]/2/ interest on the unpaid principal amount of each Working Capital
Advance from the date of such Working Capital Advance until such principal
amount is paid in full, at such interest rates, and payable at such times, as
are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America for the account of the Lender to Banque Nationale de Paris, as
Agent, at the Agent's Account, in same day funds. Each Working Capital Advance
owing to the Lender by the Borrower and the maturity thereof, and all payments
made on account of principal thereof, shall be recorded by the Lender in its
books and, prior to any transfer hereof, endorsed on the grid attached hereto,
which is part of this Promissory Note; provided, however, that the failure of
-------- -------
the Lender to make any such recordation or endorsement shall not affect the
Obligations of the Borrower under this Promissory Note or the Obligations of any
of the Loan Parties under or in respect of any of the Loan Documents.
This Promissory Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement. The Credit Agreement, among
other things, (i) provides for the making of advances (the "Working Capital
---------------
Advances") by the Lender to the Borrower from time to time in an aggregate
- - --------
amount
__________________________
/1/ Delete these brackets, but include the bracketed language, if the
applicable Lender Party will not be relying on the portfolio interest
---
exception; delete both the brackets and the bracketed language if the
applicable Lender Party will be relying on the portfolio interest
----
exception.
/2/ Delete both the brackets and the bracketed language if the applicable
Lender Party will not be relying on the portfolio interest exception;
---
delete the brackets, but include the bracketed language, if the applicable
Lender Party will be relying on the portfolio interest exception.
----
<PAGE>
2
not to exceed at any time outstanding the U.S. dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Working
Capital Advance being evidenced by this Promissory Note, and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions therein specified. The
Obligations of the Borrower under this Promissory Note and the other Loan
Documents, and the Obligations of the other Loan Parties under or in respect of
the Loan Documents, are secured by the Collateral referred to, and as provided
in, the Collateral Documents.
This Promissory Note shall be governed by and construed in accordance
with, the laws of the State of New York.
IRON AGE CORPORATION
By____________________________________
Name:
Title:
<PAGE>
3
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
=======================================================================
AMOUNT OF
WORKING AMOUNT OF UNPAID
CAPITAL PRINCIPAL PAID PRINCIPAL NOTATION
DATE ADVANCE OR PREPAID BALANCE MADE BY
=======================================================================
<S> <C> <C> <C> <C>
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
=======================================================================
</TABLE>
<PAGE>
EXHIBIT A-2 TO THE
CREDIT AGREEMENT
FORM OF ACQUISITION NOTE
$ [__________] Dated: ________ __, ____
FOR VALUE RECEIVED, the undersigned, IRON AGE CORPORATION, a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY [to the order of]/1/
--------
____________________ [or its registered assigns]/2/ (the "Lender") for the
------
account of its Applicable Lending Office (as defined in the Credit Agreement
referred to below) the aggregate principal amount of the Acquisition Advances
(as defined below) owing to the Lender by the Borrower pursuant to the Credit
Agreement dated as of April 24, 1998 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"; terms defined therein unless
----------------
otherwise defined herein being used herein as therein defined) among the
Borrower, IRON AGE HOLDINGS CORPORATION, a Delaware corporation, as Parent
Guarantor, the Lender and certain other Lender Parties party thereto, and Banque
Nationale de Paris, as Agent and Swing Line Bank, on the dates and in the
amounts specified in the Credit Agreement.
The Borrower promises to pay to the Lender [or its registered
assigns]/2/ interest on the unpaid principal amount of each Acquisition Advance
from the date of such Acquisition Advance until such principal amount is paid in
full, at such interest rates, and payable at such times, as are specified in the
Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America for the account of the Lender to Banque Nationale de Paris, as
Agent, at the Agent's Account, in same day funds. Each Acquisition Advance
owing to the Lender by the Borrower and the maturity thereof, and all payments
made on account of principal thereof, shall be recorded by the Lender in its
books and, prior to any transfer hereof, endorsed on the grid attached hereto,
which is part of this Promissory Note; provided, however, that the failure of
-------- -------
the Lender to make any such recordation or endorsement shall not affect the
Obligations of the Borrower under this Promissory Note or the Obligations of any
of the Loan Parties under or in respect of any of the Loan Documents.
This Promissory Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement. The Credit Agreement, among
other things, (i) provides for the making of acquisition advances (the
"Acquisition Advances") by the Lender to the Borrower from time to time in an
--------------------
aggregate amount not to exceed at any time outstanding the U.S. dollar amount
first above mentioned, the indebtedness of the Borrower resulting from each such
Acquisition Advance being evidenced by this
_____________________________
/1/ Delete these brackets, but include the bracketed language, if the
applicable Lender Party will not be relying on the portfolio interest
---
exception; delete both the brackets and the bracketed language if the
applicable Lender Party will be relying on the portfolio interest
----
exception.
/2/ Delete both the brackets and the bracketed language if the applicable
Lender Party will not be relying on the portfolio interest exception;
---
delete the brackets, but include the bracketed language, if the
applicable Lender Party will be relying on the portfolio interest
----
exception.
<PAGE>
2
Promissory Note, and (ii) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for prepayments on
account of principal hereof prior to the maturity hereof upon the terms and
conditions therein specified. The Obligations of the Borrower under this
Promissory Note and the other Loan Documents, and the Obligations of the other
Loan Parties under or in respect of the Loan Documents, are secured by the
Collateral referred to, and as provided in, the Collateral Documents.
This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
IRON AGE CORPORATION
By____________________________________
Name:
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
=======================================================================
AMOUNT OF AMOUNT OF UNPAID
ACQUISITION PRINCIPAL PAID PRINCIPAL NOTATION
DATE ADVANCE OR PREPAID BALANCE MADE BY
=======================================================================
<S> <C> <C> <C> <C>
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
=======================================================================
</TABLE>
<PAGE>
EXHIBIT B TO THE
CREDIT AGREEMENT
FORM OF NOTICE OF BORROWING
[Date of Notice of Borrowing]
Banque Nationale de Paris,
as Agent for the Lender Parties to the Credit
Agreement referred to below
499 Park Avenue
New York, NY 10022
Attention: _________
Ladies and Gentlemen:
The undersigned, Iron Age Corporation, a Delaware corporation (the
"Borrower"), refers to the Credit Agreement dated as of April 24, 1998 (as
---------
amended, supplemented or otherwise modified from time to time, the "Credit
------
Agreement", the terms defined therein unless otherwise defined herein being used
- - ---------
herein as therein defined), among the Borrower, the Lender Parties party thereto
and Banque Nationale de Paris, as Swing Line Bank and as Agent for Lender
Parties, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of
the Credit Agreement that the Borrower hereby requests a Borrowing under the
Credit Agreement, and in that connection sets forth below the information
relating to such Borrowing (the "Proposed Borrowing") as required by Section
------------------
2.02(a) of the Credit Agreement:
(i) The Business Day of the Proposed Borrowing is requested to be
_________ __, ____.
(ii) The Facility under which the Proposed Borrowing is requested is
the [Acquisition] [Working Capital] Facility.
(iii) The Type of Advances comprising the Proposed Borrowing is [Base
Rate Advances] [Eurodollar Rate Advances].
(iv) The aggregate amount of the Proposed Borrowing is requested to
be $__________.
[(v) The initial Interest Period that is requested for each
Eurodollar Rate Advance to be made as part of the Proposed Borrowing is
[one] [two] [three] [six] __________ month[s].]/1/
___________
/1/ To be included for a Proposed Borrowing requested to be comprised of
Eurodollar Rate Advances.
<PAGE>
2
The Borrower hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in each Loan
Document are true and correct on and as of such date, both before and after
giving effect to the Proposed Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date other than any
such representations or warranties that, by their terms, refer to a
specific date other than the date of the Proposed Borrowing, in which case,
as of such specific date;
(B) no event has occurred and is continuing, or would result from the
Proposed Borrowing or from the application of the proceeds therefrom, that
constitutes a Default;
[(C) the Proposed Borrowing shall be applied in compliance with the
terms set forth in Section 5.02(f)(xi) of the Credit Agreement;]/2/
[(C) the sum of the Loan Values of the Eligible Collateral (as
determined based on the most recent Borrowing Base Certificate delivered to
the Lender Parties under the Credit Agreement) exceeds the aggregate
principal amount of the Working Capital Advances to be outstanding plus the
----
Letter of Credit Advances outstanding plus the aggregate Available Amount
----
of all Letters of Credit outstanding, respectively, as follows:
(1) Borrowing Base Availability Total from the most
recent Borrowing Base Certificate _____________
(2) Working Capital Advances Outstanding _____________
(3) Aggregate Principal Amount of Letter of
Credit Advances Outstanding _____________
(4) Aggregate Principal Amount of Swing
Line Advances Outstanding _____________
(5) Total Available Amount of all Letters of
Credit Outstanding _____________
(6) Total Working Capital Availability
((1) less (2) less (3) less (4) less (5)) _____________
---- ---- ---- ----
[(7) Total Unused Commitments _____________]/3/
________________
/2/ To be used for a Proposed Borrowing consisting of Acquisition Advances.
/3/ To be used for a Proposed Borrowing consisting of Working Capital Advances.
<PAGE>
3
Very truly yours,
IRON AGE CORPORATION
By:____________________________
Name:
Title:
<PAGE>
EXHIBIT C TO THE
CREDIT AGREEMENT
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of April 24, 1998,
(as amended, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"; unless otherwise defined herein, capitalized terms are used herein
- - ---------
as therein defined) among Iron Age Corporation, a Delaware corporation (the
"Borrower"), the Lender Parties party thereto and Banque Nationale de Paris, as
--------
Swing Line Bank, Initial Issuing Bank and as Agent for the Lender Parties.
The "Assignor" and the "Assignee" referred to on Schedule 1 hereto
hereby agree as follows:
1. The Assignor hereby sells and assigns, without recourse except as
to the representations and warranties made by the Assignor herein, to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement as of the Effective Date (as hereinafter defined) equal to the
percentage interest specified on Schedule 1 hereto of all outstanding rights and
obligations under the Facility or Facilities specified on Schedule 1 hereto.
After giving effect to such sale and assignment, the Commitments of each of the
Assignor and the Assignee and the amount of the Advances owing to each of the
Assignor and the Assignee will be as set forth on Schedule 1 hereto.
2. The Assignor (i) hereby represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with any Loan
Document or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of, or the perfection or priority of any lien or security
interest created or purported to be created under or in connection with, any
Loan Document or any other instrument or document furnished pursuant thereto;
(iii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Loan Party or the performance or
observance by any Loan Party of any of its obligations under or in respect of
any Loan Document or any other instrument or document furnished pursuant
thereto; and (iv) attaches the Note or Notes held by the Assignor and requests
that the Agent exchange such Note or Notes for a new Note or Notes payable to
the order of the Assignee in an amount equal to the Commitments assumed by the
Assignee pursuant hereto or new Notes payable to the order of the Assignee in an
amount equal to the Commitments assumed by the Assignee pursuant hereto and to
the order of the Assignor in an amount equal to the Commitments retained by the
Assignor under the Credit Agreement, respectively, as specified on Schedule 1
hereto.
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon
<PAGE>
2
the Agent, the Assignor or any other Lender Party and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Credit Agreement;
(iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers and
discretion under the Loan Documents as are delegated to the Agent by the terms
thereof, together with such powers and discretion as are reasonably incidental
thereto; (v) agrees that it will perform in accordance with their terms all of
the obligations that by the terms of the Credit Agreement are required to be
performed by it as a Lender Party; and (vi) attaches any U.S. Internal Revenue
Service forms required to be provided by it under Section 2.12 of the Credit
Agreement.
4. Following the execution of this Assignment and Acceptance, it
will be delivered to the Agent for Acceptance and recording in the Register by
the Agent. The effective date for this Assignment and Acceptance (the
"Effective Date") shall be the date of acceptance and recording in the Register
--------------
of this Assignment and Acceptance by the Agent, unless otherwise specified on
Schedule 1 hereto.
5. Upon such acceptance and recording in the Register by the Agent,
as of the Effective Date, (i) the Assignee shall be a party to the Credit
Agreement and, to the extent provided in this Assignment and Acceptance, have
the rights and obligations of a Lender Party thereunder and (ii) the Assignor
shall, to the extent provided in this Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Credit Agreement (and, if
this Assignment and Acceptance covers all or the remaining portion of the
Assignor's rights and obligations under the Credit Agreement, such Assignor
shall cease to be a party thereto).
6. Upon such acceptance and recording in the Register by the Agent,
from and after the Effective Date, the Agent shall make all payments under the
Credit Agreement and the Notes in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and
commitment fees with respect thereto) to the Assignee. The Assignor and
Assignee shall make all appropriate adjustments in payments under the Credit
Agreement and the Notes for periods prior to the Effective Date directly between
themselves.
7. This Assignment and Acceptance may be executed in any number of
counterparts and by different 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. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
8. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
<PAGE>
SCHEDULE 1
TO
ASSIGNMENT AND ACCEPTANCE
As to the _______ Facility in respect of which an interest is being assigned:
Percentage interest of such Facility assigned: __________%
amount of Facility assigned to such Assignee
--------------------------------------------
aggregate amount of such Facility
Commitment assumed by the Assignee: $__________
Commitment retained by the Assignor: $__________
Aggregate outstanding principal amount of Advances assigned: $__________
Aggregate outstanding principal amount of Advances retained: $__________
Principal amount of Note payable to Assignee: $__________
Principal amount of Note payable to Assignor: $__________
Effective Date (if other than date of acceptance and recording in the
Register by Agent) /1/: _________ __, ____
__________________
/1/ This date should be no earlier than Five Business Days after the delivery
of this Assignment and Acceptance to the Agent.
<PAGE>
[NAME OF ASSIGNOR], as Assignor
By ________________________________
Name:
Title:
Dated: _________ __, ____
[NAME OF ASSIGNEE], as Assignee
By ________________________________
Name:
Title:
Dated:_________ __, ____
Domestic Lending Office:
Eurodollar Lending Office:
<PAGE>
ACCEPTED /2/[AND APPROVED] this
____ day of ___________ __, ___
BANQUE NATIONALE DE PARIS,
as Agent
By _____________________________
Name:
Title:
By _____________________________
Name:
Title:
/3/[ACCEPTED this ____ day of ______, ____
BANQUE NATIONALE DE PARIS,
as Issuing Bank
By _____________________________
Name:
Title:
By _____________________________
Name:
Title:]
_____________
/2/ Required only if the Assignee is an Eligible Assignee solely by reason of
clause (vii) of the definition of Eligible Assignee.
/3/ Required only (i) if the Assignee is an Eligible Assignee solely by reason
of clause (vii) of the definition of Eligible Assignee and (ii) such
Assignee is becoming a Working Capital Lender.
<PAGE>
/4/[APPROVED this __ day of _________, ____
IRON AGE CORPORATION
By ___________________________
Name:
Title:]
________________
/4/ Required only (i) if the Assignee is an Eligible Assignee solely by reason
of clause (vii) of the definition of Eligible Assignee and (ii) no Default
shall have occurred and be continuing as of the Effective Date.
<PAGE>
EXHIBIT J TO THE
CREDIT AGREEMENT
FORM OF BORROWING BASE CERTIFICATE
To: Banque Nationale de Paris
499 Park Avenue
New York, New York 10022
Attn:
Telecopy: (212) 418-8269
IRON AGE CORPORATION
--------------------
Date: ___________
(1) Inventory Net Availability
[Total from Schedule I] $_________
(2) Accounts Receivable Net Availability
[Total from Schedule II] $_________
(3) Total Borrowing Base Availability
[1 plus 2] $_________
----
(4) Working Capital Facility $_________
(5) The lesser of (3) and (4) $_________
(6) Working Capital Advances Outstanding $_________
(7) Aggregate Principal Amount of
Letter of Credit Advances Outstanding $_________
<PAGE>
2
(8) Total Available Amount of all
Letters of Credit Outstanding
a. Standby Letters of Credit $_________
b. Trade Letters of Credit $_________
c. Total Letters of Credit [(a) plus (b)] $_________
(9) Total Working Capital Availability
[(5) less (6) less (7) less (8)] $_________
This report is submitted pursuant to the Credit Agreement dated as of
April 24, 1998 among Iron Age Corporation, a Delaware corporation (the
"Borrower"), the Lender Parties (the "Lender Parties") that are, or may from
-------- --------------
time to time become, party thereto and Banque Nationale de Paris, as Swing Line
Bank and as Agent for the Lender Parties thereunder. All of the current
accounts referred to in this report (the "Accounts") have been assigned to the
--------
Agent, and the Agent has been granted a lien on and security interest in the
Accounts pursuant to the Collateral Documents. Unless otherwise indicated,
capitalized terms are used herein as defined in the Credit Agreement.
The undersigned hereby certifies that (i) the amounts and the
representations set forth above are true and correct in all material respects,
(ii) the calculations determined herein were determined in accordance with the
Credit Agreement and (iii) except as noted, none of the Accounts referred to in
this report falls within the ineligible or prohibited categories as noted in the
Credit Agreement. We further confirm the above mentioned assignment and grant
of a lien on and security interest in the Accounts to the Agent.
IRON AGE CORPORATION
Date: ___________________ By:_______________________
Name:
Title:
<PAGE>
SCHEDULE I
Inventory Net Availability
--------------------------
(a) Gross Inventory $________
Less: Ineligible Inventory
- - ----
- - --------------------------------------------------------------------------------
(b) Inventory consisting of "perishable agricultural $________
commodities" within the meaning of the Perishable
Agricultural Commodities Act of 1930, as amended, and the
regulations thereunder, or on which a Lien has arisen or
may arise in favor of agricultural producers under
comparable state or local laws
- - --------------------------------------------------------------------------------
(c) Inventory aggregating more than $500,000 at any single $________
location and located on leaseholds as to which the lessor has
not entered into a consent and agreement providing the
Agent with the right to receive notice of default, the right to
repossess such Inventory at any time and such other rights as
may be acceptable to the Agent
- - --------------------------------------------------------------------------------
(d) Inventory that is obsolete, unusable or otherwise unavailable $________
for sale
- - --------------------------------------------------------------------------------
(e) Inventory with respect to which the representations and $________
warranties set forth in Section 8 of the Security Agreement
applicable to Inventory are not true and correct
- - --------------------------------------------------------------------------------
(f) Inventory consisting of promotional, marketing, packaging $________
or shipping materials and supplies exclusive of boxes
containing shoes or boots
- - --------------------------------------------------------------------------------
(g) Inventory that fails to meet in any material respect all $________
standards imposed by any governmental agency, or
department or division thereof, having regulatory authority
over such Inventory or its use or sale
- - --------------------------------------------------------------------------------
(h) Inventory that is subject to any licensing, patent, royalty, $________
trademark, trade name or copyright agreement with any
third party from whom any Loan Party or any of its
Subsidiaries has received written notice of a material dispute
in respect of any such agreement
- - --------------------------------------------------------------------------------
(i) Inventory located outside the United States, Puerto Rico or $________
Canada, other than as permitted under paragraph (j) below
- - --------------------------------------------------------------------------------
<PAGE>
2
- - --------------------------------------------------------------------------------
(j) Inventory that is not in the possession of or under the sole $________
control of the Borrower, IAK Acquisition, Falcon or IA
Canada, other than (i) up to $4,000,000 at any one time
outstanding of Inventory in transit to the Borrower, IAK
Acquisition, Falcon or IA Canada by common carrier,
which Inventory is owned by the Borrower, IAK
Acquisition, Falcon or IA Canada free and clear of all Liens
(other than Liens imposed by such common carrier in the
ordinary course of business in respect of the shipping of
such Inventory) and insured in accordance with Section
11(a) of the Security Agreement or Section 1.9 of the
Canadian Security Agreement with the Agent named as loss
payee under such insurance policy and (ii) any Inventory of
the Borrower, IAK Acquisition or Falcon located on any
customer's premises; provided that such Inventory must be
segregated from all inventory of such customer and must be
clearly identifiable as Inventory of the Borrower, IAK
Acquisition or Falcon; provided further that any such
Inventory on consignment on any customer's premises must
also be subject to UCC-1 protective filings;
- - --------------------------------------------------------------------------------
(k) Inventory consisting of work in progress $________
- - --------------------------------------------------------------------------------
(l) Inventory in respect of which the Security Agreement, the $________
Canadian Security Agreement or the Factor's Lien
Agreement, after giving effect to the related filings of
financing statements that have then been made, if any, does
not or has ceased to create a valid and perfected first
priority lien or security interest in favor of the Agent for
the benefit of the Secured Parties securing the Secured
Obligations and as to which no other Liens exist, other than
Permitted Liens.
- - --------------------------------------------------------------------------------
(m) Other Ineligible Inventory $________
- - --------------------------------------------------------------------------------
(n) Total Ineligible Inventory [(sum of (b) through (m)] $________
- - --------------------------------------------------------------------------------
(o) Eligible Inventory [(a) less (n)] $________
- - --------------------------------------------------------------------------------
================================================================================
Inventory Net Availability at 50% of
Eligible Inventory [(o) multiplied by 50%] $========
---------- --
<PAGE>
SCHEDULE II
Accounts Receivable Net Availability
------------------------------------
(a) Gross Receivables $________
Less: Ineligible Receivables
- - ----
- - --------------------------------------------------------------------------------
(b) Receivables that do not arise out of the sale of goods or the $________
rendering of services in the ordinary course of the
Borrower's, Falcon's, IAK Acquisition's or IA Canada's
business
- - --------------------------------------------------------------------------------
(c) Receivables on terms other than those normal or customary $________
in the Borrower's, Falcon's, IAK Acquisition's or IA
Canada's business
- - --------------------------------------------------------------------------------
(d) Receivables owing (i) from any Loan Party or any of its $________
Subsidiaries or (ii) from any other Person that is an Affiliate
of the Borrower, Falcon, IAK Acquisition or IA Canada
other than Receivables owing by such Affiliate which arose
pursuant to transactions on terms which were fair and
reasonable and no less favorable to the Borrower, Falcon,
IAK Acquisition or IA Canada, as the case may be, than
those which would have been obtained in a comparable
arm's length transaction with a Person not an Affiliate
- - --------------------------------------------------------------------------------
(e) Receivables (i) more than 90 days past original invoice date $________
(but excluding up to $1,500,000 of Receivables not more
than 180 days past original invoice date) or (ii) more than 60
days past the date due
- - --------------------------------------------------------------------------------
(f) Solely with respect to Receivables owned by Falcon or IA $________
Canada, Receivables owing from, as determined as of
January 31, 1998 and thereafter on the first Business Day of
each fiscal quarter ended January 31, April 30, July 31 and
October 31, any Person (i) from which an aggregate amount
of more than 25% of the Receivables owing are (A) more
than 60 days past due or (B) in dispute or (ii) from which an
aggregate amount of 25% or less of the Receivables owing
are (A) more than 60 days past due or (B) in dispute, except
that, with respect to this clause (ii), only to the extent of
those Receivables which are more than 60 days past due and
are in dispute
- - --------------------------------------------------------------------------------
<PAGE>
2
- - --------------------------------------------------------------------------------
(g) Receivables owing from any Person that has asserted any $________
claim, demand or liability, whether by action, suit,
counterclaim or other judicial or arbitral proceeding against
any Loan Party or any of its Subsidiaries; provided,
--------
however, that solely for the purposes of this paragraph (g),
-------
the term "Person" shall mean the invoiced division that is
the contractual obligor of such Receivable
- - --------------------------------------------------------------------------------
(h) Receivables owing from any Person to the extent such $________
Person shall take or be the subject of any action or
proceeding of a type described in Section 6.01(f) of the
Credit Agreement
- - --------------------------------------------------------------------------------
(i) Receivables representing any manufacturer's or supplier's $________
credits, discounts, incentive plans or similar arrangements
entitling any Loan Party to discounts on future purchase
therefrom
- - --------------------------------------------------------------------------------
(j) Receivables arising out of sales to account debtors outside $________
the United States, Puerto Rico or Canada, unless backed by
a letter of credit issued by a bank organized under the laws
of the United States, or any state thereof, and having a
combined capital and surplus of at least $500,000,000
- - --------------------------------------------------------------------------------
(k) Receivables arising out of sales on a bill-and-hold, $________
guaranteed sale, sale-or-return, sale on approval or
consignment basis or subject to any right of return, setoff or
charge-back
- - --------------------------------------------------------------------------------
(l) Receivables in respect of which the Security Agreement, the $________
Canadian Security Agreement or the Factor's Lien
Agreement, after giving effect to the related filings of
financing statements that have then been made, if any, does
not or has ceased to create a valid and perfected first
priority lien on or security interest in favor of the Agent
for the benefit of the Secured Parties securing the Secured
Obligations and as to which no other Liens exist, other than
Permitted Liens
- - --------------------------------------------------------------------------------
<PAGE>
3
- - --------------------------------------------------------------------------------
(m) Other Ineligible Receivables $________
- - --------------------------------------------------------------------------------
(n) Total Ineligible Receivables [sum of (b) through (m)] $________
- - --------------------------------------------------------------------------------
(o) Eligible Receivables [(a) less (n)] $________
================================================================================
Accounts Receivable Net Availability at 80% of
Eligible Receivables [(o) multiplied by 80%] $========
---------- --
<PAGE>
EXHIBIT M-1 TO THE CREDIT
AGREEMENT AS SEPARATELY EXECUTED
BORROWER SOLVENCY CERTIFICATE
IRON AGE CORPORATION
I, Keith McDonough, Chief Financial Officer of Iron Age Corporation, a
Delaware corporation (the "Company") hereby certify that I am the Chief
-------
Financial Officer of the Company and that I am duly authorized to execute this
Solvency Certificate on behalf of the Company, which is hereby delivered
pursuant to Section 3.01(k)(xv) of the Credit Agreement dated as of April 24,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") among the Company, Iron Age Holdings Corporation, a Delaware
- - -----------------
corporation, as Parent Guarantor, the Lender Parties from time to time party
thereto (the "Lender Parties") and Banque Nationale de Paris, as Swing Line Bank
--------------
and as Agent for the Lender Parties. Unless otherwise defined herein
capitalized terms defined in the Credit Agreement are used herein as therein
defined.
I further certify that I am familiar with the properties, businesses,
assets, finances and operations of the Company and its Subsidiaries and have
carefully reviewed the Transaction Documents and the contents of this Solvency
Certificate and, in connection herewith, I have reviewed such other
documentation and I have made such investigation and inquiries as I deem
necessary and prudent therefor. I further certify, on behalf of the Company,
that the financial information and assumptions that underlie and form the basis
for the representations and certifications made in this Solvency Certificate
were reasonable when made and were made in good faith and continue to be
reasonable as of the date hereof.
The Company understands that the Agent, the Lender Parties and the
Hedge Banks are relying upon the truth and accuracy of this Solvency Certificate
in connection with the transactions contemplated by the Loan Documents.
I do hereby further certify, on behalf of the Company, that:
1. I have reviewed the financial statements attached hereto as Annex
A of the Company prepared by its management, including forecasts relating to
balance sheets, income statements and cash flow statements of the Company (the
"Projected Financial Statements"), which were prepared on the basis of the
------------------------------
estimates and assumptions stated therein. The Projected Financial Statements
were prepared in good faith, fairly present the best estimate of the Company's
future financial performance and are reasonable in light of the business
conditions existing on the date hereof.
2. On the date hereof, both before and after giving effect to the
consummation of the Refinancing and the other transactions contemplated by the
Credit Agreement and the other Transaction Documents, the fair value of the
property of the Company is greater than the total amount of liabilities,
including, without limitation, contingent, subordinated, absolute, fixed,
matured or unmatured and liquidated or unliquidated liabilities, of the Company.
3. On the date hereof, both before and after giving effect to the
consummation of the Refinancing and the other transactions contemplated by the
Credit Agreement and the other Transaction Documents, the present fair saleable
value of the assets of the Company exceeds the amount that will be required to
pay the probable liabilities of the Company on its debts as they become absolute
and matured.
<PAGE>
2
4. On the date hereof, both before and after giving effect to the
consummation of the Refinancing and the other transactions contemplated by the
Credit Agreement and the other Transaction Documents, the Company is not engaged
in business or in a transaction, and is not about to engage in business or in a
transaction, for which its property would constitute an unreasonably small
capital.
5. The Company does not intend to, and does not believe that it
will, incur debts and liabilities that will be beyond its ability to pay such
debts or liabilities as they mature.
6. The Company does not intend, in consummating the transactions
contemplated by the Credit Agreement and the other Transaction Documents, to
hinder, delay or defraud either present or future creditors or any other Person
to which the Company is or will become, on or after the date hereof, indebted.
7. In reaching the conclusions set forth in this Solvency
Certificate, I have considered, on behalf of the Company, among other things:
(a) the cash and other current assets of the Company and its
Subsidiaries reflected in the financial statements of the Company delivered
to the Agent and the Lender Parties pursuant to Section 3.01(k)(xiv) of the
Credit Agreement;
(b) all unliquidated and contingent liabilities of the Company and
its Subsidiaries including, without limitation, any claims arising out of
pending or threatened litigation against any such Person or any of their
respective property and assets, and in so doing, the Company has computed
the amount of such liabilities as the amount that, in light of all the
facts and circumstances existing on the date hereof, represents the amount
that can reasonably be expected to become an actual or matured liability
(the "Contingent Liabilities");
----------------------
(c) all obligations and liabilities of the Company and its
Subsidiaries, whether matured or unmatured, liquidated or unliquidated,
disputed or undisputed, secured or unsecured, subordinated, absolute, fixed
or contingent, other than Contingent Liabilities;
(d) historical and anticipated growth in sales volume of the Company
and its Subsidiaries and in the income stream generated by the Company and
its Subsidiaries as reflected in, among other things, the cash flow
statements comprising part of the Projected Financial Statements;
(e) the customary sales terms and the trade payables and other
accounts payable of the Company and its Subsidiaries;
(f) the amount of the credit extended by suppliers and to customers
of the Company and its Subsidiaries;
(g) the amortization and mandatory commitment reduction requirements
set forth in the Credit Agreement, the anticipated interest payable on the
Advances made from time to time under the Credit Agreement and fees payable
under the Credit Agreement;
<PAGE>
3
(h) the level of capital customarily maintained by the Company and
its Subsidiaries and other entities engaged in the same or similar business
as the business of the Company and its Subsidiaries; and
(i) the Projected Financial Statements.
Delivery of an executed counterpart of a signature page to this
Solvency Certificate by telecopier shall be effective as delivery of a manually
executed signature page hereof.
IN WITNESS WHEREOF, the undersigned has executed this Borrower
Solvency Certificate on behalf of the Company this 24th day of April, 1998.
IRON AGE CORPORATION
By: /s/ Keith A. McDonough
---------------------------------
Name: Keith A. McDonough
Title: Chief Financial Officer
<PAGE>
EXHIBIT M-2 TO THE CREDIT
AGREEMENT AS SEPARATELY EXECUTED
PARENT GUARANTOR SOLVENCY CERTIFICATE
IRON AGE HOLDINGS CORPORATION
I, Keith A. McDonough, Chief Financial Officer of Iron Age Holdings
Corporation, a Delaware corporation (the "Parent Guarantor") hereby certify that
----------------
I am the Chief Financial Officer of the Parent Guarantor and that I am duly
authorized to execute this Solvency Certificate on behalf of the Parent
Guarantor, which is hereby delivered pursuant to Section 3.01(k)(xv) of the
Credit Agreement dated as of April 24, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement") among Iron Age
----------------
Corporation, a Delaware corporation, the Parent Guarantor, the Lender Parties
from time to time party thereto and Banque Nationale de Paris, as Swing Line
Bank and as Agent for the Lender Parties. Unless otherwise defined herein,
capitalized terms defined in the Credit Agreement are used herein as therein
defined.
I further certify that I am familiar with the properties, businesses,
assets, finances and operations of the Parent Guarantor and its Subsidiaries and
have carefully reviewed the Transaction Documents and the contents of this
Solvency Certificate and, in connection herewith, I have reviewed such other
documentation and information and I have made such investigation and inquiries
as I deem necessary and prudent therefor. I further certify, on behalf of the
Parent Guarantor, that the financial information and assumptions that underlie
and form the basis for the representations and certifications made in this
Solvency Certificate were reasonable when made and were made in good faith and
continue to be reasonable as of the date hereof.
The Parent Guarantor understands that the Agent, the Lender Parties
and the Hedge Banks are relying upon the truth and accuracy of this Solvency
Certificate in connection with the transactions contemplated by the Loan
Documents.
I do hereby further certify, on behalf of the Parent Guarantor, that:
1. I have reviewed the financial statements attached hereto as Annex
A of the Parent Guarantor prepared by its management, including forecasts
relating to balance sheets, income statements and cash flow statements of the
Parent Guarantor (the "Projected Financial Statements"), which were prepared on
------------------------------
the basis of the estimates and assumptions stated therein. The Projected
Financial Statements were prepared in good faith, fairly present the best
estimate of the Parent Guarantor's future financial performance and are
reasonable in light of the business conditions existing on the date hereof.
2. On the date hereof, both before and after giving effect to the
consummation of the Refinancing and the other transactions contemplated by the
Credit Agreement and the other Transaction Documents, the fair value of the
property of the Parent Guarantor is greater than the total amount of
liabilities, including, without limitation, contingent, subordinated, absolute,
fixed, matured or unmatured and liquidated or unliquidated liabilities, of the
Parent Guarantor.
3. On the date hereof, both before and after giving effect to the
consummation of the Refinancing and the other transactions contemplated by the
Credit Agreement and the other Transaction Documents, the present fair saleable
value of the assets of the Parent Guarantor exceeds the amount that
<PAGE>
2
will be required to pay the probable liabilities of the Parent Guarantor on its
debts as they become absolute and matured.
4. On the date hereof, both before and after giving effect to the
consummation of the Refinancing and the other transactions contemplated by the
Credit Agreement and the other Transaction Documents, the Parent Guarantor is
not engaged in business or in a transaction, and is not about to engage in
business or in a transaction, for which its property would constitute an
unreasonably small capital.
5. The Parent Guarantor does not intend to, and does not believe
that it will, incur debts and liabilities that will be beyond its ability to pay
such debts or liabilities as they mature.
6. The Parent Guarantor does not intend, in consummating the
transactions contemplated by the Credit Agreement and the other Transaction
Documents, to hinder, delay or defraud either present or future creditors or any
other Person to which the Parent Guarantor is or will become, on or after the
date hereof, indebted.
7. In reaching the conclusions set forth in this Solvency
Certificate, I have considered, on behalf of the Parent Guarantor, among other
things:
(a) the cash and other current assets of the Parent Guarantor and its
Subsidiaries reflected in the financial statements of the Parent Guarantor
delivered to the Agent and the Lender Parties pursuant to Section
3.01(k)(xiv) of the Credit Agreement;
(b) all unliquidated and contingent liabilities of the Parent
Guarantor and its Subsidiaries including, without limitation, any claims
arising out of pending or threatened litigation against any such Person or
any of their respective property and assets and in so doing, the Parent
Guarantor has computed the amount of such liabilities as the amount that,
in light of all the facts and circumstances existing on the date hereof,
represents the amount that can reasonably be expected to become an actual
or matured liability (the "Contingent Liabilities");
----------------------
(c) all obligations and liabilities of the Parent Guarantor and its
Subsidiaries, whether matured or unmatured, liquidated or unliquidated,
disputed or undisputed, secured or unsecured, subordinated, absolute, fixed
or contingent, other than Contingent Liabilities;
(d) historical and anticipated growth in sales volume of the Parent
Guarantor and its Subsidiaries and in the income stream generated by the
Parent Guarantor and its Subsidiaries as reflected in, among other things,
the cash flow statements comprising part of the Projected Financial
Statements;
(e) the customary sales terms and the trade payables and other
accounts payable of the Parent Guarantor and its Subsidiaries;
(f) the amount of the credit extended by suppliers and to customers
of the Parent Guarantor and its Subsidiaries;
<PAGE>
3
(g) the amortization and mandatory commitment reduction requirements
set forth in the Credit Agreement the anticipated interest payable on the
Advances made from time to time under the Credit Agreement and fees payable
under the Credit Agreement;
(h) the level of capital customarily maintained by the Parent
Guarantor and its Subsidiaries and other entities engaged in the same or
similar business as the business of the Parent Guarantor and its
Subsidiaries; and
(i) the Projected Financial Statements.
Delivery of an executed counterpart of a signature page to this
Solvency Certificate by telecopier shall be effective as delivery of a manually
executed signature page hereof.
IN WITNESS WHEREOF, the undersigned has executed this Solvency
Certificate on behalf of the Parent Guarantor this 24th day of April, 1998.
IRON AGE HOLDINGS CORPORATION
By: /s/ Keith A. McDonough
----------------------------------
Name: Keith A. McDonough
Title: Chief Financial Officer
<PAGE>
EXHIBIT 10.2
SECURITY AGREEMENT
Dated April 24, 1998
From
THE GRANTORS NAMED HEREIN
as Grantors,
-----------
to
BANQUE NATIONALE DE PARIS,
as Agent
--------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. Grant of Security............................................. 2
SECTION 2. Security for Obligations...................................... 6
SECTION 3. Grantors Remain Liable........................................ 6
SECTION 4. Delivery of Security Collateral, Account Collateral
and other Collateral......................................... 7
SECTION 5. Maintaining the L/C Cash Collateral Account................... 8
SECTION 6. Maintaining the Blocked Accounts.............................. 8
SECTION 7. Investing of Amounts in the L/C Cash Collateral Account....... 9
SECTION 8. Representations and Warranties................................ 9
SECTION 9. Further Assurances............................................ 12
SECTION 10. As to Equipment and Inventory................................. 13
SECTION 11. Insurance..................................................... 14
SECTION 12. Place of Perfection; Records; Collection of Receivables....... 14
SECTION 13. Voting Rights; Dividends; Etc................................. 15
SECTION 14. As to the Assigned Agreements................................. 17
SECTION 15. Transfers and Other Liens; Additional Shares.................. 18
SECTION 16. Agent Appointed Attorney-in-Fact.............................. 18
SECTION 17. Agent May Perform............................................. 19
SECTION 18. The Agent's Duties............................................ 19
SECTION 19. Remedies...................................................... 19
SECTION 20. Registration Rights........................................... 21
SECTION 21. Indemnity and Expenses........................................ 22
</TABLE>
<PAGE>
ii
<TABLE>
<S> <C>
SECTION 22. Security Interest Absolute.................................... 22
SECTION 23. Amendments; Waivers; Etc...................................... 23
SECTION 24. Addresses for Notices......................................... 24
SECTION 25. Continuing Security Interest; Assignments Under the
Credit Agreement............................................. 24
SECTION 26. Release and Termination....................................... 24
SECTION 27. The Mortgages................................................. 25
SECTION 28. Governing Law; Submission to Jurisdiction; Waiver of
Jury Trial; Etc.............................................. 25
</TABLE>
SCHEDULES
- - ---------
Schedule I - Pledged Shares and Pledged Indebtedness
Schedule II - Assigned Agreements
Schedule III - Locations of Equipment and Inventory
Schedule IV - Trade Names and Trademarks
Schedule V - Blocked Accounts
Schedule VI - Financing Statements
EXHIBITS
- - --------
Exhibit A - Form of Blocked Account Letter
Exhibit B - Form of Security Agreement Supplement
Exhibit C - Form of Consent and Agreement
<PAGE>
SECURITY AGREEMENT, dated April 24, 1998 made by IRON AGE CORPORATION,
a Delaware corporation (the "Borrower"), IRON AGE HOLDINGS CORPORATION, a
--------
Delaware corporation, and the Persons listed on the signature pages hereof under
the caption "The Collateral Grantors" (such Persons, together with the Borrower
and the Additional Collateral Grantors (as defined in Section 23(c)), the
"Grantors", and each individually, a "Grantor"), to BANQUE NATIONALE DE PARIS
-------- -------
("BNP"), as agent (together with any successor agent appointed pursuant to
---
Article VIII of the Credit Agreement, the "Agent") for the lenders (the
-----
"Lenders") and the swing line bank (the "Swing Line Bank") party to the Credit
------- ---------------
Agreement (as hereinafter defined), and the issuer of Letters of Credit (the
"Issuing Bank") under the Credit Agreement and as custodian for the Hedge Banks
------------
(as defined in the Credit Agreement).
PRELIMINARY STATEMENTS:
(1) The Borrower has entered into a Credit Agreement dated as of
April 24, 1998 (as amended, supplemented or otherwise modified, the "Credit
------
Agreement"; the terms defined therein and not otherwise defined herein being
- - ---------
used herein as therein defined) with the Lenders, the Issuing Bank, the Swing
Line Bank and the Agent.
(2) Each Grantor is the owner of (i) the shares of stock
(collectively, the "Pledged Shares"), described opposite such Grantor's name on
--------------
Part A of Schedule I hereto and issued by the corporations named therein, (ii)
the indebtedness (the "Pledged Indebtedness") described opposite such Grantor's
--------------------
name on Part B of Schedule I hereto and issued by the obligors named therein,
(iii) the security entitlements (the "Pledged Security Entitlements") described
-----------------------------
opposite such Grantor's name on Part C of Schedule I hereto and with respect to
the financial assets described, the securities intermediary named, and the
securities accounts (the "Securities Accounts") referred to, therein, and (iv)
-------------------
the commodity contracts (the "Pledged Commodity Contracts") described opposite
---------------------------
such Grantor's name on Part D of Schedule I hereto and with respect to the
commodity intermediary named, and the commodity accounts (the "Commodity
---------
Accounts") referred to, therein.
- - --------
(3) The Borrower has opened a non-interest bearing cash collateral
account (the "L/C Cash Collateral Account") with BNP at its offices at 499 Park
---------------------------
Avenue, New York, New York 10022, Account No. 202906-001-35, in the name of the
Borrower but under the sole dominion and control of the Agent and subject to the
terms of this Agreement.
(4) It is a condition precedent to the making of Advances by the
Lender Parties under the Credit Agreement and the issuance of Letters of Credit
by the Issuing Bank under the Credit Agreement that each Grantor shall have
granted the assignment and security interest and made the pledge contemplated by
this Agreement.
<PAGE>
2
(5) Unless otherwise defined herein or in the Credit Agreement,
terms defined in Article 8 or Article 9 of the New York Uniform Commercial Code
as in effect at such time (the "Code") are used herein as therein defined.
----
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lender Parties to make Advances under the Credit Agreement, the
Issuing Bank to issue Letters of Credit under the Credit Agreement and the Hedge
Banks to enter into arrangements permitted by Section 5.02(b)(ii)(A) of the
Credit Agreement, each Grantor hereby agrees with the Agent for the ratable
benefit of the Secured Parties as follows:
SECTION 1. Grant of Security. Each Grantor hereby assigns and
-----------------
pledges to the Agent for the benefit of the Secured Parties, and hereby grants
to the Agent for the benefit of the Secured Parties, a security interest in the
following (collectively, the "Collateral"):
----------
(a) all of such Grantor's right, title and interest, whether now
owned or hereafter acquired, in and to all equipment in all of its forms
wherever located, now or hereafter existing (including, without limitation,
shoemobiles, boxes to be used in connection with shoemobiles, shelving
units, racks, benches, computers, lasting machines, injection molding
machines and other manufacturing machinery), all fixtures and all parts
thereof and all accessions thereto (any and all such equipment, fixtures,
parts and accessions being the "Equipment");
---------
(b) all of such Grantor's right, title and interest, whether now
owned or hereafter acquired, in and to all inventory in all of its forms,
wherever located, now or hereafter existing (including, but not limited to,
(i) all shoes, boots, shoe packaging, leather, outsoles, urethane
compounds, steel toe caps, raw materials and work in process therefor,
finished goods thereof and materials used or consumed in the manufacture or
production thereof, (ii) goods in which such Grantor has an interest in
mass or a joint or other interest or right of any kind (including, without
limitation, goods in which such Grantor has an interest or right as
consignee), (iii) goods that are returned to or repossessed by such Grantor
and (iv) goods in transit to or from such Grantor), and all accessions
thereto and products thereof and documents therefor (any and all such
inventory, accessions, products and documents being the "Inventory");
---------
(c) all of such Grantor's right, title and interest, whether now
owned or hereafter acquired, in and to all accounts, contract rights,
chattel paper, instruments, deposit accounts, general intangibles, rights
to payment of money and other obligations of any kind, 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, and all rights now or
hereafter existing in and to all security agreements, leases and other
contracts securing or otherwise relating to any such accounts, contract
rights, chattel paper, instruments,
<PAGE>
3
deposit accounts, general intangibles or obligations (any and all such
accounts, contract rights, chattel paper, instruments, deposit accounts,
general intangibles and obligations, to the extent not referred to in
clause (d), (e), (f) or (g) below, being the "Receivables", and any and all
-----------
such leases, security agreements and other contracts being the "Related
-------
Contracts");
---------
(d) all of the following (collectively, the "Security Collateral"):
-------------------
(i) the Pledged Shares and the certificates representing the
Pledged Shares, and all dividends, cash, instruments and other
property and assets from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of
the Pledged Shares;
(ii) the Pledged Indebtedness and the instruments evidencing
the Pledged Indebtedness, and all interest, cash, instruments and
other property and assets from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of
the Pledged Indebtedness;
(iii) the Pledged Security Entitlements and all dividends,
interest, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such Pledged Security Entitlements;
(iv) the Securities Accounts, all security entitlements from
time to time carried in the Securities Accounts, and all dividends,
interest, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such security entitlements;
(v) the Pledged Commodity Contracts and all value, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
of such Pledged Commodity Contracts;
(vi) the Commodity Accounts, all commodity contracts from time
to time carried in the Commodity Accounts, and all value, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
of such commodity contracts;
(vii) all additional shares of stock, from time to time
acquired by such Grantor in any manner, and the certificates
representing such additional shares
<PAGE>
4
and all dividends, cash, instruments and other property and assets
from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such additional shares;
provided, that none of the Grantors shall be required to pledge any
--------
shares of Voting Stock or other ownership interest in any Foreign
Subsidiary directly owned thereby which, when aggregated with all of
the other shares of Voting Stock or other ownership interest in such
Foreign Subsidiary pledged by such Grantor and the other Grantors,
would result in more than 66% of the Voting Stock or other ownership
interest in such Foreign Subsidiary entitled to vote (within the
meaning of Treasury Regulation Section 1.956-2(c)(2) promulgated under
the Internal Revenue Code) (the "Voting Equity Interests") (on a fully
-----------------------
diluted basis) being pledged to the Agent, on behalf of the Secured
Parties, under this Agreement and the other Collateral Documents
(although all of the shares of stock or other ownership interests in
such Foreign Subsidiary not entitled to vote (within the meaning of
Treasury Regulation Section 1.956-2(c)(2) promulgated under the
Internal Revenue Code) (the "Non-Voting Equity Interests") shall be
---------------------------
pledged by each of the Grantors that directly owns any such Non-Voting
Equity Interest therein); provided further that, if, as a result of
----------------
any change in the tax laws of the United States of America after the
date of this Agreement, the pledge by such Grantor of any additional
shares of directly owned Voting Stock or other ownership interest in
any such Foreign Subsidiary to the Agent, on behalf of the Secured
Parties, under this Agreement or any of the other Collateral Documents
would not result in an increase in the aggregate net consolidated tax
liabilities of the Borrower and its Subsidiaries, then, promptly after
the change in such laws, all such additional shares of Voting Stock or
other ownership interests shall be so pledged under this Agreement or
such other Collateral Document, as applicable, and; provided further,
----------------
that none of the Grantors shall be required to pledge any shares of
stock or other ownership interest in any Foreign Subsidiary that is
not directly owned by such Grantor (all such shares of stock or other
ownership interests not required to be pledged to the Agent, on behalf
of the Secured Parties, pursuant to this subsection (vii) hereinafter
referred to as the "Excluded Equity Interests");
-------------------------
(viii) all additional indebtedness from time to time owed to
such Grantor in any manner and the instruments evidencing such
additional indebtedness, and all interest, cash, instruments and other
property and assets from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all such
additional indebtedness; and
(ix) all additional investment property (including, without
limitation, all (A) securities, whether certificated or
uncertificated, (B) security
<PAGE>
5
entitlements, as defined in Section 8-102(a)(17) of the Code or, in
the case of any U.S. Treasury book-entry securities, as defined in 31
C.F.R. Section 357.2, or, in the case of any U.S. federal agency book-
entry securities, as defined in the corresponding U.S. federal
regulations governing such book-entry securities, (C) securities
accounts, (D) commodity contracts and (E) commodity accounts) in which
such Grantor has or acquires from time to time any right, title or
interest in any manner, and the certificates or instruments, if any,
representing or evidencing such investment property, and all
dividends, interest, distributions, value, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
investment property, excluding from clauses (A), (B) and (C) of this
---------
subsection (ix) all Excluded Equity Interests;
(e) all of such Grantor's right, title and interest in and to each
agreement set forth beneath such Grantor's name on Schedule II hereto and
each Hedge Agreement to which the Borrower is now or may hereafter become a
party, in each case as such agreement may be amended, supplemented or
otherwise modified from time to time (collectively, the "Assigned
--------
Agreements"), including, without limitation, (i) all rights of such Grantor
----------
to receive moneys due and to become due under or pursuant to the Assigned
Agreements, (ii) all rights of such Grantor to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect to the Assigned
Agreements or any instruments, opinions or documents delivered pursuant
thereto, (iii) all rights of such Grantor in and to all mortgages, security
agreements, leases or other contracts securing or otherwise relating to the
Assigned Agreements, (iv) all claims of such Grantor for damages arising
out of or for breach of or default under the Assigned Agreements and (v)
all rights of such Grantor to terminate the Assigned Agreements, to perform
thereunder and to compel performance and otherwise exercise all remedies
thereunder (all such Collateral being the "Agreement Collateral");
--------------------
(f) all of the following (collectively, the "Account Collateral"):
------------------
(i) the L/C Cash Collateral Account, all funds held therein
and all certificates and instruments, if any, from time to time
representing or evidencing the L/C Cash Collateral Account;
(ii) all Blocked Accounts (as hereinafter defined), all funds
held therein and all certificates and instruments, if any, from time
to time representing or evidencing the Blocked Accounts;
<PAGE>
6
(iii) all other deposit accounts of such Grantor, all funds
held therein and all certificates and instruments, if any, from time
to time representing or evidencing such deposit accounts;
(iv) all Collateral Investments (as hereinafter defined) from
time to time and all certificates and instruments, if any, from time
to time representing or evidencing the Collateral Investments;
(v) all notes, certificates of deposit, deposit accounts,
checks and other instruments from time to time hereafter delivered to
or otherwise possessed by the Agent for or on behalf of such Grantor
in substitution for or in addition to any or all of the then existing
Account Collateral;
(vi) 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 or all of the then
existing Account Collateral; and
(g) all of such Grantor's right, title and interest in and to all
general intangibles of such Grantor (other than general intangibles for
money due or to become due and described in clause (c) above), including,
without limitation, all trademarks (including, without limitation, the
trade names and trademarks listed on Schedule IV attached hereto), trade
names, trade styles, trade secrets, services marks, logos, copyrights,
patents, patent applications and all licenses, license applications,
registrations and registration applications and good will relating to or
associated with any of the foregoing; and
(h) all proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds that constitute property of the
types described in clauses (a) through (g) of this Section 1) and, to the
extent not otherwise included, all (i) payments under insurance (whether or
not the Agent 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 the foregoing Collateral and (ii) cash.
SECTION 2. Security for Obligations. The pledge, assignment and
------------------------
security interest granted under this Agreement by each Grantor secure the
payment of all Obligations of such Grantor now or hereafter existing under the
Loan Documents, whether for principal, interest, premiums, fees, expenses or
otherwise (all such Obligations being the "Secured Obligations"). Without
-------------------
limiting the generality of the foregoing, this Agreement secures the payment of
all amounts that constitute part of the Secured Obligations and would be owed by
such Grantor to the Secured Parties under the Loan Documents but for the fact
that they are
<PAGE>
7
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such Grantor.
SECTION 3. Grantors Remain Liable. Anything herein to the contrary
----------------------
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by the Agent of any of the
rights hereunder shall not release any Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) no Secured Party shall have any obligation or liability under the contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
any Secured Party be obligated to perform any of the obligations or duties of
any Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 4. Delivery of Security Collateral, Account Collateral and
-------------------------------------------------------
other Collateral. (a) All certificates or instruments representing or
- - ----------------
evidencing Security Collateral or Account Collateral shall be delivered to and
held by or on behalf of the Agent pursuant hereto and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to
the Agent. Upon the occurrence and during the continuance of any Event of
Default, the Agent shall have the right, at any time in its discretion and
without notice to any Grantor, to transfer to or register in the name of the
Agent or any of its nominees any or all of the Security Collateral and the
Account Collateral subject only to the revocable rights specified in Section
13(a). In addition, after the occurrence and during the continuance of an Event
of Default, the Agent shall have the right at any time to exchange certificates
or instruments representing or evidencing Security Collateral or Account
Collateral for certificates or instruments of smaller or larger denominations.
(b) With respect to any Security Collateral that constitutes a
security and is not represented or evidenced by a certificate or an instrument,
the applicable Grantor shall cause the issuer thereof either (i) to register the
Agent as the registered owner of such security or (ii) to agree in writing with
such Grantor and the Agent that such issuer will comply with instructions with
respect to such security originated by the Agent without further consent of such
Grantor, such agreement to be in form and substance satisfactory to the Agent.
(c) With respect to any Security Collateral that constitutes a
security entitlement, the applicable Grantor shall cause the securities
intermediary with respect to such security entitlement either (i) to identify in
its records the Agent as having such security entitlement against such
securities intermediary or (ii) to agree in writing with such Grantor and the
Agent that such securities intermediary will comply with entitlement orders
(that is, notifications communicated to such securities intermediary directing
transfer or redemption of
<PAGE>
8
the financial asset to which such Grantor has a security entitlement) originated
by the Agent without further consent of such Grantor, such agreement to be in
form and substance satisfactory to the Agent.
(d) With respect to any Security Collateral that constitutes a
commodity contract, the applicable Grantor shall cause the commodity
intermediary with respect to such commodity contract to agree in writing with
such Grantor and the Agent that such commodity intermediary will apply any value
distributed on account of such commodity contract as directed by the Agent
without further consent of such Grantor, such agreement to be in form and
substance satisfactory to the Agent.
(e) With respect to any Security Collateral that constitutes a
securities account or a commodity account, the applicable Grantor shall, in the
case of a securities account, comply with subsection (c) of this Section 4 with
respect to all security entitlements carried in such securities account and, in
the case of a commodity account, comply with subsection (d) of this Section 4
with respect to all commodity contracts carried in such commodity account.
SECTION 5. Maintaining the L/C Cash Collateral Account. So long as
-------------------------------------------
any Advance shall remain unpaid, any Letter of Credit shall be outstanding, any
Secured Hedge Agreement shall be in effect or any Lender Party shall have any
Commitment under the Credit Agreement:
(a) The Borrower shall maintain the L/C Cash Collateral Account with
BNP.
(b) It shall be a term and condition of the L/C Cash Collateral
Account, notwithstanding any term or condition to the contrary in any other
agreement relating to the L/C Cash Collateral Account, and except as
otherwise provided in Section 19, that no amount (including, without
limitation, interest on Collateral Investments) shall be paid or released
to or for the account of, or withdrawn by or for the account of, the
Borrower or any other Person from the L/C Cash Collateral Account.
The L/C Cash Collateral Account shall be subject to such applicable laws, and
such applicable regulations of the Board of Governors of the Federal Reserve
System and of any other appropriate banking or governmental authority, as are in
effect from time to time.
SECTION 6. Maintaining the Blocked Accounts. So long as any Advance
--------------------------------
shall remain unpaid, any Letter of Credit shall be outstanding, any Secured
Hedge Agreement shall be in effect or any Lender Party shall have any Commitment
under the Credit Agreement:
<PAGE>
9
(a) Each Grantor shall maintain blocked deposit accounts ("Blocked
-------
Accounts") only with banks ("Blocked Account Banks") that have entered into
-------- ---------------------
letter agreements in substantially the form of Exhibit A (or such other
form as the Agent shall agree) with such Grantor and the Agent (the
"Blocked Account Letters").
-----------------------
(b) Each Grantor shall immediately instruct each Person obligated at
any time to make any payment to such Grantor for any reason (an "Obligor")
-------
to make such payment to a Blocked Account and, if an Event of Default shall
have occurred and be continuing, shall, at the request of the Agent, pay to
the Agent for application as provided by the terms of the Credit Agreement,
at the end of each Business Day, all proceeds of Collateral. So long as
an Event of Default shall not have occurred and be continuing or if the
Agent shall not have given the notice referred to in the immediately
preceding sentence, such Grantor may operate the Blocked Account in
accordance with its past business practice.
(c) Upon any termination of any Blocked Account Letter or other
agreement with respect to the maintenance of a Blocked Account by such
Grantor or any Blocked Account Bank, such Grantor shall immediately notify
all Obligors that were making payments to such Blocked Account to make all
future payments to another Blocked Account. Following the occurrence and
during the continuance of an Event of Default, such Grantor agrees to
terminate any or all Blocked Accounts and Blocked Account Letters upon
request by the Agent.
SECTION 7. Investing of Amounts in the L/C Cash Collateral Account.
-------------------------------------------------------
If requested by the Borrower, the Agent shall, subject to the provisions of
Section 19, from time to time invest:
(a) amounts on deposit in the L/C Cash Collateral Account in such
Cash Equivalents in the name of the Agent as the Borrower may select and
the Agent may approve, which approval shall not be unreasonably withheld;
and
(b) interest paid on the Cash Equivalents referred to in subsection
(a) above, and reinvest other proceeds of any such certificates of deposit
of BNP or such overnight funds that may mature or be sold, in each case in
such Cash Equivalents in the name of the Agent as the Borrower may select
and the Agent may approve, which approval shall not be unreasonably
withheld (the Cash Equivalents referred to in subsection (a) above and in
this subsection (b) being, collectively, "Collateral Investments").
----------------------
Interest and proceeds that are not invested or reinvested in Collateral
Investments as provided above shall be deposited and held in the L/C Cash
Collateral Account.
<PAGE>
10
SECTION 8. Representations and Warranties. Each Grantor represents
------------------------------
and warrants as to itself and its Collateral as follows:
(a) Except for Inventory which, for a period not to exceed seven
days, is located on shoemobiles for sale to such Grantor's customers in
amounts consistent with such Grantor's ordinary business practices as
presently conducted or in transit to one of the places referred to below,
all of the Equipment and Inventory is located at the places specified
beneath such Grantor's name on Schedule III hereto. The principal place of
business of such Grantor or, if such Grantor has more than one principal
place of business, the chief executive office of such Grantor, and the
office where such Grantor keeps its records concerning the Receivables, the
original copies of each Assigned Agreement to which it is a party and all
originals of all chattel paper that evidence its Receivables, are located
at the address listed below the name of such Grantor on the signature pages
hereof or, in the case of any Additional Collateral Grantor, at the address
listed below the name of such Additional Collateral Grantor and its
Security Agreement Supplement (as defined in Section 23(c)). Original
copies of each Assigned Agreement and all originals of all chattel paper
that evidence Receivables have been delivered to the Agent. None of the
Receivables or Agreement Collateral is evidenced by a promissory note or
other instrument.
(b) Such Grantor is the legal and beneficial owner of the Collateral
of such Grantor in which it is granting a security interest free and clear
of any Lien, except for the security interest created by this Agreement and
for other Permitted Liens. No effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is
on file in any recording office, except such as may have been filed in
favor of the Agent relating to this Agreement or the other Collateral
Documents, and as set forth in Schedule VI. All of the trade names and
trademarks of each Grantor are set forth below its name on Schedule IV
hereto.
(c) Such Grantor has exclusive possession and control of the
Equipment and Inventory of such Grantor, other than Inventory (i) which is
located on shoemobiles for sale to such Grantor's customers for any single
period not to exceed seven days, (ii) Inventory in transit to any Grantor
by common carrier from locations outside the United States or Canada and
(iii) in-plant Inventory and Inventory on consignment with customers of the
Borrower.
(d) All of the shares of stock that constitute Pledged Shares have
been duly authorized and validly issued and are fully paid and
nonassessable. The Pledged Indebtedness has been duly authorized,
authenticated or issued and delivered, is the legal, valid and binding
obligation of the issuers thereof and is not in default.
<PAGE>
11
(e) The Pledged Shares of such Grantor constitute the percentage of
the issued and outstanding shares of stock of the issuers thereof indicated
on Part A of Schedule I hereto. The Pledged Indebtedness of such Grantor is
outstanding in the principal amount indicated on Part B of Schedule I
hereto.
(f) All of the investment property owned by such Grantor on the date
hereof is listed on Schedule I hereto other than the Voting Equity
Interests in one or more of the Foreign Subsidiaries that, when aggregated
with all of the other Voting Equity Interests in each such Foreign
Subsidiary directly owned by such Grantor and the other Grantors, exceeds
34% of the issued and outstanding Voting Equity Interests in such Foreign
Subsidiary (on a fully diluted basis) and other shares of stock or other
ownership interests in any Foreign Subsidiary that are indirectly owned by
such Grantor. The jurisdiction (for purposes of Section 8-110(e) of the
Code) of each securities intermediary that maintains a Securities Account
for such Grantor is as set forth on Schedule I hereto. The jurisdiction
(for purposes of Section 9-103(6)(e) of the Code) of each commodity
intermediary that maintains a Commodity Account for such Grantor is as set
forth on Schedule I hereto.
(g) The Assigned Agreements of such Grantor, true and complete
copies of which have been furnished to each Lender Party, (i) have been
duly authorized, executed and delivered by all other parties thereto, (ii)
have not been amended, supplemented or otherwise modified and are in full
force and effect, and (iii) are binding upon and enforceable against all
parties thereto in accordance with their terms. There exists no default
under any Assigned Agreement by any party thereto. Each party to any
Assigned Agreement, other than the Hedge Agreements, has executed and
delivered to such Grantor a consent, in substantially the form of Exhibit C
hereto (or otherwise in form and substance satisfactory to the Agent), to
the assignment of the Agreement Collateral to the Agent pursuant to this
Agreement.
(h) No Grantor has Blocked Accounts or other deposit accounts other
than the Blocked Accounts and other deposit accounts listed on Schedule V
hereto.
(i) This Agreement, the pledge of the Security Collateral pursuant
hereto and the pledge and assignment of the Agreement Collateral and the
Account Collateral pursuant hereto, together with the filings described
below, create a valid and perfected first priority security interest in all
material respects in the Collateral, taken as a whole, subject to Permitted
Liens, other Liens permitted pursuant to Section 5.02(a) of the Credit
Agreement and bills of lading held by common carriers for Collateral in
transit to any Grantor from locations outside the United States, securing
the payment of the Secured Obligations, and all filings and other actions
necessary or desirable to perfect and protect such security interest have
been duly made or taken.
<PAGE>
12
(j) No consent of any other Person and no authorization, approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body or any other third party is required for (i)
the grant by such Grantor of the assignment and security interest granted
hereby, the pledge by such Grantor of the Security Collateral pursuant
hereto or the execution, delivery or performance of this Agreement by such
Grantor, (ii) the perfection or maintenance of the pledge, assignment and
security interest created hereby (including the first priority nature of
such pledge, assignment or security interest) in all material respects
other than the filing of financing and continuation statements under the
Uniform Commercial Code in the jurisdictions listed on Schedule VI hereto,
or (iii) the exercise by the Agent of its voting or other rights provided
for in this Agreement or the remedies in respect of the Collateral pursuant
to this Agreement (except as may be required in connection with the
disposition of any portion of the Security Collateral by laws affecting the
offering and a sale of securities generally).
(k) Inventory which has been produced by any Grantor has been
produced in compliance with the requirements of the Fair Labor Standards
Act.
SECTION 9. Further Assurances. (a) Each Grantor agrees that from
------------------
time to time, at its own expense, it shall promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Agent may request, in order to perfect and
protect any pledge, assignment or security interest granted or purported to be
granted hereby (including, without limitation, the first priority nature
thereof) or to enable the Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral of such Grantor. Without limiting the
generality of the foregoing, each Grantor shall promptly after an Event of
Default: (i) mark conspicuously each document included in the Inventory, each
chattel paper included in the Receivables, each Related Contract, each Assigned
Agreement and, at the request of the Agent, each of its records pertaining to
the Collateral with a legend, in form and substance satisfactory to the Agent,
indicating that such document, chattel paper, Related Contract, Assigned
Agreement or Collateral is subject to the security interest granted hereby; (ii)
if any Collateral of such Grantor shall be evidenced by a promissory note or
other instrument or chattel paper, deliver and pledge to the Agent hereunder
such note, instrument or chattel paper duly indorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and substance
satisfactory to the Agent; and (iii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable or as the Agent may request, in order
to perfect and preserve the pledge, assignment and security interest granted or
purported to be granted hereby.
(b) Each Grantor hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral
<PAGE>
13
without the signature of such Grantor where permitted by law. A photocopy or
other reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
(c) Each Grantor shall furnish to the Agent, upon the Agent's
request at any time after the occurrence and during the continuance of an Event
of Default or, in any event, once annually, statements and schedules further
identifying and describing the Collateral of such Grantor and such other reports
in connection with the Collateral of such Grantor as the Agent may reasonably
request, all in reasonable detail.
(d) Each Grantor shall not materially amend, alter, modify or change
any provision of the lease dated January 14, 1994, entered into between Robert
A. Roy d/b/a Roy Continental Mill and Falcon Shoe Mfg. Co. (the "Lewiston
--------
Lease"). Each Grantor shall deliver a copy of any notice of default under the
- - -----
Lewiston Lease to the Agent.
SECTION 10. As to Equipment and Inventory. (a) Each Grantor shall
-----------------------------
keep its Equipment and Inventory (other than Inventory (i) which is located on
shoemobiles for sale to such Grantor's customers for any single period not to
exceed seven days and (ii) Inventory in transit to any Grantor by common carrier
from locations outside the United States) at the locations specified therefor in
Section 8(a) or, upon 30 days' prior written notice to the Agent, at such other
locations in a jurisdiction where all action required by Section 9 shall have
been taken with respect to such Equipment and Inventory.
(b) Each Grantor shall cause the Equipment to be maintained and
preserved in the same condition, repair and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacture's manual and
shall forthwith, or in the case of any loss or damage to any of the Equipment as
quickly as practicable after the occurrence thereof, make or cause to be made
all repairs, replacements and other improvements in connection therewith that
are necessary or desirable to such end. Each Grantor shall promptly furnish to
the Agent a statement respecting any material loss or damage to any of the
Equipment.
(c) Each Grantor shall pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all
claims (including, without limitation, claims for labor, materials and supplies)
against, the Equipment and Inventory.
(d) Each Grantor which produces Inventory shall do so in compliance
with all requirements of the Fair Labor Standards Act.
<PAGE>
14
(e) Upon the Agent's reasonable request (i) at any time after the
occurrence and during the continuance of an Event of Default or, (ii) in any
event, once annually, each Grantor shall furnish to each of the Secured Parties
a report detailing material changes in the amount and condition of the
Equipment, including purchases, depreciation, sales and losses.
(f) Not more than once each year or at any time during the
occurrence and continuance of an Event Default, promptly upon the reasonable
request of the Agent, each Grantor shall deliver to the Agent such warehouse
receipts, bills of lading and other documents of title with respect to Inventory
and Equipment as are requested, together with copies of all invoices with
respect to the Inventory and Equipment.
(g) Each Grantor shall not deposit any Collateral to the landlord
for the Lewiston, Maine facility for a "negotiable" (as such term is used in
Section 7-104 of the Uniform Commercial Code as in effect in Maine or under
other relevant law) receipt or any other document.
SECTION 11. Insurance. (a) Each Grantor shall, at its own expense,
---------
maintain insurance with respect to the Equipment and Inventory in such amounts,
against such risks, in such form and with such insurers, as shall be
satisfactory to the Agent from time to time. Each such policy shall in addition
(i) name such Grantor and the Agent as insured parties thereunder (without any
representation or warranty by or obligation upon the Agent) as their interests
may appear, (ii) provide that there shall be no recourse against the Agent for
payment of premiums or other amounts with respect thereto and (iii) provide that
at least ten days' prior written notice of cancellation or of lapse shall be
given to the Agent by the insurer. Each Grantor shall, if so requested by the
Agent, deliver to the Agent original or duplicate policies of such insurance
and, upon the Agent's request at any time after the occurrence and during the
continuance of an Event of Default and, in any event, once annually, a report of
a reputable insurance broker with respect to such insurance. Further, each
Grantor shall, at the request of the Agent, duly execute and deliver instruments
of assignment of such insurance policies to comply with the requirements of
Section 9.
(b) Reimbursement under any liability insurance maintained by any
Grantor pursuant to this Section 11 may be paid directly to the Person who shall
have incurred liability covered by such insurance. In case of any loss
involving damage to any Equipment or Inventory when Section 11(c) is not
applicable, such Grantor shall make or cause to be made the necessary repairs to
or replacements of such Equipment or Inventory, and any proceeds of insurance
maintained by such Grantor pursuant to this Section 11 shall be paid to such
Grantor as reimbursement for the costs of such repairs or replacements.
(c) Upon the occurrence and during the continuance of any Event of
Default, or the actual or constructive total loss (in excess of $500,000 per
occurrence) of any
<PAGE>
15
Equipment or Inventory, all insurance payments in respect of such Equipment or
Inventory shall be paid to and applied by the Agent as specified in Section
19(b).
SECTION 12. Place of Perfection; Records; Collection of Receivables.
-------------------------------------------------------
(a) Each Grantor shall keep its principal place of business and its chief
executive office, and the office where it keeps its records concerning the
Collateral of such Grantor and the original copies of the Assigned Agreements of
such Grantor to which it is a party, and all originals of all chattel paper that
evidence its Receivables, at the location therefor specified in Section 8(a) or,
upon 30 days' prior written notice to the Agent, at such other locations in a
jurisdiction where all actions required by Section 9 shall have been taken with
respect to the Collateral. Each Grantor shall hold and preserve such records,
Assigned Agreements and chattel paper and shall permit representatives of the
Agent at any time during normal business hours of such Grantor to inspect and
make abstracts from such records and chattel paper. If the jurisdiction of any
securities intermediary that maintains a Securities Account or the jurisdiction
of any commodity intermediary that maintains a Commodity Account shall change
from that jurisdiction specified in Section 8(f), such Grantor shall promptly
notify the Agent of such change and of such new jurisdiction.
(b) Except as otherwise provided in this Section 12(b), each Grantor
shall continue to collect, at its own expense, all amounts due or to become due
such Grantor under the Receivables. In connection with such collections, each
Grantor may take (and, at the Agent's direction, shall take) such action as such
Grantor or the Agent may reasonably deem necessary or advisable to enforce
collection of the Receivables; provided, however, that the Agent shall have the
-------- -------
right at any time after the occurrence and during the continuance of an Event of
Default, upon written notice to such Grantor of its intention to do so, to
notify the account debtors or obligors under any Receivables of the assignment
of such Receivables to the Agent and to direct such account debtors or obligors
to make payment of all amounts due or to become due to such Grantor thereunder
directly to the Agent and, upon such notification and at the expense of such
Grantor, to enforce collection of any such Receivables, and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done. After receipt by any Grantor of the
notice from the Agent referred to in the proviso to the immediately preceding
-------
sentence, (i) all amounts and proceeds (including instruments) received by such
Grantor in respect of the Receivables shall be received in trust for the benefit
of the Agent hereunder, shall be segregated from other funds of such Grantor and
shall be forthwith paid over to the Agent in the same form as so received (with
any necessary indorsement or assignment) to be held as cash collateral and
applied as provided by Section 19(b), and (ii) such Grantor shall not adjust,
settle or compromise the amount or payment of any Receivable, release wholly or
partly any account debtor or obligor thereof, or allow any credit or discount
thereon.
<PAGE>
16
SECTION 13. Voting Rights; Dividends; Etc. (a) So long as no Event
-----------------------------
of Default shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise or refrain from
exercising any and all voting and other consensual rights pertaining to the
Security Collateral or any part thereof for any purpose not inconsistent
with the terms of this Agreement or the other Loan Documents.
(ii) Each Grantor shall be entitled to receive and retain any and all
dividends, distributions and interest paid in respect of the Security
Collateral; provided, however, that any and all
-------- -------
(A) dividends and interest paid or payable other than in cash
in respect of, and instruments and other property and assets received
or receivable or otherwise distributed in respect of, or in exchange
for, any Security Collateral,
(B) dividends and other distributions paid or payable in cash
in respect of any Security Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(C) cash paid or payable or otherwise distributed in respect
of principal of, or in redemption of, or in exchange for, any Security
Collateral
shall be, and shall be forthwith delivered to the Agent to hold as,
Security Collateral and, if received by such Grantor, shall be received in
trust for the benefit of the Agent, shall be segregated from other property
and assets or funds of such Grantor and shall be forthwith delivered to the
Agent as Security Collateral in the same form as so received (with any
necessary indorsement or assignment). Each Grantor promptly upon the
request of the Agent, shall execute such documents and do such acts as may
be necessary or desirable in the judgment of the Agent to give effect to
this clause (ii).
(iii) The Agent shall execute and deliver (or cause to be executed
and delivered) to each Grantor all such proxies and other instruments as
such Grantor may request for the purpose of enabling such Grantor to
exercise the voting and other consensual rights that it is entitled to
exercise pursuant to subparagraph (i) of this Section 13(a) and to receive
the dividends, distributions or interest payments that it is authorized to
receive and retain pursuant to clause (ii) of this Section 13(a).
<PAGE>
17
(b) Upon the occurrence and during the continuance of an Event of
Default and upon exercise of foreclosure remedies by the Agent under Section 19
hereof:
(i) All rights of each Grantor to (A) exercise or refrain from
exercising the voting and other consensual rights that it would otherwise
be entitled to exercise pursuant to subparagraph (i) of Section 13(a)
shall, upon notice to such Grantor by the Agent, cease and (B) receive the
dividends, interest payments and other distributions that it would
otherwise be authorized to receive and retain pursuant to subparagraph (ii)
of Section 13(a) shall automatically cease, and all such rights shall
thereupon become vested in the Agent, which shall thereupon have the sole
right to exercise or refrain from exercising such voting and other
consensual rights and to receive and retain as Security Collateral such
dividends, interest payments and other distributions.
(ii) All dividends, interest payments and other distributions that
are received by any Grantor contrary to the provisions of clause (i) of
this Section 13(b) shall be received in trust for the benefit of the Agent,
shall be segregated from other property and assets or funds of such Grantor
and shall be forthwith paid over to the Agent as Security Collateral in the
same form as so received (with any necessary indorsement or assignment).
SECTION 14. As to the Assigned Agreements. (a) Each Grantor shall,
-----------------------------
at its own expense:
(i) perform and observe all the terms and provisions of each
Assigned Agreement to be performed or observed by it, maintain such
Assigned Agreement in full force and effect and enforce each such Assigned
Agreement in accordance with its terms, and take all such action to such
end as may be from time to time reasonably requested by the Agent; and
(ii) furnish to the Agent, promptly upon receipt thereof, copies of
all notices, requests and other documents received by such Borrower under
or pursuant to any Assigned Agreement and, from time to time, (A) furnish
to the Agent such information and reports regarding the Collateral as the
Agent may reasonably request and (B) upon the request of the Agent, make to
each other party to any Assigned Agreement such demands and requests for
information and reports or for action as such Grantor is entitled to make
under such Assigned Agreement.
(b) Each Grantor agrees not:
<PAGE>
18
(i) to cancel or terminate any Assigned Agreement or consent to or
accept any cancellation or termination thereof without the consent of the
Agent, which consent shall not be unreasonably withheld,
(ii) to amend, modify or otherwise change in any manner any material
term or material condition of any Assigned Agreement or give any consent,
waiver or approval thereunder without the consent of the Agent, which
consent shall not be unreasonably withheld,
(iii) to waive any default under or any breach of any term or
condition of any Assigned Agreement without the consent of the Agent, which
consent shall not be unreasonably withheld, or
(iv) take any other action in connection with any Assigned Agreement
that would impair the value of the interest or rights of such Grantor
thereunder or that would impair the interest or rights of the Agent.
SECTION 15. Transfers and Other Liens; Additional Shares. (a) Each
--------------------------------------------
Grantor agrees not (i) to sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the
Collateral, except sales of Inventory in the ordinary course of business and
sales permitted pursuant to Section 5.02(e) of the Credit Agreement, or (ii) to
create or suffer to exist any Lien upon or with respect to any of the
Collateral, except for the pledge, assignment and security interest created by
this Agreement, Permitted Liens, and other Liens to the extent permitted
pursuant to Section 5.02(a) of the Credit Agreement.
(b) Each Grantor shall (i) cause each issuer of the Pledged Shares
not to issue any stock or other securities in addition to or in substitution for
the Pledged Shares issued by such issuer, except to such Grantor, and (ii)
pledge to the Agent hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all additional shares of stock or other securities
of each issuer of the Pledged Shares.
SECTION 16. Agent Appointed Attorney-in-Fact. Each Grantor hereby
--------------------------------
irrevocably appoints the Agent such Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such Grantor
or otherwise, upon the occurrence and continuance of an Event of Default, to
take any action and to execute any instrument that the Agent may deem necessary
or advisable to accomplish the purposes of this Agreement, including, without
limitation:
(a) to obtain and adjust insurance required to be paid to the Agent
pursuant to Section 11,
<PAGE>
19
(b) to ask for, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral,
(c) to receive, indorse and collect any drafts, instruments,
chattel paper and other documents in connection with Section 16(a) or 16(b)
above (including, without limitation, all instruments representing any
dividend, interest payment or other distribution in respect of the Security
Collateral or any part thereof) and give full discharge for the same, and
(d) to file any claims, to take any action or to institute any
proceedings that the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce compliance with
the terms and conditions of any Assigned Agreement or to enforce the rights
of the Agent with respect to any of the Collateral.
SECTION 17. Agent May Perform. If any Grantor fails to perform any
-----------------
agreement contained herein, the Agent may upon notice to such Grantor perform,
or cause the performance of, such agreement, and the expenses of the Agent
incurred in connection therewith shall be payable by such Grantor under Section
21(b).
SECTION 18. The Agent's Duties. The powers conferred on the Agent
------------------
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the safe custody and preservation of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Agent shall have no duty as to any Collateral, as to ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Security Collateral, whether or not any Secured
Party has or is deemed to have knowledge of such matters, or as to the taking of
any necessary steps to preserve rights against any parties or any other rights
pertaining to any Collateral. The Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which BNP accords its own property of like tenor.
SECTION 19. Remedies. If any Event of Default shall have occurred
--------
and be continuing:
(a) The Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it under applicable law, all the rights and remedies of a
secured party upon default under the Uniform Commercial Code in effect in
the State of New York at such time (the "Code") (whether or not the Code
----
applies to the affected Collateral), and also may (i) require
<PAGE>
20
each Grantor to, and each Grantor hereby agrees that it shall at its own
expense and upon request of the Agent forthwith, assemble all or part of
the Collateral as directed by the Agent and make it available to the Agent
at a place to be designated by the Agent that is reasonably convenient to
both parties and (ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private
sale, at any exchange or broker's board or at any of the Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Agent may deem commercially reasonable. Each Grantor agrees
that, to the extent notice of sale shall be required by law, at least ten
days' notice to such Grantor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute
reasonable notification. The Agent shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. The Agent may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(b) Any cash held by the Agent as Collateral and all cash proceeds
received by the Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral may, in the discretion
of the Agent, be held by the Agent as collateral for, and/or then or at any
time thereafter applied (after payment of any amounts payable to the Agent
pursuant to Section 21) in whole or in part by the Agent for the ratable
benefit of the Secured Parties against all or any part of the Secured
Obligations in such order as the Agent shall elect. In determining the
amounts owing to the Hedge Banks under the Secured Hedge Agreements, the
Agent shall be entitled to rely and be fully protected in relying, upon the
Agreement Values of the Secured Hedge Agreements. The term "Agreement
Value" means, with respect to any Secured Hedge Agreement at any date of
determination, the amount, if any, that would be payable to the Hedge Bank
in respect of any "agreement value" under such Secured Hedge Agreement as
though such Secured Hedge Agreement were terminated on such date,
calculated as provided in the 1991 ISDA Definitions published by the
International Swap Dealers Association, Inc. Each determination of
Agreement Value shall be made by the Agent in good faith and in reliance on
any information (including information provided by such Hedge Bank) that it
believes accurate, but without any obligation to verify such information.
Any surplus of such cash or cash proceeds held by the Agent and remaining
after payment in full of all of the Secured Obligations shall be paid over
to the Grantors or to whomsoever may be lawfully entitled to receive such
surplus.
(c) The Agent may exercise any and all rights and remedies of the
Grantors under or in connection with the Assigned Agreements or otherwise
in respect of the Collateral, including, without limitation, any and all
rights of the Grantors to demand
<PAGE>
21
or otherwise require payment of any amount under, or performance of any
provision of, any Assigned Agreement or any other Collateral.
(d) All payments received by any Grantor under or in connection
with any Assigned Agreement or otherwise in respect of the Collateral shall
be received in trust for the benefit of the Agent, shall be segregated from
other funds of such Grantor and shall be forthwith paid over to the Agent
in the same form as so received (with any necessary indorsement or
assignment).
(e) The Agent may, without notice to any Grantor, except as
required by law, and at any time or from time to time, charge, set off and
otherwise apply all or any part of the Secured Obligations against the L/C
Cash Collateral Account, or any part thereof.
SECTION 20. Registration Rights. If the Agent shall determine to
-------------------
exercise its right to sell all or any of the Security Collateral pursuant to
Section 19, each Grantor agrees that, upon request of the Agent, such Grantor
will, at its own expense:
(a) execute and deliver, and cause each issuer of the Security
Collateral of such Grantor contemplated to be sold and the directors and
officers thereof to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts and things, as
may be necessary or, in the reasonable opinion of the Agent, advisable to
register such Security Collateral under the provisions of the Securities
Act of 1933, as from time to time amended (the "Securities Act"), to cause
--------------
the registration statement relating thereto to become effective and to
remain effective for such period as prospectuses are required by law to be
furnished, and to make all amendments and supplements thereto and to the
related prospectus that, in the reasonable opinion of the Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto;
(b) use its best efforts to qualify the Security Collateral under
the state securities or "blue sky" laws and to obtain all necessary
governmental approvals for the sale of the Security Collateral, as
reasonably requested by the Agent;
(c) cause each such issuer that is a Subsidiary of such Grantor to
make available to its security holders, as soon as practicable, an earnings
statement that will satisfy the provisions of Section 12(a) of the
Securities Act and the rules and regulations thereunder;
<PAGE>
22
(d) provide the Agent with such other information and projections
as may be reasonably necessary or, in the reasonable opinion of the Agent,
advisable to enable the Agent to effect the sale of such Security
Collateral; and
(e) do or use its best efforts cause to be done all such other acts
and things as may be necessary to make such sale of the Security Collateral
or any part thereof valid and binding and in compliance with applicable
law.
The Agent is authorized, in connection with any sale of the Security Collateral
pursuant to Section 19, to deliver or otherwise disclose to any prospective
purchaser of the Security Collateral (i) any registration statement or
prospectus, and all supplements and amendments thereto, prepared pursuant to
subsection (a) above, (ii) any information and projections provided to it
pursuant to subsection (d) above and (iii) any other information in its
possession relating to the Security Collateral. Solely for purposes of this
Section 20, the term "Security Collateral" will not include Pledged
Indebtedness.
SECTION 21. Indemnity and Expenses. (a) Each of the Grantors
----------------------
jointly and severally agrees to indemnify the Agent, each Secured Party and each
of their respective officers, directors, employees, agents and advisors (each an
"Indemnified Party") from, and hold each of them harmless against, any and all
-----------------
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and reasonable expenses of counsel) arising out of
or in connection with or resulting from this Agreement (including, without
limitation, enforcement of this Agreement), except to the extent that such
claims, damages, losses, liabilities and expenses are found in a final,
nonappealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct.
(b) Each Grantor jointly and severally agrees to pay to the Agent,
upon demand, the amount of any and all expenses (including, without limitation,
the reasonable fees and expenses of its counsel and of any experts and agents)
that the Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of any Secured Party hereunder or
(iv) the failure by such Grantor to perform or observe any of the provisions
hereof.
SECTION 22. Security Interest Absolute. The obligations of each
--------------------------
Grantor under this Agreement are independent of the Secured Obligations, and a
separate action or actions may be brought and prosecuted against such Grantor to
enforce this Agreement irrespective of whether any action is brought against the
other Grantors or whether the other Grantors are joined in any such action or
actions. All rights of the Agent and the pledge,
<PAGE>
23
assignment and security interest hereunder, and all obligations of each Grantor
hereunder, shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of any Loan Document,
any Hedge Agreement or any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from any Loan
Document or any Secured Hedge Agreement, including, without limitation, any
increase in the Secured Obligations resulting from the extension of
additional credit to any Grantor or any of its Subsidiaries or otherwise;
(iii) any taking, exchange, release or nonperfection of any
Collateral, or any taking, release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Secured Obligations;
(iv) any manner of application of Collateral, or proceeds thereof,
to all or any of the Secured Obligations, or any manner of sale or other
disposition of any Collateral for all or any of the Secured Obligations or
any other assets of any Grantor or any of its Subsidiaries;
(v) any change, restructuring or termination of the corporate
structure or existence of any Grantor or any of its Subsidiaries; or
(vi) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, such Grantor or a third party
grantor of a security interest.
SECTION 23. Amendments; Waivers; Etc. (a) No amendment or waiver of
------------------------
any provision of this Agreement, and no consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
(b) No failure on the part of any Secured Party to exercise, and no
delay in exercising, any right, power or privilege hereunder shall operate as a
waiver thereof or consent thereto; nor shall any single or partial exercise of
any such right, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
<PAGE>
24
(c) Upon the execution and delivery by any Person of a security
agreement supplement in substantially the form of Exhibit B hereto (each a
"Security Agreement Supplement"), (i) such Person shall be referred to as an
- - ------------------------------
"Additional Collateral Grantor" and shall be and become a Grantor, and each
- - ------------------------------
reference in this Agreement to "Grantor" shall also mean and be a reference to
such Additional Collateral Grantor and (ii) the supplements attached to each
Security Agreement Supplement shall be incorporated into and become a part of
and supplement Schedules I through V hereto, as appropriate, and the Agent may
attach such supplements to such Schedules, and each reference to such Schedules
shall mean and be a reference to such Schedules, as supplemented pursuant
hereto.
SECTION 24. Addresses for Notices. All notices and other
---------------------
communications provided for hereunder shall be in writing (including telecopier,
telegraphic or telex communication) and mailed, telecopied, telegraphed,
telexed, cabled or delivered, if to any Grantor, addressed to it at the address
set forth below the name of such Grantor on the signature pages hereof, and if
to the Agent, any Lender, the Issuing Bank, the Swing Line Bank or any Hedge
Bank, addressed to it at its address set forth in Section 9.02 of the Credit
Agreement, or, as to any party, at such other address as shall be designated by
such party in a written notice to the each other party complying as to delivery
with the terms of this Section 24. All such notices and other communications
shall, when mailed, telecopied, telegraphed or telexed, be effective when
deposited in the mails, delivered to the telegraph company, transmitted by
telecopier or confirmed by telex answerback, respectively, addressed as
aforesaid.
SECTION 25. Continuing Security Interest; Assignments Under the
---------------------------------------------------
Credit Agreement. This Agreement shall create a continuing security interest in
- - ----------------
the Collateral and shall (a) remain in full force and effect until the latest of
(i) the payment in full in cash of the Secured Obligations and all other amounts
payable under this Agreement, (ii) the Termination Date and (iii) the
termination or expiration of all Secured Hedge Agreements, (b) be binding upon
each Grantor, its successors and assigns, and (c) inure, together with the
rights and remedies of the Agent hereunder, to the benefit of and be enforceable
by the Secured Parties and their respective successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), subject to Section
9.07 of the Credit Agreement, any Lender Party may assign or otherwise transfer
all or any portion of its rights and obligations under the Credit Agreement
(including, without limitation, all or any portion of its Commitment or
Commitments, the Advances owing to it and any Note or Notes held by it) to any
other Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender Party herein or otherwise, in
each case as provided in Section 9.07 of the Credit Agreement.
SECTION 26. Release and Termination. (a) Upon any sale, lease,
-----------------------
transfer or other disposition of any item of Collateral in accordance with the
terms of the Loan
<PAGE>
25
Documents (other than sales of Inventory and Equipment in the ordinary course of
business), the Agent shall, at the appropriate Grantor's expense, execute and
deliver to such Grantor such documents as such Grantor shall reasonably request
to evidence the release of such item of Collateral from the assignment and
security interest granted hereby; provided, however, that (i) at the time of
-------- -------
such request and such release, no Default shall have occurred and be continuing,
(ii) such Grantor shall have delivered to the Agent, at least ten days prior to
the date of the proposed release, a request for release describing the item of
Collateral and the terms of the sale, lease, transfer or other disposition in
reasonable detail (including, without limitation, the price thereof and any
expenses in connection therewith), together with a form of release for execution
by the Agent and a certification by such Grantor to the effect that the
transaction is in compliance with the Loan Documents and as to such other
matters as the Agent may request and (iii) the proceeds of any such sale, lease,
transfer or other disposition required to be applied in accordance with Section
2.06(b) of the Credit Agreement shall be paid to, or in accordance with the
instructions of, the Agent at the closing thereof.
(b) Upon the later of (i) the cash payment in full of the Secured
Obligations, (ii) the Termination Date and (iii) the termination or expiration
of all Secured Hedge Agreements, the pledge, assignment and security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the appropriate Grantor. Upon any such termination and reversion, the Agent
shall, at the appropriate Grantor's expense, return to such Grantor such of the
Collateral of such Grantor in its possession as shall not have been sold or
otherwise applied pursuant to the terms of the Loan Documents and execute and
deliver to such Grantor such documents as such Grantor shall reasonably request
to evidence such termination and reversion.
SECTION 27. The Mortgages. In the event that any of the Collateral
-------------
hereunder is also subject to a valid and enforceable Lien under the terms of any
Mortgage and the terms of such Mortgage are inconsistent with the terms of this
Agreement, then, with respect to such Collateral, the terms of such Mortgage
shall be controlling in the case of fixtures and leases, letting and licenses
of, and contracts and agreements relating to, the real property, and the terms
of this Agreement shall be controlling in the case of all other Collateral.
SECTION 28. Governing Law; Submission to Jurisdiction; Waiver of Jury
---------------------------------------------------------
Trial; Etc. (a) This Agreement shall be governed by and construed in
- - ----------
accordance with the laws of the State of New York. Unless otherwise defined
herein or in the Credit Agreement, terms used in Articles 8 and 9 of the Code
are used herein as therein defined.
(b) Each Grantor hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of any New York
State court or federal court of the United States of America sitting in New York
City, and any appellate court from any
<PAGE>
26
thereof, in any action or proceeding arising out of or relating to this
Agreement or any other Loan Document or Secured Hedge Agreement to which it is
or is to be a party, or for recognition and enforcement of any judgment, and
such Grantor hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any such
New York State or, to the extent permitted by law, in such federal court. Each
Grantor irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection or defense that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or any of the other Loan Documents to which
it is or is to be a party in any New York State or federal court. Each Grantor
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court. Each Grantor agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing herein
shall affect the right that any party may otherwise have to commence or
participate in any action, suit or proceeding relating to this Agreement, any of
the other Loan Documents or any Secured Hedge Agreement to which it is or is to
be a party, or otherwise to proceed against any Grantor, in any other
jurisdiction.
(c) Each Grantor irrevocably consents to the service of any and all
process in any such action, suit or proceeding by the mailing of copies of such
process to such Grantor at the address set forth below its name on the signature
page hereof, or by any other method permitted by law. Each Grantor agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(d) To the extent that any Grantor has or hereafter may acquire
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, such
Grantor hereby irrevocably waives such immunity in respect of its Obligations
under this Agreement, any other Loan Document and any Secured Hedge Agreement to
which it is or is to be a party.
(e) TO THE EXTENT PERMITTED BY LAW, EACH GRANTOR IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY SECURED HEDGE AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OF ANY SECURED PARTY
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
<PAGE>
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
IRON AGE CORPORATION
By /s/ Keith A. McDonough
------------------------------------
Name: Keith A. McDonough
Title: Executive Vice President
Address: Robinson Plaza Three
Suite 400
Pittsburgh, PA 15205
IRON AGE HOLDINGS CORPORATION
By /s/ Keith A. McDonough
------------------------------------
Name: Keith A. McDonough
Title: Vice President - Finance
Address: Robinson Plaza Three
Suite 400
Pittsburgh, PA 15205
IRON AGE INVESTMENT COMPANY
By /s/ Keith A. McDonough
------------------------------------
Name: Keith A. McDonough
Title: President
Address: 801 West Street
Wilmington, DE 19801
<PAGE>
FALCON SHOE MFG. CO.
By /s/ Keith A. McDonough
------------------------------------
Name: Keith A McDonough
Title: Vice President
Address: 2 Cedar Street
P.O. Box 1286
Lewiston, Maine
04243-1286
<PAGE>
EXHIBIT A
to
Security Agreement
FORM OF BLOCKED ACCOUNT LETTER
______ __, 1998
[Blocked Account Bank Address]
Attn: [ ]
[Grantor]
---------
Ladies and Gentlemen:
Reference is made to the deposit accounts listed on the attached
Schedule I into which certain monies, instruments and other properties are
deposited from time to time (the "Accounts") maintained with you by [Grantor], a
--------
________ corporation (the "Company"). Pursuant to a Security Agreement dated
-------
April 24, 1998 (as amended, supplemented or otherwise modified, the "Security
--------
Agreement"), the Company has granted to Banque Nationale de Paris, as Agent for
- - ---------
the Secured Parties referred to in the Credit Agreement dated as of April 24,
1998 (as amended, supplemented or otherwise modified, the "Credit Agreement")
----------------
with the Company, a security interest in certain property of the Company,
including, among other things, the following (the "Account Collateral"): the
------------------
Accounts, all funds held therein and all certificates and instruments, if any,
from time to time representing or evidencing the Accounts, 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 or all
of the then existing Account Collateral and all proceeds of any and all of the
foregoing Account Collateral and, to the extent not otherwise included, all (i)
payments under insurance (whether or not the Agent 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 the foregoing Account Collateral and (ii)
cash. It is a condition to the continued maintenance of the Accounts with you
that you agree to this letter agreement.
By signing this letter agreement, you acknowledge notice of the
Security Agreement and confirm to the Agent that you have received no notice of
any other pledge or assignment of the Accounts. Further, you hereby agree with
the Agent that:
(a) Notwithstanding anything to the contrary in any other agreement
relating to the Accounts, the Accounts are and will be subject to the terms
and conditions of the
<PAGE>
2
Security Agreement, will be maintained solely for the benefit of the Agent,
will be entitled "Banque Nationale de Paris, as Agent, Re: [Grantor]" and
will be subject to written instructions only from an officer of the Agent.
(b) Upon the written request of the Agent to you, which request
shall specify that an "Event of Default" under the Credit Agreement has
occurred and is continuing (which writing may be by telex or telecopy and
upon which you may conclusively rely, absent manifest error), you shall
immediately transfer (at the cost and expense of the Company) subject to
your usual deposit terms, all funds then or thereafter deposited in the
Accounts by wire transfer into the Agent's Account at the Federal Reserve
Bank of New York, 33 Liberty Street, New York, NY, 10048, ABA No.
026007689, for further credit to Account No. 750420-701-08.
(c) From and after the date that the Agent shall have sent to you a
written notice (which writing may be by telex or telecopy and upon which
you may conclusively rely, absent manifest error) that an "Event of
Default" under the Credit Agreement has occurred and until the date, if
any, that the Agent shall have advised you in writing (which writing may be
by telex or telecopy and upon which you may conclusively rely, absent
manifest error) that no Event of Default is continuing, you shall not honor
any withdrawal or transfer from, or any check, draft or other item of
payment on, the Accounts, other than any withdrawal, transfer, check, draft
or other item made in writing by the Agent or bearing the written consent
of the Agent, and, to the extent of collected funds in the Accounts, you
shall honor each such withdrawal, transfer, check, draft or other item made
in writing by the Agent or bearing the written consent of the Agent.
(d) You will follow your usual operating procedures for the
handling of the Accounts, including any remittance received in the Accounts
that contains restrictive endorsements, irregularities (such as a variance
between the written and numerical amounts), undated or postdated items,
missing signatures, incorrect payees, etc.
(e) You shall furnish to the Agent, promptly upon the reasonable
written request of the Agent in each instance, all information regarding
the Accounts, to the extent the same is provided to the Company, for the
period of time specified in such written notice, and the Company hereby
authorizes you to furnish same.
(f) You agree that you will not make, and you hereby waive all of
your rights to make, any charge, debit or offset to the Accounts for any
reason whatsoever, and waive any and all liens, whether contractual or
provided under law, which you may have or hereafter acquire on the Accounts
or funds therein, in each case, other than any charge, offset, debit or
lien in respect of your customary service charges relating to the Accounts.
<PAGE>
3
(g) All service charges and fees with respect to the Accounts shall
be payable by the Company.
(h) After the giving of notice referred to in paragraphs (b) and
(c) above, the Agent shall be entitled to exercise any and all rights of
the Company in respect of the Accounts, and the undersigned shall comply in
all respects with such exercise.
This letter agreement shall be binding upon you and your successors
and assigns and shall inure to the benefit of the Agent, the other Secured
Parties and their successors, transferees and assigns. You may terminate this
letter agreement only upon thirty days' prior written notice to the Company and
the Agent. Upon such termination you shall close the Accounts and transfer all
funds in the Accounts to the Agent's Account specified in paragraph (b) above.
<PAGE>
4
This letter agreement shall be governed by and construed in accordance
with the laws of the State of New York.
Very truly yours,
[GRANTOR]
By _________________________________
Name:
Title:
BANQUE NATIONALE DE PARIS,
as Agent
By _________________________________
Title:
By _________________________________
Title:
Acknowledged and agreed to as of
the date first above written:
[BLOCKED ACCOUNT BANK NAME]
By ________________________________
Title:
<PAGE>
SCHEDULE I TO EXHIBIT A TO THE
SECURITY AGREEMENT
Accounts
--------
<PAGE>
EXHIBIT B
to
Security Agreement
FORM OF SECURITY AGREEMENT SUPPLEMENT
_______________,19__
Banque Nationale de Paris,
as Agent
499 Park Avenue
New York, New York 10022
Attention: Structured Finance Group
Security Agreement dated April 24, 1998
between Iron Age Corporation,
Banque Nationale de Paris, as Agent,
and certain other parties thereto
---------------------------------
Ladies and Gentlemen:
Reference is made to the above-captioned Security Agreement (as
amended, supplemented or otherwise modified, the "Security Agreement"). Unless
------------------
otherwise defined herein, terms defined in the Security Agreement are used
herein as therein defined.
The undersigned affirms that it has received ________________ in
consideration for the execution and delivery of this Security Agreement
Supplement.
The undersigned hereby agrees, as of the date first above written, to
become a Grantor under the Security Agreement as if it were an original party
thereto and agrees that each reference in the Security Agreement to a "Grantor"
shall also mean and be a reference to the undersigned.
The undersigned hereby assigns and pledges to the Agent for its
benefit, the benefit of the Issuing Bank, the Swing Line Bank and the ratable
benefit of the Lenders and hereby grants to the Agent for its benefit, the
benefit of the Issuing Bank, the Swing Line Bank and the ratable benefit of the
Lenders as collateral for the Secured Obligations a pledge and assignment of,
and a security interest in, all of the right, title and interest of the
undersigned in and to its Collateral, whether now owned or hereafter acquired.
<PAGE>
2
The undersigned has attached hereto supplements to Schedules I through
V to the Security Agreement, and the undersigned hereby certifies that such
supplements have been prepared by the undersigned in substantially the form of
the Schedules to the Security Agreement and are accurate and complete as of the
date first above written.
The undersigned hereby makes each representation and warranty set
forth in Section 8 of the Security Agreement as to itself and as to its
Collateral to the same extent as each other Grantor and hereby agrees to be
bound as a Grantor by all of the terms and provisions of the Security Agreement
to the same extent as all other Grantors.
This letter shall be governed by and construed in accordance with the
laws of the State of New York.
Very truly yours,
[NAME OF ADDITIONAL
GRANTOR]
By ____________________________________
Name:
Title:
Address:
<PAGE>
EXHIBIT C
to
Security Agreement
FORM OF CONSENT AND AGREEMENT
The undersigned hereby acknowledges notice of, and consents to the
terms and provisions of, the Security Agreement dated April 24, 1998 (as
amended, supplemented or otherwise modified, the "Security Agreement"; unless
------------------
otherwise defined herein, terms defined therein are used herein as therein
defined) from Iron Age Corporation, a Delaware corporation (the "Borrower") and
--------
certain other parties thereto (together with the Borrower, the "Grantors") to
--------
Banque Nationale de Paris, New York Branch ("BNP"), as Agent (together with any
---
successor agent thereto, the "Agent") for the Secured Parties referred to
-----
therein, and hereby agrees with the Agent that:
1. The undersigned hereby acknowledges and agrees that the execution and
delivery [(i)] of this Consent and Agreement is a material inducement to the
willingness of the Lender Parties to make Advances under the Credit Agreement,
the Issuing Bank to issue Letters of Credit under the Credit Agreement and the
Hedge Banks to enter into the arrangements permitted by Section 5.02(b)(ii)(A)
of the Credit Agreement [and (ii) repeats and reaffirms for the benefit of the
Secured Parties the representations and warranties made in Section ____ of the
Assigned Agreement].
2. The undersigned will make, upon the occurrence and during the
continuance of any Event of Default (unless otherwise required to be paid to the
Lender Parties under the Credit Agreement), all payments to be made by it under
or in connection with the ___________ Agreement dated ________, 19__ (as
amended, supplemented or otherwise modified, the "Assigned Agreement") between
------------------
the undersigned and the Grantor in accordance with the instructions of the
Agent.
3. All payments referred to in paragraph 2 above shall be made by the
undersigned irrespective of, and without deduction for, any counterclaim,
defense, recoupment or set-off and shall be final, and the undersigned will not
seek to recover from any Secured Party for any reason any such payment once
made.
4. The Agent shall be entitled to exercise any and all rights and
remedies of the Grantor under the Assigned Agreement in accordance with the
terms of the Security Agreement, and the undersigned shall comply in all
respects with such exercise.
5. The undersigned will not, without the prior written consent of the
Agent, (i) cancel or terminate the Assigned Agreement or consent to or accept
any cancellation or termination thereof or (ii) amend or otherwise modify the
Assigned Agreement in any manner.
<PAGE>
2
6. Any notices to the Agent pursuant hereto shall be in writing and shall
be delivered to:
Banque Nationale de Paris, as Agent
499 Park Avenue
New York, New York 10022
Attention: Structured Finance Group
Telecopier: (212) 418-8269
7. This Consent and Agreement constitutes the entire agreement of the
parties hereto in respect of the subject matter hereof and may not be amended,
supplemented or otherwise modified without the written agreement of the parties
hereto.
This Consent and Agreement shall be binding upon the undersigned and
its successors and assigns, and shall inure, together with the rights and
remedies of the Agent hereunder, to the benefit of, and enforceable by, the
Secured Parties and their respective successors, transferees and assigns. This
Consent and Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has duly executed this Consent and
Agreement as of the date set opposite its name below.
Dated: __________ __, 19__ [NAME OF OBLIGOR]
By __________________________
Name:
Title:
<PAGE>
SCHEDULE I
----------
PLEDGED SHARES
--------------
PART A
------
<TABLE>
<CAPTION> PERCENTAGE OF
STOCK ISSUED AND
CLASS OF CERTIFICATE NUMBER OUTSTANDING
GRANTOR ISSUER STOCK PAR VALUE NUMBER OF SHARES SHARES OF ISSUER
------- ------ ----- --------- ------ --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Iron Age Iron Age Com. $1.00 1 1,000 100%
Holdings Corporation
Corporation
Iron Age Falcon Shoe Com. $1.00 64 9,800 100%
Corporation Mfg. Co.
Iron Age Iron Age Com. $ .01 1 & 2 1,000 100%
Corporation Investment (943 & 57)
Company
Iron Age Iron Age Com. (no par C-3 66 66%
Corporation Canada Ltd. in
Canada)
Iron Age Iron Age de Com. N$500 65 66%
Investment Mexico S.A. de New
Company C.V. Pesos
</TABLE>
<PAGE>
PLEDGED INDEBTEDNESS
PART B
------
<TABLE>
<CAPTION>
OUTSTANDING
GRANTOR ISSUER DESCRIPTION OF DEBT FINAL MATURITY PRINCIPAL AMOUNT
------- ------ ------------------- -------------- ----------------
<S> <C> <C> <C> <C>
Iron Age Iron Age Grid Note None Varies
Corporation Canada Ltd.
Iron Age Iron Age Grid Note None Varies
Corporation Mexico, S.A.
de C.V.
Iron Age Iron Age Grid Note None Varies
Investment Corporation
Company
Falcon Shoe Iron Age Grid Note None Varies
Mfg. Co. Corporation
Iron Age Falcon Shoe Grid Note None Varies
Corporation Mfg. Co.
</TABLE>
<PAGE>
Securities Accounts
Part C
------
<TABLE>
<CAPTION>
Securities Account
Issuer of Description of Securities Intermediary (number, location
Financial Asset Financial Asset (Name and address) and jurisdiction)
- - --------------- --------------- ----------------- ----------------
<S> <C> <C> <C>
None
</TABLE>
Commodity Accounts
Part D
------
<TABLE>
<CAPTION>
Commodity Account
Description of Board of trade, exchange or Commodity Intermediary (Number, location
Commodity Contract market where traded (Name and address) and jurisdiction)
- - ------------------ ------------------- ----------------- ----------------
<S> <C> <C> <C>
None
</TABLE>
<PAGE>
SCHEDULE II
-----------
ASSIGNED AGREEMENTS
-------------------
The Canadian Security Agreement dated as of April 24, 1998 made by Iron Age
Canada Ltd., a corporation duly incorporated under the laws of Ontario, to and
in favor of Iron Age Corporation, a Delaware corporation.
<PAGE>
SCHEDULE III
------------
LOCATIONS OF EQUIPMENT AND INVENTORY*
------------------------------------
Property at 240 North Avenue in the village of Penn Yan, Yates County, New York
Property at the locations on the list attached hereto.
__________________________
* The inventory listed in Schedule III does not include inventory in transit or
inventory located in shoemobiles.
<PAGE>
SCHEDULE IV
-----------
TRADE NAMES AND TRADEMARKS
--------------------------
IRON AGE CORPORATION
U.S. TRADEMARKS
---------------
<TABLE>
<CAPTION>
=====================================================================
TRADEMARK REGISTRATION NO. REGISTRATION DATE
- - --------- ---------------- -----------------
- - ---------------------------------------------------------------------
<S> <C> <C>
IRON AGE MAXIMUM & Design 1,671,179 1/7/92
- - ----------------------------------------------------------------------
IRON AGE SPORTWORK II 1,677,695 3/3/92
- - ----------------------------------------------------------------------
GRABBER 928,349 2/1/72
- - ----------------------------------------------------------------------
FREEDOM TOE 1,276,282 5/1/84
- - ----------------------------------------------------------------------
METAPRO 949,859 1/2/73
- - ----------------------------------------------------------------------
SAFE-GARD 1,082,707 1/17/88
- - ----------------------------------------------------------------------
IRON AGE & Design 1,212,263 10/12/82
- - ----------------------------------------------------------------------
IRON AGE 634,888 9/25/56
- - ----------------------------------------------------------------------
MIGHTY TOUGH 1,919,851 9/19/95
- - ----------------------------------------------------------------------
MIGHTY TOUGH & Design 1,919,852 9/19/95
- - ----------------------------------------------------------------------
IRON AGE PLUS 2,112,932 11/11/97
- - ----------------------------------------------------------------------
ROUGH CREEK 2,082,503 7/22/97
- - ----------------------------------------------------------------------
OIL RESISTANT GUARANTEED SHU- 780,371 11/17/64
LIFE SOLE
- - ----------------------------------------------------------------------
KNAPP ATVS BUILT TO GO 1,919,898 9/19/95
ANYWHERE (Stylized Letters)
- - ----------------------------------------------------------------------
KNAPP ATVS BUILT TO GO 1,967,884 4/16/96
ANYWHERE
- - ----------------------------------------------------------------------
KNAPP ATVS U.S.A. 2000 SERIES 1,901,251 6/20/95
(Stylized Letters)
- - ----------------------------------------------------------------------
KNAPP ATVS U.S.A. 2000 SERIES 1,905,063 7/11/95
- - ----------------------------------------------------------------------
ATVS BY KNAPP 1,477,784 2/23/88
- - ----------------------------------------------------------------------
TUF-SHOT 1,344,676 6/25/85
- - ----------------------------------------------------------------------
TWO-SHOT 1,201,228 7/13/82
- - ----------------------------------------------------------------------
KNAPP MASTER CRAFT CUSHIONED 1,133,194 4/15/80
COMFORT (and Design)
- - ----------------------------------------------------------------------
KNAPP SHOES & Design 785,262 2/16/65
- - ----------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- - ----------------------------------------------------------------------
<S> <C> <C>
KNAPP FREE-WAY CUSHIONED SHOES 671,243 12/16/58
& Design
======================================================================
</TABLE>
U.S. SERVICE MARKS
------------------
<TABLE>
<CAPTION>
=====================================================================
SERVICE MARK REGISTRATION NO. REGISTRATION DATE
- - ------------ ---------------- ------------------
- - ---------------------------------------------------------------------
<S> <C> <C>
IRON AGE 1,966,512 4/9/96
- - ---------------------------------------------------------------------
IRON AGE PLUS 2,120,443 12/9/97
=====================================================================
</TABLE>
U.S. TRADEMARK APPLICATIONS
---------------------------
<TABLE>
<CAPTION>
=====================================================================
TRADEMARK SERIAL NO. FILING DATE
- - --------- ---------- -----------
- - ---------------------------------------------------------------------
<S> <C> <C>
RUFFHIDES 74/491,094 2/15/94
- - ---------------------------------------------------------------------
SPORTWORK 319,367 7/3/97
- - ---------------------------------------------------------------------
ARMOR 75X-TRA LITE & Design 342,582 8/18/97
- - ---------------------------------------------------------------------
SAFE-GARD 357,666 9/16/97
- - ---------------------------------------------------------------------
HIGH-WIDE PROFILE II 418,663 1/9/98
- - ---------------------------------------------------------------------
THE SOLES OF WORKING AMERICA 462,254 4/6/98
=====================================================================
</TABLE>
U.S. SERVICE MARK APPLICATIONS
------------------------------
None.
FOREIGN TRADEMARKS
------------------
<TABLE>
<CAPTION>
=====================================================================
TRADEMARK COUNTRY REGISTRATION NO. REGISTRATION DATE
- - ----------- -------------- ---------------- -----------------
- - ---------------------------------------------------------------------
<S> <C> <C> <C>
IRON AGE Benelux 488,506 12/7/90
- - ---------------------------------------------------------------------
IRON AGE Canada 223,537 10/7/77
- - ---------------------------------------------------------------------
IRON AGE Germany 1,022,860 11/27/80
- - ---------------------------------------------------------------------
IRON AGE Denmark 2318-1981 9/4/81
- - ---------------------------------------------------------------------
IRON AGE France 1,621,306 11/27/80
- - ---------------------------------------------------------------------
IRON AGE United Kingdom 1,144,205 11/19/80
- - ---------------------------------------------------------------------
IRON AGE Mexico 419,038 3/8/92
- - ---------------------------------------------------------------------
IRON AGE Norway 110,047 12/3/81
- - ---------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- - ---------------------------------------------------------------------
<S> <C> <C> <C>
IRON AGE Taiwan 434,908 3/16/89
- - ---------------------------------------------------------------------
IRON AGE China 642,723 5/21/93
- - ---------------------------------------------------------------------
IRON AGE Sweden 176,255 4/16/81
- - ---------------------------------------------------------------------
IRON AGE Hong Kong 04875 12/30/93
- - ---------------------------------------------------------------------
IRON AGE United Kingdom 1,512,133 9/9/92
- - ---------------------------------------------------------------------
IRON AGE Japan 3338462 8/8/97
- - ---------------------------------------------------------------------
IRON AGE Korea 386476 12/15/97
- - ---------------------------------------------------------------------
</TABLE>
FOREIGN SERVICE MARKS
---------------------
<TABLE>
<CAPTION>
=====================================================================
SERVICE MARK COUNTRY REGISTRATION NO. REGISTRATION
- - -------------- ------- ---------------- ------------
DATE
----
- - ---------------------------------------------------------------------
<S> <C> <C> <C>
IRON AGE Korea 41362 2/19/98
=====================================================================
</TABLE>
FOREIGN TRADEMARK APPLICATIONS
------------------------------
<TABLE>
<CAPTION>
=====================================================================
TRADEMARK COUNTRY SERIAL NO. FILING DATE
- - --------- ------- ---------- -----------
- - ---------------------------------------------------------------------
<S> <C> <C> <C>
SPORTWORK Mexico 318,773 1/7/98
- - ---------------------------------------------------------------------
ARMOR 75X-TRA Canada 322,891 1/20/98
LITE & Design
- - ---------------------------------------------------------------------
KNAPP Canada 865,487 12/31/97
- - ---------------------------------------------------------------------
SPORTWORK Canada 865,488 12/31/97
- - ---------------------------------------------------------------------
SPORTWORK II & Canada 865,489 12/31/97
Design
- - ---------------------------------------------------------------------
IRON AGE Philippines 102,856 9/20/95
- - ---------------------------------------------------------------------
SAFE-GARD Canada 869,158 2/11/98
- - ---------------------------------------------------------------------
SAFE-GARD Mexico 325,962 3/16/98
=====================================================================
</TABLE>
<PAGE>
FOREIGN SERVICE MARK APPLICATIONS
---------------------------------
<TABLE>
<CAPTION>
===============================================================
SERVICE MARK COUNTRY SERIAL NO. FILING DATE
- - ------------ ------- ---------- -----------
- - ---------------------------------------------------------------
<S> <C> <C> <C>
IRON AGE Philippines 102857 9/20/95
===============================================================
</TABLE>
IRON AGE INVESTMENT COMPANY
U.S. REGISTRATIONS
------------------
None.
FOREIGN SERVICE MARK REGISTRATIONS
----------------------------------
<TABLE>
<CAPTION>
============================================================
SERVICE MARK COUNTRY REGISTRATION NO. REGISTRATION DATE
- - ------------ ------- ---------------- -----------------
- - ------------------------------------------------------------
<S> <C> <C> <C>
IRON AGE Mexico 509304 10/31/95
- - ------------------------------------------------------------
IRON AGE Canada TMA 473,865 3/26/97
============================================================
</TABLE>
FALCON SHOE MFG. CO.
U.S. TRADEMARKS
---------------
<TABLE>
<CAPTION>
=====================================================================
TRADEMARK REGISTRATION NO. REGISTRATION DATE
- - --------- ---------------- -----------------
- - ---------------------------------------------------------------------
<S> <C> <C>
DUNHAM 895,088 7/21/70
- - ---------------------------------------------------------------------
DUNHAM TYROLEANS 740,975 11/20/62
- - ---------------------------------------------------------------------
DUNHAM WAFFLE-STOMPERS 973,456 11/20/73
- - ---------------------------------------------------------------------
GREAT FOOTWEAR FOR THE GREAT 1,119,327 5/29/79
OUTDOORS
- - ---------------------------------------------------------------------
THE WAY OF NATURE. . .THRU THE 1,110,565 1/2/79
HANDS OF MAN
- - ---------------------------------------------------------------------
RUGGARDS (Stylized) 419,794 3/5/46
- - ---------------------------------------------------------------------
TRU-TRAK 1,437,386 4/21/87
- - ---------------------------------------------------------------------
TRUKKERS 993,107 9/10/74
- - ---------------------------------------------------------------------
DUNHAM DOUBLE COVERAGE TOES & 1,855,821 9/27/94
DESIGN
- - ---------------------------------------------------------------------
DURAFLEX 843,731 2/6/68
- - ---------------------------------------------------------------------
WIDE TRAK 2,030,521 1/14/97
- - ---------------------------------------------------------------------
ARMOR-TECH 2,051,944 4/15/97
=====================================================================
</TABLE>
<PAGE>
STATE REGISTRATION
------------------
<TABLE>
<CAPTION>
=====================================================================
TRADEMARK STATE REGISTRATION NO. REGISTRATION DATE
- - --------- ----- ---------------- -----------------
- - ---------------------------------------------------------------------
<S> <C> <C> <C>
DUNHAM Vermont 4,553 3/29/73
=====================================================================
</TABLE>
FOREIGN REGISTRATIONS
---------------------
<TABLE>
<CAPTION>
==============================================================
TRADEMARK COUNTRY REGISTRATION NO. REGISTRATION DATE
- - ------------ ----------- ---------------- -----------------
- - --------------------------------------------------------------
<S> <C> <C> <C>
DUNHAM Austria 142,074 5/21/92
- - --------------------------------------------------------------
DUNHAM Canada 225,957 2/10/78
TYROLEANS
- - --------------------------------------------------------------
DUNHAM'S Italy 586,393 12/29/92
- - --------------------------------------------------------------
DUNHAM Japan 1,620,432 9/29/83
- - --------------------------------------------------------------
DUNHAM Germany 2,027,548 1/5/93
- - --------------------------------------------------------------
DUNHAM Spain 1,683,507 4/3/95
- - --------------------------------------------------------------
DUNHAM Canada 460,625 8/2/96
- - --------------------------------------------------------------
DUNHAM'S France 1,613,236 9/30/90
- - --------------------------------------------------------------
DUNHAM'S Switzerland 383,406 7/19/91
==============================================================
</TABLE>
FOREIGN APPLICATIONS
--------------------
<TABLE>
<CAPTION>
========================================================
TRADEMARK COUNTRY SERIAL NO. FILING DATE
- - --------- ------- ---------- -----------
- - --------------------------------------------------------
<S> <C> <C> <C>
ARMOR-TECH Canada 801,437 1/10/96
- - ---------------------===================================
</TABLE>
TRADEMARK APPLICATIONS TO BE FILED
----------------------------------
<TABLE>
<CAPTION>
=================================================
TRADEMARK COUNTRY
- - --------- -------
- - -------------------------------------------------
<S> <C>
THE SOLE OF WORKING AMERICA United States
- - -------------------------------------------------
KNAPP United States
=================================================
</TABLE>
<PAGE>
SCHEDULE V
----------
BLOCKED ACCOUNTS
----------------
BANK ACCOUNT ACCOUNT NAME ADDRESS
- - ------------ ------------ -------
Iron Age
- - --------
Holdings Corporation
- - --------------------
PNC Bank of Delaware 56-4173-3320 300 Delaware Ave. Ste 327
Wilmington, DE 19801
Iron Age Investment
- - -------------------
Company
- - -------
PNC Bank of Delaware Checking Acct: 300 Delaware Ave. Ste 327
56-4173-338 Wilmington, DE 19801
Falcon Shoe Mfg. Co.
- - --------------------
Key Bank of Maine 5020099 55 Lisbon Street
Lewiston, ME 04240
Iron Age Corporation
- - --------------------
PNC Bank 1001739581 Fifth Ave. and Wood Street
1001739602 Pittsburgh, PA 15265
1004405333
National Bank of Geneva 274718677 2 Seneca Street
P.O. Box 193
Geneva, NY 14456
Bath National Bank 536701423 184 Main Street
536701431 Penn Yan, NY 14527
<PAGE>
SCHEDULE VI
-----------
FINANCING STATEMENTS
--------------------
Please see Exhibit A re: certain UCC filings.
<PAGE>
Schedule III
------------
(continued)
-----------
IRON AGE CORPORATION
ALL LOCATIONS WITH LEASE INFORMATION
[Lessee is Iron Age Corporation except where otherwise noted (see pp. 8&9)]
<TABLE>
<CAPTION>
LOCATION LOCATION Annual Expiration
Code (ADDRESS) ST COUNTY** Lessor Rent* Date
- - ---- --------- -- -------- ------ ----- ----
<S> <C> <C> <C> <C> <C> <C>
170 Mobile, Al Mobile Unit AL Mobile Springdale Stores, Inc. $18,300.00 4/30/99
Yester Oaks Shopping Center
3696B Airport Blvd.
Mobile, AL 36608
164 Birmingham Mobile Unit AL Jefferson Birmingham Realty $20,400.00 8/31/02
660 University Blvd., Suite H Company
Birmingham, AL 35233
105 Phoenix Mobile Unit AZ Maricopa Westco Properties of Phoenix $12,068.52 8/31/02
2837 McDowell Road
Phoenix, AZ 85009
217 Tucson I/A Store AZ Pima Kackley Properties $ 8,656.20 12/14/98
2628 East 22nd Street
Tucson, AZ 85713
106 San Jose Mobile CA Santa Clara Gambord Trust Properties $28,200.00 12/31/01
1626 Old Bayshore Hwy.
San Jose, CA 95112
110 Los Angles Mobile Unit CA Orange VSW Investments $25,284.00 11/30/98
6475 Knott Avenue
Unit 4
Buena Park, CA 90040
166 Los Angeles Mobile Unit CA Los Angeles Crow-Copley-Commerce #1 Assoc. $25,505.28 10/14/99
3328 Garfield Ave.
Commerce, CA 90040
177 Los Angeles Knapp CA Los Angeles Commerce Properties $52,356.00 04/30/98
5380 E. Washington Blvd.
Los Angeles, CA 90504
178 Torrance, CA CA Los Angeles Floyd Sanger, Jr. $34,128.00 06/30/02
18533 Hawthorne Blvd.
Torrance, CA 90504
179 West Covina, CA CA Los Angeles Varney Center, Inc. $34,128.00 06/30/00
408 North Azusa Ave.
West Covina, CA 91790
172 Denver Mobile Unit CO Jefferson Wyatt Enterprises $13,332.00 4/30/01
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
4952 Ward Road
Wheat Ridge, CO 80033
173 Milford Mobile Unit CT New Haven 321 B.P.R. LLC $24,779.52 9/30/00
321 Boston Post Road
Milford, CT 06460
108 Mid-Atlantic Mobile Unit DE New Castle Airport Business Center VI $21,729.24 2/28/00
Airport Business Center
243 Quigley Blvd.
Suite J
New Castle, DE 19720
113 Tampa Mobile Unit FL Hillsborough Henry M. Ransone $14,058.00 12/31/03
5100 East Broadway
Tampa, FL 33169
131 Jacksonville Mobile Unit FL Duval St. Augustine Road Investments $10,255.20 5/31/01
Commerce Park
4541-7 Augustine Road
Jacksonville, FL 32207
134 Ft. Lauderdale Mobile Unit FL Broward PBP Venture Corp-Trammell $16,992.24 12/31/98
Cypress Creek Industrial Park
Suite 215
6600 N. W. 12th Avenue
Ft. Lauderdale, FL 33309
114 Jonesboro Mobile Unit GA Clayton B&B Management, Inc. $16,956.36 07/31/00
7681 Southlake Parkway
Suite 750
Jonesboro, GA 30326
121 Augusta Mobile Unit GA Richmond Meybohm Realty $10,500.00 5/31/99
Aarbour Crossing
3240 Peach Orchard Rd.
Augusta, GA 30906
196 Forest Park, GA GA Clayton F.P. Limited $ 9,799.92 month to month
4436 Jonesboro Road
Forest Park, GA 30050
107 Moline Mobile Unit IL Rock Island Kuang Lia Sung $15,000.00 7/31/98
South Park Plaza, Unit #1
4703 16th St.
Moline, IL 61265
132 Franklin Park Mobile Unit IL Cook Myers Industries $26,448.00 10/31/98
11125 Franklin Avenue
Franklin Park, IL 60131
185 Oaklawn, IL IL Cook Joaquin Martinez $26,400.00 12/02/99
8238 S. Cicero Ave.
Oaklawn, IL 60453
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
186 Melrose Park, IL IL Cook Lee Alport $18,759.96 07/31/00
2300 North Ave.
Melrose Park, IL 60160
160 Indianapolis IN Marion F&R Realty Co. $12,600.00 5/31/00
Mobile Unit
5446 W. 86th Street
Indianapolis, IN 46268
158 Louisville Mobile Unit KY Jefferson DeLor Ltd. $24,269.16 4/30/01
3101 Fern Valley Road,
Suite 14
Louisville, KY 40213
156 Baton Rouge Mobile Unit LA E. Baton Lennar Partners $18,562.56 3/31/99
Southridge Center Rouge
88350 Florida Blvd., Ste. A1
Baton Rouge, LA 70809
102 Worcester Mobile Unit MA Worcester KRS Realty Trust $21,735.00 8/31/98
Heritage Business Park d/b/a Heritage
1200 Milbury St., Suite 7K
Worcester, MA 01607
139 Mansfield Mobile Unit MA Bristol Nancy Gray McNeeley $29,400.00 1/31/01
888 South Main St., Rt. 140
Mansfield, MA 02048
187 Brockton, MA MA Plymouth Stonehill Shoppes Inc. $44,313.00 10/31/01
Lambert's Rainbow Square
1285 Belmont Street
Brockton, MA 02401
153 Baltimore Mobile Unit MD Baltimore MIE Development $19,956.00 4/30/00
1667 Kneeht Ave., Ste. D (front)
Baltimore, MD 21227
117 Westbrook Mobile Unit ME Cumberland Portland Associates Trust $16,320.00 1/31/01
Bradlee's Plaza
11 Main Street
Westbrook, ME 04101
188 Lewiston, ME ME Androscoggin Equity Properties $ 4,800.00 12/31/99
80 Middle Street
Lewiston, ME 04240
135 Michigan Mobile Unit MI Oakland Madison Square Ltd. Part. $15,984.00 11/9/99
31036 John R. Street
Madison Heights, MI 48071
169 Kentwood Mobile Unit MI Kent Giant Development $15,000.00 2/28/00
4445-D Breton Ave., SE
Kentwood, MI 49508
183 Eastpointe, MI MI Macomb East Detroit Investment $24,000.00 6/30/99
20909 Gratiot Ave.
Eastpointe, MI 48021
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
184 Westland, MI MI Wayne Black & Decker (U.S.) $16,263.96 10/31/03
8047 Wayne Road
Westland, MI 48185
126 Minneapolis Mobile Unit MN Hennepin St. Croix Medical, Inc. $10,992.00 7/31/98
5155 E. River Rd., Suite 415
Minneapolis, MN 55421
115 Independence Mobile Unit MO Jackson Noland South Development Co. $13,151.16 1/31/00
4380 South Noland Road
South Noland Shopping Center
Independence, MO 64055
122 St. Louis Mobile Unit MO St. Louis Metro Park Joint Venture $23,400.00 2/28/00
11984 Dorsett Road
Maryland Heights, MO 63043
111 Charlotte Mobile Unit NC Mecklenburg Vinson Realty Co. $13,197.00 12/31/99
Stock Port Business Center
2900 Westinghouse Blvd -112A
Charlotte, NC 28217
124 Greensboro Mobile Unit NC Guilford Joseph M. McDowell $18,000.00 6/30/99
701 Carnegie Place
Greensboro, NC 27409
159 Raleigh Mobile Unit NC Durham Highwoods/Forsyth $21,299.52 5/31/01
Creekstone Crossing Ser Limited Partner
Center
5400 S. Miami Blvd., Suite 104
Morrisville, NC 27560
195 Charlotte, NC NC Mecklenburg Varnadore Associates $17,499.96 05/31/98
3809 E. Independence Blvd.
Charlotte, NC 28205
101 New Jersey Mobile Unit NJ Middlesex AAA Budget Self Storage $24,375.00 10/14/02
1617 Stelton Road
Piscataway, NJ 00854
146 Parsippany Mobile Unit NJ Morris Susa Realty Corp. $29,712.00 1/31/01
325 Route 46 East
Pasrsippany, NJ 07054
175 Cherry Hill, NJ NJ Camden Robert Mark Associates $25,404.24 08/31/02
2121 Route 70 West
Cherry Hill, NJ 08002
193 Wayne, NJ NJ Passaic Construction Realty Co., Inc. $44,493.12 06/16/01
Willow Square
113 Rout 46
Wayne, NJ 07512
194 Union, NJ NJ Union Rondo Music, Inc. $32,721.96 11/30/00
1605 Route 22
Union, NJ 07083
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
157 Albuquerque Mobile Unit NM Bernalillo Southeast Candelaria Ltd. $16,380.00 03/31/99
2029 Candelaria N.E.
Albuquerque, NM 87107
005 Penn Yan Warehouse #2/ NY Yates Yates County IDA $31,800.00 2/28/99
Central Tractor
1 Keuka Business Park
Senecca Bldg.
Penn Yan, NY 14528
109 Vestal Mobile Unit NY Broome Hart Electronics Corp. $21,312.00 8/31/99
241 Vestal Parkway East
Vestal, NY 13850
141 Depew Mobile Unit NY Eric Dick Urban Plaza Associated $21,600.00 12/16/01
Dick Urban Plaza
502 Dick Road
Depew, NY 14043
165 Westbury Truck NY Nassua Ronrett Realty Company $23,970.72 09/30/01
9155 Merrick Ave.
Westbury, NY
168 Albany Mobile Unit NY Saratoga J. Eric King $30,658.56 03/05/03
76 Crossing Blvd.
Clifton Park, NY 12065
209 Penn Yan Store NY Yates Jean A. Jensen $19,200.00 9/30/00
130 Main Street
Penn Yan, NY 14527
180 Rochester, NY NY Monroe Milton Axelrod $21,600.00 06/30/01
2862 Q. Henrietts Road
Rochester, NY 14623
181 Cheektowaga, NY NY Erie M.S. Real Estate $21,675.00 month to month
1625 Walden Ave.
Cheektowaga, NY 14225
189 Elmhurst, NY NY Kings Leeann Associates $51,000.00 month to month
86-26 Queens Rd.
Elmhurst, NY 10704
190 Yonkers, NY NY Westchester Wyckoff Ind. Dev. Corp. $67,143.96 10/26/98
680 Central Park Ave.
Yonkers, NY 10704
191 Westbury, NY NY Nassau Ronret Realty Company $79,104.12 09/30/01
915 Merrick Ave.
Westbury, NY 11590
192 Brooklyn, NY NY Kings Juliana Investors $17,031.00 05/31/98
2381 Flatbush Ave.
Brooklyn, NY 11234
</TABLE>
-5-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
197 Bohemia, NY NY Suffolk Connetquot Associates $ 24,600.00 12/31/02
4629 Sunrise Highway
Bohemia, NY 11716
138 Bedford Mobile Unit OH Cuyahoga Meadowbrook Market Square $ 16,800.00 6/30/99
Meadowbrook Market Square
22137 Rockside Road
Bedford, OH 44146
155 Cincinnati Mobile Unit OH Hamilton Norwood Real Estate Partners $ 14,263.56 7/31/99
2300 Wall St., Suite P
Cincinnati, OH 45212
162 Columbus Mobile Unit OH Franklin Hartsook Real Estate Corp. $ 13,599.96 4/30/03
1850 Bethel Road
Columbus, OH 43220
136 Oklahoma City Mobile Unit OK Oklahoma Windsor Park Associates $ 12,600.00 6/30/00
2506 N. Meridian
Oklahoma City, OK 73107
163 Tulsa Mobile Unit OK Tulsa Security Square Shopping $ 14,400.00 9/30/99
10915 E. 31st Street
Tulsa, OK 74129
137 Portland Mobile Unit OR Multnomah Linda Hess $ 15,900.00 7/16/98
711 S. E. Stark Street
Portland, OR 97214
001 Iron Age PA Allegheny Joseph A. & Carolyn C. $ 255,023.41 9/30/99
Robinson Plaza Three, Massaro
Suite 400
Pittsburgh, PA 15205
5900 Baum Blvd. $ 100.00
Exhibition Floater
118 Pittsburgh Mobile Unit PA Allegheny Joseph Olszewski $ 48,000.00 5/31/03
4450 Steubenville Pike
Pittsburgh, PA 17402
147 York Mobile Unit PA York H.G. Rotz Associates, Inc. $ 17,700.00 9/30/00
2133 Industrial Highway
York, PA 17402
151 Erie Mobile Unit PA Erie Terra Erie Associates $ 7,200.00 9/30/98
Eastway Plaza
4245 Buffalo Road (Rt. 20)
Erie, PA 16510
125 Manati Mobile Unit PR Manati Ernesto Acosta Matos $ 24,000.00 3/31/00
Road #2, Kilometer 44.7
BO. Cantera #43, Suite 2
Manati, PR 00701
</TABLE>
-6-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
142 Caguas Mobile Unit PR Caguas Turabo Development, Inc. $ 22,500.00 5/14/01
State Road No. 189, Km. 4
Caguas, PR 00726
152 Ponce Mobile Unit PR Ponce Hilda Gonzales Logo $ 13,800.00 4/30/99
Las Americas Ave., #10
Ponce, PR 00731
119 Florence Mobile Unit SC Florence Joseph M. McDowell $ 10,800.00 6/30/99
795 North Cashue Drive
Florence, SC 29501
129 Spartanburg Mobile Unit SC Spartanburg Johnson Development Assoc. $ 9,600.00 5/31/00
Cleveland Village Shopping Cen
1564 Asheville Hwy. Suite 9
Spartanburg, SC 29303
145 Columbia Mobile Unit SC Richland McWill Partnership $ 30,000.00 11/30/06
1545 Burnette Drive
Columbia, SC 29210
100 Memphis Mobile Unit TN Shelby BICO Associates $ 16,020.00 9/30/99
3140 Teeehulahoma Rd.
Suite 12
Memphis, TN 38118
112 Nashville Mobile Unit TN Davidson Charles W. Hawkins III $ 17,100.00 4/30/00
331 Wilmington Road
Nashville, TN 37217
127 Knoxville Mobile Unit TN Knox West End Phasde I $ 11,199.96 9/17/00
156 West End Ave.
Farragut, TN 37922
143 Kingsport Mobile Unit TN Sullivan J. Fred Brooks $ 5,160.00 8/31/99
Wilcox Business Center
Unit 2, Bldg. 3
920 S. Wilcox Drive
Kingsport, TN 37660
230 Goodyear Tire & Rubber Co. TN Obion Williams Scotman $ 2,273.16 month to month
3260 Barbam Road
Union City, TN 38281
103 El Paso Mobile Unit TX El Paso Shirlee Z. Amstater $ 18,588.00 12/31/00
2914 East Yandell.
Suite 1
El Paso, TX 79903
120 Dallas Mobile Unit TX Dallas Sam Lewis $ 18,000.00 2/31/01
1000 Lupo Drive
Dallas, TX 75207
123 Houston Mobile Unit TX Harris T.T. Templin $ 24,000.00 2/31/00
9000 Emmott Road
Houston, TX 77040
</TABLE>
-7-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
128 San Antonio Mobile Unit TX Bexar N.P. Partners, Ltd. $ 16,860.00 5/31/99
3903 Fredericksburg Road
San Antonio, TX 782291
140 Longview Mobile Unit TX Greg Dell Thompson $ 12,000.00 10/31/05
1517 Pine Tree Road
Longview, TX 75604
144 Pasadena Mobile Unit TX Harris John O. Harris $ 11,880.00 9/30/98
4111 Fairmont Parkway
Suite 108
Pasadena, TX 77504
150 Austin Store TX Travis Kramer Center, Inc. $ 18,000.00 12/31/98
11055 Burnett Rd
Austin, TX 78758
130 Salt Lake City Mobile Unit UT Salt Lake Fulton Partnership $ 16,868.28 12/31/99
2284 South Redwood Rd.
West Valley City, UT 84119
104 Virginia Mobile Unit VA Bedford Edward McNally $ 16,800.00 6/30/00
Popular Forest Center
P.O. Box 1170, Route 5
Forest, VA 24551
176 Norfolk Mobile Unit VA Independent Northampton Corporate $ 18,636.00 4/30/00
Northampton Business Center Park Assoc.
5760 Northampton Blvd.
Suite 112
Virginia Beach, VA 23455
222 Goodyear VA Independent Williams Scotman $ 2,587.68 month to month
1435 Goodyear Blvd.
Danville, VA 24541
337 Hocchst Celanese VA GE Capital Modular Space $ 5,655.36 9/10/98
Corporation
P.O. Box 440
Pairsburg, VA 24134
133 Seattle Mobile Unit WA King Cumberland Industrial Center $18,600.00 10/31/01
22030 68th Ave., South
Building A
Kent, WA 98032
116 Greendale Mobile Unit WI Milwaukee Megal Development Corp. $ 17,100.00 4/30/99
Unit D
7030 Industrial Loop
Greendale, WI 53129
229 Green Bay Store WI Brown Walnut Center Company $ 7,332.00 12/31/99
2979 Allied Street
Green Bay, WI 54304
161 Parkersburg WV Wood Jerome S. Glazer $ 6,600.00 7/31/99
202 Park Center Drive
Parkersburg, WV 26101
</TABLE>
-8-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Iron Age Canada, LTD CN Ontario Von-Land Corporation C$50,151.96 6/30/01
475 North Rivermede Rd., Limited
Unit 2
Concord, ON L4K-3R2
122 Iron Age Canada, LTD CN Alberta Capital Ideas LTD C$10,500.00 1/31/01
Bay #204
255 28 Street S.E.
Calgary, Alberta
130 Iron Age Canada, LTD CN British Columbia Colliers C$32,432.28 04/30/02
11500 Bridgeport Road
Suite 105
Richmond, British Columbia V6X IT2
160 Iron Age Canada, LTD CN Ontario Associates Corporation of C $5,400.00 11/30/98
2500 Barton Street East North America and
Hamilton, Ontario L8E 4A2 Ongiara Properties, Inc. C$46,963.08 08/30/00
161 Iron Age Canada, LTD CN Ontario St. Catherines Equities C$26,551.50 07/31/02
286 Bunting Road Limited
St. Catherines, Ontario L2M 7S5
162 Iron Age Canada, LTD CN Ontario Jack & Percy Rosen C$35,310.00 month to month
353 Manitou Drive
Kitchener, Ontario N2C IL5
163 Iron Age Canada, LTD CN Ontario Enterprise Property Group C$18,877.20 05/31/00
304 Dunlop Street West
Unit A
Barrie, Ontario L4N 7L2
164 Iron Age Canada LTD CN Ontario John and Paul Mobilos C$14,775.24 month to month
433 Simcoc Street South
South Simoce Plaza
Oshawa, Ontario L1H 4J5
165 Iron Age Canada, LTD CN Ontario John Tillney Warrington C$15,079.20 month to month
196 Rubidge Street
Peterborough, Ontario LIH 4J5
Iron Age Canada, LTD CN Ontario Comro Developments C$32,945.88 12/31/99
1790 Dundas Street East
Units 14 & 15'
London, Ontario N5W 3E5
Iron Age De Mexico S.A. MX Quimica Industrial Fronteriza N$184,833.60 12/31/99
DE C.V.
Cattetera Juaraz Porvenir 1568 9-B
Centro Comercial Satelite
Ciudad Juarez, Chihuahua
Falcon Shoe Manufacturing ME Androscoggin Roy Continental $216,917.28 03/31/99
Company
2 Cedar Street
Lewiston, ME 04204
</TABLE>
-9-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Falcon Shoe/Knapp ME Androscoggin Equity Properties $122,268.80 12/31/99
Manufacturing
80 Middle Street
Lewiston, ME 04210
Knapp Shoes (old MA Plymouth Concord Foods, Inc. $121,263.60 10/31/98
corporate offices)
One Knapp Centre
Brockton, MA 02401
</TABLE>
-10-
* Excludes CAM and Taxes
** County not included in lease
<PAGE>
IRON AGE UCC FILINGS
IN CONNECTION WITH THE FEBRUARY 26, 1997 CREDIT AGREEMENT
AND APRIL 24, 1998 CREDIT AGREEMENT
<TABLE>
<CAPTION>
====================================================================================================================================
DEBTOR: IRON AGE CORPORATION ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING BNP'S UCC-1 FILING FILINGBNP'S UCC-2/3
AMENDMENT FILING
- - ------------------------------------------------------------------------------------------------------------------------------------
CREDIT STATE JURISDICTION FILING FILING FILING FILING FILING FILING FILING FILING
FOR DATE NO. DATE NO. DATE NO. DATE NO.
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PNC AL Secretary of State 1/24/95 B95-03248FS 3/3/97 B95-03248 3/3/97 B97-08492 FS
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC AK Secretary of State None None None None 3/3/97 427548
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC AZ Secretary of State 12/29/93 770984 3/3/97 770984 3/3/97 957911
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC AZ Secretary of State 1/24/95 817127 3/3/97 817127 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC AR Secretary of State None None None None 3/4/97 1061423
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC CA Secretary of State 12/28/93 93259814 3/3/97 97065C0251 3/3/97 9706660051
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC CA Secretary of State 1/31/95 9503361114 3/3/97 97065C0253 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC CO Secretary of State 1/24/95 952005994 3/3/97 19972016142 3/3/97 19972016439
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC CT Secretary of State 1/24/95 1600529 3/3/97 1754008 3/3/97 1753752
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC DE Secretary of State 11/15/93 9315322 3/3/97 9707027 3/3/97 97-07021
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC DE Secretary of State 1/24/95 9501249 3/3/97 9707026 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC DC Recorder of Deeds None None None None 3/3/97 9700003527
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC FL Secretary of State 11/10/93 930000231898 3/3/97 970000044751 3/3/97 970000044748
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC FL Secretary of State 1/25/95 950000016550 3/3/97 970000044753 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC GA Clayton County 12/29/93 93-4670 3/3/97 31-1997-1161 3/3/97 31-1997-1163
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC GA Clayton County 1/24/95 31-1995-154 3/3/97 31-1997-1162 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
====================================================================================================================================
DEBTOR: IRON AGE CORPORATION ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING BNP'S UCC-1 FILING FILINGBNP'S UCC-2/3
AMENDMENT FILING
- - ------------------------------------------------------------------------------------------------------------------------------------
CREDIT STATE JURISDICTION FILING FILING FILING FILING FILING FILING FILING FILING
FOR DATE NO. DATE NO. DATE NO. DATE NO.
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PNC GA Richmond County 12/29/93 158724 3/3/97 121-1997-000770 3/3/97 121-1997-
(Reel 1019, 000769
Page 700)
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC GA Richmond County 1/24/95 121-1995-120 3/3/97 121-1997-000771 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC HI Secretary of State None None None None 3/19/97 97-036039
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC ID Secretary of State None None None None 3/3/97 741982
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC IL Secretary of State 11/9/93 3187164 3/5/97 389649 3/11/97 3661136
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC IL Secretary of State 1/24/95 3355701 3/5/97 389650 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC IN Secretary of State 11/10/93 1878287 3/3/97 1878287 3/3/97 2108360
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC IN Secretary of State 11/10/93 1878287 3/3/97 1878287 3/3/97 2108360
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC IN Secretary of State 11/10/93 1878287 3/3/97 1878287 3/3/97 2108360
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC IN Secretary of State 1/24/95 1962901 3/3/97 1962901 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC IA Secretary of State None None None None 3/3/97 K815237
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC KS Secretary of State None None None None 3/3/97 2330471
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC KY Secretary of State 11/15/93 134326 3/3/97 134326 3/3/97 142094
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC KY Secretary of State 1/24/95 137666 3/3/97 137666 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC KY Jefferson County 12/30/93 93-11787 3/3/97 93-11787 3/4/97 97-01753
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC KY Jefferson County 1/25/95 95-00853 3/3/97 95-00853 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC LA Parish of East 12/29/93 17-1092287 3/3/97 17-1129776 3/3/97 17-1129774
Baton Rouge
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC LA Parish of East 1/24/95 17-1103262 3/3/97 17-1129775 None None None None
Baton Rouge
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC ME Secretary of State 11/12/93 1054721 3/3/97 T0594410 3/3/97 1210730
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC ME Secretary of State 1/24/95 1110557 3/3/97 T0594411 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
3
<TABLE>
<CAPTION>
=========================================================================================
DEBTOR: IRON AGE CORPORATION ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING
- - -----------------------------------------------------------------------------------------
FILING FILING
CREDITOR STATE JURISDICTION DATE FILING NO. DATE FILING NO.
=========================================================================================
<S> <C> <C> <C> <C> <C> <C>
PNC MD Department 11/10/93 133167765 3/7/97 133167765
of (Liber 3560,
Assessments Folio 0356)
& Taxation
- - -----------------------------------------------------------------------------------
PNC MD Department 1/24/95 150257210 3/7/97 150257210
of (Liber 3682,
Assessments Folio 0376)
& Taxation
- - -----------------------------------------------------------------------------------
PNC MD Baltimore 12/30/93 463627 (Liber 3/7/97 Bk2143
County 2110, Folio Pg002
412)
- - -----------------------------------------------------------------------------------
PNC MD Baltimore 1/24/95 468370 (Liber 3/7/97 Bk2143
County 2130, 827) Pg827
- - -----------------------------------------------------------------------------------
PNC MA Secretary of 12/29/93 206722 3/3/97 002127
the
Commonwealth
- - -----------------------------------------------------------------------------------
PNC MA Secretary of 1/24/95 288432 3/3/97 002128
the
Commonwealth
- - -----------------------------------------------------------------------------------
PNC MA City Clerk 11/12/93 111060 3/3/97 111060
of Worcester
- - -----------------------------------------------------------------------------------
PNC MA City Clerk 1/26/95 113329 3/3/97 113329
of Worcester
- - -----------------------------------------------------------------------------------
PNC MA Mansfield None None None None
Town
- - -----------------------------------------------------------------------------------
n/a MA Brockton City SEE IAK ACQUISITION CHART
- - -----------------------------------------------------------------------------------
n/a MA Holbrook Town SEE IAK ACQUISITION CHART
- - -----------------------------------------------------------------------------------
PNC MI Secretary of 11/10/93 36906B 3/3/97 36906B
State
- - -----------------------------------------------------------------------------------
PNC MI Secretary of 1/25/95 51822B 3/3/97 51822B
State
- - -----------------------------------------------------------------------------------
PNC MN Secretary of 12/29/93 1639973 3/3/97 1921634
State
- - -----------------------------------------------------------------------------------
PNC MN Secretary of 1/24/95 1732604 3/3/97 1921633
State
- - -----------------------------------------------------------------------------------
<CAPTION>
=========================================================================================
DEBTOR: IRON AGE CORPORATION BNP'S UCC-1 FILING BNP'S UCC-2/3 AMENDMENT FILING
- - -----------------------------------------------------------------------------------------
FILING FILING
CREDITOR STATE JURISDICTION DATE FILING NO. DATE FILING NO.
=========================================================================================
<S> <C> <C> <C> <C> <C> <C>
PNC MD Department 3/7/97 170698063
of
Assessments
& Taxation
- - -----------------------------------------------------------------------------------------
PNC MD Department None None None None
of
Assessments
& Taxation
- - -----------------------------------------------------------------------------------------
PNC MD Baltimore None None None None
County
- - -----------------------------------------------------------------------------------------
PNC MD Baltimore None None None None
County
- - -----------------------------------------------------------------------------------------
PNC MA Secretary of 3/3/97 452095
the
Commonwealth
- - ------------------------------------------------------------------------------------------
PNC MA Secretary of None None None None
the
Commonwealth
- - ------------------------------------------------------------------------------------------
PNC MA City Clerk 3/3/97 117188
of Worcester
- - ------------------------------------------------------------------------------------------
PNC MA City Clerk None None None None
of Worcester
- - ------------------------------------------------------------------------------------------
PNC MA Mansfield 3/4/97 41
Town
- - ------------------------------------------------------------------------------------------
n/a MA Brockton City SEE IAK ACQUISITION CHART
- - ------------------------------------------------------------------------------------------
n/a MA Holbrook Town SEE IAK ACQUISITION CHART
- - ------------------------------------------------------------------------------------------
PNC MI Secretary of 3/3/97 D204025
State
- - ------------------------------------------------------------------------------------------
PNC MI Secretary of None None None None
State
- - ------------------------------------------------------------------------------------------
PNC MN Secretary of 3/3/97 1921303
State
- - ------------------------------------------------------------------------------------------
PNC MN Secretary of None None None None
State
- - ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
=================================================================================
DEBTOR: IRON AGE CORPORATION ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING
- - ---------------------------------------------------------------------------------
FILING FILING
CREDITOR STATE JURISDICTION DATE FILING NO. DATE FILING NO.
==================================================================================
<S> <C> <C> <C> <C> <C> <C>
PNC MS Secretary of None None None None
State
- - ----------------------------------------------------------------------------------
PNC MT Secretary of None None None None
State
- - ----------------------------------------------------------------------------------
PNC MO Secretary of 11/15/93 2332393 3/3/97 2332393
State
- - ----------------------------------------------------------------------------------
PNC MO Secretary of 1/24/95 2496789 3/3/97 2496789
State
- - ----------------------------------------------------------------------------------
PNC MO St. Louis 12/29/93 015763 3/3/97 015763
County
- - ----------------------------------------------------------------------------------
PNC MO St. Louis 1/24/95 001055 3/3/97 001055
County
- - ----------------------------------------------------------------------------------
PNC MO Jackson 11/12/93 J328435 3/3/97 J380177
County
- - ----------------------------------------------------------------------------------
PNC MO Jackson 1/24/95 J348631 3/3/97 J380178
County
- - ----------------------------------------------------------------------------------
PNC NE Secretary of None None None None
State
- - ----------------------------------------------------------------------------------
PNC NH Secretary of None None None None
State
- - ----------------------------------------------------------------------------------
PNC NJ Secretary of 11/15/93 1540244 3/3/97 1540244
State
- - ----------------------------------------------------------------------------------
PNC NJ Secretary of 1/24/95 1615117 3/3/97 1615117
State
- - ----------------------------------------------------------------------------------
PNC NM Secretary of 12/29/93 931229054 3/3/97 931229054
State
- - ----------------------------------------------------------------------------------
PNC NM Secretary of 1/24/95 950124043 3/3/97 950124043
State
- - ----------------------------------------------------------------------------------
PNC NY Secretary of 11/10/93 236125 3/3/97 043389
State
- - ----------------------------------------------------------------------------------
PNC NY Secretary of 1/24/95 015834 3/3/97 043384
State
- - ----------------------------------------------------------------------------------
PNC NY Albany County None None None None
- - ----------------------------------------------------------------------------------
PNC NY Broome County 12/1/93 93003823 3/10/97 93003823
- - ----------------------------------------------------------------------------------
PNC NY Broome County 1/25/95 1995000158 3/10/97 1995000158
- - ----------------------------------------------------------------------------------
PNC NY Erie County 11/18/93 Q16-577 3/12/97 Q16-577
- - ----------------------------------------------------------------------------------
<CAPTION>
=========================================================================================
DEBTOR: IRON AGE CORPORATION BNP'S UCC-1 FILING BNP'S UCC-2/3 AMENDMENT FILING
- - -------------------------------------------------------------------------------------------
FILING FILING
CREDITOR STATE JURISDICTION DATE FILING NO. DATE FILING NO.
===========================================================================================
<S> <C> <C> <C> <C> <C> <C>
PNC MS Secretary of 3/3/97 01079643
State
- - --------------------------------------------------------------------------------------------
PNC MT Secretary of 3/3/97 503444
State
- - ---------------------------------------------------------------------------------------------
PNC MO Secretary of 3/3/97 2761678
State
- - ----------------------------------------------------------------------------------------------
PNC MO Secretary of None None None None
State
- - ---------------------------------------------------------------------------------------------
PNC MO St. Louis 3/3/97 2616
County
- - ---------------------------------------------------------------------------------------------
PNC MO St. Louis None None None None
County
- - ---------------------------------------------------------------------------------------------
PNC MO Jackson 3/3/97 J380176
County
- - ---------------------------------------------------------------------------------------------
PNC MO Jackson None None None None
County
- - ---------------------------------------------------------------------------------------------
PNC NE Secretary of 3/3/97 723332
State
- - ---------------------------------------------------------------------------------------------
PNC NH Secretary of 3/3/97 481904
State
- - ---------------------------------------------------------------------------------------------
PNC NJ Secretary of 3/3/97 1752902
State
- - ---------------------------------------------------------------------------------------------
PNC NJ Secretary of None None None None
State
- - ---------------------------------------------------------------------------------------------
PNC NM Secretary of 3/3/97 970303086
State
- - ---------------------------------------------------------------------------------------------
PNC NM Secretary of None None None None
State
- - ---------------------------------------------------------------------------------------------
PNC NY Secretary of 3/3/97 043407
State
- - ---------------------------------------------------------------------------------------------
PNC NY Secretary of None None None None
State
- - ---------------------------------------------------------------------------------------------
PNC NY Albany County 3/3/97 97-01593
- - ---------------------------------------------------------------------------------------------
PNC NY Broome County 3/3/97 1997000519
- - ---------------------------------------------------------------------------------------------
PNC NY Broome County None None None None
- - ---------------------------------------------------------------------------------------------
PNC NY Erie County 3/3/97 Q32-8784
- - ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
5
<TABLE>
<CAPTION>
=================================================================================================================
DEBTOR: IRON AGE CORPORATION ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING
- - -----------------------------------------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO.
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PNC NY Erie County 1/24/95 Q16-580 3/12/97 Q16-580
- - -----------------------------------------------------------------------------------------------------------------
n/a NY Kings County SEE IAK ACQUISITION CHART
- - -----------------------------------------------------------------------------------------------------------------
n/a NY Monroe County SEE IAK ACQUISITION CHART
- - -----------------------------------------------------------------------------------------------------------------
n/a NY Nassau County SEE IAK ACQUISITION CHART
- - -----------------------------------------------------------------------------------------------------------------
n/a NY Queens County SEE IAK ACQUISITION CHART
- - -----------------------------------------------------------------------------------------------------------------
n/a NY Westchester County SEE IAK ACQUISITION CHART
- - -----------------------------------------------------------------------------------------------------------------
PNC NY Yates County 12/29/93 93-869 3/3/97 93-869
- - -----------------------------------------------------------------------------------------------------------------
PNC NY Yates County 1/25/95 95-58 3/3/97 95-58
- - -----------------------------------------------------------------------------------------------------------------
PNC NY Yates County 1/25/94 94-45 3/3/97 94-45
(Fixture Filing)
- - -----------------------------------------------------------------------------------------------------------------
PNC NY Yates County 1/25/95 95-59 3/3/97 95-59
(Fixture Filing)
- - -----------------------------------------------------------------------------------------------------------------
PNC NV Secretary of State None None None None
- - -----------------------------------------------------------------------------------------------------------------
PNC NC Secretary of State 11/12/93 1050432 3/3/97 1432134
- - -----------------------------------------------------------------------------------------------------------------
PNC NC Secretary of State 1/24/95 1186423 3/3/97 1432133
- - -----------------------------------------------------------------------------------------------------------------
PNC NC Durham County None None None None
- - -----------------------------------------------------------------------------------------------------------------
PNC NC Guilford County 12/29/93 416309 3/3/97 459963
- - -----------------------------------------------------------------------------------------------------------------
PNC NC Guilford County 1/24/95 431560 3/3/97 459962
- - -----------------------------------------------------------------------------------------------------------------
PNC NC Mecklenburg County 2/7/94 001905 3/18/97 004648
- - -----------------------------------------------------------------------------------------------------------------
<CAPTION>
=====================================================================================================================
DEBTOR: IRON AGE CORPORATION BNP'S UCC-1 FILING BNP'S UCC-2/3 AMENDMENT FILING
- - ---------------------------------------------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO.
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PNC NY Erie County None None None None
- - ---------------------------------------------------------------------------------------------------------------------
n/a NY Kings County
- - ---------------------------------------------------------------------------------------------------------------------
n/a NY Monroe County
- - ---------------------------------------------------------------------------------------------------------------------
n/a NY Nassau County
- - ---------------------------------------------------------------------------------------------------------------------
n/a NY Queens County
- - ---------------------------------------------------------------------------------------------------------------------
n/a NY Westchester County
- - ---------------------------------------------------------------------------------------------------------------------
PNC NY Yates County 3/3/97 97-157
- - ---------------------------------------------------------------------------------------------------------------------
PNC NY Yates County None None None None
- - ---------------------------------------------------------------------------------------------------------------------
PNC NY Yates County None None None None
(Fixture Filing)
- - ---------------------------------------------------------------------------------------------------------------------
PNC NY Yates County None None None None
(Fixture Filing)
- - ---------------------------------------------------------------------------------------------------------------------
PNC NV Secretary of State 3/3/97 9703386
- - ---------------------------------------------------------------------------------------------------------------------
PNC NC Secretary of State 3/3/97 001432212
- - ---------------------------------------------------------------------------------------------------------------------
PNC NC Secretary of State None None None None
- - ---------------------------------------------------------------------------------------------------------------------
PNC NC Durham County 3/3/97 97-475
- - ---------------------------------------------------------------------------------------------------------------------
PNC NC Guilford County 3/3/97 459942
- - ---------------------------------------------------------------------------------------------------------------------
PNC NC Guilford County None None None None
- - ---------------------------------------------------------------------------------------------------------------------
PNC NC Mecklenburg County 3/3/97 003789
- - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
6
<TABLE>
<CAPTION>
====================================================================================================================
DEBTOR: IRON AGE CORPORATION ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING
- - --------------------------------------------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO.
====================================================================================================================
<S> <C> <C> <C> <C>
PNC NC Mecklenburg 1/24/9 5 001033 3/18/97 004647
County
- - --------------------------------------------------------------------------------------------------------------------
PNC NC Wake County 12/29/93 93-15959 3/4/97 93-15959
- - --------------------------------------------------------------------------------------------------------------------
PNC NC Wake County 1/24/95 95-08987 3/4/97 95-08987
- - --------------------------------------------------------------------------------------------------------------------
PNC ND Secretary of State None None None None
- - --------------------------------------------------------------------------------------------------------------------
PNC OH Secretary of State 11/10/93 AK58490 3/4/97 5395808
- - --------------------------------------------------------------------------------------------------------------------
PNC OH Secretary of State 1/24/95 AL58561 3/4/97 5395809
- - --------------------------------------------------------------------------------------------------------------------
PNC OH Hamilton County 12/29/93 93-240990 3/20/97 97-38905
- - --------------------------------------------------------------------------------------------------------------------
PNC OH Hamilton County 1/24/95 95-9279 3/20/97 97-38907
- - --------------------------------------------------------------------------------------------------------------------
PNC OH Summit County 12/29/93 476967 3/3/97 476967
- - --------------------------------------------------------------------------------------------------------------------
PNC OH Cuyahoga County 1/24/95 1302936 3/3/97 1302936
- - --------------------------------------------------------------------------------------------------------------------
PNC OH Franklin County 1/24/95 003012 3/3/97 04932E10
(Book 04323,
Page C01)
- - --------------------------------------------------------------------------------------------------------------------
PNC OK Oklahoma County 12/29/93 068185 3/4/97 004093
- - --------------------------------------------------------------------------------------------------------------------
PNC OK Oklahoma County 1/24/95 004092 3/4/97 004092
- - --------------------------------------------------------------------------------------------------------------------
PNC OR Secretary of State 11/19/93 R81449 3/3/97 198846
- - --------------------------------------------------------------------------------------------------------------------
PNC OR Secretary of State 1/24/95 S37267 3/3/97 251387
- - --------------------------------------------------------------------------------------------------------------------
PNC PA Secretary of 11/9/93 22570549 3/3/97 26420739
the Commonwealth
- - --------------------------------------------------------------------------------------------------------------------
PNC PA Secretary of 1/23/95 23920790 3/3/97 26420741
the Commonwealth
- - --------------------------------------------------------------------------------------------------------------------
<CAPTION>
==========================================================================================================================
DEBTOR: IRON AGE CORPORATION BNP'S UCC-1 FILING BNP'S UCC-2/3 AMENDMENT FILING
- - --------------------------------------------------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO.
==========================================================================================================================
<S> <C> <C> <C> <C>
PNC NC Mecklenburg None None None None
County
- - --------------------------------------------------------------------------------------------------------------------------
PNC NC Wake County 3/4/97 97-001786
- - --------------------------------------------------------------------------------------------------------------------------
PNC NC Wake County None None None None
- - --------------------------------------------------------------------------------------------------------------------------
PNC ND Secretary of State 3/3/97 97-000664214
- - --------------------------------------------------------------------------------------------------------------------------
PNC OH Secretary of State 3/5/97 AN45126
- - --------------------------------------------------------------------------------------------------------------------------
PNC OH Secretary of State None None None None
- - --------------------------------------------------------------------------------------------------------------------------
PNC OH Hamilton County 3/11/97 97-33722
- - --------------------------------------------------------------------------------------------------------------------------
PNC OH Hamilton County None None None None
- - --------------------------------------------------------------------------------------------------------------------------
PNC OH Summit County None None None None
- - --------------------------------------------------------------------------------------------------------------------------
PNC OH Cuyahoga County 3/3/97 1378685
- - --------------------------------------------------------------------------------------------------------------------------
PNC OH Franklin County 3/3/97 04932E02
- - --------------------------------------------------------------------------------------------------------------------------
PNC OK Oklahoma County 3/4/97 N00992
- - --------------------------------------------------------------------------------------------------------------------------
PNC OK Oklahoma County None None None None
- - --------------------------------------------------------------------------------------------------------------------------
PNC OR Secretary of State 3/10/97 362269
- - --------------------------------------------------------------------------------------------------------------------------
PNC OR Secretary of State None None None None
- - --------------------------------------------------------------------------------------------------------------------------
PNC PA Secretary of 3/3/97 26420283
the Commonwealth
- - --------------------------------------------------------------------------------------------------------------------------
PNC PA Secretary of None None None None
the Commonwealth
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
7
<TABLE>
<CAPTION>
====================================================================================================================================
Debtor: Iron Age Corporation Original UCC-1 Filing BNP's UCC-2 Filing BNP's UCC-1 Filing
- - ------------------------------------------------------------------------------------------------------------------------------------
Credi
tor State Jurisdiction Filing Date Filing No. Filing Date Filing No. Filing Date Filing No.
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ampli PA Secretary of 12/27/93 22701421 Not Terminated Not Terminated None None
con the
Commonwealth
- - ------------------------------------------------------------------------------------------------------------------------------------
Norwt PA Secretary of 11/10/94 23700239 Not Terminated Not Terminated None None
est the
Commonwealth
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Allegheny 11/8/93 UCC-93-07474 3/5/97 UCC-93-007474 3/3/97 UCC-97-001491
County
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Allegheny 1/23/95 UCC-95-000412 3/5/97 UCC-95-000412 None None
County
- - ------------------------------------------------------------------------------------------------------------------------------------
Ampli PA Alleghany 12/28/93 08547 Not Terminated Not Terminated None None
con County
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Allegheny 1/13/94 49933 3/3/97 49933-T None None
County
(Fixture
Filing)
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Allegheny 1/23/95 51157 3/3/97 51157-T None None
County
(Fixture
Filing)
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Erie County 12/29/93 21474-1993 3/3/97 21474-1993 3/3/97 20369-97
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Erie County 1/24/95 20121-1995 3/3/97 20121-1995 None None
- - ------------------------------------------------------------------------------------------------------------------------------------
n/a PA Philiadelphia SEE IAK ACQUISITION CHART
County
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA York County None None None None 3/3/97 97-ST-00454-01
- - ------------------------------------------------------------------------------------------------------------------------------------
n/a PR Secretary of None None None None None None
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC RI Secretary of None None None None 3/3/97 663231
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC SC Secretary of 12/29/93 931229-142617A 3/4/97 970304-100456A 3/3/97 970303-131752A
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC SC Secretary of 1/24/95 950124-145146A 3/4/97 970304-101458A None None
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC SD Secretary of None None None None 3/4/97 970630900076
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC TN Secretary of 1/24/94 273068 3/7/97 972-013349 3/7/97 972-013272
State
- - ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=======================================================================
Debtor: Iron Age Corporation BNP's UCC-2/3 Amendment Filing
- - -----------------------------------------------------------------------
Credi
tor State Jurisdiction Filing Date Filing No.
=======================================================================
<S> <C> <C> <C> <C>
Ampli PA Secretary of None None
con the
Commonwealth
- - -----------------------------------------------------------------------
Norwt PA Secretary of None None
est the
Commonwealth
- - -----------------------------------------------------------------------
PNC PA Allegheny
County
- - -----------------------------------------------------------------------
PNC PA Allegheny None None
County
- - -----------------------------------------------------------------------
Ampli PA Alleghany None None
con County
- - -----------------------------------------------------------------------
PNC PA Allegheny None None
County
(Fixture
Filing)
- - -----------------------------------------------------------------------
PNC PA Allegheny None None
County
(Fixture
Filing)
- - -----------------------------------------------------------------------
PNC PA Erie County
- - -----------------------------------------------------------------------
PNC PA Erie County None None
- - -----------------------------------------------------------------------
n/a PA Philiadelphia
County
- - -----------------------------------------------------------------------
PNC PA York County
- - -----------------------------------------------------------------------
n/a PR Secretary of None None
State
- - -----------------------------------------------------------------------
PNC RI Secretary of
State
- - -----------------------------------------------------------------------
PNC SC Secretary of
State
- - -----------------------------------------------------------------------
PNC SC Secretary of None None
State
- - -----------------------------------------------------------------------
PNC SD Secretary of
State
- - -----------------------------------------------------------------------
PNC TN Secretary of
State
- - -----------------------------------------------------------------------
</TABLE>
<PAGE>
8
<TABLE>
<CAPTION>
====================================================================================================================================
Debtor: Iron Age Corporation Original UCC-1 Filing BNP's UCC-3 Filing BNP's UCC-1 Filing
- - ------------------------------------------------------------------------------------------------------------------------------------
Credi
tor State Jurisdiction Filing Date Filing No. Filing Date Filing No. Filing Date Filing No.
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PNC TN Secretary of 1/24/95 95-391633 3/7/97 972-013348 None None
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC TX Secretary of 11/10/93 213873 3/3/97 627394 3/3/97 041009
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC TX Secretary of 1/24/95 012970 3/3/97 627395 None None
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC UT Secretary of 12/29/93 383253 3/3/97 93-383253 3/3/97 97-556361
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC UT Secretary of 1/24/95 424246 3/3/97 95-424246 None None
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC VT Secretary of None None None None 3/3/97 97-77443
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC VA Secretary of 11/15/93 931115-7810 3/3/97 970303-7043 3/3/97 970303-7301
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC VA Secretary of 1/24/95 950124-7709 3/3/97 970303-7044 None None
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC VA Bedford 11/16/93 025632 3/3/97 970000178 3/3/97 970000177
County
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC VA Bedford 1/24/95 026686 3/3/97 970000179 None None
County
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC VA Danville City None None None None 3/5/97 97-132
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC VA Giles County None None None None 3/3/97 16019
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC VA Northampton None None None None 3/5/97 27
County
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC VA Virginia None None None None 3/3/97 97-823
Beach City
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC WA Secretary of 11/12/93 93-316-0163 3/3/97 97-062-5064 3/3/97 97-062-0527
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC WA Secretary of 1/24/95 95-024-0007 3/3/97 97-062-5063 None None
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC WV Secretary of 12/29/93 390977 3/3/97 390977 3/4/97 0465124
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC WV Secretary of 1/25/95 0415042 3/3/97 0415042 None None
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC WI Secretary of 11/10/93 1390733 3/3/97 427579 3/3/97 1652559
State
- - ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
======================================================================
Debtor: Iron Age Corporation BNP's UCC-2/3 Amendment Filing
- - ----------------------------------------------------------------------
Credi
tor State Jurisdiction Filing Date Filing No.
======================================================================
<S> <C> <C> <C> <C>
PNC TN Secretary of None None
State
- - ----------------------------------------------------------------------
PNC TX Secretary of
State
- - ----------------------------------------------------------------------
PNC TX Secretary of None None
State
- - ----------------------------------------------------------------------
PNC UT Secretary of
State
- - ----------------------------------------------------------------------
PNC UT Secretary of None None
State
- - ----------------------------------------------------------------------
PNC VT Secretary of
State
- - ----------------------------------------------------------------------
PNC VA Secretary of
State
- - ----------------------------------------------------------------------
PNC VA Secretary of None None
State
- - ----------------------------------------------------------------------
PNC VA Bedford
County
- - ----------------------------------------------------------------------
PNC VA Bedford None None
County
- - ----------------------------------------------------------------------
PNC VA Danville City
- - ----------------------------------------------------------------------
PNC VA Giles County
- - ----------------------------------------------------------------------
PNC VA Northampton
County
- - ----------------------------------------------------------------------
PNC VA Virginia
Beach City
- - ----------------------------------------------------------------------
PNC WA Secretary of
State
- - ----------------------------------------------------------------------
PNC WA Secretary of None None
State
- - ----------------------------------------------------------------------
PNC WV Secretary of
State
- - ----------------------------------------------------------------------
PNC WV Secretary of None None
State
- - ----------------------------------------------------------------------
PNC WI Secretary of
State
- - ----------------------------------------------------------------------
</TABLE>
<PAGE>
9
<TABLE>
<CAPTION>
==================================================================================================================================
DEBTOR: IRON AGE CORPORATION ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING BNP'S UCC-1 FILING
- - ----------------------------------------------------------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO.
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PNC WI Secretary of State 1/24/95 1482997 3/3/97 427580 None None
- - ----------------------------------------------------------------------------------------------------------------------------------
PNC WY Secretary of State None None None None 3/3/97 9706216-1B02
==================================================================================================================================
<CAPTION>
=================================================================================
DEBTOR: IRON AGE CORPORATION BNP'S UCC-2/3 AMENDMENT FILING
- - ---------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO.
=================================================================================
<S> <C> <C> <C> <C>
PNC WI Secretary of State None None
- - ---------------------------------------------------------------------------------
PNC WY Secretary of State
=================================================================================
</TABLE>
<PAGE>
10
<TABLE>
<CAPTION>
=================================================================================================================
DEBTOR: FALCON SHOE MFG. CO. D/B/A
DUNHAM BOOTMAKERS ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING
- - -----------------------------------------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO.
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PNC ME Secretary of State 1/24/95 1110555 3/3/97 T0594401
- - -----------------------------------------------------------------------------------------------------------------
PNC ME Androscoggin 1/24/95 01113 3/5/97 Bk3745 Pg 185
County (BK3378, PG
332)
- - -----------------------------------------------------------------------------------------------------------------
PNC ME Androscoggin 1/24/95 01111 3/5/97 Bk3745 Pg 189
County (BK3378, PG
(Fixture Filing) 325)
=================================================================================================================
<CAPTION>
=================================================================================================================
DEBTOR: FALCON SHOE MFG. CO. D/B/A
DUNHAM BOOTMAKERS BNP'S UCC-1 FILING BNP'S UCC-2/3 AMENDMENT FILING
- - -----------------------------------------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO.
=================================================================================================================
<S> <C> <C>
PNC ME Secretary of State None None None None
- - -----------------------------------------------------------------------------------------------------------------
PNC ME Androscoggin
County None None None None
- - -----------------------------------------------------------------------------------------------------------------
PNC ME Androscoggin
County
(Fixture Filing) None None None None
=================================================================================================================
</TABLE>
<PAGE>
11
<TABLE>
<CAPTION>
==================================================================================================================================
DEBTOR: FALCON SHOE MFG. CO. D/B/A
DUNHAM BOOTMAKERS ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING BNP'S UCC-1 FILING
- - ----------------------------------------------------------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO.
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PNC ME Secretary of State 1/24/95 1110556 3/3/97 T0594402 3/3/97 1210721
(P.O. Box
address)
- - ----------------------------------------------------------------------------------------------------------------------------------
ME Secretary of State None None None None 3/3/97 1210722
(Street address)
- - ----------------------------------------------------------------------------------------------------------------------------------
PNC ME Androscoggin 1/24/95 01112 3/5/97 Bk3745 Pg 187 None None
County (BK 3378, PG
329)
- - ----------------------------------------------------------------------------------------------------------------------------------
PNC ME Androscoggin 1/24/95 01110 3/5/97 Bk3745 Pg 191 None None
County (BK 3378, PG
(Fixture Filing) 321)
==================================================================================================================================
<CAPTION>
==================================================================================================
DEBTOR: FALCON SHOE MFG. CO. D/B/A
DUNHAM BOOTMAKERS BNP'S UCC-2/3 AMENDMENT FILING
- - --------------------------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO.
==================================================================================================
<S> <C> <C> <C> <C>
PNC ME Secretary of State
(P.O. Box
address)
- - --------------------------------------------------------------------------------------------------
ME Secretary of State
(Street address)
- - --------------------------------------------------------------------------------------------------
PNC ME Androscoggin None None
County
- - -------------------------------------------------------------------------------------------------
PNC ME Androscoggin None None
County
(Fixture Filing)
================================================================================================
</TABLE>
<PAGE>
12
<TABLE>
<CAPTION>
==================================================================================================================================
DEBTOR: FALCON SHOE MFG. CO. ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING BNP'S UCC-1 FILING
- - ----------------------------------------------------------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO.
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PNC ME Secretary of State 1/25/95 1110621 3/3/97 T0594403 3/3/97 1210723
(P.O. Box
address)
- - ----------------------------------------------------------------------------------------------------------------------------------
ME Secretary of State None None None None 3/3/97 1210724
(Street address)
- - ----------------------------------------------------------------------------------------------------------------------------------
PNC ME Androscoggin 1/25/95 01192 3/5/97 Bk3745 Pg 193 None None
County (BK3379, PG
149)
- - ----------------------------------------------------------------------------------------------------------------------------------
PNC ME Androscoggin 1/25/95 01188 3/5/97 Bk3745 Pg 197 None None
County (BK3379, PG
(Fixture Filing) 134)
==================================================================================================================================
<CAPTION>
=============================================================================================
DEBTOR: FALCON SHOE MFG. CO. BNP'S UCC-2/3 AMENDMENT FILING
- - ---------------------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO.
=============================================================================================
<S> <C> <C> <C> <C>
PNC ME Secretary of State
(P.O. Box
address)
- - ---------------------------------------------------------------------------------------------
ME Secretary of State
(Street address)
- - ---------------------------------------------------------------------------------------------
PNC ME Androscoggin
County None None
- - ---------------------------------------------------------------------------------------------
PNC ME Androscoggin
County
(Fixture Filing) None None
=============================================================================================
</TABLE>
<PAGE>
13
<TABLE>
<CAPTION>
==================================================================================================================
ORIGINAL UCC-1 BNP'S UCC-3 BNP'S UCC-1 BNP'S UCC-2/3
DEBTOR: FALCON SHOE MFG. CO. FILING FILING FILING AMENDMENT FILING
- - ------------------------------------------------------------------------------------------------------------------
FILING FILING FILING FILING FILING FILING FILING FILING
CREDITOR STATE JURISDICTION DATE NO. DATE NO. DATE NO. DATE NO.
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PNC ME Secretary 1/25/95 1110620 3/3/97 T0594404 None None None None
of State
- - ------------------------------------------------------------------------------------------------------------------
PNC ME Androscoggin 1/25/95 01191 3/5/97 Bk 3745 None None None None
County (BK 3379, Pg 195
PG 146)
- - ------------------------------------------------------------------------------------------------------------------
PNC ME Androscoggin 1/25/95 01187 3/5/97 Bk 3745 None None None None
County (BK 3379, Pg 199
(Fixture PG 130)
Filing)
==================================================================================================================
</TABLE>
<PAGE>
14
<TABLE>
<CAPTION>
==================================================================================================================================
DEBTOR: DUNHAM BOOTMAKERS ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING BNP'S UCC-1 FILING BNP'S UCC-2/3 AMENDMENT FILING
- - ----------------------------------------------------------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO.
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PNC ME Secretary of 1/25/95 1110619 3/3/97 T0594405 3/3/97 1210725
State (P.O.
Box address)
- - ----------------------------------------------------------------------------------------------------------------------------------
ME Secretary of None None None None 3/3/97 1210726
State (Street
address)
- - ----------------------------------------------------------------------------------------------------------------------------------
PNC ME Androscoggin 1/25/95 01194 3/5/97 Bk 3745 None None None None
County (BK 3379, Pg 201
PG 155)
- - ----------------------------------------------------------------------------------------------------------------------------------
PNC ME Androscoggin 1/25/95 01190 3/5/97 Bk 3745 None None None None
County (BK 3379, Pg 205
(Fixture Filing) PG 142)
==================================================================================================================================
</TABLE>
<PAGE>
15
<TABLE>
<CAPTION>
====================================================================================================================================
DEBTOR: DUNHAM BOOTMAKERS ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING BNP'S UCC-1 FILINGBNP'S UCC- 2/3 AMENDMENT FILING
- - ------------------------------------------------------------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO.
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PNC ME Secretary of 1/25/95 1110622 3/3/97 TO594406 None None None None
State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC ME Androscoggin 1/25/95 01193 3/5/97 Bk 3745 None None None None
County (BK 3379, Pg 203
PG 152)
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC ME Androscoggin 1/25/95 01189 3/5/97 Bk 3745 None None None None
County (BK 3379, Pg 207
(Fixture PG 138)
Filing)
====================================================================================================================================
</TABLE>
<PAGE>
16
<TABLE>
<CAPTION>
====================================================================================================================================
DEBTOR: IRON AGE HOLDINGS
CORPORATION ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING BNP'S UCC-1 FILING BNP'S UCC-2/3 AMENDMENT FILING
- - ------------------------------------------------------------------------------------------------------------------------------------
CREDITOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO.
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PNC DE Secretary None None None None 3/3/97 97-07025
of State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Secretary None None None None 3/3/97 26420275
of the
Commonwealth
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Allegheny None None None None 3/3/97 UCC-97-001490
County
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Erie County None None None None 3/3/97 20372-97
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA York County None None None None 3/3/97 97-ST-00451-01
====================================================================================================================================
</TABLE>
<PAGE>
17
<TABLE>
<CAPTION>
====================================================================================================================================
BNP'S UCC-2/3
DEBTOR: IAH ACQUISITION CORP. ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING BNP'S UCC-1 FILING AMENDMENT FILING
- - ------------------------------------------------------------------------------------------------------------------------------------
CREDI
TOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO.
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PNC DE Secretary None None None None 3/3/97 97-07024
of State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Secretary None None None None 3/3/97 26420267
of the
Commonwealth
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Allegheny None None None None 3/3/97 UCC-97-001488
County
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Erie County None None None None 3/3/97 20371-97
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA York County None None None None 3/3/97 97-ST-00452-01
====================================================================================================================================
</TABLE>
<PAGE>
18
<TABLE>
<CAPTION>
====================================================================================================================================
BNP'S UCC-2/3
DEBTOR: IAH ACQUISITION CORP. ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING BNP'S UCC-1 FILING AMENDMENT FILING
- - ------------------------------------------------------------------------------------------------------------------------------------
CREDI
TOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO.
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PNC DE Secretary None None None None 3/3/97 97-07023
of State
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Secretary None None None None 3/3/97 26420259
of the
Commonwealth
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Allegheny None None None None 3/3/97 UCC-97-001486
County
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA Erie County None None None None 3/3/97 20370-97
- - ------------------------------------------------------------------------------------------------------------------------------------
PNC PA York County None None None None 3/3/97 97-ST-00453-01
============================================= ======================================================================================
</TABLE>
<PAGE>
19
<TABLE>
<CAPTION>
====================================================================================================================================
DEBTOR: FROM AGE INVESTMENT BNP'S UCC-2/3
COMPANY ORIGINAL UCC-1 FILING BNP'S UCC-3 FILING BNP'S UCC-1 FILING AMENDMENT FILING
- - ------------------------------------------------------------------------------------------------------------------------------------
CREDI
TOR STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO.
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PNC DE Secretary None None None None 3/3/97 97-07022
of State
====================================================================================================================================
</TABLE>
<PAGE>
20
<TABLE>
<CAPTION>
====================================================================================================================================
BNP's UCC-3 Filing (changing
Secured Party: Banque Nationale de Debtor name to Iron Age BNP's UCC-2/3 Amendment Filing
Debtor: IAK Acquisition Corp. Paris, as Agent Corporation) (1998 Refinancing)
- - ------------------------------------------------------------------------------------------------------------------------------------
STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO.
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
CA Secretary of State 03/21/97 9708061052 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
DE Secretary of State 04/30/97 97-14478 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
GA Clayton County 03/21/97 31-19971641 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
IL Secretary of State 03/21/97 3667018 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
ME Secretary of State 03/21/97 1213143 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
MA Secretary of
Commonwealth 03/31/97 457931 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
MA Brockton City 03/21/97 00167 12/22/98 00167
- - ------------------------------------------------------------------------------------------------------------------------------------
MA Holbrook Town 03/21/97 97-25 12/22/98 97-25
- - ------------------------------------------------------------------------------------------------------------------------------------
MI Secretary of State 03/21/97 D211530 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
NJ Secretary of State 03/21/97 1756434 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
NY Secretary of State 03/21/97 057976 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
NY Erie County 03/21/97 Q33-4106 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
NY Kings County 03/21/97 97PK03647 12/23/98 97PK16692
- - ------------------------------------------------------------------------------------------------------------------------------------
NY Monroe County 03/27/97 97-1996 12/22/98 97-1996
- - ------------------------------------------------------------------------------------------------------------------------------------
NY Nassau County 03/28/97 UC97-5451 12/22/98 UC97-021501
- - ------------------------------------------------------------------------------------------------------------------------------------
NY Queens County 03/21/97 97PQ05157 12/23/98 97PQ20771
- - ------------------------------------------------------------------------------------------------------------------------------------
NY Westchester County 03/21/97 97-02218 12/23/98 97-2218
- - ------------------------------------------------------------------------------------------------------------------------------------
NC Secretary of State 03/21/97 1439620 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
NC Mecklenburg County 03/21/97 004926 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
21
<TABLE>
<CAPTION>
====================================================================================================================================
BNP's UCC-3 Filing (changing
Secured Party: Banque Nationale de Debtor name to Iron Age BNP's UCC-2/3 Amendment Filing
Debtor: IAK Acquisition Corp. Paris, as Agent Corporation) (1998 Refinancing)
- - ------------------------------------------------------------------------------------------------------------------------------------
STATE JURISDICTION FILING DATE FILING NO. FILING DATE FILING NO. FILING DATE FILING NO.
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
OH Secretary of State 04/24/97 AN58349 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
OH Cuyahoga County 03/21/97 1380127 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
OH Hamilton County 03/27/97 97-42625 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
PA Secretary of
Commonwealth 03/21/97 26480893 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
PA Alleghany County 04/29/97 UCC-97-003089 None None None None
- - ------------------------------------------------------------------------------------------------------------------------------------
PA Philadelphia County 03/21/97 97-1391 12/22/98 97-1391
====================================================================================================================================
</TABLE>
<PAGE>
EXHIBIT 10.3
INTELLECTUAL PROPERTY SECURITY AGREEMENT
Dated April 24, 1998
From
THE GRANTORS NAMED HEREIN
as Grantors,
-----------
to
BANQUE NATIONALE DE PARIS,
as Agent
--------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
SECTION PAGE
- - ------- ----
<S> <C>
1. Grant of Security.................................................. 1
2. Security for Obligations........................................... 3
3. Grantors Remain Liable............................................. 3
4. Representations and Warranties..................................... 3
5. Further Assurances................................................. 5
6. Transfers and Other Liens.......................................... 8
7. The Agent Appointed Attorney-in-Fact............................... 8
8. The Agent May Perform.............................................. 8
9. The Agent's Duties................................................. 9
10. Remedies........................................................... 9
11. Indemnity and Expenses............................................. 10
12. Security Interest Absolute......................................... 11
13. Amendments; Waivers; Etc........................................... 12
14. Addresses for Notices.............................................. 12
15. Continuing Security Interest; Assignments Under the
Credit Agreement................................................... 12
16. Release and Termination............................................ 13
17. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial;
Etc................................................................ 13
</TABLE>
<PAGE>
SCHEDULES
- - ---------
Schedule I - Patents and Patent Applications
Schedule II - Trademark Registrations and Applications
Schedule III - Copyright Registrations and Applications
Schedule IV - Licenses
Schedule V - Third Party Claims/Pending Litigation/Unauthorized Uses
EXHIBITS
- - --------
Exhibit A - Form of Intellectual Property Agreement Supplement
<PAGE>
INTELLECTUAL PROPERTY SECURITY AGREEMENT dated April 24, 1998, made by
IRON AGE CORPORATION, a Delaware corporation (the "Borrower"), IRON AGE HOLDINGS
--------
CORPORATION, a Delaware corporation, and the Persons listed on the signature
pages hereof under the caption "The Collateral Grantors" (such Persons, together
with the Borrower and the Additional Intellectual Property Collateral Grantors
(as defined in Section 13(c)), the "Grantors", and each individually, a
--------
"Grantor"), to BANQUE NATIONALE DE PARIS ("BNP"), as agent (together with any
------- ---
successor agent appointed pursuant to Article VIII of the Credit Agreement, the
"Agent") for the lenders (the "Lenders") and the swing line bank (the "Swing
----- ------- -----
Line Bank") party to the Credit Agreement (as hereinafter defined), and the
- - ---------
issuer of Letters of Credit (the "Issuing Bank") under the Credit Agreement and
------------
as custodian for the Hedge Banks (as defined in the Credit Agreement).
PRELIMINARY STATEMENTS:
(1) The Borrower has entered into a Credit Agreement dated as of
April 24, 1998 (as amended, supplemented or otherwise modified, the "Credit
------
Agreement"; the terms defined therein and not otherwise defined herein being
- - ---------
used herein as therein defined) with the Lenders, the Issuing Bank, Swing Line
Bank and the Agent.
(2) It is a condition precedent to the making of Advances by the
Lender Parties under the Credit Agreement and the issuance of Letters of Credit
by the Issuing Bank under the Credit Agreement that each Grantor shall have
granted the assignment and security interest and made the pledge contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lender Parties to make Advances under the Credit Agreement, the
Issuing Bank to issue Letters of Credit under the Credit Agreement and the Hedge
Banks to enter into arrangements permitted by Section 5.02(b)(ii)(A) of the
Credit Agreement, each Grantor hereby agrees with the Agent for the ratable
benefit of the Secured Parties as follows:
SECTION 1. Grant of Security. Each Grantor hereby pledges and
-----------------
assigns to the Agent for the benefit of the Secured Parties, and hereby grants
to the Agent for the benefit of the Secured Parties a security interest in, all
of such Grantor's right, title and interest in and to the following, whether now
owned or hereafter acquired (collectively, the "Intellectual Property
---------------------
Collateral"):
- - ----------
(a) all patents, patent applications and patentable inventions,
including, without limitation, each patent and patent application
identified in Schedule I attached hereto and made a part hereof, and
including without limitation (i) all inventions and improvements described
and claimed therein, (ii) the right to sue or otherwise recover for any
misappropriations thereof, (iii) all income, royalties, damages and other
payments now and hereafter due and/or payable with respect thereto
(including,
<PAGE>
without limitation, payments under all licenses entered into in connection
therewith, and damages and payments for past and future infringements
thereof), and (iv) all rights corresponding thereto throughout the world
and all reissues, divisions, continuations, continuations-in-part,
substitutes, renewals, and extensions thereof, all improvements thereon and
all other rights of any kind whatsoever of such Grantor accruing thereunder
or pertaining thereto (the "Patents");
-------
(b) all trademarks, service marks, trade names, trade dress or other
indicia of trade origin, trademark and service mark registrations, and
applications for trademark or service mark registrations and any renewals
thereof, including, without limitation, each registration and application
identified in Schedule II attached hereto and made a part hereof, and
including without limitation (i) the right to sue or otherwise recover for
any and all past, present and future infringements and misappropriations
thereof, (ii) all income, royalties, damages and other payments now and
hereafter due and/or payable with respect thereto (including, without
limitation, payments under all licenses entered into in connection
therewith, and damages and payments for past or future infringements
thereof), and (iii) all rights corresponding thereto throughout the world
and all other rights of any kind whatsoever of such Grantor accruing
thereunder or pertaining thereto, together in each case with the goodwill
of the business connected with the use of, and symbolized by, each such
trademark, service mark, trade name, trade dress or other indicia of trade
origin (the "Trademarks");
----------
(c) all copyrights, whether statutory or common law, and whether or
not the underlying works of authorship have been published, and all works
of authorship and other intellectual property rights therein, all
copyrights of works based on, incorporated in, derived from or relating to
works covered by such copyrights, all right, title and interest to make and
exploit all derivative works based on or adopted from works covered by such
copyrights, and all copyright registrations and copyright applications, and
any renewals or extensions thereof, including, without limitation, each
copyright registration and copyright application, if any, identified in
Schedule III attached hereto and made a part hereof, and including, without
limitation, (i) the right to print, publish and distribute any of the
foregoing, (ii) the right to sue or otherwise recover for any and all past,
present and future infringements and misappropriations thereof, (iii) all
income, royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including, without limitation, payments under
all licenses entered into in connection therewith, and damages and payments
for past or future infringements thereof), and (iv) all rights
corresponding thereto throughout the world and all other rights of any kind
whatsoever of such Grantor accruing thereunder or pertaining thereto (the
"Copyrights"); and
----------
(d) all license agreements with any other person in connection with
any of the Patents, Trademarks or Copyrights, or such other person's
patents, trade names, trademarks or copyrights, whether such Grantor is a
licensor or licensee under any such license agreement, including, without
limitation, the license agreements listed on
-2-
<PAGE>
Schedule IV attached hereto and made a part hereof, subject, in each case,
to the terms of such license agreements, including, without limitation,
terms requiring consent to a grant of a security interest, and any right to
prepare for sale, sell and advertise for sale, all Inventory (as defined in
the Security Agreement) now or hereafter owned by such Grantor and now or
hereafter covered by such licenses (the "Licenses").
--------
SECTION 2. Security for Obligations. The pledge, assignment and
------------------------
security interest granted under this Agreement by each Grantor secure the
payment of all Obligations of such Grantor now or hereafter existing under the
Loan Documents, whether for principal, interest, premiums, fees, expenses, or
otherwise (all such Obligations being the "Secured Obligations"). Without
-------------------
limiting the generality of the foregoing, this Agreement secures the payment of
all amounts that constitute part of the Secured Obligations and would be owed by
such Grantor to the Secured Parties under the Loan Documents but for the fact
that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving such Grantor.
SECTION 3. Grantors Remain Liable. Anything herein to the contrary
----------------------
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in the Intellectual Property Collateral to the extent set
forth therein to perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed, (b) the exercise by the
Agent of any of the rights hereunder shall not release any Grantor from any of
its duties or obligations under the contracts and agreements included in the
Intellectual Property Collateral, and (c) no Secured Party shall have any
obligation or liability under the contracts and agreements included in the
Intellectual Property Collateral by reason of this Agreement, nor shall any
Secured Party be obligated to perform any of the obligations or duties of any
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 4. Representations and Warranties. Each Grantor represents
------------------------------
and warrants as to itself and its Intellectual Property Collateral as follows:
(a) Such Grantor is the legal and beneficial owner of the entire
right, title and interest in and to the Intellectual Property Collateral of
such Grantor in which it is granting a security interest free and clear of
any Lien, except for the security interest created by this Agreement,
Permitted Liens and other Liens permitted pursuant to Section 5.02(a) of
the Credit Agreement. No effective financing statement or other instrument
similar in effect covering all or any part of such Intellectual Property
Collateral is on file in any recording office (including, without
limitation, the United States Patent and Trademark Office), except such as
may have been filed in favor of the Agent relating to this Agreement or the
other Collateral Documents, and as set forth in Schedule VI of the Security
Agreement and except for (1) the Security Agreement in favor of Wolverine
World Wide, Inc. which is recorded in the United States Patent and
Trademark Office ("PTO") at Reel 773, Frames 434-444, (2) the
-3-
<PAGE>
Intellectual Property Security Agreement dated February 26, 1997 in favor
of the Agent which is recorded in the PTO at Reel 1565, Frames 638-674, and
(3) the Intellectual Property Security Agreement Supplement dated March 14,
1997 from IAK Acquisition Corp. in favor of the Agent which is recorded in
the PTO at Reel 1583, Frames 132-173.
(b) Set forth in Schedule I opposite the name of such Grantor is a
complete and accurate list of all patents and all patent applications owned
by such Grantor. Set forth in Schedule II opposite the name of such Grantor
is a complete and accurate list of all trademark and service mark
registrations and all trademark and service mark applications owned by such
Grantor. Set forth in Schedule III opposite the name of such Grantor is a
complete and accurate list of all copyright registrations and copyright
applications owned by such Grantor. Set forth in Schedule IV opposite the
name of such Grantor is a complete and accurate list of all Licenses owned
by such Grantor in which such Grantor is (i) a licensor with respect to any
of the Patents, Trademarks or Copyrights, or (ii) a licensee of any other
person's patents, trade names, trademarks or copyrights. Such Grantor has
made all necessary filings and recordations to protect and maintain its
interest in the patents, patent applications, trademark and service mark
registrations, trademark and service mark applications, copyright
registrations, copyright applications and Licenses set forth in Schedules
I, II, III and IV.
(c) Each patent, patent application, trademark or service mark
registration, trademark or service mark application, copyright registration
and copyright application of such Grantor set forth in Schedules I, II and
III is subsisting and has not been adjudged invalid, unregistrable or
unenforceable, in whole or in part, and is valid, registrable and
enforceable, except as otherwise disclosed to the Agent. Each License of
such Grantor identified in Schedule IV is validly subsisting and has not
been adjudged invalid or unenforceable, in whole or in part, and is valid
and enforceable. Such Grantor is not aware of any uses of any item of
Intellectual Property Collateral which could be expected to lead to such
item becoming invalid or unenforceable, including unauthorized uses by
third parties and uses which were not supported by the goodwill of the
business connected with such Intellectual Property Collateral.
(d) Such Grantor has not made a previous assignment, transfer or
agreement constituting a present or future assignment, transfer or
encumbrance of any of the Intellectual Property Collateral which has not
been reassigned or retransferred to such Grantor. Such Grantor has not
granted any license (other than those listed on Schedule IV hereto),
release, covenant not to sue, or non-assertion assurance to any person with
respect to any part of the Intellectual Property Collateral.
-4-
<PAGE>
(e) Such Grantor has used proper statutory notice in connection with
its use of each patent, each registered trademark and service mark and each
copyright contained in Schedules I, II and III.
(f) This Agreement and the pledge of the Intellectual Property
Collateral pursuant hereto, together with the filings described below,
create a valid and perfected first priority security interest in the
Intellectual Property Collateral subject to Permitted Liens and other Liens
permitted pursuant to Section 5.02(a) of the Credit Agreement, securing the
payment of the Secured Obligations, and all filings and other actions
necessary or desirable to perfect and protect such security interest have
been or will promptly be duly made or taken.
(g) No consent of any other Person and no authorization, approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body or any other third party is required for (i)
the grant by such Grantor of the assignment and security interest granted
hereby, the pledge by such Grantor of the Intellectual Property Collateral
pursuant hereto or the execution, delivery or performance of this Agreement
by such Grantor, (ii) the perfection or maintenance of the pledge,
assignment and security interest created hereby (including the first
priority nature of such pledge, assignment or security interest) or (iii)
the exercise by the Agent of its rights provided for in this Agreement or
the remedies in respect of the Intellectual Property Collateral pursuant to
this Agreement, in each case other than the filing of financing and
continuation statements under the Uniform Commercial Code in the
jurisdictions listed on Schedule VI to the Security Agreement and the
filing and recordal of this Agreement with the United States Patent and
Trademark Office and the United States Copyright Office, which shall be
duly filed promptly following the execution of this Agreement.
(h) Except for the Licenses set forth in Schedule IV and except as
set forth in Schedule V, to such Grantor's knowledge after due diligence
that such Grantor has deemed necessary and appropriate under the
circumstances there are no claims relating to any item of Intellectual
Property Collateral.
(i) Except as set forth in Schedule V, no claim has been made and is
continuing or, to such Grantor's knowledge after due diligence that such
Grantor has deemed necessary and appropriate under the circumstances,
threatened that any item of Intellectual Property Collateral is invalid or
unenforceable or that the use by such Grantor of any Intellectual Property
Collateral does or may violate the rights of any Person. Except as set
forth in Schedule V, there is currently no infringement or unauthorized use
of any item of Intellectual Property Collateral.
(j) Such Grantor has taken all necessary steps to use consistent
standards of quality in the manufacture, distribution and sale of all
products sold and the provision of all services provided under or in
connection with any of the Trademarks and has
-5-
<PAGE>
taken all reasonably necessary steps to ensure that all licensed users of
any of the Trademarks use such consistent standards of quality.
SECTION 5. Further Assurances. (a) Each Grantor agrees that from
------------------
time to time, at its own expense, it shall promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Agent may reasonably request, in order to
perfect and protect any pledge, assignment or security interest granted or
purported to be granted hereby (including, without limitation, the first
priority nature thereof) or to enable the Agent to exercise and enforce its
rights and remedies hereunder with respect to any part of the Intellectual
Property Collateral of such Grantor. Without limiting the generality of the
foregoing, each Grantor shall promptly after an Event of Default execute and
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable or as the Agent
may request, in order to perfect and preserve the pledge, assignment and
security interest granted or purported to be granted hereby.
(b) Each Grantor hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Intellectual Property Collateral without the signature of such
Grantor where permitted by law. A photocopy or other reproduction of this
Agreement or any financing statement covering the Intellectual Property
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
(c) Each Grantor shall furnish to the Agent, upon the Agent's request
at any time after the occurrence and during the continuance of an Event of
Default statements and schedules further identifying and describing the
Intellectual Property Collateral of such Grantor and such other reports in
connection with the Intellectual Property Collateral of such Grantor as the
Agent may reasonably request, all in reasonable detail.
(d) Each Grantor agrees that, should it obtain an ownership interest
in any patent, patent application, patentable invention, trademark, service
mark, trade name, trade dress, other indicia of trade origin, trademark or
service mark registration, trademark or service mark application, copyright,
work of authorship, copyright registration, copyright application or license,
which is not now a part of the Intellectual Property Collateral, (i) the
provisions of Section 1 shall automatically apply thereto, (ii) any such patent,
patent application, patentable invention, trademark, service mark, trade name,
trade dress, indicia of trade origin, trademark or service mark registration or
trademark or service mark application (together with the goodwill of the
business connected with the use of same and symbolized by same), copyright, work
of authorship, copyright registration, copyright application or license shall
automatically become part of the Intellectual Property Collateral, and (iii)
with respect to any ownership interest in any patent, patent application,
trademark or service mark registration, trademark or service mark application,
copyright registration, copyright application or license that such Grantor
should obtain, it shall give prompt written
-6-
<PAGE>
notice thereof to the Agent in accordance with Section 14 hereof. Each Grantor
authorizes the Agent to modify this Agreement by amending Schedules I, II, III,
IV and V (and will cooperate with the Agent in effecting any such amendment) to
include any patent, patent application, trademark or service mark registration,
trademark or service mark application, copyright registration, copyright
application or license which becomes part of the Intellectual Property
Collateral under this Section.
(e) With respect to each patent, patent application, trademark or
service mark registration, trademark or service mark application, copyright
registration, copyright application and License, such Grantor agrees to take all
necessary steps, including, without limitation, in the United States Patent and
Trademark Office, the United States Copyright Office or in any court, to (i)
maintain each such patent, trademark or service mark registration, copyright
registration and License of such Grantor, and (ii) pursue each such patent
application, trademark or service mark application, and copyright application
now or hereafter included in the Intellectual Property Collateral of such
Grantor, including, without limitation, the filing of responses to office
actions issued by the United States Patent and Trademark Office and the United
States Copyright Office, the filing of applications for renewal or extension,
the filing of affidavits under Sections 8 and 15 of the United States Trademark
Act, the filing of divisional, continuation, continuation-in-part and substitute
applications, the filing of applications for re-issue, renewal or extensions,
the payment of maintenance fees, and the participation in interference,
reexamination, opposition, cancellation, infringement and misappropriation
proceedings. Each Grantor agrees to take corresponding steps with respect to
each new or acquired patent, patent application, trademark or service mark
registration, trademark or service mark application, copyright registration,
copyright application or License to which it is now or later becomes entitled.
Any expenses incurred in connection with such activities shall be borne by such
Grantor. No Grantor shall, without the written consent of the Agent, discontinue
use of or otherwise abandon any patent or patentable invention, trademark or
service mark, or copyright identified in Schedules I, II and III, or abandon any
right to file an application for letters patent, trademark or service mark, or
copyright, or abandon any pending application for a letters patent, trademark or
service mark, or copyright identified in Schedules I, II and III, unless such
Grantor shall have previously determined that such use or the pursuit or
maintenance of such patent, registration or application is no longer desirable
in the conduct of such Grantor's business and that the loss thereof will not
have a Material Adverse Effect and, in which case, such Grantor will give prompt
notice of any such abandonment to the Agent pursuant to the terms of Section 14
hereof.
(f) Each Grantor agrees to notify the Agent promptly and in writing
if it learns (i) that any item of the Intellectual Property Collateral may be
determined to have become abandoned or dedicated or (ii) of any adverse
determination or the institution of any proceeding (including, without
limitation, the institution of any proceeding in the United States Patent and
Trademark Office or any court) regarding any item of the Intellectual Property
Collateral.
-7-
<PAGE>
(g) In the event that any Grantor becomes aware that any item of the
Intellectual Property Collateral is infringed or misappropriated by a third
party, such Grantor shall promptly notify the Agent and shall take such actions
as such Grantor or the Agent deems reasonable and appropriate under the
circumstances to protect such Intellectual Property Collateral, including,
without limitation, suing for infringement or misappropriation and for an
injunction against such infringement or misappropriation. Any expense incurred
in connection with such activities shall be borne by such Grantor.
(h) Each Grantor shall continue to use proper statutory notice in
connection with its use of each of its patents, registered trademarks and
service marks, and copyrights contained in Schedules I, II and III.
(i) Each Grantor shall take all steps which it or the Agent deems
reasonable and appropriate under the circumstances to preserve and protect each
item of its Intellectual Property Collateral, including, without limitation,
maintaining the quality of any and all products or services used or provided in
connection with any of the Trademarks, consistent with the quality of the
products and services as of the date hereof, and taking all steps necessary to
ensure that all licensed users of any of the Trademarks use such consistent
standards of quality.
SECTION 6. Transfers and Other Liens. Each Grantor agrees not (i) to
-------------------------
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any item of the Intellectual Property
Collateral, except for sales of Inventory in the ordinary course of business and
sales permitted pursuant to Section 5.02(e) of the Credit Agreement, or (ii) to
create or suffer to exist any Lien upon or with respect to any of the
Intellectual Property Collateral, except for the pledge, assignment and security
interest created by this Agreement, Permitted Liens, and other Liens to the
extent permitted pursuant to Section 5.02(a) of the Credit Agreement.
SECTION 7. The Agent Appointed Attorney-in-Fact. Each Grantor hereby
------------------------------------
irrevocably appoints the Agent such Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such Grantor
or otherwise, upon the occurrence and continuance of an Event of Default, to
take any action and to execute any instrument that the Agent may deem necessary
or advisable to accomplish the purposes of this Agreement, including, without
limitation:
(a) to ask for, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Intellectual Property Collateral,
(b) to receive, indorse and collect any drafts, instruments, chattel
paper and other documents in connection with subsection (a) above and give
full discharge for the same; and
-8-
<PAGE>
(c) to file any claims, or take any action or to institute any
proceedings that the Agent may deem necessary or desirable for the
collection of any payments relating to any of the Intellectual Property
Collateral or to enforce the rights of the Agent with respect to any item
of the Intellectual Property Collateral.
SECTION 8. The Agent May Perform. If any Grantor fails to perform any
---------------------
agreement contained herein, the Agent may upon notice to such Grantor perform,
or cause performance of, such agreement, and the expenses of the Agent incurred
in connection therewith shall be payable by such Grantor under Section 11(b).
SECTION 9. The Agent's Duties. The powers conferred on the Agent
------------------
hereunder are solely to protect its interest in the Intellectual Property
Collateral and shall not impose any duty upon it to exercise any such powers.
Except for the exercise of reasonable care in the safe custody and preservation
of the certificates of registration for any of the Trademarks and Copyrights,
the letters patent for any of the Patents and any License in its possession and
the accounting for moneys actually received by it hereunder, the Agent shall
have no duty as to any Intellectual Property Collateral, whether or not any
Secured Party has or is deemed to have knowledge of such matters, or as to the
taking of any necessary steps to preserve rights against any parties or any
other rights pertaining to any Intellectual Property Collateral. The Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of the certificates of registration for any of the Trademarks and
Copyrights, the letters patent for any of the Patents and any License in its
possession if such certificates of registration, letters patent and licenses are
accorded treatment substantially equal to that which BNP accords its own
property of like tenor.
SECTION 10. Remedies. If any Event of Default shall have occurred
--------
and be continuing:
(a) The Agent may exercise in respect of the Intellectual Property
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it under applicable law, all the rights and remedies
of a secured party upon default under the Uniform Commercial Code in effect
in the State of New York at such time (the "Code") (whether or not the Code
----
applies to the affected Intellectual Property Collateral), and also may (i)
require each Grantor to, and each Grantor hereby agrees that it shall at
its own expense and upon request of the Agent forthwith, assemble all or
part of the documents and things embodying all or any part of the
Intellectual Property Collateral as directed by the Agent and make them
available to the Agent at a place to be designated by the Agent that is
reasonably convenient to both parties and (ii) without notice, except as
specified below, sell the Intellectual Property Collateral or any part
thereof in one or more parcels at public or private sale, at any exchange
or broker's board or at any of the Agent's offices or elsewhere, for cash,
on credit or for future delivery, and upon such other terms as the Agent
may deem commercially reasonable. In the event of any sale, assignment, or
other disposition of any of the Intellectual Property Collateral of any
Grantor, the goodwill of the business connected
-9-
<PAGE>
with and symbolized by any Trademarks subject to such disposition shall be
included, and such Grantor shall supply to the Agent or its designee such
Grantor's know-how and expertise, and documents and things embodying the
same, relating to the manufacture, distribution, advertising and sale of
products or the provision of services relating to any Intellectual Property
Collateral subject to such disposition, and such Grantor's customer lists
and other records and documents relating to such Intellectual Property
Collateral and to the manufacture, distribution, advertising and sale of
such products and services. Each Grantor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to such Grantor
of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The
Agent shall not be obligated to make any sale of Intellectual Property
Collateral regardless of notice of sale having been given. The Agent may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(b) Any cash held by the Agent as Collateral and all cash proceeds
received by the Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Intellectual Property Collateral
may, in the discretion of the Agent, be held by the Agent as collateral
for, and/or then or at any time thereafter applied (after payment of any
amounts payable to the Agent pursuant to Section 11) in whole or in part by
the Agent for the ratable benefit of the Secured Parties against all or any
part of the Secured Obligations in such order as the Agent shall elect.
Any surplus of such cash or cash proceeds held by the Agent and remaining
after payment in full of all of the Secured Obligations shall be paid over
to the Grantors or to whomsoever may be lawfully entitled to receive such
surplus.
(c) The Agent may exercise any and all rights and remedies of the
Grantors under or in respect of the Intellectual Property Collateral,
including, without limitation, any and all rights of the Grantors to demand
or otherwise require payment of any amount under, or performance of any
provision of, any of the Intellectual Property Collateral.
(d) All payments received by any Grantor under or in respect of the
Intellectual Property Collateral shall be received in trust for the benefit
of the Agent, shall be segregated from other funds of such Grantor and
shall be forthwith paid over to the Agent in the same form as so received
(with any necessary indorsement or assignment).
SECTION 11. Indemnity and Expenses. (a) Each of the Grantors
----------------------
jointly and severally agrees to indemnify the Agent, each Secured Party and each
of their respective officers, directors, employees, agents and advisors (each an
"Indemnified Party") from, and hold each of them harmless against, any and all
-----------------
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and reasonable expenses of counsel)
-10-
<PAGE>
arising out of or in connection with or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except to the
extent that such claims, damages, losses, liabilities and expenses are found in
a final, nonappealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.
(b) Each Grantor jointly and severally agrees to pay to the Agent,
upon demand, the amount of any and all expenses (including, without limitation,
the reasonable fees and expenses of its counsel and of any experts and agents)
that the Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from or other realization upon, any of the Intellectual Property
Collateral, (iii) the exercise or enforcement of any of the rights of any
Secured Party hereunder or (iv) the failure by such Grantor to perform or
observe any of the provisions hereof.
SECTION 12. Security Interest Absolute. The obligations of each
--------------------------
Grantor under this Agreement are independent of the Secured Obligations, and a
separate action or actions may be brought and prosecuted against such Grantor to
enforce this Agreement irrespective of whether any action is brought against the
other Grantors or whether the other Grantors are joined in any such action or
actions. All rights of the Agent and the pledge, assignment and security
interest hereunder, and all obligations of each Grantor hereunder, shall be
absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of any Loan Document, any
Hedge Agreement or any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from any Loan
Document or any Hedge Agreement, including, without limitation, any
increase in the Secured Obligations resulting from the extension of
additional credit to any Grantor or any of its Subsidiaries or otherwise;
(iii) any taking, exchange, release or nonperfection of any
Intellectual Property Collateral, or any taking, release or amendment or
waiver of or consent to departure from any guaranty, for all or any of the
Secured Obligations;
(iv) any manner of application of Intellectual Property Collateral,
or proceeds thereof, to all or any of the Secured Obligations, or any
manner of sale or other disposition of any Intellectual Property Collateral
for all or any of the Secured Obligations or any other assets of any
Grantor or any of its Subsidiaries;
(v) any change, restructuring or termination of the corporate
structure or existence of any Grantor or any of its Subsidiaries; or
-11-
<PAGE>
(vi) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, such Grantor or a third party grantor of a
security interest.
SECTION 13. Amendments; Waivers; Etc. (a) No amendment or waiver of
------------------------
any provision of this Agreement, and no consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
(b) No failure on the part of any Secured Party to exercise, and no
delay in exercising, any right, power or privilege hereunder shall operate as a
waiver thereof or consent thereto; nor shall any single or partial exercise of
any such right, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
(c) Upon the execution and delivery by any Person of a security
agreement supplement in substantially the form of Exhibit A hereto (each an
"Intellectual Property Security Agreement Supplement"), (i) such Person shall be
- - ----------------------------------------------------
referred to as an "Additional Intellectual Property Collateral Grantor" and
---------------------------------------------------
shall be and become a Grantor, and each reference in this agreement to "Grantor"
shall also mean and be a reference to such Additional Collateral Grantor and
(ii) the supplements attached to each Security Agreement Supplement shall be
incorporated into and become a part of and supplement Schedules I through V
hereto, as appropriate, and the Agent may attach such supplements to such
Schedules, and each reference to such Schedules shall mean and be a reference to
such Schedules, as supplemented pursuant hereto.
SECTION 14. Addresses for Notices. All notices and other
---------------------
communications provided for hereunder shall be in writing (including telecopier,
telegraphic or telex communication) and mailed, telecopied, telegraphed,
telexed, cabled or delivered, if to any Grantor, addressed to it at the address
set forth below the name of such Grantor on the signature pages hereof, and if
to the Agent, any Lender, the Issuing Bank, the Swing Line Bank or any Hedge
Bank, addressed to it at its address set forth in Section 9.02 of the Credit
Agreement, or, as to any party, at such other address as shall be designated by
such party in a written notice to each other party complying as to delivery with
the terms of this Section 14. All such notices and other communications shall,
when mailed, telecopied, telegraphed or telexed, be effective when deposited in
the mails, delivered to the telegraph company, transmitted by telecopier or
confirmed by telex answerback, respectively, addressed as aforesaid.
SECTION 15. Continuing Security Interest; Assignments Under the
---------------------------------------------------
Credit Agreement. This Agreement shall create a continuing security interest in
- - ----------------
the Intellectual Property Collateral and shall (a) remain in full force and
effect until the latest of (i) the payment in full in cash of the Secured
Obligations and all other amounts payable under this
-12-
<PAGE>
Agreement, (ii) the Termination Date and (iii) the termination or expiration of
all Secured Hedge Agreements, (b) be binding upon each Grantor, its successors
and assigns and (c) inure, together with the rights and remedies of the Agent
hereunder, to the benefit of and be enforceable by the Secured Parties and their
respective successors, transferees and assigns. Without limiting the generality
of the foregoing clause (c), subject to Section 9.07 of the Credit Agreement,
any Lender Party may assign or otherwise transfer all or any portion of its
rights and obligations under the Credit Agreement (including, without
limitation, all or any portion of its Commitment or Commitments, the Advances
owing to it and any Note or Notes held by it) to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Lender Party herein or otherwise, in each case as
provided in Section 9.07 of the Credit Agreement.
SECTION 16. Release and Termination. (a) Upon any sale, lease,
-----------------------
transfer or other disposition of any item of Intellectual Property Collateral in
accordance with the terms of the Loan Documents (other than sales of Inventory
and Equipment in the ordinary course of business), the Agent shall, at the
appropriate Grantor's expense, execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence the release of
such item of Intellectual Property Collateral from the assignment and security
interest granted hereby; provided, however, that (i) at the time of such request
-------- -------
and such release, no Default shall have occurred and be continuing, (ii) such
Grantor shall have delivered to the Agent, at least ten Business Days prior to
the date of the proposed release, a request for release describing the item of
Intellectual Property Collateral and the terms of the sale, lease, transfer or
other disposition in reasonable detail (including, without limitation, the price
thereof and any expenses in connection therewith), together with a form of
release for execution by the Agent and a certification by such Grantor to the
effect that the transaction is in compliance with the Loan Documents and as to
such other matters as the Agent may reasonably request and (iii) the proceeds of
any such sale, lease, transfer or other disposition required to be applied in
accordance with Section 2.06(b) of the Credit Agreement shall be paid to, or in
accordance with the instructions of, the Agent at the closing thereof.
(b) Upon the later of (i) the cash payment in full of the Secured
Obligations, (ii) the Termination Date and (iii) the termination or expiration
of all Secured Hedge Agreements, the pledge, assignment and security interest
granted hereby shall terminate and all rights to the Intellectual Property
Collateral shall revert to the appropriate Grantor. Upon any such termination
and reversion, the Agent shall, at the appropriate Grantor's expense, return to
such Grantor such of the Intellectual Property Collateral of such Grantor in its
possession as shall not have been sold or otherwise applied pursuant to the
terms of the Loan Documents and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination
and reversion.
SECTION 17. Governing Law; Submission to Jurisdiction; Waiver of Jury
---------------------------------------------------------
Trial; Etc. (a) This Agreement shall be governed by and construed in
- - ----------
accordance with the
-13-
<PAGE>
laws of the State of New York. Unless otherwise defined herein or in the Credit
Agreement, terms used in Articles 8 and 9 of the Code are used herein as therein
defined.
(b) Each Grantor hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or any other Loan Document or Secured Hedge
Agreement to which it is or is to be a party, or for recognition and enforcement
of any judgment, and such Grantor hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in any such New York State or, to the extent permitted by law, in
such federal court. Each Grantor irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection or defense
that it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any of the other Loan
Documents to which it is or is to be a party in any New York State or federal
court. Each Grantor hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court. Each Grantor agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing herein shall affect the right that any party may otherwise have to
commence or participate in any action, suit or proceeding relating to this
Agreement, any of the other Loan Documents or any Secured Hedge Agreement to
which it is or is to be a party, or otherwise to proceed against any Grantor, in
any other jurisdiction.
(c) Each Grantor irrevocably consents to the service of any and all
process in any such action, suit or proceeding by the mailing of copies of such
process to such Grantor at the address set forth below its name on the signature
page hereof, or by any other method permitted by law. Each Grantor agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(d) To the extent that any Grantor has or hereafter may acquire
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, such
Grantor hereby irrevocably waives such immunity in respect of its Obligations
under this Agreement, any other Loan Document and any Hedge Agreement to which
it is or is to be a party.
-14-
<PAGE>
(e) TO THE EXTENT PERMITTED BY LAW, EACH GRANTOR IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY HEDGE AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OF ANY SECURED PARTY IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
IRON AGE CORPORATION
By: /s/ Keith A. McDonough
----------------------------------
Name: Keith A. McDonough
Title: Executive Vice President
Address: Robinson Plaza Three
Suite 400
Pittsburgh, PA 15205
IRON AGE HOLDINGS CORPORATION
By: /s/ Keith A. McDonough
----------------------------------
Name: Keith A. McDonough
Title: Vice President - Fiance
Address: Robinson Plaza Three
Suite 400
Pittsburgh, PA 15205
IRON AGE INVESTMENT COMPANY
By: /s/ Keith A. McDonough
---------------------------------
Name: Keith A. McDonough
Title: President
Address: 801 West Street
Wilmington, DE 19801-1136
-15-
<PAGE>
FALCON SHOE MFG. CO.
By: /s/ Keith A. McDonough
----------------------------------
Name: Keith A. McDonough
Title: Vice President
Address: 2 Cedar Street
P.O. Box 1286
Lewiston, Maine 04243-1286
-16-
<PAGE>
Agreed and consented to as of
the date first above written:
BANQUE NATIONALE DE PARIS,
as Agent
By: /s/ Paul P. Barnes
-------------------------------
Name: Paul P. Barnes
Title: AVP
-17-
<PAGE>
STATE OF New York )
) ss.:
COUNTY OF New York )
On the 24th day of April, 1998, before me personally came Keith A.
McDonough to me known, who, being by me duly sworn, did depose and say he
resides at 8 Highlandview Road, Rennerdale, PA 15106 and that he is the Exec.
Vice President of IRON AGE CORPORATION, the corporation described in and which
executed the above instrument; that he has been authorized to execute said
instrument on behalf of said corporation; and that he signed said instrument on
behalf of said corporation pursuant to said authority.
/s/ Liam M. Toohey
------------------------
Notary Public
[Notarial Seal]
STATE OF New York )
) ss.:
COUNTY OF New York )
On the 24th day of April, 1998, before me personally came Keith A.
McDonough to me known, who, being by me duly sworn, did depose and say he
resides at 8 Highlandview Road, Rennerdale, PA 15106 and that he is the Vice
Pres - Finance of IRON AGE HOLDINGS CORPORATION, the corporation described in
and which executed the above instrument; that he has been authorized to execute
said instrument on behalf of said corporation; and that he signed said
instrument on behalf of said corporation pursuant to said authority.
/s/ Liam M. Toohey
------------------------
Notary Public
[Notarial Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24th day of April, 1998, before me personally came Keith A.
McDonough to me known, who, being by me duly sworn, did depose and say he
resides at 8 Highlandview Road, Rennerdale, PA 15106 and that he is the
President of IRON AGE INVESTMENT COMPANY, the corporation described in and which
executed the above instrument; that he has been authorized to execute said
instrument on behalf of said corporation; and that he signed said instrument on
behalf of said corporation pursuant to said authority.
/s/ Liam Toohey
------------------------
Notary Public
[Notarial Seal]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24th day of April, 1998, before me personally came Keith A.
McDonough to me known, who, being by me duly sworn, did depose and say he
resides at 8 Highlandview Road, Rennerdale, PA 15106 and that he is the Vice
President of FALCON SHOE MFG. CO., the corporation described in and which
executed the above instrument; that he has been authorized to execute said
instrument on behalf of said corporation; and that he signed said instrument on
behalf of said corporation pursuant to said authority.
/s/ Liam Toohey
------------------------
Notary Public
[Notarial Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24th day of April, 1998, before me personally came Paul P.
Barnes to me known, who, being by me duly sworn, did depose and say he resides
at 17 Coralyn Avenue, White Plains, NY 10605 and that he is the Assistant Vice
President of BANQUE NATIONALE DE PARIS, the banking corporation described in and
which executed the above instrument; that he has been authorized to execute said
instrument on behalf of said corporation; and that he signed said instrument on
behalf of said corporation pursuant to said authority.
/s/ Liam Toohey
------------------------
Notary Public
[Notarial Seal]
<PAGE>
SCHEDULE I
to
Intellectual Property Security Agreement
Patents and Patent Applications
-------------------------------
I. Iron Age Corporation
A. U.S. Patent
Title Pat. No. Issue Date
- - ----- -------- ----------
Outsole for a Shoe D302,765 8/15/89
II. Iron Age Holdings Corporation
None.
III. Iron Age Investment Company
None.
IV. Falcon Shoe Mfg. Co.
A. U.S. Patent Application
Title Ser. No. File Date
- - ----- -------- ---------
Methods and Apparatuses for 08/543,002 10/13/95
Insulating an Article of
Footwear Having a Protective
Toe Cap
<PAGE>
SCHEDULE II
to
Intellectual Property Security Agreement
Trademark Registrations and Applications
----------------------------------------
I. Iron Age Corporation
A. U.S. Trademark Registrations
<TABLE>
<CAPTION>
Mark Reg. No. Reg. Date
- - ---- -------- ---------
<S> <C> <C>
IRON AGE MAXIMUM 1,671,179 1/7/92
and Design
IRON AGE 1,677,695 3/3/92
SPORTWORK II
GRABBER 928,349 2/1/71
FREEDOM TOE 1,276,282 5/1/84
BF and Design 1,077,024 11/8/77
METAPRO 949,859 1/2/73
SAF-GARD 1,082,707 1/17/88
IRON AGE and Design 1,212,263 10/12/82
IRON AGE 634,888 9/25/56
MIGHTY TOUGH 1,919,851 9/19/95
MIGHTY TOUGH 1,919,852 9/19/95
and Design
IRON AGE PLUS 2,112,932 11/11/97
ROUGH CREEK 2,082,503 7/22/97
</TABLE>
<PAGE>
OIL RESISTANT GUARANTEED 780,371 11/17/64
SHU-LIFE SOLE
KNAPP ATVS BUILT TO 1,919,898 9/19/95
GO ANYWHERE (Stylized)
KNAPP ATVS BUILT TO 1,967,884 4/16/96
GO ANYWHERE
KNAPP ATVS U.S.A. 1,901,251 6/20/95
2000 SERIES (Stylized)
KNAPP ATVS U.S.A. 1,905,063 7/11/95
2000 SERIES
ATVS BY KNAPP 1,477,784 2/23/88
TUF-SHOT 1,344,676 6/25/85
TWO-SHOT 1,201,228 7/13/82
KNAPP MASTERCRAFT 1,133,194 4/15/80
CUSHIONED COMFORT and Design
KNAPP SHOES 785,262 2/16/65
KNAPP FREE-WAY 671,243 12/16/58
CUSHIONED SHOES and Design
B. U.S. Service Mark Registrations
Mark Reg. No. Reg. Date
- - ---- -------- ---------
IRON AGE 1,966,512 4/9/96
IRON AGE PLUS 2,120,443 12/9/97
C. U.S. Trademark Applications
Mark Ser. No. File Date
- - ---- -------- ---------
RUFFHIDES 74/491,094 2/15/94
<PAGE>
SLIP KNOTS 75/443,441 2/24/98
SPORTWORK 75/319,368 7/3/97
ARMOR 75X-TRA LITE 75/342,582 8/18/97
SAFE-GARD 75/357,666 9/16/97
HIGH-WIDE PROFILE II 75/418,663 1/9/98
THE SOLES OF WORKING AMERICA 75/462,254 4/6/98
THE SOLE OF WORKING AMERICA (to be filed)
KNAPP (to be filed)
D. Foreign Trademark Registrations
Mark Country Reg. No. Reg. Date
- - ---- ------- -------- ---------
IRON AGE Benelux 488,506 12/7/90
IRON AGE Canada 223,537 10/7/77
IRON AGE Germany 1,022,860 11/27/80
IRON AGE Denmark 2318-1981 9/4/81
IRON AGE France 1,621,306 11/27/80
IRON AGE United Kingdom 1,144,205 11/19/80
IRON AGE Mexico 419,038 3/8/92
IRON AGE Norway 110,047 12/3/81
IRON AGE Taiwan 434,908 3/16/89
IRON AGE China 642,723 5/21/93
IRON AGE Sweden 176,255 4/16/81
IRON AGE Hong Kong 04875 12/30/93
<PAGE>
IRON AGE United Kingdom 1,512,133 9/9/92
IRON AGE Japan 3338462 8/8/97
IRON AGE Korea 386476 12/15/97
E. Foreign Service Mark Registrations
Mark Country Reg. No. Reg. Date
- - ---- ------- -------- ---------
IRON AGE Korea 41362 2/19/98
F. Foreign Trademark Applications
Mark Country Ser. No. File Date
- - ---- ------- -------- ---------
SPORTWORK Mexico 318,773 1/7/98
ARMOR 75X-TRA Canada 322,891 1/20/98
LITE & Design
KNAPP Canada 865,487 12/31/97
SPORTWORK Canada 865,488 12/31/97
SPORTWORK II Canada 865,489 12/31/97
& Design
IRON AGE Philippines 102856 9/20/95
SAFE-GARD Canada 869,158 2/11/98
SAFE-GARD Mexico 325,962 3/16/98
G. Foreign Service Mark Applications
Mark Country Ser. No. File Date
- - ---- ------- -------- ---------
IRON AGE Philippines 102857 9/20/95
<PAGE>
II. Iron Age Holdings Corporation
None.
III. Iron Age Investment Company
A. U.S. Registrations
Mark Reg. No. Reg. Date
- - ---- -------- ---------
None.
B. U.S. Applications
Mark Ser. No. File Date
- - ---- -------- ---------
None.
C. Foreign Service Mark Registration
Mark Country Reg. No. Reg. Date
- - ---- ------- ---------- ---------
IRON AGE Mexico 509,304 10/31/95
IRON AGE Canada TMA473,865 3/26/97
D. Foreign Service Mark Application
Mark Country Ser. No. File Date
- - ---- ------- -------- ---------
None.
<PAGE>
IV. Falcon Shoe Manufacturing Co.
A. U.S. Trademark Registrations
Mark Reg. No. Reg. Date
- - ---- --------- ---------
CHIEF QUODDY'S 656,488 12/31/57
MAINE MADE and Design
DUNHAM 895,088 7/21/70
DUNHAM TYROLEANS 740,975 11/20/62
DUNHAM WAFFLE- 973,456 11/20/73
STOMPERS
GREAT FOOTWEAR FOR 1,119,327 5/29/79
THE GREAT OUTDOORS
RUGGARDS (Stylized) 419,794 3/5/46
THE WAY OF NATURE......... 1,110,565 1/2/79
THRU THE HANDS OF MAN
TRU-TRAK 1,437,386 4/21/87
TRUKKERS 993,107 9/10/74
DUNHAM DOUBLE 1,855,821 9/27/94
COVERAGE TOES and Design
DURAFLEX 843,731 2/6/68
WIDE TRAK 2,030,521 1/14/97
ARMOR-TECH 2,051,944 4/15/97
B. U.S. Trademark Application
Mark Ser. No. File Date
- - ---- -------- ---------
None.
<PAGE>
C. State Registration
Mark State Reg. No. Reg. Date
- - ---- ----- -------- ---------
DUNHAM Vermont 4,553 3/29/73
D. Foreign Registrations
Mark Country Reg. No. Reg. Date
- - ---- ------- -------- ---------
DUNHAM Austria 142,074 5/21/92
DUNHAM Canada 225,957 2/10/78
TYROLEANS
DUNHAM'S Italy 259,229 12/29/92
DUNHAM'S Japan 1,620,432 9/29/83
DUNHAM'S Switzerland 383,406 7/19/91
DUNHAM Germany 2,027,548 1/5/93
DUNHAM Spain 1/683/507 4/3/95
DUNHAM Canada 460,625 8/2/96
DUNHAM'S France 1,613,236 9/3/90
DUNHAM'S Switzerland 383,406 7/19/91
QUODDY South Africa 815,685 6/6/81
MOCCASINS &
Design
E. Foreign Applications
Mark Country Ser. No. File Date
- - ---- ------- -------- ---------
ARMOR-TECH Canada 801,437 1/10/96
<PAGE>
SCHEDULE III
to
Intellectual Property Security Agreement
Copyright Registrations and Applications
----------------------------------------
I. Iron Age Corporation
None.
II. Iron Age Holdings Corporation
None.
III. Iron Age Investment Company
None.
IV. Falcon Shoe Mfg. Co.
None.
<PAGE>
SCHEDULE IV
to
Intellectual Property Security Agreement
Licenses
--------
I. Iron Age Corporation
A. Trademark License Agreement, dated August 15, 1994, between W.L. Gore
& Associates, Inc. and Iron Age Corporation
II. Iron Age Holdings Corporation
None.
III. Iron Age Investment Company
A. Service Mark License Agreement, dated January 29, 1995, between Iron
Age Investment Company and Iron Age Canada Ltd.
B. Service Mark License Agreement, dated January 29, 1995, between Iron
Age Investment Company and Iron Age de Mexico de C.V.
C. Services Agreement, dated January 29, 1995, between Iron Age
Investment Company and Iron Age Corporation
IV. Falcon Shoe Mfg. Co.
A. Trademark License Agreement, dated July 25, 1994, between W.L. Gore &
Associates, Inc. and Falcon Shoe Mfg. Co.
B. Manufacturing Certification Agreement, dated July 25, 1994, between
W.L. Gore & Associates, Inc. and Falcon Shoe Mfg. Co.
<PAGE>
SCHEDULE V
to
Intellectual Property Security Agreement
Third Party Claims/Pending Litigation/Unauthorized Uses
-------------------------------------------------------
None.
<PAGE>
EXHIBIT A
to
Intellectual Property Security Agreement
____________, 19___
Banque Nationale de Paris,
as Agent
499 Park Avenue
New York, New York 10022
Attention: Structured Finance Group
Intellectual Property Security Agreement
dated April 24, 1998
between Iron Age Corporation
and Banque Nationale de Paris, as Agent
---------------------------------------
Ladies and Gentlemen:
Reference is made to the above-captioned Intellectual Property
Security Agreement (as amended, supplemented or otherwise modified, the
"Intellectual Property Security Agreement"). Unless otherwise defined herein,
- - -----------------------------------------
terms defined in the Intellectual Property Agreement are used herein as therein
defined.
The undersigned affirms that it has received ____________ in
consideration for the execution and delivery of this Intellectual Property
Security Agreement Supplement.
The undersigned hereby agrees, as of the date first above written, to
become a Grantor under the Intellectual Property Security Agreement as if it
were an original party thereto and agrees that each reference in the
Intellectual Property Security Agreement to a "Grantor" shall also mean and be a
reference to the undersigned.
The undersigned hereby assigns and pledges to the Agent for its
benefit, the benefit of the Issuing Bank and the ratable benefit of the Lenders
and hereby grants to the Agent for its benefit, the benefit of the Issuing Bank
and the ratable benefit of the Lenders as collateral for the Secured Obligations
a pledge and assignment of, and a security interest in, all of the right, title
and interest of the undersigned in and to its Intellectual Property Collateral,
whether now owned or hereafter acquired.
<PAGE>
The undersigned has attached hereto supplements to Schedules I through
V to the Intellectual Property Security Agreement, and the undersigned hereby
certifies that such supplements have been prepared by the undersigned in
substantially the form of the Schedules to the Intellectual Property Security
Agreement and are accurate and complete as of the date first above written.
The undersigned hereby makes each representation and warranty set
forth in Section 4 of the Intellectual Property Security Agreement as to itself
and as to its Intellectual Property Collateral to the same extent as each other
Grantor and hereby agrees to be bound as a Grantor by all of the terms and
provisions of the Intellectual Property Security Agreement to the same extent as
all other Grantors.
This letter shall be governed by and construed in accordance with the
laws of the State of New York.
Very truly yours,
[NAME OF ADDITIONAL GRANTOR]
By_________________________________
Name:
Title:
Address:
<PAGE>
EXHIBIT 10.4
CANADIAN SECURITY AGREEMENT
Dated April 24, 1998
From
IRON AGE CANADA LTD.
as Debtor
to
IRON AGE CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
ARTICLE I
SECURITY
1.1 Terms Incorporated by Reference................................... 1
1.2 Grant of Security................................................. 1
1.3 Obligations Secured............................................... 2
1.4 Attachment........................................................ 3
1.5 Accounts.......................................................... 3
1.6 Scope of Security Interest........................................ 4
1.7 Care and Custody of Collateral.................................... 4
1.8 Debtor's Dealings with Collateral................................. 4
1.9 Insurance......................................................... 5
ARTICLE II
ENFORCEMENT
2.1 Default........................................................... 6
2.2 Remedies.......................................................... 6
2.3 Additional Rights................................................. 7
2.4 Concerning the Receiver........................................... 8
2.5 Appointment of Attorney........................................... 8
2.6 Dealing with the Collateral and the Security Interest............. 8
2.7 Standards of Sale................................................. 9
2.8 Dealings by Third Parties......................................... 9
2.9 Indemnity and Expenses............................................ 10
ARTICLE III
GENERAL
3.1 Discharge......................................................... 10
3.2 No Merger, etc.................................................... 10
3.3 Waivers, etc...................................................... 10
3.4 Further Assurances................................................ 11
3.5 Successors and Assigns............................................ 11
3.6 Headings, etc..................................................... 11
</TABLE>
<PAGE>
ii
<TABLE>
<S> <C>
3.7 Severability...................................................... 11
3.8 Governing Law..................................................... 11
</TABLE>
Schedule I - Intellectual Property
Schedule II - Collateral Locations
Schedule III - Deposit Accounts
<PAGE>
CANADIAN SECURITY AGREEMENT, dated April 24, 1998, made by Iron Age
Canada Ltd. (the "Debtor"), a corporation duly incorporated under the laws of
------
Ontario, to and in favour of Iron Age Corporation, a Delaware corporation (the
"Corporation").
- - ------------
WHEREAS the Corporation will make, from time to time, certain advances
(the "Advances") to the Debtor which Advances will be evidenced by an
--------
intercompany note in substantially the form of Exhibit A hereto (the "Note")
----
payable to the order of the Corporation;
WHEREAS the Debtor has agreed to execute and deliver this security
agreement to and in favour of the Corporation as security for the payment and
performance of the obligations, present or future, direct or indirect, absolute
or contingent, matured or unmatured, of the Debtor to the Corporation pursuant
to the Note;
NOW THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Debtor hereby agrees with the Corporation for the benefit of
the Corporation as follows:
ARTICLE I
SECURITY
1.1 TERMS INCORPORATED BY REFERENCE. Terms defined in the Personal
Property Security Act (Ontario) (as amended from time to time, the "PPSA") and
----
used in this security agreement shall have the same meaning herein.
1.2 GRANT OF SECURITY. (1) Subject to Section 1.5, the Debtor
hereby (i) mortgages and charges to the Corporation, as and by way of a fixed
mortgage and charge; (ii) pledges to the Corporation; (iii) assigns and
transfers to the Corporation as and by way of a specific transfer and
assignment; and (iv) grants to the Corporation a security interest in all of the
Debtor's right, title and interest in and to the personal property and
undertaking of the Debtor now owned or hereafter acquired (collectively, the
"Collateral", and all references thereto herein including any part thereof)
- - -----------
including, without limitation, any and all of the Debtor's:
(a) inventory including goods held for sale or lease, goods furnished
or to be furnished to third parties under contracts of lease, consignment
or service, goods which are raw materials or work in process, goods used in
or procured for packing, and materials used or consumed in the business of
the Debtor;
<PAGE>
2
(b) equipment, fixtures and other goods of every kind and
description, all licenses and other rights and all records, files, charts,
plans, drawings, specifications, manuals and comments relating thereto;
(c) accounts due or accruing due and all agreements, books, accounts,
invoices, letters, documents and papers recording, evidencing or relating
thereto;
(d) deposit accounts, including, without limitation, the Deposit
Accounts and the Canadian Cash Collateral Account (as such terms are
hereinafter defined), all funds held therein and all certificates and
instruments, if any, from time to time, representing any such deposit
accounts, together with 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 or all of such deposit
accounts;
(e) money, documents of title, chattel paper, instruments and
securities:
(f) intangibles including all security interests, goodwill, choses in
action and other contractual benefits (including, without limitation, all
benefits under insurance policies and any hedge agreements) and all trade
marks, trade mark registrations and pending trade mark applications,
patents and pending patent applications and copyrights and other
intellectual property (collectively, the "Intellectual Property") including
---------------------
the Intellectual Property described in Schedule I hereto;
(g) substitutions and replacements of and increases, additions and,
where applicable, accessions to the property described in Sections
1.2(l)(a)-(f) inclusive; and
(h) proceeds in any form derived directly or indirectly from any
dealing with all or any part of the property described in Sections
1.2(l)(a)-(g) inclusive or the proceeds therefrom.
(2) Without limiting the generality of the foregoing, the Collateral
shall include all personal property of the Debtor now or hereafter located on or
about or in transit to or from the locations set out in Schedule II hereto. The
Debtor shall promptly inform the Corporation in writing of any other location at
which the Collateral consisting of tangible personal property may in the future
be located.
1.3 OBLIGATIONS SECURED. (1) The mortgages, charges, pledges,
transfers, assignments and security interest granted hereby (collectively, the
"Security Interest") by the Debtor secure payment to the Corporation and
- - ------------------
performance of all debts, liabilities and obligations, present or future, direct
or indirect, absolute or contingent, matured or unmatured, at any time due or
accruing due owing by the Debtor to the Corporation pursuant to the Note
<PAGE>
3
(collectively, and together with the expenses, costs and charges set out in
Section 1.3(2), the "Obligations").
-----------
(2) All expenses, costs and charges incurred by or on behalf of the
Corporation in connection with this security agreement, the Security Interest or
the realization of the Collateral, including all reasonable legal fees, court
costs, receiver's or agent's remuneration and other expenses of taking
possession of, repairing, protecting, insuring, preparing for disposition,
realizing, collecting, selling, transferring, delivering or obtaining payment of
the Collateral shall be added to and form a part of the Obligations.
1.4 ATTACHMENT. (1) The Debtor and the Corporation hereby
acknowledge that (i) value has been given; (ii) the Debtor has rights in the
Collateral; (iii) they have not agreed to postpone the time of attachment of the
Security Interest; and (iv) the Debtor has received a duplicate original copy of
this security agreement.
(2) If at any time the Debtor acquires Collateral consisting of
chattel paper, instruments, securities or negotiable documents of title
(collectively, "Negotiable Collateral"), the Debtor will, forthwith upon receipt
---------------------
by the Debtor, deliver to the Corporation such Negotiable Collateral and shall,
at the request of the Corporation (i) cause the transfer thereof to the
Corporation to be registered wherever, in the opinion of the Corporation, such
registration may be required or advisable; (ii) duly endorse the same for
transfer in blank or as the Corporation may direct; and (iii) forthwith deliver
to the Corporation any and all consents or other instruments or documents which
may be necessary to effect the transfer of the Negotiable Collateral to the
Corporation or any third party.
(3) The Debtor agrees to promptly inform the Corporation in writing
of the acquisition by the Debtor of any personal property which is not
adequately described herein, and the Debtor agrees to execute and deliver at its
own expense from time to time amendments to this security agreement or the
schedules hereto or additional security agreements or schedules as may be
reasonably required by the Corporation in order that the Security Interest shall
attach to such personal property.
1.5 ACCOUNTS. So long as any Advance shall remain outstanding under
the Note, the Debtor shall maintain deposit accounts in the Province of Ontario
("Deposit Accounts") only with banks that are listed on Schedule III (as such
----------------
Schedule may be amended or supplemented from time to time) and shall maintain
with one of the banks listed on Schedule III a concentration account into which
all cash receipts and from which all cash disbursements of its business in the
normal course shall flow (the "Canadian Cash Collateral Account").
--------------------------------
1.6 SCOPE OF SECURITY INTEREST. (1) To the extent that the creation
of the Security Interest would constitute a breach or permit the acceleration of
any agreement, right,
<PAGE>
4
license or permit to which the Debtor is a party, the Security Interest shall
not attach thereto but the Debtor shall hold its interest therein in trust for
the Corporation, and shall assign such agreement, right, license or permit to
the Corporation or as it may direct forthwith upon obtaining the consent of the
other party thereto.
(2) Subject to Section 2.2, the grant of the Security Interest in the
Intellectual Property shall not affect in any way the Debtor's rights to
commercially exploit the Intellectual Property, to defend the Intellectual
Property, to enforce the Debtor's rights therein or with respect thereto against
third parties in any court or to the claim and be entitled to receive any
damages with respect to any infringement thereof.
1.7 CARE AND CUSTODY OF COLLATERAL. (1) The Corporation shall not
be bound to collect, dispose of, realize, protect or enforce any of the Debtor's
right, title and interest in and to the Collateral or to institute proceedings
for the purpose thereof and, without limiting the generality of the foregoing,
the Corporation shall not be required to take any steps necessary to preserve
rights against prior parties in respect of any Negotiable Collateral.
(2) The Corporation shall not have any obligation to keep Collateral
in its possession identifiable.
(3) The Corporation may at any time, and from time to time (i) notify
any person obligated on an account or on chattel paper or any obligor on an
instrument to make payment thereunder to the Corporation whether or not the
Debtor was theretofore making collections thereon; and (ii) assume control of
any proceeds arising from the Collateral.
1.8 DEBTOR'S DEALINGS WITH COLLATERAL. (1) The Debtor shall not,
without the prior written consent of the Corporation, sell, exchange, lease,
release or abandon or otherwise dispose of the Collateral except Collateral
consisting of inventory sold or leased in the ordinary course of its business
and for the purpose of carrying on the same.
(2) The Debtor represents and warrants as follows:
(a) All of the equipment and inventory are located on or about or in
transit to or from the locations specified in Schedule II hereto.
(b) The Debtor is the legal and beneficial owner of the Collateral
free and clear of any lien or encumbrance, other than with respect to liens
permitted pursuant to Section 5.02(a) of the Credit Agreement (as
hereinafter defined), except for the security interests created by this
security agreement, (collectively, the "Other Security Interests"). No
------------------------
effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording
office, except such
<PAGE>
5
as may have been filed in favour of the Corporation relating to this
security agreement, the General Assignment.
(c) The Debtor has exclusive possession and control of the equipment
and inventory other than Inventory in transit to the Debtor from locations
outside Canada.
(d) This security agreement creates a valid security interest in the
Collateral of the Debtor, securing the payment of the Obligations of the
Debtor.
1.9 INSURANCE. (1) The Debtor shall, at its own expense, maintain
insurance with respect to the equipment and inventory in such amounts, against
such risks, in such form and with insurers, as shall be satisfactory to the
Corporation from time to time. Each such policy shall in addition (i) name the
Debtor and the Corporation as insured parties thereunder (without any
representation or warranty by or obligation upon the Corporation) as their
interests may appear; (ii) provide that the Corporation shall have the right but
not the obligation to pay the premiums under the relevant insurance policies;
(iii) provide that there shall be no recourse against the Corporation for
payment of premiums or other amounts with respect thereto; and (iv) provide that
at least 30 days' prior written notice of cancellation or of lapse shall be
given to the Corporation by the insurer. The Debtor shall, as often as the
Corporation reasonably requests, deliver to the Corporation original or
duplicate policies of such insurance and the report of reputable insurance
broker with respect to such insurance. Further, the Debtor shall duly execute
and deliver instruments of assignment of such insurance policies and cause the
insurers to acknowledge notice of such assignment.
(2) Reimbursement under any liability insurance maintained by the
Debtor pursuant to this Section 1.9 may be paid directly to the Person who shall
have incurred liability covered by such insurance. In case of any loss
involving damage to equipment or inventory when subsection (3) of this Section
1.9 is not applicable, the Debtor shall make or cause to be made the necessary
repairs to or replacements of such equipment or inventory, and any proceeds of
insurance maintained by the Debtor pursuant to this Section 1.9 shall be paid to
the Debtor as reimbursement for the costs of such repairs or replacements.
(3) If and when (i) the Debtor shall fail to pay or perform any of
the Obligations on demand or otherwise when due and payable or to be performed,
as the case may be; or (ii) upon the occurrence and during the continuance of
the actual or constructive total loss of any equipment or inventory, all
insurance payments in respect of such equipment or inventory shall be paid to
the Corporation and may, in the discretion of the Corporation, be held by the
Corporation as collateral for, and/or then or at any time thereafter applied
(after payment of any amounts payable to the Corporation pursuant to Section
2.9) in whole or in part by the Corporation for the ratable benefit of the
Corporation against, all or any part of the Obligations in such order as the
Corporation shall elect. Any surplus of such cash or cash
<PAGE>
6
proceeds held by the Corporation and remaining after payment in full of all the
Obligations shall be paid over to the Debtor or to whomsoever may be lawfully
entitled to receive such surplus.
ARTICLE II
ENFORCEMENT
2.1 DEFAULT. The Security Interest shall be and become enforceable
against the Debtor if and when it shall fail to pay or perform any of the
Obligations on demand or otherwise when due and payable or to be performed, as
the case may be.
2.2 REMEDIES. Whenever the Security Interest has become enforceable,
the Corporation may realize upon the Collateral and enforce the rights of the
Corporation by:
(a) entry onto any premises where Collateral consisting of tangible
personal property may be located;
(b) taking possession of the Collateral by any method permitted by
law;
(c) sale or lease of the Collateral;
(d) collection of any proceeds arising in respect of the Collateral;
(e) collection, realization or sale of or other dealing with the
accounts;
(f) the appointment by instrument in writing of a receiver (which
term as used in this security agreement includes a receiver and manager) or
agent of the Collateral;
(g) the institution of proceedings in any court of competent
jurisdiction for the appointment of a receiver of the Collateral;
(h) the institution of proceedings in any court of competent
jurisdiction for sale or foreclosure of the Collateral;
(i) filing proofs of claim and other documents to establish claims in
any proceeding relating to the Debtor; and
<PAGE>
7
(j) any other remedy or proceeding authorized or permitted under the
PPSA or otherwise by law or equity.
Such remedies may be exercised from time to time separately or in combination
and are in addition to and not in substitution for any other rights of the
Corporation however created. The Corporation shall not be bound to exercise any
such right or remedy, and the exercise of such rights and remedies shall be
without prejudice to the rights of the Corporation in respect of the Obligations
including the right to claim for any deficiency.
2.3 ADDITIONAL RIGHTS. In addition to the remedies of the
Corporation set forth in Section 2.2, the Corporation may, whenever the Security
Interest has become enforceable,
(a) require the Debtor, at the Debtor's expense, to assemble the
Collateral at a place or places designated by notice in writing given by
the Corporation to the Debtor;
(b) require the Debtor, by notice in writing given by the Corporation
to the Debtor, to disclose to the Corporation the location or locations of
the Collateral;
(c) repair, process, modify, complete or otherwise deal with the
Collateral and prepare for the disposition of the Collateral, whether on
the premises of the Debtor or otherwise;
(d) carry on all or any part of the business or businesses of the
Debtor and, to the exclusion of all others including the Debtor, enter
upon, occupy and use all of any of the premises, buildings, plant,
undertaking and other property of or used by the Debtor for such time as
the Corporation sees fit, free of charge, and the Corporation shall not be
liable to the Debtor for any act, omission or negligence in so doing or for
any rent, charges, depreciation or damages incurred in connection therewith
or resulting therefrom;
(e) borrow for the purpose of carrying on the business of the Debtor
or for the maintenance, preservation of protection of the Collateral and
mortgage, charge, pledge or grant a security interest in the Collateral,
whether or not in priority to the Security Interest, to secure repayment;
and
(f) demand, commence, continue or defend any judicial or
administrative proceedings for the purpose of protecting, seizing,
collecting, realizing or obtaining possession or payment of the Collateral,
and give valid and effectual receipts and
<PAGE>
8
discharges therefor and compromise or give time for the payment or
performance of all or any part of the accounts or any other obligation of
any third party to the Debtor.
2.4 CONCERNING THE RECEIVER. (1) Any receiver appointed by the
Corporation shall be vested with the rights and remedies which could have been
exercised by the Corporation in respect of the Debtor or the Collateral and such
other powers and discretions as are granted in the instrument of appointment and
any instrument or instruments supplemental thereto. The identity of the
receiver, any replacement thereof and any remuneration thereof shall be within
the sole and unfettered discretion of the Corporation.
(2) Any receiver appointed by the Corporation shall act as agent for
the Corporation for the purposes of taking possession of the Collateral, but
otherwise and for all other purposes (except as provided below), as agent for
the Debtor. The receiver may sell, lease, or otherwise dispose of Collateral as
agent for the Debtor or as agent for the Corporation as the Corporation may
determine in its discretion. The Debtor agrees to ratify and confirm all
actions of the receiver acting as agent for the Debtor, and to release and
indemnify the receiver in respect of all such actions.
(3) The Corporation, in appointing or refraining from appointing any
receiver, shall not incur liability to the receiver, the Debtor or otherwise and
shall not be responsible for any misconduct or negligence of such receiver.
2.5 APPOINTMENT OF ATTORNEY. The Debtor hereby irrevocably appoints
the Corporation (and any officer thereof) as attorney of the Debtor (with full
power of substitution) to exercise in the name of and on behalf of the Debtor
any of the Debtor's right (including the right of disposal), title and interest
in and to the Collateral including the execution, endorsement and delivery of
any agreements, documents, instruments, securities, documents of title and
chattel paper and any notices, receipts, assignments or verifications of the
accounts. All acts of any such attorney are hereby ratified and approved, and
such attorney shall not be liable for any act, failure to act or any other
matter or thing in connection therewith, except for its own negligence or wilful
misconduct.
2.6 DEALING WITH THE COLLATERAL AND THE SECURITY INTEREST. (1) The
Corporation shall not be obliged to exhaust its recourse against the Debtor or
any other Person or Persons or against any other security it may hold in respect
of the Obligations before realizing upon or otherwise dealing with the
Collateral in such manner as the Corporation may consider desirable.
(2) The Corporation may grant extensions or other indulgences, take
and give up securities, accept compositions, grant releases and discharges and
otherwise deal with
<PAGE>
9
the Debtor and with other parties, sureties or securities as the Corporation may
see fit without prejudice to the Obligations or the rights of the Corporation in
respect of the Collateral.
(3) Subject to section 2.7, the Corporation shall not be (i) liable
or accountable for any failure to collect, realize or obtain payment in respect
of the Collateral; (ii) bound to institute proceedings for the purpose of
collecting, enforcing, realizing or obtaining payment of the Collateral or for
the purpose of preserving any rights of the Corporation, the Debtor or any other
parties in respect thereof; (iii) responsible for any loss occasioned by any
sale or other dealing with the Collateral or by the retention of or failure to
sell or otherwise deal therewith; or (iv) bound to protect the Collateral from
depreciating in value or becoming worthless.
2.7 STANDARDS OF SALE. Without prejudice to the ability of the
Corporation to dispose of the Collateral in any manner which is commercially
reasonable, the Debtor acknowledges that a disposition of Collateral by the
Corporation which takes place substantially in accordance with the following
provisions shall be deemed to be commercially reasonable:
(a) Collateral may be disposed of in whole or in part;
(b) Collateral may be disposed of by public auction, public tender or
private contract, with or without advertising and without any other
formality;
(c) any purchaser or lessee of such Collateral may be a customer of
the Corporation or a permitted assignee hereunder, provided that the
Collateral is purchased or leased by such customer on the basis of fair
market value with regard to existing circumstances;
(d) a disposition of Collateral may be on such terms and conditions
as to credit or otherwise as the Corporation, in its sole discretion, may
deem advantageous; and
(e) the Corporation may establish an upset or reserve bid or price in
respect of the Collateral;
but in no event shall any sale of Collateral be inconsistent with the standards
that are generally used by reasonable persons in dispositions of like
Collateral.
2.8 DEALINGS BY THIRD PARTIES. No person dealing with the
Corporation or its agent or a receiver shall be required (i) to determine
whether the Security Interest has become enforceable; (ii) to determine whether
the powers which the Corporation or its agent is
<PAGE>
10
purporting to exercise have become exercisable; (iii) to determine whether any
money remains due to the Corporation by the Debtor; (iv) to determine the
necessity or expediency of the stipulations and conditions subject to which any
sale or lease shall be made; (v) to determine the propriety or regularity of any
sale or of any other dealing by the Corporation with the Collateral; or (vi) to
see to the application of any money paid to the Corporation.
2.9 INDEMNITY AND EXPENSES. (1) The Debtor agrees to indemnify the
Corporation from and against any and all claims, losses and liabilities growing
out of or resulting from this security agreement (including, without limitation,
enforcement of this security agreement), except claims, losses or liabilities
resulting from the gross negligence or wilful misconduct of the Corporation or
such other secured Party as determined by a final judgment of a court of
competent jurisdiction.
(2) The Debtor agrees to pay to the Corporation, upon demand, the
amount of any and all expenses, including, without limitation, the fees and
expenses of its counsel and of any experts and agents, that the Corporation may
incur in connection with (i) the administration of this security agreement; (ii)
the custody, preservation, use or operation of, or the sale of, collection from
or other realization upon, any of the Collateral; (iii) the exercise or
enforcement of any of the rights of the Corporation hereunder; or (iv) the
failure by the Debtor to perform or observe any of the provisions hereof.
ARTICLE III
GENERAL
3.1 DISCHARGE. The Security Interest shall be discharged upon, but
only upon, full payment and performance of the Obligations and at the expense of
the Debtor. The Corporation shall execute and deliver to the Debtor such
releases and discharges as the Debtor or its counsel may reasonably require.
3.2 NO MERGER, ETC. No judgment recovered by the Corporation shall
operate by way of merger of or in any way affect the Security Interest, which is
in addition to and not in substitution for any other security now or hereafter
held by the Corporation on its behalf in respect of the Obligations.
3.3 WAIVERS, ETC. No amendment, consent or waiver by the Corporation
shall be effective unless made in writing and signed by an authorized officer of
the Corporation and then such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
<PAGE>
11
3.4 FURTHER ASSURANCES. The Debtor shall from time to time, whether
before or after the Security Interest shall have become enforceable, do all such
acts and things and execute and deliver all such deeds, transfers, assignments
and instruments as the Corporation may reasonably require for protecting the
Collateral or perfecting the Security Interest and for exercising all powers,
authorities and discretions hereby conferred upon the Corporation, and the
Debtor shall, from time to time after the Security Interest has become
enforceable, do all such acts and things and execute and deliver all such deeds,
transfers, assignments and instruments as the Corporation may reasonably require
for facilitating the sale of the Collateral in connection with any realization
thereof.
3.5 SUCCESSORS AND ASSIGNS. This security agreement shall be binding
upon the Debtor, its respective successors and assigns, and shall enure,
together with the rights and remedies of the Corporation hereunder and its
successors and assigns. All rights of the Corporation hereunder shall be
assignable to the Agent (as hereinafter defined) for the ratable benefit of the
Lender Parties (as hereinafter defined) party to the Credit Agreement (as
amended, supplemented or otherwise modified, the "Credit Agreement") dated as of
----------------
April 24, 1998 among the Corporation, as borrower, Iron Age Holdings
Corporation, a Delaware corporation, as parent guarantor, the banks, financial
institutions and other institutional lenders listed on the signature pages
thereof, (together with their respective successors and assigns, the "Lenders",
-------
and together with the Swing Line Bank and the Issuing Bank, the "Lender
------
Parties"), and Banque Nationale de Paris, as swing line bank (the "Swing Line
- - ------- ----------
Bank") and as agent (the "Agent") for the Lenders, and in any action brought by
- - ---- -----
an assignee to enforce any such right, the Debtor shall not assert against such
assignee any claim or defence which the Debtor has or hereafter may have against
the Corporation. When the rights of the Corporation are assigned to the Agent
for the benefit of the Lender Parties, all duties and obligations owed by the
Debtor to the Corporation shall thereafter be and be deemed to be duties and
obligations owed by the Debtor to the Agent for the benefit of the Lender
Parties.
3.6 HEADINGS, ETC. The division of this security agreement into
sections and subsections and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation thereof.
3.7 SEVERABILITY. If any provisions of this security agreement shall
be deemed by any court of competent jurisdiction to be invalid or void, the
remaining provisions shall remain in full force and effect.
3.8 GOVERNING LAW. This security agreement shall be governed by and
construed in accordance with the laws of the Province of Ontario and the laws of
Canada applicable therein and shall be treated in all respects as an Ontario
contract.
<PAGE>
12
IN WITNESS WHEREOF the Debtor has duly executed this security
agreement under the hands of its proper officers duly authorized in that behalf
as of the day and year first above written.
IRON AGE CANADA LTD.
Per: /s/ Keith A. McDonough
--------------------------------------
Authorized Signing Officer
<PAGE>
SCHEDULE I
INTELLECTUAL PROPERTY
---------------------
IRON AGE CANADA LTD.
--------------------
NONE.
<PAGE>
SCHEDULE III
DEPOSIT ACCOUNT
---------------
IRON AGE CANADA LTD.
--------------------
NAME AND ADDRESS OF BANK ACCOUNT NUMBER
------------------------ --------------
Bank of Montreal 1025-483
Keele & Seven Business Centre C($) Account
7880 Keele Street
Suite 101
Concord, Ontario L4K4G7
Attn: Sue Chafey
<PAGE>
SCHEDULE II
COLLATERAL, LOCATIONS
---------------------
IRON AGE CANADA LTD.
--------------------
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------
County Expiration Annual
Street Address and State Lessor Date Rental Loss
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Calgary Bay #204 Alberta, Capital Ideas, 1/31/2001 C$10,500.00
225 28 Street S.E., Canada Ltd.
Calgary, Alberta
- - ------------------------------------------------------------------------------------------
475 North Rivermede Ontario, Von-Land 6/30/2001 C$50,151.96
Road Canada Corporation
Unit 2 Limited
Concord, Ontario
L4K 3R2
- - ------------------------------------------------------------------------------------------
11500 Bridgeport Road British Colliers 4/30/02 C$32,432.28
Suite 105 Columbia,
Richmond, British Canada
Columbia
V6X IT2
- - ------------------------------------------------------------------------------------------
2500 Barton Street East Ontario, Associates 11/30/98 C$5,400.00
Hamilton, Ontario Canada Corporation of
L&E 4A2 North America &
Ongiara 8/30/00 C$46,963.08
Properties, Inc.
- - ------------------------------------------------------------------------------------------
286 Bunting Road Ontario, St. Catherines 07/31/02 C$26,551.50
St. Catherines, Ontario Canada Equities Limited
L2M 7S5
- - ------------------------------------------------------------------------------------------
353 Manitou Drive Ontario, Jack & Percy months-to C$35,310.00
Kitchener, Ontario Canada Rosen month
N2C IL5
- - ------------------------------------------------------------------------------------------
304 Dunlop Street West, Ontario, Enterprise 05/31/00 C$18,877.20
Unit A Canada Property Group
Barrie, Ontario L4N 7L2
- - ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- - ------------------------------------------------------------------------------------------
433 Simone Street South Ontario, John and Pat month-to- C$14,775.24
South Simone Plaza Canada Mobilos month
Oshawa, Ontario L1H 4J5
- - ------------------------------------------------------------------------------------------
196 Rubidge Street Ontario, John Tilney month-to- C$15,079,.20
Petersborough, Ontario Canada Warrington month
L1H 4J5
- - ------------------------------------------------------------------------------------------
1790 Dundas Street East Ontario, Comro 12/31/99 C$32,945.88
Units 14 & 15 Canada Developments
London, Ontario
N5W 3E5
- - ------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
Exhibit 10.5
================================================================================
MORTGAGE, ASSIGNMENT OF LEASES AND
RENTS, FIXTURE FILING, SECURITY
AGREEMENT AND
FINANCING STATEMENT
Dated: February 26, 1997
in the amount of
$2,500,000
BY
IRON AGE CORPORATION,
Mortgagor,
TO
BANQUE NATIONALE DE PARIS,
as Agent for Mortgagee.
After recording, please return to:
SHEARMAN & STERLING
599 Lexington Avenue
New York, New York 10022
Attention: Sheri P. Chromow, Esq.
================================================================================
<PAGE>
MORTGAGE, ASSIGNMENT OF LEASES AND
RENTS, FIXTURE FILING, SECURITY
AGREEMENT AND
FINANCING STATEMENT
THIS AGREEMENT, made the 26th day of February, 1997, by Iron Age
Corporation, a Delaware corporation having an office at Robinson Plaza Three,
Suite 400, Pittsburgh, Pennsylvania 15205 ("Mortgagor"), and Banque Nationale
---------
de Paris (the "Agent") having an office at 499 Park Avenue, New York, New York
-----
10022 as agent for the banks (the "Banks") parties to that certain Credit
-----
Agreement dated as of February 26, 1997, as amended, supplemented or otherwise
modified from time to time, (such Credit Agreement, as it may be further
amended, modified, supplemented, restated, extended or renewed from time to time
being the "Credit Agreement") among Mortgagor, IA Holdings Corporation, as
----------------
parent guarantor, the Banks and the Agent (the Banks and the Agent collectively
being herein "Mortgagee"). Terms defined in the Credit Agreement and not
---------
otherwise defined herein are used herein as therein defined.
W I T N E S S E T H:
-------------------
WHEREAS, Mortgagor has entered into the Credit Agreement with
Mortgagee;
WHEREAS, pursuant to the Credit Agreement and subject to the terms and
conditions therein set forth, the Banks have agreed to advance certain funds to
Mortgagor for business operating purposes aggregating in a principal amount of
One Hundred Million and 00/100 Dollars ($100,000,000);
WHEREAS, to evidence the obligations of Mortgagor for the Term A
Advance, Term B Advance and Term C Advance (collectively referred to herein as
the "Term Advances") under the Credit Agreement, Mortgagor has executed and
-------------
delivered three (3) promissory notes (such notes which are executed by
Mortgagor, as they may be amended, modified, supplemented, restated, extended or
renewed from time to time, are collectively referred to herein as the "Term
----
Notes") aggregating in the principal amount of Sixty Five Million and 00/100
- - -----
Dollars ($65,000,000.00);
WHEREAS, the total of the indebtedness, obligations and liabilities to
be secured by this Mortgage are as follows (all such indebtedness, obligations
and liabilities are collectively referred to herein as the "Obligations"):
-----------
(i) the obligations of Mortgagor for the Term Advances under the
Credit Agreement together with interest on such principal amounts or
portion, reasonable fees, costs and expenses due under the Credit
Agreement, in each case when due,
<PAGE>
2
whether at stated maturity, by acceleration, by mandatory prepayment or
otherwise; plus
(ii) the obligations of Mortgagor to pay any and all reasonable sums
advanced or paid by Mortgagee from time to time pursuant to subsection 5(b)
hereof and all other sums due and owing under the Mortgage, in each case
when due, whether at stated maturity, by acceleration, by mandatory
prepayment or otherwise;
provided, however, that notwithstanding anything to the contrary contained
- - -------- -------
herein the maximum principal amount to be secured hereby at the time of
execution or anytime thereafter shall be Two Million Five Hundred Thousand and
00/100 Dollars ($2,500,000); and
WHEREAS, it has been agreed that payment, performance and observation
of the Obligations shall be secured by this Mortgage.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor hereby agrees that to secure the full and final payment
of any and all indebtedness and obligations due and owing or which may hereafter
become due and owing from Mortgagor to Mortgagee under the Credit Agreement or
other Loan Documents, whether now existing or hereafter existing, of every
nature type and description, together with any and all renewals, extensions,
substitutions thereto and modifications thereof and whether absolute or
contingent, direct or indirect, joint or several, matured or unmatured,
Mortgagor hereby gives, grants, bargains sells, warrants, aliens, premises,
releases, conveys, assigns, transfers, mortgages, hypothecates, deposits,
pledges, sets over and confirms to Mortgagee, ALL that certain real property,
including without limitation, all plots, pieces or parcels of land, situate,
lying and being in the Village of Penn Yan, Town of Benton, County of Yates, the
State of New York, more particularly bounded and described in Exhibit A hereto
---------
annexed and made a part hereof (the "Mortgaged Property");
------------------
TOGETHER with all right, title and interest, if any, of Mortgagor of,
in and to the land lying in the streets, roads or avenues, open or proposed, in
front of or adjoining the Premises and of, in and to any strips or gores of land
adjoining the Premises and all easements and appurtenances thereto;
TOGETHER, ALSO, with all fixtures, chattels and articles of personal
property now or hereafter attached to or located in or upon the Premises, and
used or usable in connection with any present or future operation or letting of
the Premises or the activities at any time conducted therein (the "Building
--------
Equipment"), including, but not limited to, furnaces, boilers, oil burners,
- - ---------
radiators and piping, coal stokers, plumbing and bathroom fixtures,
refrigeration, air conditioning and sprinkler systems, wash-tubs, sinks, gas and
<PAGE>
3
electric fixtures, stoves, ranges, awnings, screens, window shades, elevators,
motors, dynamos, refrigerators, kitchen cabinets, incinerators, plants and
shrubbery and all other machinery, appliances, fittings, furniture, furnishings
and fixtures of every kind used in the operation of the buildings standing or
hereafter erected on the Premises, together with any and all replacements
thereof and additions thereto, and all right, title and interest of Mortgagor in
and to any Building Equipment;
TOGETHER, ALSO, with any and all leases, subleases, lettings and
licenses of, if any, affecting the Premises now or hereafter entered into,
assigned to, taken subject to, assumed by or granted for the benefit of
Mortgagor and all amendments, modifications, supplements, additions, extensions
and renewals thereof (all of the foregoing, collectively, being the "Leases"),
------
and all right, title and interest of Mortgagor in and to all rents, additional
rents, increases in rents, security deposits, advance rents, income, proceeds,
earnings, royalties, revenues, issues, profits, rights, deposits, benefits and
other payments due or to become due under, or otherwise derived from or relating
to, the Leases or the use or occupancy of the Premises (including any claims (i)
based on holdover by any lessee, (ii) for damages sustained by Mortgagor or
(iii) arising under any Federal, state or other law as a result of or in
connection with the bankruptcy or insolvency of any lessee) and the rights to
collect and receive all of the foregoing and to enforce, whether at law or in
equity or by any other means, all provisions thereof or thereunder and all
rights of Mortgagor relating thereto (all of the foregoing, collectively, being
the "Rents") and the right to apply the same to the payment, performance and
-----
observance of the Obligations;
TOGETHER, ALSO, with any and all rights, dividends and claims of any
kind whatsoever relating to the Premises (including damage, secured, unsecured,
lien, priority and administration claims); together with the right to take any
action or file any papers or process with any governmental or quasi-governmental
authority or in any court of competent jurisdiction which action or filing may,
in the opinion of Mortgagee, be necessary to preserve, protect or enforce such
rights, dividends and claims, including the right to file any proof of claim in
any bankruptcy or insolvency proceeding under any Federal, state or other laws;
and any rights, claims or awards accruing to or to be paid to Mortgagor in its
capacity as lessor or lessee under any Lease;
TOGETHER, ALSO, with any and all unearned premiums now or hereafter
accrued under insurance policies relating to the Premises now or hereafter
obtained by Mortgagor and all proceeds of the conversion, voluntary or
involuntary, of the Premises into cash or liquidated claims, including proceeds
of hazard and title insurance;
TOGETHER, ALSO, with any and all awards, including interest thereon,
now or hereafter made to Mortgagor for taking by eminent domain of the whole or
any part of the Premises or any easement therein, including any awards for
changes of grade of streets, which said awards are hereby assigned to Mortgagee,
who is hereby authorized to collect and
<PAGE>
4
receive the proceeds of such awards and to give proper receipts and acquittances
therefor, and to apply the same toward the payment of the Obligations,
notwithstanding the fact that the amount owing thereon may not then be due and
payable; and
TOGETHER, ALSO, with any and all extensions, improvements,
betterments, renewals, substitutes and replacements of, and all additions and
appurtenances to, any of the foregoing hereafter acquired by, or released to,
Mortgagor or constructed, assembled or placed by Mortgagor on the Premises and
all conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assemblage, placement or conversion, as the
case may be, and in each such case, without any further mortgage, conveyance,
assignment or other act by Mortgagor, the same shall become subject to the lien
of this Mortgage as fully and completely, and with the same effect, as though
now owned by Mortgagor and specifically described herein.
TO HAVE AND TO HOLD the Premises and other property, privilege,
rights, interests and franchises hereby granted or mortgaged, or intended so to
be, unto Mortgagee, its successors and assigns forever;
PROVIDED, HOWEVER, these presents are upon the express condition that,
if Mortgagor shall well and truly pay to Mortgagee the Obligations and all other
obligations under the Credit Agreement at the time and in the manner provided in
the Term Notes and this Mortgage and shall well and truly abide by and comply
with each and every covenant and condition set forth herein and in the Term
Notes in a timely manner, these presents and the estate hereby granted shall
cease, terminate and be void;
AND Mortgagor covenants with Mortgagee as follows:
1. Payment of Indebtedness. Mortgagor will pay all indebtedness as
-----------------------
hereinbefore provided in a timely fashion.
2. Insurance. (a) Mortgagor will keep the buildings on the
---------
Premises and the Building Equipment insured for the benefit of Mortgagee (i)
against loss by fire, (ii) by means of an extended coverage endorsement, against
loss or damage by windstorm, hail, explosion, riot, riot attending a strike,
civil commotion, aircraft, vehicle and smoke, (iii) against war risks as, when
and to the extent such insurance is obtainable from the United States of America
or an agency thereof, (iv) against loss of rentals due to any of the foregoing
causes in the event that Mortgagor enters into a Lease of all or any portion of
the Premises, (v) against loss by flood if the Premises are located in an area
identified by the Secretary of Housing and Urban Development as an area having
special flood hazards and in which flood insurance has been made available under
the National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of
1973, as amended, modified, supplemented or replaced from time to time, and (vi)
when and to the extent reasonably required by
<PAGE>
5
Mortgagee, against any other risk insured against by persons operating like
properties in the locality of the Premises; Mortgagor will assign and deliver to
Mortgagee the policies of such insurance and the proceeds thereof; Mortgagor in
accordance with subparagraph (f) hereof will reimburse Mortgagee for any
premiums paid for insurance made by Mortgagee on Mortgagor's default in taking
out such insurance, or in so assigning and delivering the policies, together
with interest thereon at the rate per annum specified in Section 5 hereof, and
the same shall be added to the Obligations secured hereby and be secured by this
Mortgage.
(b) Regardless of the types or amounts of insurance required and
approved by Mortgagee, Mortgagor hereby assigns and delivers to Mortgagee all
policies of insurance acquired by Mortgagor to insure against any loss or damage
to the Premises, as additional security for the Obligations.
(c) Notwithstanding the provisions of Subdivision 4 of Section 254 of
the Real Property Law, Mortgagee shall only to the extent permitted in Section
13 be entitled to retain and apply the proceeds of any insurance, whether
against fire or other hazard, to the payment of the indebtedness as provided for
in Section 13 hereof.
(d) Not less than thirty (30) days prior to the expiration date of
each policy furnished by Mortgagor pursuant to this Section, Mortgagor will
deliver to Mortgagee a renewal policy or policies or a certificate of insurance
or other evidence of insurance coverage marked "premium paid" or accompanied by
other evidence of payment satisfactory to Mortgagee.
(e) In the event of a sale of the Premises pursuant to Section 19
hereof, the purchaser of the Premises shall succeed to all the rights of
Mortgagor, including any rights to the proceeds of insurance and to unearned
premiums, in and to all policies of insurance assigned and delivered to
Mortgagee pursuant to this Section.
(f) In the event that Mortgagor fails to keep the Premises insured in
compliance with this Section, Mortgagee may, but shall not be obligated to,
obtain insurance and pay the premiums therefor and Mortgagor shall, on demand,
reimburse Mortgagee for all sums advanced and expenses incurred in connection
therewith. Such sums and expenses, together with interest thereon at the
Alternate Interest Rate (as hereinafter defined), shall be part of the
Obligations secured hereby.
All insurance policies (i) shall be continuously maintained at Mortgagor's sole
expense, (ii) shall be issued by insurers of recognized responsibility which are
reasonably satisfactory to Mortgagee, (iii) shall be in form, substance and
amount reasonably satisfactory to Mortgagee, (iv) with respect to liability
insurance, shall name Mortgagee as an additional insured, and (v) with respect
to insurance covering damage to the Mortgaged Property
<PAGE>
6
(A) shall name Mortgagee as an additional insured, (B) shall contain a "lender's
loss payable" endorsement in form and substance reasonably satisfactory to
Mortgagee, and (C) shall contain an agreed value clause sufficient to eliminate
any risk of coinsurance. Mortgagor shall deliver or cause to be delivered to
Mortgagee, from time to time at Mortgagee's request, certificates evidencing the
same.
3. Intentionally omitted.
4. Intentionally omitted.
5. Alternate Interest Rate. (a) In the event of any default in the
-----------------------
performance of any of Mortgagor's covenants or agreements herein, Mortgagee may,
at the option of Mortgagee, perform any covenant or agreement of Mortgagor and
the amount or cost thereof, with interest at a rate per annum equal to two (2%)
percent per annum in excess of the rate payable at the time in question
hereunder in effect from time to time (the "Alternate Interest Rate") (but not
-----------------------
in excess of the maximum rate allowed by law to be charged to Mortgagor), shall
immediately be due and payable from Mortgagor to Mortgagee. If any payment due
hereunder is not paid in full when due, whether at maturity or otherwise, by
acceleration or otherwise, then the same shall bear interest thereon at a rate
per annum equal at all times to two (2%) percent per annum above the rate of
interest otherwise applicable with respect to such amount,computed from such
date and until receipt and collection of the Obligations, and such charge shall
be secured by this Mortgage. This provision shall not, however, be construed as
an agreement on the part of Mortgagee in favor of Mortgagor or privilege granted
by Mortgagee to Mortgagor to extend this Mortgage or as a waiver by Mortgagee of
any other right or remedy of this Mortgage.
(b) To the extent that any such amounts or costs paid by Mortgagee as
provided for in (a) above shall constitute payments of (i) Impositions (as
hereinafter defined); (ii) premiums on insurance policies covering the Premises;
(iii) expenses incurred in upholding the lien of this Mortgage, including, but
not limited to the expenses of any litigation to prosecute or defend the rights
and lien created by this Mortgage; or (iv) any amount, cost or charge relating
to the protection or preservation of the Premises to which Mortgagee becomes
subrogated, upon payment, whether under recognized principles of law or equity,
or under express statutory authority; then, and in each such event, such amounts
or costs, together with interest thereon at the Alternate Interest Rate, shall
be added to the Obligations and shall be secured by this Mortgage.
6. Impositions. Mortgagor will promptly pay when due and before any
-----------
penalty or interest thereon may be added thereto, all taxes, assessments, water
rates, sewer rents and other charges now or hereafter levied against the
Premises or any part thereof, and also any and all license fees or similar
charges which may be imposed by the municipality in which the Premises are
situated for the use of vaults, chutes, areas and other space beyond
<PAGE>
7
the lot line and on or abutting the public sidewalks in front of or adjoining
the Premises, together with any penalties or interest on any of the foregoing
(the"Impositions"), and in default thereof Mortgagee may pay the same and
-----------
Mortgagor will repay the same with interest thereon at the rate per annum
specified in Section 5 hereof and the same shall be added to the Obligations
secured hereby and be secured by this Mortgage; that upon request of Mortgagee,
Mortgagor will exhibit to Mortgagee receipts for the payment of all Impositions
prior to the date when the same shall become delinquent. Notwithstanding
anything to the contrary provided herein, the Mortgagor shall be entitled to
contest the amount or validity of the Impositions in accordance with the terms
of the Credit Agreement. If any exemption, abatement, or reduction of any
Imposition on the Premises is altered, modified, revoked, reduced, terminated or
in any wise disallowed or declared invalid, Mortgagor shall, within five (5)
days upon request of Mortgagee in person or within fifteen (15) days upon
request of Mortgagee by mail, pay any tax or charge imposed upon the Premises by
reason of the loss or reduction of such abatement or exemption, together with
any interest or penalty thereon.
7. Compliance with Applicable Laws. Mortgagor hereby covenants that
-------------------------------
Mortgagor shall use and occupy the Premises in accordance with, and cause the
Premises to be in compliance with, in all material respects, any present or
future federal, state, municipal or local laws, ordinances, rules, regulations,
requirements, judgments, decrees, determinations, awards or court orders,
including all environmental laws and zoning ordinances affecting the Premises
(collectively, "Applicable Laws"). Mortgagor has not received any notice of a
---------------
material violation of any Applicable Law in connection with its use, occupancy
or operations at the Premises which has not heretofore been cured and has no
actual knowledge of any current violation of Applicable Law that could have a
Material Adverse Effect on such use, occupancy or operations. At such time as
Mortgagor receives notice of a material violation of an Applicable Law,
Mortgagor shall promptly cure any such violation; provided, however, that
-------- -------
Mortgagor, at its expense, after notice to Mortgagee, may contest, by
appropriate proceedings diligently prosecuted, the validity of such violation;
provided further that in connection with such contest Mortgagee shall not be
- - -------- -------
subject to criminal penalty or prosecution for a crime, nor shall the Premises
or any part thereof be subject to being condemned, forfeited, sold, lost or
vacated, by reason of such contest and Mortgagor shall indemnify Mortgagee
against any liability resulting from or incurred in connection with such
contest. The Premises is not dependent upon any premises or any interest rest
therein other than the Premises to fulfill any requirement of any Applicable Law
in any manner that could have a Material Adverse Effect on the Premises.
Mortgagor shall not, by act or omission, permit any building or other
improvement not subject to the lien of this Mortgage to rely on the Premises or
any interest therein to fulfill any requirement of any Applicable Law in any
manner that could have a Material Adverse Effect on the Premises. Mortgagor has
and will maintain all necessary certificates, licenses, authorizations,
registrations, permits and/or approvals necessary for the operation, use and
occupancy of the Premises as it exists on the date hereof and the conduct of
Mortgagor's business at the Premises, provided the failure to so maintain would
have a Material Adverse Effect on the
<PAGE>
8
Premises and, promptly upon request by Mortgagee, Mortgagor shall deliver to
Mortgagee copies of all of the same.
8. Estoppel Certificate. Mortgagor from time to time, within thirty
--------------------
(30) days upon request in person or within thirty (30) days upon request by
mail, will furnish to Mortgagee a written statement duly acknowledged of the
amount due on this Mortgage, whether any offsets or defenses exist against the
indebtedness secured hereby, and any other relevant information reasonably
requested by Mortgagee.
9. Notice of Demand. Notice and demand or request may be made in
----------------
writing and may be served in person or by mail.
10. Warranty of Title, Etc. (a) Mortgagor represents and warrants
----------------------
that it has good and marketable title to the Premises free and clear of all
liens, charges and encumbrances of every kind and character, subject only to the
encumbrances set forth in Exhibit B annexed hereto and made a part hereof (the
---------
"Permitted Encumbrances"); that it has and will continue to have power and
- - -----------------------
lawful authority to encumber and convey the Premises as provided herein and that
this Mortgage is and will continue to remain a valid and enforceable mortgage
lien, in accordance with Section 32 hereof. Mortgagor covenants that it will
preserve such title and will forever warrant and defend the title to the
Mortgaged Property (subject to the Permitted Encumbrances) unto Mortgagee
against all claims whatsoever and will forever warrant and defend (subject to
the Permitted Encumbrances) the validity, enforceability and priority of the
lien of this Mortgage against the claims of all persons whomsoever.
(b) Mortgagor, upon request, shall make, execute and deliver any and
all reasonable instruments sufficient for the purpose of confirming the
assignment to Mortgagee of awards for the taking by eminent domain of the whole
or any part of the Premises or any easement therein, including any awards for
changes of grade of streets, free, clear and discharged of any encumbrances of
any kind or nature whatsoever.
(c) Except for Permitted Liens under the Credit Agreement, Mortgagor
will not, without the prior written consent of Mortgagee, create, place or
permit to be created or placed or allow to remain, and shall discharge and
release within ten (10) days of the placing thereof, any deed of trust,
mortgage, trust deed, voluntary lien, security interest or other encumbrance
against or covering the Mortgaged Property, whether or not
<PAGE>
9
subordinate hereto; provided, however, that, in connection with any involuntary
-------- -------
lien, Mortgagor shall have thirty (30) days after receipt by Mortgagor of notice
thereof to procure the discharge and release of any such lien by bonding or
otherwise.
11. Mortgagee's Expenses. If any action or proceeding be commenced
--------------------
(including an action to foreclose this Mortgage or to collect the indebtedness
secured hereby), in which Mortgagee becomes a party or participates, by reason
of being the holder of this Mortgage or the indebtedness secured hereby, all
sums paid by Mortgagee for the expense of so becoming a party or participating
(including reasonable counsel fees), together with interest thereon at the rate
per annum specified in Section 5 hereof, shall be added to the Obligations
secured hereby; and that in any action or proceeding to foreclose this Mortgage,
or to recover or collect the Obligations secured hereby, the provision of law
respecting the recovery of costs, disbursements and allowances shall apply in
addition to the foregoing.
12. Proper Use, Care and Maintenance. Provided the failure to so
--------------------------------
comply would materially impair or diminish the value of the Mortgaged Property
or the security value of the Mortgage, (i) Mortgagor will maintain the Premises
and the Building Equipment in good condition and repair, will not commit or
suffer any waste thereof or the conduct of any nuisance or unlawful occupation
or business on, or use of, the Premises, and will comply with, or cause to be
complied with, all statutes, ordinances and requirements of any governmental
authority relating to the Premises; (ii) Mortgagor will promptly repair,
restore, replace or rebuild any part of the Premises or the Building Equipment
now or hereafter subject to the lien of this Mortgage which may be affected by
any proceeding of the character referred to in Section 13(a); and (iii)
Mortgagor will not initiate, join in, or consent to any change in any private
restrictive covenant, zoning ordinance, or other public or private restrictions,
limiting or defining the uses which may be made of the Premises or any part
thereof without the prior written consent of Mortgagee.
13. Eminent Domain and Casualty. (a) Eminent Domain. (i)
--------------------------- --------------
Mortgagor, promptly upon obtaining knowledge of any pending or threatened
institution of any proceedings for the condemnation of the Premises, or of any
right of eminent domain, or of any other proceedings arising out of injury or
damage to or decrease in the value of the Premises, including a change in grade
of any street, will notify Mortgagee of the threat or pendency thereof.
Mortgagee may participate in any such proceedings, and Mortgagor from time to
time will execute and deliver to Mortgagee all reasonable instruments requested
by Mortgagee or as may be required to permit such participation. Mortgagor
shall, at its expense, diligently prosecute any such proceedings, shall deliver
to Mortgagee copies of all papers served in connection therewith and shall
consult and cooperate with Mortgagee, its attorneys and agents, in the carrying
on and defense of any such proceedings; provided, however, that no settlement in
-------- -------
excess of $100,000 of any such proceeding shall be made by Mortgagor without
Mortgagee's consent. Notwithstanding any taking by eminent domain or
<PAGE>
10
other governmental action causing injury to, or decrease in value of, the
Premises and creating a right to compensation therefor, including, without
limitation, the change of the grade of any street, Mortgagor shall continue to
pay interest, computed at the rate reserved in the Term Notes, on the entire
unpaid principal amount thereof, until the award or compensation for such taking
or other action shall have been actually received by Mortgagee. Mortgagee shall
have the right to apply such award or compensation first, to reimburse Mortgagee
-----
for all costs and expenses incurred in connection with the collection of such
award or compensation, and, second, the remainder shall be applied, prior to the
------
occurrence of an Event of Default, to Mortgagor solely for the restoration or
rebuilding, in whole or in part, of the portion of the Premises so subject to
such governmental action; provided, however, that any funds in excess of the
-------- -------
amount needed to restore or rebuild the Premises shall be applied towards the
payment of all or any part of the Obligations; and provided further, however,
---------------- -------
that such funds held by Mortgagee to be applied to the restoration or rebuilding
of the Premises shall be so held without payment or allowance of interest
thereon and shall be paid out from time to time upon compliance by Mortgagor
with such reasonable provisions and requirements as may be imposed by Mortgagee.
Upon the occurrence of an Event of Default, Mortgagee may retain the remainder
of such award or compensation in payment of all or any part of the Obligations.
Notwithstanding anything herein or at law or equity to the contrary, none of the
awards paid to Mortgagee shall be deemed trust funds and Mortgagee shall be
entitled to dispose of the same as provided in this Section 13.
(ii) In the event of foreclosure of this Mortgage, transfer of title
to the Premises in lieu of foreclosure or other transfer of title assignment of
the Premises in extinguishment, in whole or in part, of the Obligations, all
right, title and interest of Mortgagor in and to all compensation or awards
shall immediately vest in the purchaser or other transferee of the Premises.
(b) Casualty. (i) Mortgagor's Obligations. In the event of any
-------- -----------------------
damage to or loss or destruction of the Premises, Mortgagor shall (A) promptly
notify Mortgagee of such event and take such steps as shall be necessary to
preserve any undamaged portion of the Premises, (B) promptly advise the insurer
under any policy providing coverage for such damage, loss or destruction of the
same and take such other actions as are required of Mortgagor under each such
policy and (C) unless otherwise instructed by Mortgagee, provided the insurance
proceeds are made available for the purpose, promptly commence and diligently
pursue to completion the restoration, replacement and rebuilding of the Premises
to the condition of the Premises affected thereby immediately prior to such
damage, loss or destruction in accordance with plans and specifications
approved, and with other provisions for the preservation of the security
hereunder established, by Mortgagee.
(ii) Mortgagee's Rights; Application of Proceeds. In the event that
-------------------------------------------
any portion of the Premises is damaged, destroyed or lost, and such damage,
destruction or loss is covered, in whole or in part, by insurance referred to in
Section 2, then, (A) Mortgagee
<PAGE>
11
may, but shall not be obligated to, make proof of loss and is hereby authorized
and empowered by Mortgagor to settle, adjust or compromise any claims for
damage, destruction or loss thereunder, (B) each insurance company concerned is
hereby authorized and directed to make payment therefor directly to Mortgagee,
and (C) Mortgagee shall have the right to apply the insurance proceeds, first,
-----
to reimburse Mortgagee for all costs and expenses, including adjustors' and
attorneys' fees and disbursements, incurred in connection with the collection of
such proceeds, and, second, the remainder of such proceeds shall be applied,
------
prior to the occurrence of an Event of Default, to Mortgagor solely for the
restoration, replacement or rebuilding, in whole or in part, of the portion of
the Premises so damaged, destroyed or lost; provided, however, that any
-------- -------
insurance proceeds held by Mortgagee to be appli to the restoration, replacement
or rebuilding of the Premises shall be so held without payment or allowance of
interest thereon and shall be paid out from time to time upon compliance by
Mortgagor with such reasonable provisions and requirements as may be imposed by
Mortgagee. Upon the occurrence of an Event of Default, Mortgagee may retain the
remainder of such proceeds in payment of all or any part of the Obligations.
Notwithstanding anything herein or at law or in equity to the contrary, no
insurance proceeds or payments in lieu thereof paid to Mortgagee shall be deemed
trust funds, and Mortgagee shall be entitled to dispose of such proceeds as
provided in this subsection.
(iii) Effect on the Obligations. Notwithstanding any loss, damage
-------------------------
or destruction referred to in this Section, Mortgagor shall continue to pay and
perform the Obligations as provided herein. Any reduction in the Obligations
resulting from such application shall be deemed to take effect only on the date
of receipt by Mortgagee of such insurance proceeds and application against the
Obligations provided that if prior to the receipt by Mortgagee of such insurance
proceeds the Mortgaged Property shall have been sold on foreclosure of this
Mortgage, or shall have been transferred by deed in lieu of foreclosure of this
Mortgage, Mortgagee shall have the right to receive the same to the extent of
any deficiency found to be due upon such sale, with legal interest thereon
together with attorneys' fees and disbursements incurred by Mortgagee in
connection with the collection thereof. If, after the application of any
insurance proceeds to the Obligations, any portion of the Obligations shall
remain unpaid, such unpaid portion of the Obligations shall continue in full
force and effect and Mortgagor shall not be excused from the payment thereof.
14. Inspection; Management. (a) Mortgagee and any persons
----------------------
authorized by Mortgagee shall have the right, but not the obligation, to enter
and inspect the Premises at all reasonable times after reasonable prior written
notice to Mortgagor; and if, at any time during the continuance of an Event of
Default by Mortgagor in the performance of any of the terms, covenants or
provisions of this Mortgage or any of the loan documents, the management or
maintenance of the Mortgaged Property shall be determined by Mortgagee to be
unsatisfactory, Mortgagor shall employ at the sole cost and expense of
Mortgagor, for the duration of such an Event of Default, as managing agent of
the Mortgaged Property, such person or firm as from time to time shall be
approved by Mortgagee.
<PAGE>
12
(b) Mortgagor, at all reasonable times upon reasonable prior notice,
shall make available for audit and inspection by Mortgagee, any Bank and its
representatives and agents all property, equipment, books, contracts,
agreements, records and other documents relating to the Mortgaged Property in
the possession or under the control of Mortgagor (the "Books and Records").
-----------------
Mortgagor shall assist Mortgagee and its representatives in effecting any such
audit and inspection. Mortgagee shall have the right to make copies of the
Books and Records.
(c) Any inspection or audit of the Mortgaged Property or the Books
and Records by or on behalf of Mortgagee shall be for the purpose of informing
Mortgagee of the condition, operation, maintenance and status of the Mortgaged
Property and the compliance by Mortgagor with the Obligations and no such
inspection or audit shall be a representation by such person that the Mortgaged
Property is being maintained and operated in a manner that is acceptable to such
person, nor shall any such inspection or audit by such person constitute its
approval of any certification given to Mortgagee or relieve Mortgagor from any
of the Obligations. The Books and Records shall be maintained by Mortgagor at
its corporate headquarters. Mortgagor shall promptly respond to any inquiry from
Mortgagee for information with respect to the Mortgaged Property.
15. Reporting Requirements. Promptly after the occurrence thereof,
----------------------
and in addition to the reporting requirements under the Credit Agreement,
Mortgagor shall promptly notify the Mortgagee of any material and adverse change
affecting the Mortgaged Property.
16. Assignment of Leases and Rents. (a) Mortgagor represents that
-------------------------------
as of the date hereof Mortgagor has not entered into any Leases affecting the
Premises. Mortgagor shall not enter into a Lease of all or any portion of the
Premises without Mortgagee's consent, which consent shall be in Mortgagee's sole
discretion.
(b) In the event that Mortgagor enters into a Lease of all or any
portion of the Premises, Mortgagor shall as a condition precedent to the
transfer execute an Assignment of Leases and Rents (the "Assignment of Leases
--------------------
and Rents") assigning to Mortgagee all of its right, title and interest in all
- - ---------
current and future Leases and in and to Rents. Until the occurrence and
continuance of an Event of Default, Mortgagor shall be entitled to collect and
receive the Rents. Such right of Mortgagor to collect and receive said Rents
shall be revoked upon the occurrence and continuance of an Event of Default and
delivery of notice of revocation to Mortgagor. The provisions of the Assignment
of Leases and Rents shall thereafter be incorporated herein by reference.
(c) Upon execution of the Assignment of Leases and Rents, this
Mortgage is intended to be, and shall operate as, the agreement described in
Section 291-f of the Real Property Law of the State of New York and Mortgagor
shall (i) deliver the written notices described in said Section 291-f to all
present and future holders of any interest in any Leases,
<PAGE>
13
by assignment or otherwise, therein a direction that, in the event that
Mortgagee notifies such tenant of a default under this Mortgage, such tenant pay
its rent and all other sums due under such Lease to Mortgagee and (ii) take such
other action, as may be reasonably required to afford Mortgagee the full
protections and benefits of said Section 291-f.
17. Events of Default. The term "Event of Default" as used in this
----------------- ----------------
Mortgage shall mean the occurrence of any of the following events:
(a) to the extent not listed in this Section 17, the occurrence of an
Event of Default (as defined in the Credit Agreement); or
(b) in the event that Mortgagor enters into a Lease of all or any
portion of the Premises, assignment by Mortgagor of the whole or any part
of the rents arising from the Premises to any person without the written
consent of Mortgagee; or
(c) except as permitted under Section 7 hereof, failure to comply with
any requirement or order or notice of violation of law or ordinance issued
by any governmental department claiming jurisdiction over the Premises
within three (3) months from the issuance thereof; or
(d) the passage of any law deducting from the value of real property
for the purposes of taxation, any lien thereon, or changing in any way the
taxation of mortgages or debts secured thereby for state or local purposes,
or the manner of collecting such taxes and imposing a tax, either directly
or indirectly, on this Mortgage or the Term Notes; or
(e) default after the expiration of any applicable notice, grace or
cure periods, under the terms, conditions or provisions of any other
mortgage consented to by Mortgagee on the Premises has occurred and remains
unremedied for 10 days after the Mortgagor becomes aware or such default;
or
(f) except as otherwise permitted in the Credit Agreement and herein,
(i) the Premises or any portion thereof shall be sold or otherwise
transferred or further encumbered by the Mortgagor, or (ii) the Mortgagor
shall be a corporation and a controlling amount of its voting stock shall
be sold or otherwise transferred or pledged, hypothecated or otherwise
transferred as security for debt or (iii) the Mortgagor shall be a
partnership, joint venture, syndicate or other group and all or any portion
of the interest of any partner or member thereof shall be sold or otherwise
transferred or pledged, hypothecated or otherwise transferred as security
for debt.
<PAGE>
14
18. Remedies. Upon the occurrence and continuance of any Event of
--------
Default, Mortgagee may, in addition to any rights or remedies available to it
hereunder or under the other loan documents and to the extent permitted by
Applicable Law, take such action personally or by its agents or attorneys, with
or without entry, and without notice, demand, presentment or protest (each and
all of which are hereby waived), as it deems necessary or advisable to protect
and enforce Mortgagee's rights and remedies against Mortgagor and in and to the
Mortgaged Property, including the following actions, each of which may be
pursued concurrently or otherwise, at such time and in such order as Mortgagee
may determine, in its sole discretion, without impairing or otherwise affecting
its other rights or remedies:
(a) declare the entire balance of the indebtedness to be immediately
due and payable, and upon any such declaration, the entire unpaid balance
of the indebtedness shall become and be immediately due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by Mortgagor; or
(b) institute a proceeding or proceedings, judicial or otherwise, for
the complete or partial foreclosure of this Mortgage under any applicable
provision of law; or
(c) sell the Mortgaged Property, and all estate, right, title,
interest, claim and demand of Mortgagor therein, and all rights of
redemption thereof, at one or more sales, as an entirety or in parcels,
with such elements of real and/or personal property, and at such time and
place and upon such terms as Mortgagee may deem expedient, or as may be
required by Applicable Law, and in the event of a sale, by foreclosure or
otherwise, of less than all of the Mortgaged Property, this Mortgage shall
continue as a lien and security interest on the remaining portion of the
Mortgaged Property; or
(d) institute an action, suit or proceeding in equity for the specific
performance of any of the provisions contained in any of the loan
documents; or
(e) request the appointment of a receiver, custodian, trustee,
liquidator or conservator of the Premises, it being agreed that this
Mortgage contains the covenant pursuant to Section 254(10) of the Real
Property Law of the State of New York "that the holder of this mortgage, in
any action to foreclose it, shall be entitled to the appointment of a
receiver"; or
(f) enter upon the Premises, and exclude Mortgagor and its agents and
servants wholly therefrom, without liability for trespass, damages or
otherwise, and take possession of all Books and Records, and Mortgagor
agrees to surrender
<PAGE>
15
possession of the Mortgaged Property and of such Books and Records to
Mortgagee on demand; and having and holding the same may use, operate,
manage, preserve, control and otherwise deal therewith and conduct the
business thereof, either personally or by its superintendents, managers,
agents, servants, attorneys or receivers, without interference from
Mortgagor; and upon each such entry and from time to time thereafter may,
at the expense of Mortgagor and the Premises, without interference by
Mortgagor and as Mortgagee may deem advisable, (i) insure or reinsure the
Premises, (ii) make all necessary or proper repairs, renewals,
replacements, alterations, additions, betterments and improvements thereto
and thereon and (iii) in every such case in connection with the foregoing
have the right to exercise all rights and powers of Mortgagor with respect
to the Mortgaged Property, either in Mortgagor's name or otherwise. For the
purpose of carrying out the provisions of this subsection, Mortgagor hereby
constitutes and appoints Mortgagee the true and lawful attorney-in-fact of
Mortgagor, which appointment is irrevocable and shall be deemed to be
coupled with an interest, in Mortgagor's name and stead, to do and perform,
from time to time, any and all actions necessary and incidental to such
purpose and does by these presents ratify and confirm any and all actions
of said attorney-in-fact in and with respect to the Mortgaged Property; or
(g) with or without entrance upon the Premises collect, receive, sue
for and recover in its own name all rents and cash collateral derived from
the Mortgaged Property, and after deducting therefrom all costs, expenses
and liabilities of every character incurred by Mortgagee in collecting the
same and in using, operating, managing, preserving and controlling the
Mortgaged Property, and otherwise in exercising Mortgagee's rights under
subsection (f) of this Section, including all amounts necessary to pay
Impositions, insurance premiums and other charges in connection with the
Mortgaged Property, as well as reasonable compensation for the services of
Mortgagee and its attorneys, agents and employees, to apply the remainder
as provided in Section 20; or
(h) release any portion of the Mortgaged Property for such
consideration as Mortgagee may require without, as to the remainder of the
Mortgaged Property, in any way impairing or affecting the lien or priority
of this Mortgage, or improving the position of any subordinate lienholder
with respect thereto, except to the extent that the indebtedness shall have
been reduced by the actual monetary consideration, if any, received by
Mortgagee for such release and applied to the indebtedness, and may accept
by assignment, pledge or otherwise any other property in place thereof as
Mortgagee may require without being accountable for so doing to any other
lienholder; or
(i) take all actions permitted under the UCC (as hereinafter defined);
or
<PAGE>
16
(j) take any other action, or pursue any other right or remedy, as
Mortgagee may have under Applicable Law, and Mortgagor does hereby grant
the same to Mortgagee.
In the event that Mortgagee shall exercise any of the rights or
remedies set forth in subsections (f) and (g) of this Section, Mortgagee shall
not be deemed to have entered upon or taken possession of the Premises except
upon the exercise of its option to do so, evidenced by its demand and overt act
for such purpose, nor shall it be deemed a beneficiary or mortgagee in
possession by reason of such entry or taking possession. Mortgagee shall not be
liable to account for any action taken pursuant to any such exercise other than
for Rents actually received by Mortgagee, nor liable for any loss sustained by
Mortgagor resulting from any failure to let the Premises, or from any other act
or omission of Mortgagee except to the extent such loss is caused by the willful
misconduct or bad faith of Mortgagee.
19. Rights Pertaining to Sales. Subject to the requirements of law
--------------------------
and except as otherwise provided herein, the following provisions shall apply to
any sale or sales of all or any portion of the Mortgaged Property under or by
virtue of Section 18, whether made under the power of sale herein granted or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale:
(a) Mortgagee may conduct any number of sales from time to time. The
power of sale set forth in subsection 18(c) hereof shall not be exhausted
by any one or more such sales as to any part of the Mortgaged Property
which shall not have been sold, nor by any sale which is not completed or
is defective in Mortgagee's opinion, until the Obligations shall have been
paid in full. Any such sale may be as a whole or in part or parcels and
Mortgagor hereby waives its right to direct the order in which the
Mortgaged Property or any parcel that is part thereof is sold.
(b) Any sale may be postponed or adjourned by public announcement at
the time and place appointed for such sale or for such postponed or
adjourned sale without further notice.
(c) After each sale, Mortgagee or an officer of any court empowered
to do so shall execute and deliver to the purchaser or purchasers at such
sale a good and sufficient instrument or instruments granting, conveying,
assigning and transferring all right, title and interest of Mortgagor in
and to the property and rights sold and shall receive the proceeds of said
sale or sales and apply the same as herein provided. Mortgagee is hereby
appointed the true and lawful attorney-in-fact of Mortgagor, which
appointment is irrevocable and shall be deemed to be coupled with an
interest, in Mortgagor's name and stead, to make all necessary conveyances,
assignments, transfers and deliveries of the property and rights so sold,
and for that purpose
<PAGE>
17
Mortgagee may execute all necessary instruments of conveyance, assignment,
transfer and delivery, and may substitute one or more persons with like
power, Mortgagor hereby ratifying and confirming all that said attorney or
such substitute or substitutes shall lawfully do by virtue thereof.
Nevertheless, Mortgagor, if requested by Mortgagee, shall ratify and
confirm any such sale or sales by executing and delivering to Mortgagee or
such purchaser or purchasers all such instruments as may be advisable, in
Mortgagee's judgment, for the purposes as may be designated in such
request.
(d) Any and all statements of fact or other recitals made in any of
the instruments referred to in subsection (c) of this Section given by
Mortgagee as to nonpayment of the Obligations, or as to the occurrence and
continuance of any default or Event of Default, or as to Mortgagee having
declared all or any of the Obligations to be due and payable, or as to the
request to sell, or as to notice of time, place and terms of sale and of
the property or rights to be sold having been duly given, or as to any
other act or thing having been duly done by Mortgagor or Mortgagee, shall
be taken as conclusive and binding against all persons as to evidence of
the truth of the facts so stated and recited. Mortgagee may appoint or
delegate any one or more persons as its agent or agents to perform any act
or acts necessary or incidental to any sale so held, including the posting
of notices and the conduct of sale, but in the name and behalf of
Mortgagee.
(e) The receipt of Mortgagee for the purchase money paid at any such
sale, or the receipt of any other person authorized to receive the same,
shall be sufficient discharge therefor to any purchaser of any property or
rights sold as aforesaid, and no such purchaser, or its representatives,
grantees or assigns, after paying such purchase price and receiving such
receipt, shall be bound to see to the application of such purchase price or
any part thereof upon or for any trust or purpose of this Mortgage or, in
any manner whatsoever, be answerable for any loss, misapplication or
nonapplication of any such purchase money, or part thereof, or be bound to
inquire as to the authorization, necessity, expediency or regularity of any
such sale.
(f) Any such sale or sales shall operate to divest Mortgagor of all
of its estate, right, title and interest, and of all claims and demands
whatsoever, whether at law or in equity, in and to the properties and
rights so sold, and shall be a perpetual bar both at law and in equity
against Mortgagor and any and all persons claiming or who may claim the
same, or any part thereof or any interest therein, by, through or under
Mortgagor to the fullest extent permitted by Applicable Law.
(g) Upon any such sale or sales, Mortgagee may bid for and acquire
the Mortgaged Property and, in lieu of paying cash therefor, may make
settlement for the purchase price by crediting against the Obligations the
amount of the bid made
<PAGE>
18
therefor, after deducting therefrom the expenses of the sale, the cost of
any enforcement proceeding hereunder, and any other sums which Mortgagee is
authorized to deduct under the terms hereof, to the extent necessary to
satisfy such bid.
(h) In the event that Mortgagor, or any person claiming by, through
or under Mortgagor, shall transfer or refuse or fail to surrender
possession of the Mortgaged Property after any sale thereof, then
Mortgagor, or such person, shall be deemed a tenant at sufferance of the
purchaser at such sale, subject to eviction by means of forcible entry and
unlawful detainer proceedings, or subject to any other right or remedy
available hereunder or under Applicable Law.
(i) Upon any such sale, it shall not be necessary for Mortgagee or
any public officer acting under execution or order of court to have present
actual or constructive possession of any of the Mortgaged Property.
(j) In the event a foreclosure hereunder shall be commenced by
Mortgagee, Mortgagee may at any time before the sale of the Mortgaged
Property abandon the sale, and may institute suit for the collection of the
Obligations and for the foreclosure of this Mortgage, or in the event that
Mortgagee shall institute a suit for collection of the Obligations and for
the foreclosure of this Mortgage, Mortgagee may at any time before the
entry of final judgment in said suit dismiss the same and sell the
Mortgaged Property in accordance with the provisions of this Mortgage.
20. Application of Proceeds. The purchase money proceeds or avails
-----------------------
of any sale referred to in Section 18, together with any other sums which may be
held by Mortgagee hereunder, whether under the provisions of Section 18 or this
Section 19 or otherwise, shall, except as herein expressly provided to the
contrary, be applied as follows:
First: To the payment of the costs and expenses of any such sale,
-----
including compensation to Mortgagee, its agents and counsel, and of any
judicial proceeding pursuant to which the same may be made, and of all
expenses, liabilities and advances made or incurred by Mortgagee hereunder,
together with interest thereon at the Alternate Interest Rate, and all
Impositions and other charges, except any Impositions or other charges
subject to which the Mortgaged Property shall have been sold.
Second: To the payment in full of the Obligations in such order as
------
Mortgagee may elect.
Third: To the payment of any other sums secured hereunder or required
-----
to be paid by Mortgagor pursuant to any provision of any of the Loan
Documents.
<PAGE>
19
Fourth: To the extent permitted by Applicable Law, to be set aside by
------
Mortgagee as adequate security in its judgment for the payment of sums
which would have been paid by application under clauses First through Third
----- -----
above to Mortgagee, arising out of any obligation or liability with respect
to which Mortgagor has agreed to indemnify or reimburse or pay Mortgagee,
but which sums are not yet due and payable or liquidated.
Fifth: To the payment of any withholding tax requirements of the
-----
Foreign Investment in Real Property Tax Act of 1980, as amended.
Sixth: To the payment of the surplus, if any, to whomsoever may be
-----
lawfully entitled to receive the same.
21. Additional Provisions as to Remedies. (a) Acceptance of any
------------------------------------
payment after the occurrence of any default shall not be deemed a waiver or a
cure of such default, and acceptance of any payment less than any amount then
due shall be deemed an acceptance on account only.
(b) In the event that Mortgagee shall have proceeded to enforce any
right or remedy hereunder by foreclosure, sale, entry or otherwise, and such
proceeding shall be discontinued, abandoned or determined adversely for any
reason, then Mortgagor and Mortgagee shall be restored to their former positions
and rights hereunder with respect to the Mortgaged Property, subject to the lien
hereof.
(c) Each right of Mortgagee provided for in this Mortgage shall be
cumulative and shall be in addition to every other right provided for in this
Mortgage or now or hereafter existing at law or in equity, by statute or
otherwise, and the exercise by Mortgagee of any one or more of such rights shall
not preclude the simultaneous or later exercise by Mortgagee of any other such
rights.
22. Intentionally omitted.
23. Payments. Any payment made in accordance with the terms of this
--------
Mortgage by any person at any time liable for the payment of the whole or any
part of the sums now or hereafter secured by this Mortgage, or by any subsequent
owner of the Premises, or by any other person whose interest in the Premises
might be prejudiced in the event of a failure to make such payment, or by any
stockholder, officer or director of a corporation which at any time may be
liable for such payment or may own or have such an interest in the Premises,
shall be deemed, as between Mortgagee and all persons who at any time may be
liable as aforesaid or may own the Premises, to have been made on behalf of all
such persons.
<PAGE>
20
24. No Waiver or Release. Any failure by Mortgagee to insist upon
--------------------
the strict performance by Mortgagor of any of the terms and provisions hereof
shall not be deemed to be a waiver of any of the terms and provisions hereof,
and Mortgagee, notwithstanding any such failure, shall have the right thereafter
to insist upon the strict performance by Mortgagor of any and all of the terms
and provisions of this Mortgage to be performed by Mortgagor; neither Mortgagor
nor any person now or hereafter obligated for the payment of the whole or any
part of the sums now or hereafter secured by this Mortgage shall be relieved of
such obligation by reason of the failure of Mortgagee to comply with any request
of Mortgagor, or of any other person so obligated, to take action to foreclose
this Mortgage or otherwise enforce any of the provisions of this Mortgage or any
Obligations secured by this Mortgage, or by reason of the release, regardless of
consideration, of the whole or any part of the security held for the Obligations
secured by this Mortgage, or by reason of any agreement or stipulation between
any subsequent owner or owners of the Premises and Mortgagee extending the time
of payment or modifying the terms of the Term Notes or this Mortgage without
first having obtained the consent of Mortgagor or such other person, and in the
latter event, Mortgagor and all such other persons shall continue to be liable
to make such payments according to the terms of any such agreement of extension
or modification unless expressly released and discharged in writing by
Mortgagee; regardless of consideration and without the necessity for any notice
to or consent by the holder of any subordinate lien on the Premises, Mortgagee
may release the obligation of anyone at any time liable for any part of the
Obligations secured by this Mortgage or any part of the security held for the
obligations without, as to the security or the remainder thereof, anywise
impairing or affecting the lien hereof or the priority thereof over any
subordinate encumbrance; and Mortgage may resort for the payment of the
Obligations secured hereby to any other security therefor held by Mortgagee in
such order and manner as Mortgagee may elect.
25. Special Taxes. If at any time the United States of America, any
-------------
state thereof or any governmental subdivision of such state, having
jurisdiction, shall require internal revenue stamps to be affixed to the Term
Notes or this Mortgage, including such tax described in Section 42 or other tax
paid on or in connection therewith, Mortgagor will pay the same with any
interest or penalties imposed in connection therewith.
26. Security Agreement. This Mortgage shall be deemed a Security
------------------
Agreement as defined in the Uniform Commercial Code in effect in the State of
New York (the "UCC") with respect to the Building Equipment or other property
---
referred to or described herein and Mortgagor and Mortgagee shall be deemed to
be Debtor and Secured Party under the UCC, respectively, and the remedies for
any violation of the covenants, terms and conditions herein contained shall be
(i) as prescribed herein, (ii) by general law or (iii) as to such part of the
security which is also reflected in said UCC, by the specific statutory
consequences now or hereafter enacted and specified in said UCC, all at
Mortgagee's sole election. The filing of this Mortgage as a Security Agreement
in the
<PAGE>
21
records normally having to do with personal property shall not be construed as
in any way derogating from or impairing this declaration and hereby stated
intention of the parties hereto, that all items of Building Equipment and other
property used in connection with the production of income from the Premises
(furniture only excepted) or adapted for use therein or which are described or
reflected in this Mortgage are, and at all times and for all purposes and in all
proceedings, both legal and equitable, shall be, regarded as part of the real
estate irrespective of whether or not (i) any such item is physically attached
to the improvements, (ii) serial numbers are used for the better identification
of certain equipment items capable of being thus identified in a recital
contained herein or in any list filed with Mortgagee or (iii) any such item is
referred to or reflected in any such Security Agreement so filed at any time.
Similarly, the mention in any such Security Agreement of (1) the rights in or
the proceeds of any fire and/or hazard insurance policy, (2) any award in
eminent domain proceedings for a taking or for loss of value or (3) the debtor's
interest as lessor in any present or future lease or rights to income growing
out of the use or occupancy of the Premises, whether pursuant to a lease or
otherwise, shall not be construed as in any way altering any of the rights of
Mortgagee as determined by this instrument or impugning the priority of
Mortgagee's lien granted hereby or by any other recorded document, but such
mention in any such Security Agreement is declared to be for the protection of
Mortgagee in the event any court or judge shall at any time hold with respect to
(1), (2) or (3) that notice of Mortgagee's priority of interest, to be effective
against a particular class of persons, including but not limited to the Federal
government and any subdivisions or entity of the Federal government, must be
filed in the UCC records. Pursuant to Section 9-402(2)(e) of the UCC, Mortgagor
hereby authorizes Mortgagee, without the signature of Mortgagor, to execute and
file Security Agreements if Mortgagee shall determine that such are necessary or
advisable in order to perfect its security interest in any fixtures, chattels or
articles of personal property covered by this Mortgage, and shall pay to
Mortgagee on demand any reasonable expenses incurred by Mortgagee in connection
with the preparation, execution and filing of such statements and any
continuation statements that may be filed by Mortgagee.
27. Refunds and Rebates. From and during the occurrence of any
-------------------
default or Event of Default of Mortgagor in compliance with any provision of
this Mortgage, all refunds and rebates of taxes and assessments on the Premises
are hereby assigned to Mortgagee as further security for the payment of the
Obligations secured by the Mortgage.
28. Waiver of Exemptions, Marshalling, Etc. To the extent permitted
--------------------------------------
by applicable law, Mortgagor will not at any time insist upon, or plead, or in
any manner whatsoever claim or take any benefit or advantage of any stay or
extension or moratorium law, any exemption from execution or sale of the
Premises or any part thereof, wherever enacted, now or at any time hereafter in
force, which may affect the covenants and terms of performance of this Mortgage,
nor claim, take or insist upon any benefit or advantage of any law now or
hereafter in force providing for the valuation or appraisal of the Premises, or
any part thereof, prior to any sale or sales thereof which may be made pursuant
to any provision
<PAGE>
22
herein, or pursuant to the decree, judgment or order of any court of competent
jurisdiction; nor, after any such sale or sales, claim or exercise any right
under any statute heretofore or hereafter enacted to redeem the property so sold
or any part thereof, and Mortgagor hereby expressly waives all benefit or
advantage of any such law or laws and covenants not to hinder, delay or impede
the execution of any power herein granted or delegated to Mortgagee, but to
suffer and permit the execution of every power as though no such law or laws had
been made or enacted. Mortgagor, for itself and all who may claim under it,
waives, to the extent that it lawfully may, all right to have the Premises
marshalled upon any foreclosure hereof.
29. Construction; Cumulative Rights. To the extent permitted by
-------------------------------
applicable law, the clauses and covenants contained herein which are construed
by Section 254 of the Real Property Law shall be construed as provided in that
section, except as otherwise provided in Section 2 hereof; the additional
clauses and covenants contained herein shall afford rights supplemental to and
not exclusive of the rights conferred by the clauses and covenants construed by
such Section 254 and shall not impair, modify, alter or defeat such rights
notwithstanding that such additional clauses and covenants may relate to the
same subject matter or provide for different or additional rights in the same or
similar contingencies as the clauses and covenants construed by Section 254; the
rights of Mortgagee arising under the clauses and covenants contained in this
Mortgage shall be separate, distinct and cumulative and none of them shall be in
exclusion of the others; and no act of Mortgagee shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision, anything herein or otherwise to the contrary notwithstanding.
30. Specific Defined Terms. Wherever used in this Mortgage, unless
----------------------
the context clearly indicates a contrary intent or unless otherwise specifically
provided herein, the word "lease" shall mean tenancy, subtenancy, lease or
sublease, the word "Mortgagor" shall mean Mortgagor and any subsequent owner or
owners of the Premises and shall be construed as if it read "Mortgagors"
whenever the sense of this Mortgage so requires, the word "Mortgagee" shall mean
Mortgagee or any subsequent holder or holders of this Mortgage, the word
"person" shall mean any individual, corporation, partnership or unincorporated
association, and the word "Premises" shall include the Mortgaged Property,
together with all Building Equipment or other property, made subject to the lien
of the Mortgage by the terms hereof.
31. No Oral Amendment. This Mortgage cannot be changed or terminated
-----------------
orally.
32. Preservation of Lien. Until the Obligations have been paid in
--------------------
full or this Mortgage has been discharged by Mortgagee, Mortgagor shall keep
this Mortgage a
<PAGE>
23
valid mortgage lien upon the Mortgaged Property; shall not at any time create or
allow to accrue or exist any debt, lien or charge which would be prior to or on
a parity with the lien of this Mortgage upon any part of the Mortgaged Property
except as otherwise permitted herein or in the Credit Agreement; and shall not
cause or permit the lien of this Mortgage to be diminished or impaired in any
way.
33. Fees and Expenses. Mortgagor shall pay all fees and charges
-----------------
incurred in the procuring, making, discharge, satisfaction, modification,
assignment, administration and enforcement of the Obligations of Mortgagor
evidenced by the Term Notes and secured by this Mortgage, including, without
limitation, the reasonable fees and disbursements of Mortgagee's attorneys,
charges for appraisals, fees and expenses relating to examination of title,
title insurance premiums, surveys and mortgage recording, documentary, transfer
or other similar taxes and revenue stamps, and in default thereof Mortgagee may
pay the same and Mortgagee will repay the same with interest thereon at the rate
per annum specified in Section 5 hereof and the same shall be added to the
Obligations secured hereby and be secured by this Mortgage.
34. Environmental Matters. (a) Specific Defined Terms. For the
--------------------- ----------------------
purposes of this mortgage, "Hazardous Materials" means (a) petroleum or
petroleum products, by-products or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas and (b)
any other chemicals, materials or substances designated, classified or regulated
as hazardous or toxic or as a pollutant or contaminant under any Environmental
Law; "Environmental Law" means any federal, state, local or foreign statute,
law, ordinance, rule, regulation, code, order, writ, judgment, injunction,
decree or judicial or agency interpretation, policy or guidance relating to
pollution or protection of the environment, health, safety or natural resources,
including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Materials; "Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental Law; and
"Environmental Action" means any action, suit, demand, demand letter, claim,
notice of non-compliance or violation, notice of liability or potential
liability, investigation, proceeding, consent order or consent agreement
relating in any way to any Environmental Law, any Environmental Permit or
Hazardous Material or arising from alleged injury or threat to health, safety or
the environment, including, without limitation, (a) by any governmental or
regulatory authority for enforcement, cleanup, removal, response, remedial or
other actions or damages and (b) by any governmental or regulatory authority or
third party for damages, contribution, indemnification, cost recovery,
compensation or injunctive relief.
(b) Representations Regarding Hazardous Materials. The operations of
---------------------------------------------
the Mortgaged Property are in compliance in all material respects with all
applicable Environmental Laws and Environmental Permits, all past claims of non-
compliance with such
<PAGE>
24
Environmental Laws and Environmental Permits have been resolved without ongoing
obligations or costs, and no circumstances exist that could reasonably be
expected to (i) form the basis of an Environmental Action against Mortgagor that
could have a Material Adverse Effect or (ii) cause the Mortgaged Property to be
subject to any material restrictions on ownership, occupancy, use or
transferability under any Environmental Law; the Mortgaged Property is not
listed or, to the knowledge of Mortgagor, proposed for listing on the NPL or on
the CERCLIS or any analogous foreign, state or local list or, to the knowledge
of Mortgagor, is adjacent to any such property; there are no and, to the
knowledge of Mortgagor, never have been any underground or aboveground storage
tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which
Hazardous Materials are being or have been treated, stored or disposed on the
Mortgaged Property; there is no asbestos or asbestos-containing material on the
Mortgaged Property; and Hazardous Materials have not been released, discharged
or disposed of on the Mortgaged Property in a manner reasonably expected to
result in a Material Adverse Effect. The Mortgagor is not undertaking, and has
not completed, either individually or together with other potentially
responsible parties, any investigation or assessment or remedial or response
action relating to any actual or threatened release, discharge or disposal of
Hazardous Materials at the Mortgaged Property, either voluntarily or pursuant to
the order of any governmental or regulatory authority or the requirements of any
Environmental Law; and all Hazardous Materials generated, used, treated, handled
or stored at, or transported to or from the Mortgaged Property have been
disposed of in a manner not reasonably expected to result in material liability
to the Mortgagor.
(c) Compliance with Environmental Laws. Mortgagor acknowledges that
----------------------------------
it is responsible for compliance in all material respects, with all applicable
Environmental Laws and Environmental Permits; obtaining and renewing all
Environmental Permits necessary for its operations and properties; and
conducting any investigation, study, sampling and testing, and undertaking any
cleanup, removal, remedial or other action necessary to remove and clean up all
Hazardous Materials from the Mortgaged Property, in accordance with the
requirements of all Environmental Laws; provided, however, that the Mortgagor
-------- -------
shall not be required to undertake any such cleanup, removal, remedial or other
action to the extent that its obligation to do so is being contested in good
faith and by proper proceedings and appropriate reserves are being maintained
with respect to such circumstances. In accordance with the Credit Agreement, at
the request of the Mortgagee at the following times: (i) upon the occurrence
and continuance of an Event of Default, (ii) upon the sale of the Mortgaged
Property and (iii) as requested by the Required Lenders upon their belief that
the Mortgaged Property may present significant liability or potential liability
pursuant to an Environmental Law, Mortgagor shall use commercially reasonable
efforts to provided to the Mortgagee within 60 days after such request, at the
expense of the Mortgagor, a Phase I environmental site assessment report for the
Mortgaged Property, prepared by an environmental consulting firm acceptable to
Mortgagee (and, if based upon the recommendation of such environmental
consulting firm, a Phase II environmental site assessment report) indicating the
presence or
<PAGE>
25
absence of Hazardous Materials and the estimated cost of any compliance, removal
or remedial action in connection with any Hazardous Materials on the Mortgaged
Property; without limiting the generality of the foregoing, if the Mortgagee
determines at any time that a material risk exists that any such report will not
be provided within the time referred to above, the Mortgagee may retain an
environmental consulting firm to prepare such report at the expense of the
Mortgagor, and Mortgagor hereby grants to Mortgagee, such firm and any agents or
representatives thereof an irrevocable non-exclusive license, subject to the
rights of tenants, if any, to enter onto the Mortgaged Property to undertake
such an assessment.
35. Waiver of Jury Trial. Each of Mortgagor and Mortgagee hereby
--------------------
irrevocably waives all right to trial by jury in any action, proceeding or
counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to this Mortgage, the Obligations secured hereby or the actions of the
Agent or any Bank in the negotiation, administration, performance or enforcement
thereof.
36. Splitting of Lien. (a) To the extent permitted by applicable
-----------------
law and without Mortgagor being obligated to pay any mortgage tax, this Mortgage
and the Term Notes shall, at any time until the same shall be fully paid and
satisfied, at the sole election of Mortgagee, be split or divided into two or
more notes and two or more mortgages constituting liens on the Premises or
portions thereof in such principal amounts as may be agreed upon but in no event
to exceed, the aggregate principal amount evidenced by the Term Notes and
secured, or which under any contingency may be secured, by this Mortgage.
Mortgagor, upon request of Mortgagee, shall execute, acknowledge and deliver to
Mortgagee and/or its designee or designees such documents as may be necessary to
effectuate the foregoing, including, without limitation, such supplemental or
substitute mortgages, assignments of rents and leases and security agreements
and supplemental or substitute notes as the Mortgage may require. Mortgagor
shall pay all expenses in connection with the making and recording of such
documents, including, without limitation, recording fees and the reasonable fees
and disbursements of Mortgagee's reasonable attorneys' fees and expenses
relating to examination of title and title insurance premiums, if any.
37. Improvements Upon Premises. Mortgagor hereby represents and
--------------------------
warrants that this Mortgage is not a mortgage of real property principally
improved or to be improved by one or more structures containing in the aggregate
up to six residential dwelling units each having its own separate cooking
facilities.
38. Headings. The Section headings herein are for convenience only
--------
and shall not limit or define the meaning of the provisions of this Mortgage.
39. Successors and Assigns. The covenants contained in this Mortgage
----------------------
shall run with the land and bind Mortgagor, its successors and assigns and all
subsequent
<PAGE>
26
encumbrancers, tenants and subtenants of the Premises and shall inure to the
benefit of Mortgagee and the successors and assignees of Mortgagee.
40. Governing Law. This Mortgage shall be governed by, and construed
-------------
in accordance with, the law of the State of New York applicable to contracts
made and intended to be wholly performed within the State of New York.
41. Submission to Jurisdiction. Without limiting the right of
--------------------------
Mortgagee to bring any action or proceeding against the undersigned or its
property arising out of or relating to the Obligations (an "Action") in the
------
courts of other jurisdictions, Mortgagor hereby irrevocably submits to the
jurisdiction of the state court or Federal court in each jurisdiction in which
the Mortgaged Property is located, and Mortgagor hereby irrevocably agrees that
any Action may be heard and determined in such state or Federal court. Mortgagor
hereby irrevocably waives, to the fullest extent that it may effectively do so,
the defense of an inconvenient forum to the maintenance of any Action in any
such jurisdiction. Mortgagor hereby irrevocably agrees that the summons and
complaint or any other process in any Action in any jurisdiction may be served
by mailing to any of the addresses set forth herein or by hand delivery to a
person of suitable age and discretion at any such address. Such service will be
complete on the date such process is so mailed or delivered.
42. Fixture Filing. A portion of the Mortgaged Property is or is to
--------------
become a fixture upon the Premises. To the extent permitted by applicable law,
Mortgagor covenants and agrees that the filing of this Mortgage in the real
estate records of the county in which the Mortgaged Property is located shall
also operate from the time of filing as a fixture filing with respect to all
goods constituting part of the Mortgaged Property which are or are to become
fixtures related to the real estate described herein. For such purpose, the
following information is set forth:
(a) Name and Address of Debtor:
Iron Age Corporation
Robinson Plaza Three
Suite 400
Pittsburgh, Pennsylvania 15205
(b) Name and Address of Secured Party:
Banque Nationale de Paris, as Agent
499 Park Avenue
New York, New York 10022
(c) This document covers goods which are or are to become fixtures.
(d) The name of the record owner is Iron Age Corporation.
<PAGE>
27
43. (a) Transfers. Mortgagor covenants and agrees that, in the
---------
event of a sale or other transfer, it will duly complete, execute and deliver to
Mortgagee contemporaneously with their submission to the applicable taxing
authority or recording officer, all forms and supporting documentation required
by such taxing authority or recording officer to estimate and fix the real
estate transfer tax ("Transfer Tax"), if any, payable under Section 1402 or
------------
Article 31 of the New York State Tax Law by reason of such sale or other
transfer or recording of the deed evidencing such sale or other transfer. This
subsection (a) shall apply only if this Mortgage is outstanding after any such
sale or transfer.
(b) Payment. Mortgagor agrees to pay all Transfer Taxes that may
-------
hereinafter become due and payable with respect to any transfer, and in default
thereof Mortgagee may pay the same and the amount of such payment shall be added
to the Obligations and, unless incurred in connection with a foreclosure of this
Mortgage, be secured by this Mortgage. The provisions of this Section shall
survive any transfer and the delivery of the deed in connection with any
transfer. Nothing in this Section shall be deemed to deprive Mortgagee of its
rights hereunder to refuse consent to any transfer.
44. Lien Law Trust Fund. Mortgagor will, in compliance with Section
-------------------
13 and Article 3-A of the Lien Law of the State of New York, receive the
advances secured hereby and will hold the right to receive such advances as a
trust fund and will apply the same first to the payment of the cost of
improvement before using any part of the total of the same for any other
purpose.
<PAGE>
28
IN WITNESS WHEREOF, this Mortgage has been duly executed by Mortgagor
the day and year first above written.
IRON AGE CORPORATION,
a Delaware corporation
By: /s/ Donald R. Jensen
--------------------------------
Name: Donald R. Jensen
Title: President
<PAGE>
29
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 26th day of February in the year 1997 ____________ before me
personally came Donald R. Jensen to me known, who, being by my duly sworn, did
depose and say he resides in Pittsburgh, PA, at ?????? ??; that he is the
President of IRON AGE CORPORATION, the corporation described in and which
executed the above instrument; and that he signed his name thereto by authority
of the board of directors of said corporation.
/s/ Liam Toohey
-----------------------------------
Notary Public
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
ALL THAT TRACT OR PARCEL OF LAND, situate in the Village of Penn Yan, Town of
Benton, County of Yates and the State of New York, being part of Great Lots 47
and 64, bounded and described as follows: Beginning at a set 5/8" reinforcing
rod at the intersection of the northerly line of North Avenue (assumed 66 feet
wide) and the westerly line of Powell Lane (60 feet wide), as shown on a map
entitled "Map of an instrument survey of a parcel of land owned by Chicago
Pacific Corporation", map drawn by David W. Andersen, P.L.S. on June 9, 1989 and
recorded on September 13, 1991 in Liber 11A of Maps, page 335; thence
1) South eighty nine degrees fifty two minutes twenty nine seconds west (S 89
degrees 52' 29" W), along the northerly line of North Avenue distance of eighty
six and 43/100 (86.43) feet to a found iron pipe,
Thence the following courses and distances along the easterly line of lands
reputedly owned by Consolidated Railways, Inc.:
2) North twenty eight degrees six minutes fifty one seconds west (N 28 degrees
06' 51" W), a distance of one hundred seventy seven and 37/100 (177.37) feet to
the point of tangency;
3) Following along a curve to the right having a radius of nine hundred sixty
one and 76/100 (961.76) feet, an arc length of four hundred twelve and 37/100
(412.37) feet, a delta angle of twenty four degrees thirty four minutes zero
seconds (24 degrees 34' 00"), a chord bearing of north fifteen degrees forty
nine minutes fifty one seconds west (N 15 degrees 49' 51" W,) and a chord length
of four hundred nine and 22/100 (409.22) feet to a point;
4) South seventy four degrees twenty seven minutes thirty nine seconds west (S
74 degrees 27' 39" W), a distance of twenty three (23.00) feet to a point;
5) Following along a curve to the right having a radius of one thousand eight
hundred sixty (1860) feet, an arc length of two hundred ninety one and 4/100
(291.04) feet, a delta angle of eight degrees fifty seven minutes fifty five
seconds (08 degrees 57' 55"), a chord bearing of north eleven degrees three
minutes thirty one seconds west (N 11 degrees 03' 31" W), and a chord length of
two hundred ninety and 74/100 (290.74) feet to a point;
6) South eighty three degrees twenty seven minutes forty three seconds west (S
83 degrees 27' 43" W), a distance of twenty (20.00) feet to a point and
7) Following along a curve to the right having a radius of one thousand eight
hundred eighty (1880) feet, an arc length of two hundred fifty four and 54/100
(254.54) feet, a delta angle of seven degrees forty five minutes twenty seven
seconds (07 degrees 45' 27"), a chord bearing on
<PAGE>
north two degrees forty minutes fifty seven seconds west (N 02 degrees 40' 57"
W), and a chord length of two hundred fifty four and 34/100 (254.34) feet to a
point, being 1.19 foot west and 0.11 foot south from a found reinforcing rod;
Thence the following courses and distances along land of Clearplass Containers,
Inc., as shown on a map entitled "Plan of Land to be conveyed to Clearplass
Containers, Inc.", map drawn by Richard L. Willson, R.L.S. on May 18, 1992 and
recorded on July 2, 1992 in Liber 11A of Maps, page 378:
8) South eighty nine degrees thirteen minutes one seconds east (S 89 degrees
13' 01" E), a distance of five hundred eighty eight and 3/100 (588.03) feet to a
set 5/8" reinforcing rod;
9) North zero degrees forty six minutes fifty nine seconds east (N 00 degrees
46' 59" E), a distance of fifty (50.00) feet to a set 5/8" reinforcing rod and
10) South eighty nine degrees thirteen minutes one seconds east (S 89 degrees
13' 01" E), a distance of three hundred eighty nine and 74/100 (389.74) feet to
a set 5/8" reinforcing rod;
Thence the following courses and distances along the westerly line of Powell
Lane:
11) South four degrees two minutes nine seconds west (S 04 degrees 02' 09" W),
a distance of ninety six and 60/100 (96.60) feet to the point of curvature;
12) Following along a curve to the right having a radius of seven hundred
fifteen (715) feet, an arc length of five hundred nine and 64/100 (509.64) feet,
a delta angle of forty degrees fifty minutes twenty one seconds (40 degrees 50'
21"), a chord bearing of south twenty four degrees twenty seven minutes eighteen
seconds west (S 24 degrees 27' 18" W), and a chord length of four hundred ninety
eight and 92/100 (498.92) feet to the point of tangency;
13) South forty four degrees fifty two minutes twenty nine seconds west (S 44
degrees 52' 29" W), a distance of five hundred thirty two and 62/100 (532.62)
feet to a point and
14) South zero degrees thirty eight minutes thirty four seconds east (S 00
degrees 38' 34" E), a distance of one hundred eighty nine and 63/100 (189.63)
feet to the true point of beginning.
Basis of bearings is true north at 76 degrees 35' 00" meridian of west longitude
as determined by solar observations.
According to an instrument survey completed by David W. Andersen, P.L.S. on
January 27, 1997, map entitled "Map of an instrument survey of lands owned by
Iron Age Corporation", map dated January 27, 1997.
-2-
<PAGE>
EXHIBIT B
PERMITTED EXCEPTIONS
1. Easement granted to New York State Electric and Gas Corporation recorded in
Liber 356 of Deeds, page 134 of December 7, 1988.
2. Easement granted to New York State Electric and Gas Corporation recorded in
Liber 356 of Deeds, page 136 of December 7, 1988.
3. Instrument Survey Map made by David W. Andersen, dated January 27, 1997,
File #973154.DWG, shows the following:
a) Water line, gas line, sanitary sewer line and buried telephone line
crossing south property line;
b) Overhead electric and/or telephone lines and storm sewer lines crossing
west property line;
c) Apparent ditch along west property line; and
d) Gas line crossing east property line.
-3-
<PAGE>
FIRST AMENDMENT TO
MORTGAGE, ASSIGNMENT
OF LEASES AND RENTS,
FIXTURE FILING AND
FINANCING STATEMENT
This FIRST AMENDMENT TO MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
FIXTURE FILING AND FINANCING STATEMENT (this "AMENDMENT") is made as of April
---------
24, 1998 by Iron Age Corporation, a Delaware corporation ("MORTGAGOR"), and
---------
Banque Nationale de Paris, in its capacity as Agent for Mortgagee ("MORTGAGEE").
---------
<PAGE>
RECITALS
A. The Credit Agreement. Pursuant to that certain credit agreement
--------------------
dated as of February 26, 1997 (the "ORIGINAL CREDIT AGREEMENT") among Iron Age
-------------------------
Corporation (formerly IAH Acquisition Corp.) ("BORROWER" and "MORTGAGOR"), Iron
-------- ---------
Age Holdings Corporation (formerly IA Holdings Corporation), as parent guarantor
(the "PARENT GUARANTOR"), the lenders named therein (the "LENDERS") and Banque
---------------- -------
Nationale de Paris ("BNP") as Agent (the "AGENT") and Initial Issuing Bank for
--- -----
the Lenders, the Lenders agreed to make Advances (as defined in the Original
Credit Agreement) and to issue certain Letters of Credit (as defined in the
Original Credit Agreement) from time to time in the aggregate amount not to
exceed at any time $100,000,000.
B. Modification of the Credit Agreement. Pursuant to the terms of
------------------------------------
that certain credit agreement, dated as of even date herewith (the "CREDIT
------
AGREEMENT"), executed by and among the Borrower, the Parent Guarantor, the
- - ---------
Lenders and the Agent, the Lenders have agreed to refinance the Original Credit
Agreement under the terms of the Credit Agreement.
C. The Mortgage. The obligations of Mortgagor under the Credit
------------
Agreement are secured by that certain Mortgage, Assignment of Leases and Rents,
Fixture Filing and Financing Statement made as of February 26, 1997 by the
Borrower and recorded February 26, 1997 in the Yates County Clerk's Office in
Liber 280 of Mortgages at page 422 (the "MORTGAGE"). The Mortgage encumbers
--------
certain real property described on Exhibit A. Capitalized terms used herein
---------
without definition shall have the meanings given to them in the Mortgage.
D. Amendment. Mortgagor and Mortgagee desire to amend the Mortgage
---------
in certain respects as hereinafter provided, to provide, among other things,
that the Mortgage will secure the obligations of Mortgagor under the Credit
Agreement.
AGREEMENT
Therefore, Mortgagor and Mortgage agree as follows:
1. Amendments
(a) All references in the Mortgage to the Original Credit Agreement
shall hereafter refer to the Credit Agreement. All references in the
Mortgage to such Mortgage shall hereafter refer to such Mortgage, as
amended by this Amendment.
<PAGE>
2
(b) The second recital paragraph in the Mortgage is hereby amended by
deleting the phrase "One Hundred Million and 00/100 Dollars
($100,000,000.00)" and replacing it with the phrase:
"Sixty Five Million and 00/100 Dollars ($65,000,000.00)"
(c) The third recital paragraph in the Mortgage is hereby deleted in
its entirety and replaced with the following:
"WHEREAS, to evidence the obligations of Mortgagor for the
Acquisition Facility (as defined in the Credit Agreement),
Mortgagor has executed and delivered certain promissory notes
aggregating in the principal amount of Thirty Five Million and
00/100 ($35,000,000.00);"
(d) Subsection (i) of the fourth recital paragraph in the Mortgage is
hereby deleted in its entirety and replaced with the following:
"(i) the obligations of the Mortgagor for the Acquisition
Facility under the Credit Agreement together with interest on
such principal amounts or portion thereof, reasonable fees, costs
and expenses due under the Credit Agreement, in each case when
due, whether at stated maturity, by acceleration, by mandatory
prepayment or otherwise; plus"
2. Full Force and Effect
As hereby amended, the Mortgage and the Credit Agreement remain in
full force and effect.
3. Counterparts
This amendment may be executed in counterparts, each of which shall be
deemed an original and all of which, taken together shall be deemed to be one
and the same document.
<PAGE>
IN WITNESS WHEREOF, Mortgagor and Mortgagee have duly executed this
Amendment as of the day and year first above written.
IRON AGE CORPORATION
By: /s/ Keith A. McDonough
---------------------------------
Name: Keith A. McDonough
Title: Executive Vice President
BANQUE NATIONALE DE PARIS,
as Agent for the Lenders
By: /s/ Paul P. Barnes
---------------------------------
Name: Paul P. Barnes
Title: AVP
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY NEW YORK )
On this 24/th/ day of April, 1998, before me personally came
Keith A McDonough, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that he/she
resides at Highlandview Road, Rennerdale PA 15106 and he/she is the Exec. Vice
President of IRON AGE CORPORATION, a Delaware corporation, and that he/she
executed the foregoing instrument and that he/she had the authority to sign the
foregoing instrument, and he/she acknowledged to me that he/she executed the
foregoing instrument as the act and deed of said entity for the uses and
purposes therein mentioned.
/s/ Liam M. Toohey
--------------------------------
Notary Public
My Commission Expires: Aug 19, 1998
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY NEW YORK )
On this 24/th/ day of April, 1998, before me personally came Paul P.
Barnes, to me known to be the person who executed the foregoing instrument, and
who, being duly sworn by me, did depose and say that he/she resides at 17
Coralyn Avenue White Plains, NY 10605 and he/she is the Assistant Vice President
of BANQUE NATIONALE DE PARIS and that he/she executed the foregoing instrument
and that he/she had the authority to sign the foregoing instrument, and he/she
acknowledged to me that he/she executed the foregoing instrument as the act and
deed of said entity for the uses and purposes therein mentioned.
/s/ Liam M. Toohey
----------------------------------
Notary Public
My Commission Expires: Aug 19, 1998
<PAGE>
EXHIBIT A
Description of Land
-------------------
ALL THAT TRACT OR PARCEL OF LAND, situate in the Village of Penn Yan, Town of
Benton, County of Yates and the State of New York, being part of Great Lots 47
and 64, bounded and described as follows: Beginning at a set 5/8" reinforcing
rod at the intersection of the northerly line of North Avenue (assumed 66 feet
wide) and the westerly line of Powell Lane (60 feet wide), as shown on a map
entitled "Map of an instrument survey of a parcel of land owned by Chicago
Pacific Corporation", map drawn by David W. Andersen, P.L.S. on June 9, 1989 and
recorded on September 13, 1991 in Liber 11A of Maps, page 335; thence
1) South eighty nine degrees fifty two minutes twenty nine seconds west (S 89
degrees 52' 29" W), along the northerly line of North Avenue distance of eighty
six and 43/100 (86.43) feet to a found iron pipe,
Thence the following courses and distances along the easterly line of lands
reputedly owned by Consolidated Railways, Inc.:
2) North twenty eight degrees six minutes fifty one seconds west (N 28 degrees
06' 51" W), a distance of one hundred seventy seven and 37/100 (177.37) feet to
the point of tangency;
3) Following along a curve to the right having a radius of nine hundred sixty
one and 76/100 (961.76) feet, an arc length of four hundred twelve and 37/100
(412.37) feet, a delta angle of twenty four degrees thirty four minutes zero
seconds (24 degrees 34' 00"), a chord bearing of north fifteen degrees forty
nine minutes fifty one seconds west (N 15 degrees 49' 51" W,) and a chord length
of four hundred nine and 22/100 (409.22) feet to a point;
4) South seventy four degrees twenty seven minutes thirty nine seconds west (S
74 degrees 27' 39" W), a distance of twenty three (23.00) feet to a point;
5) Following along a curve to the right having a radius of one thousand eight
hundred sixty (1860) feet, an arc length of two hundred ninety one and 4/100
(291.04) feet, a delta angle of eight degrees fifty seven minutes fifty five
seconds (08 degrees 57' 55"), a chord bearing of north eleven degrees three
minutes thirty one seconds west (N 11 degrees 03' 31" W), and a chord length of
two hundred ninety and 74/100 (290.74) feet to a point;
6) South eighty three degrees twenty seven minutes forty three seconds west (S
83 degrees 27' 43" W), a distance of twenty (20.00) feet to a point and
7) Following along a curve to the right having a radius of one thousand eight
hundred eighty (1880) feet, an arc length of two hundred fifty four and 54/100
(254.54) feet, a delta angle of seven degrees forty five minutes twenty seven
seconds (07 degrees 45' 27"), a chord bearing on
<PAGE>
north two degrees forty minutes fifty seven seconds west (N 02 degrees 40' 57"
W), and a chord length of two hundred fifty four and 34/100 (254.34) feet to a
point, being 1.19 foot west and 0.11 foot south from a found reinforcing rod;
Thence the following courses and distances along land of Clearplass Containers,
Inc., as shown on a map entitled "Plan of Land to be conveyed to Clearplass
Containers, Inc.", map drawn by Richard L. Willson, R.L.S. on May 18, 1992 and
recorded on July 2, 1992 in Liber 11A of Maps, page 378:
8) South eighty nine degrees thirteen minutes one seconds east (S 89 degrees
13' 01" E), a distance of five hundred eighty eight and 3/100 (588.03) feet to a
set 5/8" reinforcing rod;
9) North zero degrees forty six minutes fifty nine seconds east (N 00 degrees
46' 59" E), a distance of fifty (50.00) feet to a set 5/8" reinforcing rod and
10) South eighty nine degrees thirteen minutes one seconds east (S 89 degrees
13' 01" E), a distance of three hundred eighty nine and 74/100 (389.74) feet to
a set 5/8" reinforcing rod;
Thence the following courses and distances along the westerly line of Powell
Lane:
11) South four degrees two minutes nine seconds west (S 04 degrees 02' 09" W),
a distance of ninety six and 60/100 (96.60) feet to the point of curvature;
12) Following along a curve to the right having a radius of seven hundred
fifteen (715) feet, an arc length of five hundred nine and 64/100 (509.64) feet,
a delta angle of forty degrees fifty minutes twenty one seconds (40 degrees 50'
21"), a chord bearing of south twenty four degrees twenty seven minutes eighteen
seconds west (S 24 degrees 27' 18" W), and a chord length of four hundred ninety
eight and 92/100 (498.92) feet to the point of tangency;
13) South forty four degrees fifty two minutes twenty nine seconds west (S 44
degrees 52' 29" W), a distance of five hundred thirty two and 62/100 (532.62)
feet to a point and
14) South zero degrees thirty eight minutes thirty four seconds east (S 00
degrees 38' 34" E), a distance of one hundred eighty nine and 63/100 (189.63)
feet to the true point of beginning.
Basis of bearings is true north at 76 degrees 35' 00" meridian of west longitude
as determined by solar observations.
According to an instrument survey completed by David W. Andersen, P.L.S. on
January 27, 1997, map entitled "Map of an instrument survey of lands owned by
Iron Age Corporation", map dated January 27, 1997.
<PAGE>
EXHIBIT 10.6
INTERCOMPANY SUBORDINATION AGREEMENT
INTERCOMPANY SUBORDINATION AGREEMENT dated April 24, 1998, made by
Iron Age Holdings Corporation, a Delaware corporation (the "Parent Guarantor"),
----------------
Iron Age Investment Company, Falcon Shoe Mfg. Co., Iron Age Canada Ltd. and Iron
Age de Mexico S.A. de C.V (collectively, the "Subordinated Creditors") and Iron
----------------------
Age Corporation, a Delaware corporation (the "Borrower"), in favor of BANQUE
--------
NATIONALE DE PARIS, as agent (together with any successor thereto appointed
pursuant to Article VIII of the Credit Agreement referred to below, the "Agent")
-----
for the Lender Parties under the Credit Agreement referred to below and the
other holders of the Senior Obligations referred to below.
PRELIMINARY STATEMENTS
(1) The Lender Parties have entered into (a) a Credit Agreement dated
as of April 24, 1998 with the Borrower and the Parent Guarantor (said agreement,
as it may hereafter be amended, restated, supplemented or otherwise modified
from time to time, and any agreement extending the maturity of, refinancing or
otherwise restructuring all or any portion of the Obligations thereunder being
the "Credit Agreement", the terms defined therein and not otherwise defined
----------------
herein being used herein as therein defined) and (b) the other Loan Documents
with the Loan Parties party thereto.
(2) The Borrower intends to issue Senior Subordinated Notes (the
"Senior Subordinated Notes") in an aggregate principal amount of up to
-------------------------
$100,000,000 pursuant to the Senior Subordinated Note Indenture dated as of
April 24, 1998 among the Borrower, certain of its Subsidiaries party thereto and
The Chase Manhattan Bank, as trustee (the "Trustee") (as amended, restated,
-------
supplemented or otherwise modified from time to time, the "Senior Subordinated
-------------------
Note Indenture").
- - --------------
(3) The Borrower may hereafter from time to time enter into other
Subordinated Debt Documents with Persons other than its Subsidiaries.
(4) The Borrower is, and may hereafter from time to time become,
indebted or otherwise obligated to the Subordinated Creditors in further
amounts. All Debt and other Obligations of the Borrower to the Subordinated
Creditors now or hereafter existing (whether created directly or acquired by
assignment or otherwise), and interest and premiums, if any, thereon and other
amounts payable in respect thereof or in connection therewith are hereinafter
referred to as the "Subordinated Debt".
-----------------
(5) It is a condition precedent to the Initial Extension of Credit by
the Lender Parties under the Credit Agreement that the Subordinated Creditors
shall have executed and delivered this Agreement.
<PAGE>
2
NOW, THEREFORE, in consideration of the premises and in order to
induce the Initial Lenders, the initial Swing Line Bank and/or the Initial
Issuing Bank to make the Initial Extension of Credit under the Loan Documents,
the Subordinated Creditors and the Borrower each hereby agree as follows:
SECTION 1. Agreement to Subordinate. The Subordinated Creditors and
------------------------
the Borrower each agrees that all of the Subordinated Debt is and shall be
subordinate and junior, to the extent and in the manner hereinafter set forth,
to the prior payment in full of all Senior Obligations (as hereinafter defined),
whether now or hereafter existing. For the purposes of this Agreement, the
Senior Obligations shall not be deemed to have been paid in full until the
latest of (a) the payment in full in cash of all of the Senior Obligations and
the termination or expiration of all of the commitments of the Secured Parties
and other holders thereof, (b) the expiration or termination of all of the
Secured Hedge Agreements and (c) the Termination Date (such latest date being
hereinafter referred to as the "Subordination Termination Date"). Furthermore,
------------------------------
for purposes of this Agreement:
(i) the term "Senior Obligations" means all Debt and other
------------------
Obligations of the Borrower under or in respect of (A)(1) the Credit
Agreement, the Notes, the other Loan Documents and the Secured Hedge
Agreements, (2) all other Hedge Agreements entered into by the Borrower
from time to time, (3) the Senior Subordinated Note Indenture and the
Senior Subordinated Notes and (4) any other Subordinated Debt Documents
other than those relating to the Obligations of the Borrower to its
Subsidiaries, in each case under this subclause (A) whether for principal,
interest (including, without limitation, interest, as provided in the
Notes, that accrues after the filing of a petition initiating any action or
proceeding under the U.S. Bankruptcy Code or any other bankruptcy,
insolvency or similar law or statute protecting creditors in effect in any
jurisdiction, whether or not such interest accrues after the filing of such
petition for purposes of the U.S. Bankruptcy Code or such other law or
statute or is an allowed claim in any such action or proceeding), fees,
premiums, indemnifications, liabilities, expenses or otherwise, and in each
case under this subclause (A), as amended, supplemented, modified,
extended, restated, renewed, refunded or replaced, in whole or in part,
from time to time, and without limitation as to amount, terms, conditions,
covenants and other provisions, and (B) any instrument or other agreement
governing any Debt or other Obligations incurred to refinance, refund or
replace, in whole or in part, any of the Debt or other Obligations referred
to in subclause (A) of this sentence, together with any related notes,
guarantees, collateral documents, instruments and agreements executed from
time to time in connection therewith;
(ii) the term "Senior Secured Obligations" means all Debt and other
--------------------------
Obligations of the Borrower referred to in subclause (A)(1) of the
definition of "Senior
<PAGE>
3
Obligations" set forth above and any Debt or other Obligations of the
Borrower incurred to refinance, refund or replace, in whole or in part, any
of such Debt or other Obligations; and
(iii) the term "Senior Creditors" means, collectively, the Agent, the
----------------
other Secured Parties and the other holders of any of the Senior
Obligations.
SECTION 2. Events of Subordination. (a) In the event of any
-----------------------
dissolution, winding up, liquidation, arrangement, reorganization, adjustment,
protection, relief or composition of the Borrower or of its debts, whether
voluntary or involuntary, in any bankruptcy, insolvency, arrangement,
reorganization, receivership, liquidation, winding up, dissolution, relief or
other similar action or proceeding under any bankruptcy, insolvency or similar
law or statute protecting creditors in effect in any jurisdiction, or upon an
assignment for the benefit of creditors or any other marshaling of the assets
and liabilities of the Borrower, or any other similar action or proceeding
(each, an "Insolvency Event"), the Senior Creditors shall be entitled to receive
----------------
payment in full of the Senior Obligations owed to them before the Subordinated
Creditors shall be entitled to receive any payment of all or any of the
Subordinated Debt, and any payment or distribution of any kind (whether in cash,
property or securities) that otherwise would be payable or deliverable upon or
with respect to the Subordinated Debt in any such Insolvency Event (including
any payment that may be payable by reason of any other indebtedness of the
Borrower being subordinated to payment of the Subordinated Debt) shall be paid
or delivered directly to (w) the Agent, or (x) after the payment in full of all
of the Senior Secured Obligations, any Senior Creditor holding "Senior
Obligations" under Section 1(i)(A)(2) hereof (all such Senior Creditors being
the "Hedge Senior Creditors"), or (y) after the payment in full of all
----------------------
Obligations referred in the foregoing clause (x), the Trustee under the Senior
Subordinated Note Indenture for the benefit of the Senior Creditors holding
"Senior Obligations" under Section 1(i)(A)(3) hereof (all such Senior Creditors
being the "Other Senior Creditors") or, (z) after the payment in full of all of
----------------------
the Obligations referred in the foregoing clause (y), any Senior Creditor (the
"Senior Representative"), for the account of (i) the Senior Creditors holding
---------------------
Senior Secured Obligations for application (in the case of cash) to, or as
collateral (in the case of non-cash property or securities) for, the payment or
prepayment of the Senior Secured Obligations owed to the applicable Senior
Creditors until such Senior Secured Obligations shall have been paid in full,
(ii) the Hedge Senior Creditors for application in the same manner for the
ratable payment or prepayment of the Obligations referred to in Section
1(i)(A)(2) hereof owed to the Hedge Senior Creditors until such Obligations
shall have been paid in full, (iii) the Other Senior Creditors for application
in the same manner for the ratable payment or prepayment of the Obligations
referred to in Section 1(i)(A)(3) hereof owed to the Other Senior Creditors
until such Obligations shall have been paid in full, or (iv) the remaining
Senior Creditors for application in the same manner for the ratable payment or
prepayment of the remaining Senior
<PAGE>
4
Obligations owed to the remaining Senior Creditors until such remaining Senior
Obligations shall have been paid in full.
(b) In the event that (i) any Default shall have occurred and be
continuing or (ii) any judicial proceeding shall be pending with respect to any
such Default, then no payment (including any payment that may be payable by
reason of any other indebtedness of the Borrower being subordinated to payment
of the Subordinated Debt) shall be made by or on behalf of the Borrower for or
on account of any Subordinated Debt, and the Subordinated Creditors shall not
take or receive from the Borrower, directly or indirectly, in cash or other
property or by set-off or in any other manner, including, without limitation,
from or by way of collateral, payment of all or any of the Subordinated Debt.
(c) In the event that any Subordinated Debt is declared due and
payable before its stated maturity, the Senior Creditors shall be entitled to
receive payment in full of all amounts due or to become due on or in respect of
all Senior Obligations before the Subordinated Creditors are entitled to receive
any payment (including any payment which may be payable by reason of the payment
of any other indebtedness of the Borrower being subordinated to the payment of
the Subordinated Debt) by the Borrower on account of the Subordinated Debt. As
long as there is no Default and except as otherwise provided in this Agreement,
the Subordinated Creditors shall be entitled to receive and keep payments in
respect of the Subordinated Debt.
SECTION 3. In Furtherance of Subordination. Each of the Subordinated
-------------------------------
Creditors agrees, in furtherance of the rights of the Senior Creditors set forth
in Section 2, that:
(a) If any Insolvency Event is commenced by or against the Borrower:
(i) the Senior Representative is hereby irrevocably authorized
and empowered (in its own name or in the name of the Subordinated
Creditors or otherwise), but shall have no obligation, to demand, sue
for, collect and receive every payment or distribution otherwise
payable to the Subordinated Creditors on account of the Subordinated
Debt following an Insolvency Event and give acquittance therefor, and
to file claims and proofs of claim and take such other action
(including, without limitation, voting the Subordinated Debt or
enforcing any security interest or other lien securing payment of the
Subordinated Debt) as it may deem necessary or advisable for the
exercise or enforcement of any of the rights or interests of any of
the Senior Creditors under this Agreement; and
(ii) the Subordinated Creditors shall duly and promptly take such
action as the Senior Representative may from time to time request (A)
to collect
<PAGE>
5
the Subordinated Debt for the account of the Senior Creditors and to
file appropriate claims or proofs of claim in respect of the
Subordinated Debt, (B) to execute and deliver to the Senior
Representative such powers of attorney, assignments, or other
instruments as the Senior Representative may request in order to
enable the Senior Representative to enforce any and all claims with
respect to, and any security interests and other liens securing
payment of, the Subordinated Debt and (C) to collect and receive any
and all payments or distributions which may be payable or deliverable
upon or with respect to the Subordinated Debt.
(b) All payments or distributions upon or with respect to the
Subordinated Debt which are received by the Subordinated Creditors contrary
to the provisions of this Agreement shall be received in trust for the
benefit of the Senior Creditors, shall be segregated from other funds and
property of the Subordinated Creditors and shall be forthwith paid over to
the Senior Representative in the same form as so received (with any
necessary indorsement) for the account of (i) the Secured Parties (or the
successors thereto) for application (in the case of cash) to, or as
collateral (in the case of noncash property or securities) for, the payment
or prepayment of the Senior Secured Obligations owed to the applicable
Senior Creditors until such Senior Secured Obligations shall have been paid
in full, and (y) the other Senior Creditors for application in the same
manner for the payment or prepayment of the remaining Senior Obligations
owed to the other Senior Creditors until such remaining Senior Obligations
shall have been paid in full.
(c) To the extent that any of the Subordinated Creditors, the
Borrower or any of its Subsidiaries or any other guarantor of or provider
of collateral for the Senior Obligations makes any payment on the Senior
Obligations that is subsequently invalidated, declared to be fraudulent or
preferential or set aside or is required to be repaid to a trustee,
receiver or any other party under any bankruptcy, insolvency or
reorganization act, state or federal law, common law or equitable cause
(such payment being hereinafter referred to as a "Voided Payment"), then to
--------------
the extent of such Voided Payment, that portion of the Senior Obligations
that had been previously satisfied by such Voided Payment shall be revived
and continue in full force and effect as if such Voided Payment had never
been made. To the extent that the Subordinated Creditors shall have
received any payments subsequent to the date of the Senior Creditors'
initial receipt of such Voided Payment and such payments have not been
invalidated, declared to be fraudulent or preferential or set aside or are
required to be repaid to a trustee, receiver, or any other party under any
bankruptcy act, state or federal law, common law or equitable cause, the
Subordinated Creditors shall be obligated and hereby agrees that any such
payment so made or received shall be deemed to have been received in trust
for the benefit of the Senior Creditors, and the Subordinated Creditors
hereby
<PAGE>
6
agrees to pay to the Senior Representative, upon demand, the full amount so
received by the Subordinated Creditors during such period of time to the
extent necessary fully to restore to the Senior Creditors the amount of
such Voided Payment to be applied as set forth in Section 3(b).
(d) The Senior Representative is hereby authorized to demand specific
performance of this Agreement, whether or not the Borrower shall have
complied with any of the provisions hereof applicable to it, at any time
when the Subordinated Creditors shall have failed to comply with any of the
provisions of this Agreement applicable to it. The Subordinated Creditors
hereby irrevocably waives any defense based on the adequacy of a remedy at
law which might be asserted as a bar to the remedy of specific performance
set forth in this Section 3(d).
(e) The Subordinated Creditors shall not have or claim any Lien in or
on any property or assets of the Borrower, whether now or hereafter
existing, except in furtherance of the execution or levy upon any judgment
which the Subordinated Creditors is permitted to obtain hereunder and, in
all such cases, subject to the provisions of this Agreement.
(f) Each of the Subordinated Creditors hereby agrees, with respect to
the Senior Obligations and any and all of the Collateral therefor, that the
Borrower and the Secured Parties may agree to amend, waive, supplement or
otherwise modify the terms or conditions of any of the Senior Obligations,
and the Senior Creditors (or any portion of them) may grant extensions of
the time of payment or performance of and make compromises in respect of,
any or all of the Senior Secured Obligations (including, without
limitation, releases of collateral of, and settlements with, the Borrower,
any of the other Loan Parties or any of the other guarantors, sureties or
providers of collateral security for the Senior Obligations) and the
agreements, instruments and other documents related thereto, in each case
without the consent of the Subordinated Creditors and without affecting any
of the agreements or obligations of the Subordinated Creditors or the
Borrower contained in this Agreement. Without the necessity of any
reservation of rights against or any notice to or assent by the
Subordinated Creditors, any demand for payment of any of the Senior
Obligations may be rescinded, in whole or in part, and any of the Senior
Obligations may be continued or extended, and the Senior Creditors may
exercise or refrain from exercising any rights and remedies against the
Borrower or any other Loan Party and the collateral therefor, all without
impairing, abridging, releasing or affecting the subordination provisions
or any of the other agreements or obligations of the Subordinated Creditors
or the Borrower contained in this Agreement. Nothing in this Agreement
shall be construed to create or impose upon the Senior Representative or
any of the other Senior Creditors any fiduciary duty to the Subordinated
Creditors or any other implied
<PAGE>
7
obligation to act or refrain from acting with respect to the Borrower, any
of the other Loan Parties or the collateral therefor, or with respect to
any of the Senior Obligations in any manner that is contrary to what the
Senior Representative and the Senior Creditors may determine from time to
time is in its or their own interests.
SECTION 4. No Commencement of Any Proceeding. (a) Each of the
---------------------------------
Subordinated Creditors agrees that, so long as the Subordination Termination
Date shall not have occurred, the Subordinated Creditors will not take, sue for,
ask or demand from the Borrower payment of all or any of the Subordinated Debt,
or commence, or join with any creditor other than the Senior Representative and
the other Senior Creditors in commencing, or directly or indirectly cause the
Borrower to commence, or assist the Borrower in commencing, any Insolvency
Event.
(b) If the Subordinated Creditors, in contravention of this
Agreement, shall commence, prosecute or participate in any of the proceedings
mentioned in Section 4(a), then the Senior Representative may intervene and
interpose as a defense or plea the making of this Agreement in its name or the
name of the Borrower.
SECTION 5. Rights of Subrogation. Each of the Subordinated Creditors
---------------------
hereby unconditionally and irrevocably agrees that no payment or distribution to
the Senior Representative, on behalf of itself or any of the other Senior
Creditors, pursuant to the provisions of this Agreement shall entitle the
Subordinated Creditors to exercise any right of subrogation in respect thereof,
nor shall the Subordinated Creditors have any right of reimbursement,
restitution, exoneration, contribution or indemnification whatsoever from any
property or assets of the Borrower, any of the other Loan Parties or any of the
other guarantors, sureties or providers of collateral security for the Senior
Obligations, or any right to participate in any claim or remedy of the Senior
Representative or any of the other Senior Creditors against the Borrower or any
of the collateral for the Senior Obligations, whether or not such claim, remedy
or right arises in equity or under contract, statute or common law (including,
without limitation, the right to take or receive from the Borrower, directly or
indirectly, in cash or other property and assets or by setoff or in any other
manner, payment or security on account of such claim, remedy or right), until
the Subordination Termination Date. If any amount shall be paid to the
Subordinated Creditors in violation of the immediately preceding sentence at any
time prior to the Subordination Termination Date, such amount shall be held in
trust for the benefit of the Senior Representative and the other Senior
Creditors, shall be segregated from all other property and funds of the
Subordinated Creditors and shall forthwith be paid to the Senior Representative
for the account of the Senior Creditors in the same form as so received (with
any necessary indorsement) for the account of (i) the Secured Parties (or the
successors thereto) for application (in the case of cash) to, or as collateral
(in the case of noncash property or securities) for, the payment or prepayment
of the Senior Secured Obligations owed to the applicable Senior Creditors until
such Senior Secured
<PAGE>
8
Obligations shall have been paid in full, and (ii) the other Senior Creditors
for application in the same manner for the payment or prepayment of the
remaining Senior Obligations owed to the other Senior Creditors until such
remaining Senior Obligations shall have been paid in full.
SECTION 6. Subordination Legend; Further Assurances. The
----------------------------------------
Subordinated Creditors and the Borrower will cause each instrument evidencing
Subordinated Debt to be endorsed with the following legend:
"THE DEBT EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL IN CASH OF ALL OF THE SENIOR OBLIGATIONS (AS DEFINED IN THE
SUBORDINATION AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE
EXTENT PROVIDED IN, THE SUBORDINATION AGREEMENT DATED APRIL 24, 1998 BY THE
MAKER HEREOF AND PAYEE NAMED HEREIN IN FAVOR OF THE SENIOR REPRESENTATIVE
AND THE OTHER SENIOR CREDITORS REFERRED TO THEREIN."
The Subordinated Creditors and the Borrower each will further mark its books of
account in such a manner as shall be effective to give proper notice of the
effect of this Agreement and will, in the case of any Subordinated Debt which is
not evidenced by any instrument, upon the Senior Representative's request,
promptly cause such Subordinated Debt to be evidenced by an appropriate
instrument or instruments endorsed with the legend set forth above. The
Subordinated Creditors and the Borrower each will, at its expense and at any
time and from time to time, promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable,
or that the Senior Representative may request, in order to protect any right or
interest granted or purported to be granted under this Agreement or to enable
the Senior Representative or any of the other Senior Creditors to exercise and
enforce its rights and remedies hereunder.
SECTION 7. Agreements in Respect of Subordinated Debt, Etc. (a) The
-----------------------------------------------
Subordinated Creditors will not:
(i) Cancel or otherwise discharge any of the Subordinated Debt
(except upon payment in full thereof paid to the Senior Representative as
contemplated by Section 3(b)), convert or exchange any of the Subordinated
Debt into or for any other indebtedness or equity interest or subordinate
any of the Subordinated Debt to any Debt or other Obligations of the
Borrower other than the Senior Obligations;
(ii) Sell, assign, pledge, encumber or otherwise dispose of any of the
Subordinated Debt unless such sale, assignment, pledge, encumbrance or
disposition
<PAGE>
9
(A) is to a Person other than the Borrower or any of its Affiliates and (B)
is made expressly subject to the terms of this Agreement; or
(iii) Permit the terms of any of the Subordinated Debt to be amended,
waived, supplemented or other modified in such a manner as could reasonably
be expected to have an adverse effect upon the rights or interests of the
Senior Representative or any of the other Senior Creditors under this
Agreement or any of the Loan Documents.
(b) The Subordinated Creditors shall promptly notify the Senior
Representative of the occurrence of any default under the Subordinated Debt.
SECTION 8. Agreement by the Borrower. The Borrower agrees that it
-------------------------
will not make any payment of any of the Subordinated Debt, or take any other
action, in contravention of the provisions of this Agreement.
SECTION 9. Senior Obligations Hereunder Not Affected. All rights and
-----------------------------------------
interests of the Senior Representative and the Secured Parties hereunder, and
all agreements and other Obligations of the Subordinated Creditors and the
Borrower under this Agreement, shall remain in full force and effect
irrespective of, and each of the Subordinated Creditors hereby irrevocably
waives any defenses it may now or hereafter have in any way relating to, any or
all of the following:
(a) any lack of validity or enforceability of the Credit Agreement or
any of the other Loan Documents, the Subordinated Debt Documents, any of
the other agreements or instruments relating to any of the Senior
Obligations, or any other agreement or instrument relating to any of the
foregoing;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Senior Obligations, or any other amendment
or waiver of or any consent to any departure from the Credit Agreement or
any of the other Loan Documents, the Subordinated Debt Documents, any of
the other agreements or instruments relating to any of the Senior
Obligations, including, without limitation, any increase in the Senior
Obligations resulting from the extension of additional credit to the
Borrower or any of its Subsidiaries or otherwise;
(c) any taking, exchange, release or nonperfection of any Collateral
or any other collateral for the Senior Obligations, or any taking, release
or amendment or waiver of or consent to departure from any guaranty, for
all or any of the Senior Obligations;
<PAGE>
10
(d) any manner of application of any Collateral or any other
collateral for the Senior Obligations, or proceeds thereof, to all or any
of the Senior Obligations, or any manner of sale or other disposition of
any Collateral or any other collateral for the Senior Obligations or any
other assets of the Borrower or any of its Affiliates;
(e) any change, restructuring or termination of the corporate
structure or existence of the Borrower or any of its Affiliates; or
(f) any other circumstance (including, without limitation, any
statute of limitations or the existence of or reliance upon any
representation by the Senior Representative or any of the other Senior
Creditors) that might otherwise constitute a defense available to, or a
discharge of, the Borrower or a subordinated creditor.
SECTION 10. Waivers and Acknowledgments. (a) The Subordinated
---------------------------
Creditors and the Borrower each hereby unconditionally and irrevocably waives
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Senior Obligations and this Agreement, and any requirement that the
Senior Representative or any of the other Senior Creditors protect, secure,
perfect or insure any Lien or any property or assets subject thereto or exhaust
any right or take any action against the Borrower or any other Person or any
Collateral or any other collateral for the Senior Obligations.
(b) The Subordinated Creditors and the Borrower each hereby
unconditionally and irrevocably waives any duty on the part of the Senior
Representative or any of the other Senior Creditors to disclose to the
Subordinated Creditors any matter, fact or thing relating to the business,
condition, operations, properties or prospects of the Borrower or any of its
Subsidiaries now or hereafter known by the Senior Representative or such other
Secured Party.
(c) The Subordinated Creditors and the Borrower each hereby
unconditionally waives any right to revoke this Agreement, and acknowledges that
this Agreement is continuing in nature at all times on or prior to the
Subordination Termination Date and applies to all of the Subordinated Debt and
all of the agreements and other Obligations of the Subordinated Creditors under
this Agreement, whether existing now or in the future.
(d) The Subordinated Creditors acknowledges that it will receive
substantial direct and indirect benefits from the financing arrangements
contemplated by the Loan Documents and the other agreements or instruments
relating to any of the Senior Obligations, and that the waivers set forth in
Section 9 and in this Section 10 are knowingly made in contemplation of such
benefits.
<PAGE>
11
SECTION 11. Representations and Warranties. The Subordinated
------------------------------
Creditors and the Borrower each hereby represent and warrant as follows:
(a) The Subordinated Debt now outstanding, true and complete copies of
instruments evidencing which have been furnished to the Senior
Representative, has been duly authorized, issued and delivered by the
Borrower, has not been amended or otherwise modified except as set forth in
Preliminary Statement (3) of this Agreement, and constitutes the legal,
valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms. There exists no default in respect
of any such Subordinated Debt.
(b) The Subordinated Creditors is the legal and beneficial owner of
the Subordinated Debt now outstanding, free and clear of any Lien.
(c) There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.
(d) The Subordinated Creditors has, independently and without reliance
upon the Senior Representative or any of the other Senior Creditors and
based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement.
SECTION 12. Amendments, Waivers, Etc. (a) No amendment or waiver of
-------------------------
any provision of this Agreement, and no consent to any departure by the
Subordinated Creditors or the Borrower herefrom, shall in any event be effective
unless the same shall be in writing and signed by the Senior Representative and
the Required Lenders, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided,
--------
however, that any provision relating solely to the rights and obligations of the
- - -------
Senior Creditors hereunder as among themselves may be amended from time to time
upon notice from the Senior Representative and the Trustee on behalf of the
Senior Subordinated Notes if the Senior Subordinated Notes are affected by any
such amendment to the Subordinated Representative and the Borrower.
(b) The Subordinated Creditors hereby agrees that no failure on the
part of the Senior Representative or any of the other Senior Creditors to
exercise, and no delay in exercising, any right, power or privilege hereunder
shall operate as a waiver thereof or a consent thereto; nor shall any single or
partial exercise of any such right, power or privilege preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The Subordinated Creditors hereby agrees that the remedies herein provided are
cumulative and not exclusive of any remedy provided by applicable law.
<PAGE>
12
SECTION 13. Addresses for Notices. All notices and other
---------------------
communications provided for hereunder shall be in writing (including
telegraphic, telecopy or telex communication) and mailed, telegraphed,
telecopied, telexed or delivered by an overnight courier of recognized standing,
if to the Subordinated Creditors, at each of the addresses listed below each
such Subordinated Creditor's name on the signature pages hereof; if to the
Borrower, the Senior Representative or any Lender Parties, at its address
specified in Section 9.02 of the Credit Agreement; and if to the holders of the
Senior Subordinated Notes, to Banque Nationale de Paris, as Agent, at 499 Park
Avenue, New York, NY 10022, Attention: Alan Mustacchi, telecopier number (212)
418-8231; or as to each party, at such other address as shall be designated by
such party in a written notice to each other party. All such notices and other
communications shall, when deposited in the mails, delivered to the telegraph
company, transmitted by telecopier, confirmed by telex answerback or delivered
by overnight courier, be effective when deposited in the mails, delivered to the
telegraph company, telecopied, confirmed by telex answerback or delivered to the
overnight courier, respectively.
SECTION 14. Expenses. The Subordinated Creditors and the Borrower
--------
jointly and severally agree to pay to the Senior Representative, upon demand,
any and all costs and expenses, including the reasonable fees and expenses of
its counsel and of any experts or agents, which the Senior Representative or any
or any of the other Senior Creditors may incur in connection with the (a) the
administration of this Agreement, (b) the exercise or enforcement of any of the
rights of the Senior Representative or the Senior Creditors hereunder or (c) the
failure by the Subordinated Creditors or the Borrower to perform or observe any
of the terms or provisions of this Agreement.
SECTION 15. Continuing Agreement; Assignments Under the Credit
--------------------------------------------------
Agreement. This Agreement is a continuing agreement and shall (a) remain in
- - ---------
full force and effect until the Subordination Termination Date, (b) be binding
upon the Subordinated Creditors, the Borrower and their respective successors
and assigns, and (c) inure to the benefit of, and be enforceable by, the Senior
Representative, the Senior Creditors and their respective successors,
transferees and assigns. Without limiting the generality of the clause (c) of
the immediately preceding sentence, any of the Lender Parties may assign or
otherwise transfer all or any portion of its rights and obligations under the
Credit Agreement (including, without limitation, all or any portion of its
Commitment, the Advances and any Note to be held by it) to any other Person, and
such other Person shall thereupon become vested with all the rights in respect
thereof granted to such Lender Party herein or otherwise, in each case as
provided in section 9.07 of the Credit Agreement.
SECTION 16. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different 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. Delivery of an executed counterpart of a signature
<PAGE>
13
page to this Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Agreement.
SECTION 17. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
SECTION 18. Severability. In case any provision of this Agreement
------------
shall be invalid, illegal, or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
<PAGE>
IN WITNESS WHEREOF, the Subordinated Creditors and the Borrower each
has caused this Agreement to be duly executed and delivered by its officer
thereunto duly authorized as of the date first above written.
IRON AGE CORPORATION
By /s/ Keith A. McDonough
--------------------------------------------
Name: Keith A. McDonough
Title: Executive Vice President
Address: Robinson Plaza Three
Suite 400
Pittsburgh, PA 15205
IRON AGE HOLDINGS CORPORATION
By /s/ Keith A. McDonough
--------------------------------------------
Name: Keith A. McDonough
Title: Vice President - Finance
Address: Iron Age Holdings Corporation
Robinson Plaza Three, Suite 400
Pittsburgh, PA 15205
<PAGE>
IRON AGE INVESTMENT COMPANY
By /s/ Keith A. McDonough
------------------------------------------
Name: Keith A. McDonough
Title: President
Address: 801 West Street
Wilmington, DE
19801
FALCON SHOE MFG. CO.
By /s/ Keith A. McDonough
------------------------------------------
Name: Keith A. McDonough
Title: Vice President
Address: 2 Cedar Street
P.O. Box 1286
Lewiston, Maine
04243-1286
IRON AGE CANADA LTD.
By /s/ Keith A. McDonough
------------------------------------------
Name: Keith A. McDonough
Title: Treasurer
Address: 475 North Rivermede Road
Unit 2
Concord, Ontario
LAK03R2, ONTARIO
<PAGE>
IRON AGE DE MEXICO S.A. DE C.V.
By /S/ Keith A. McDonough
----------------------------------------
Name: Keith A. McDonough
Title:
Address: Carretera Juarez-Porvenir
1568
9-B Centro Comercial
Satelite in Ciudad Juarez
Chihuahua, MEXICO
<PAGE>
EXHIBIT 10.7
SUBSIDIARY GUARANTY
Dated April 24, 1998
From
THE PARTIES LISTED ON THE SIGNATURE PAGES HEREOF
as SUBSIDIARY GUARANTORS,
-- ---------------------
in favor of
THE SECURED PARTIES REFERRED TO IN
THE CREDIT AGREEMENT
REFERRED TO HEREIN
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. Subsidiary Guaranty; Limitation of Liability............... 1
SECTION 2. Subsidiary Guaranty Absolute............................... 2
SECTION 3. Waiver..................................................... 3
SECTION 4. Subrogation................................................ 4
SECTION 5. Payments Free and Clear of Taxes, Etc...................... 5
SECTION 6. Representations and Warranties............................. 7
SECTION 7. Covenants.................................................. 9
SECTION 8. Amendments, Etc............................................ 10
SECTION 9. Notices, Etc............................................... 10
SECTION 10. No Waiver; Remedies....................................... 10
SECTION 11. Right of Set-off.......................................... 10
SECTION 12. Indemnification........................................... 11
SECTION 13. Continuing Subsidiary Guaranty; Assignments
under the Credit Agreement............................... 11
SECTION 14. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.... 11
</TABLE>
<PAGE>
SUBSIDIARY GUARANTY, dated April 24, 1998 made by the parties listed
on the signature pages hereof (each such party, a "Subsidiary Guarantor"), in
--------------------
favor of the Secured Parties (as defined in the Credit Agreement referred to
below).
PRELIMINARY STATEMENT. The Lender Parties and Banque Nationale de
Paris, as Swing Line Bank and as Agent, are parties to a Credit Agreement dated
as of April 24, 1998 (said agreement, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "Credit
------
Agreement", the terms defined therein and not otherwise defined herein being
- - ---------
used herein as therein defined) with Iron Age Corporation, a Delaware
corporation (the "Borrower"). Each Subsidiary Guarantor may receive a portion
--------
of the proceeds of the Advances under the Credit Agreement and will derive
substantial direct and indirect benefit from the transactions contemplated by
the Credit Agreement. It is a condition precedent to the making of Advances and
the issuance of Letters of Credit by the Lender Parties under the Credit
Agreement and the entry by the Hedge Banks into Secured Hedge Agreements with
the Borrower from time to time that each Subsidiary Guarantor shall have
executed and delivered this Subsidiary Guaranty.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lender Parties to make Advances and to issue Letters of Credit under
the Credit Agreement, each Subsidiary Guarantor, jointly and severally with each
other Subsidiary Guarantor, hereby agrees as follows:
SECTION 1. Subsidiary Guaranty; Limitation of Liability. (a) Each
--------------------------------------------
Subsidiary Guarantor hereby absolutely, unconditionally and irrevocably
guarantees the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all Obligations of each other Loan Party now or
hereafter existing under the Loan Documents, whether for principal, interest,
fees, expenses or otherwise (such Obligations being the "Guaranteed
----------
Obligations"), and agrees to pay any and all reasonable expenses (including
- - -----------
counsel fees and expenses) incurred by the Agent or any other Secured Party in
enforcing any rights under this Subsidiary Guaranty or any other Loan Document.
Without limiting the generality of the foregoing, each Subsidiary Guarantor's
liability shall extend to all amounts that constitute part of the Guaranteed
Obligations and would be owed by any other Loan Party to the Agent or any other
Secured Party under the Loan Documents but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such Loan Party.
(b) (i) Each Subsidiary Guarantor and by its acceptance of this
Subsidiary Guaranty, the Agent and each other Secured Party, hereby
confirms that it is the intention of all such parties that this Subsidiary
Guaranty not constitute a fraudulent transfer or conveyance for purposes of
Bankruptcy Law, the Uniform Fraudulent
<PAGE>
2
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal
or state law to the extent applicable to this Subsidiary Guaranty. To
effectuate the foregoing intention, the Agent, the other Secured Parties
and the Subsidiary Guarantors hereby irrevocably agree that the Obligations
of each Subsidiary Guarantor under this Subsidiary Guaranty shall not
exceed the greater of (A) the net benefit realized by such Subsidiary
Guarantor from the proceeds of the Advances made from time to time by the
Borrower to such Subsidiary Guarantor or any subsidiary of such Subsidiary
Guarantor and (B) the maximum amount that will, after giving effect to such
maximum amount and all other contingent and fixed liabilities of such
Subsidiary Guarantor that are relevant under such laws, and after giving
effect to any collections from, rights to receive contribution from or
payments made by or on behalf of any other Subsidiary Guarantor in respect
of the Obligations of such other Subsidiary Guarantor under this Subsidiary
Guaranty, result in the Obligations of such Subsidiary Guarantor under this
Subsidiary Guaranty not constituting a fraudulent transfer or conveyance.
For purposes hereof, "Bankruptcy Law" means Title 11, U.S. Code, or any
--------------
similar Federal or state law for the relief of debtors.
(ii) Each Subsidiary Guarantor agrees that in the event any payment
shall be required to be made to the Secured Parties under this Subsidiary
Guaranty or any other guaranty, such Subsidiary Guarantor will contribute,
to the maximum extent permitted by law, such amounts to each other
Subsidiary Guarantor and each other guarantor so as to maximize the
aggregate amount paid to the Secured Parties under the Loan Documents.
SECTION 2. Subsidiary Guaranty Absolute. Each Subsidiary Guarantor
----------------------------
guarantees that the Guaranteed Obligations will be paid strictly in accordance
with the terms of the Loan Documents, regardless of any law, regulation or order
now or hereafter in effect in any jurisdiction affecting any of such terms or
the rights of the Agent or any other Secured Party with respect thereto. The
Obligations of each Subsidiary Guarantor under this Subsidiary Guaranty are
independent of the Guaranteed Obligations or any other Obligations of any other
Loan Party under the Loan Documents, and a separate action or actions may be
brought and prosecuted against such Subsidiary Guarantor to enforce this
Subsidiary Guaranty, irrespective of whether any action is brought against the
Borrower or any other Loan Party or whether the Borrower or any other Loan Party
is joined in any such action or actions. The liability of each Subsidiary
Guarantor under this Subsidiary Guaranty shall be irrevocable, absolute and
unconditional irrespective of, and each Subsidiary Guarantor hereby irrevocably
waives to the fullest extent it may legally and effectively do so any defenses
it may now or hereafter have in any way relating to, any or all of the
following:
(a) any lack of validity or enforceability of any Loan Document or
any agreement or instrument relating thereto;
<PAGE>
3
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations or any other
Obligations of any other Loan Party under the Loan Documents, or any other
amendment or waiver of or any consent to departure from any Loan Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Loan Party or any
of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any Collateral,
or any taking, release or amendment or waiver of or consent to departure
from any other guaranty, for all or any of the Guaranteed Obligations;
(d) any manner of application of Collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any Collateral for all or any of the Guaranteed Obligations
or any other Obligations of any other Loan Party under the Loan Documents
or any other assets of any Loan Party or any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any Loan Party or any of its Subsidiaries;
(f) any failure of any Secured Party to disclose to the Borrower, the
Parent Guarantor or any Subsidiary Guarantor any information relating to
the financial condition, operations, properties or prospects of any other
Loan Party or any Subsidiary of any Loan Party now or in the future known
to any Secured Party (each Subsidiary Guarantor waiving any duty on the
part of the Secured Parties to disclose such information); or
(g) any other circumstance (including, without limitation, any statute
of limitations) or any existence of or reliance on any representation by
the Agent or any other Secured Party that might otherwise constitute a
defense available to, or a discharge of, the Borrower, any Subsidiary
Guarantor or any other guarantor or surety.
This Subsidiary Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by any Secured Party or any other Person
upon the insolvency, bankruptcy or reorganization of the Borrower or any other
Loan Party or otherwise, all as though such payment had not been made.
SECTION 3. Waivers and Acknowledgments. (a) Each Subsidiary
---------------------------
Guarantor hereby waives (to the extent permitted by applicable law) promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this
<PAGE>
4
Subsidiary Guaranty and any requirement that the Agent, or any other Secured
Party protect, secure, perfect or insure any Lien or any property subject
thereto or exhaust any right or take any action against any Loan Party or any
other Person or any collateral.
(b) Each Subsidiary Guarantor hereby waives (to the extent permitted
by applicable law) any right to revoke this Subsidiary Guaranty and acknowledges
that this Subsidiary Guaranty is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.
(c) Each Subsidiary Guarantor acknowledges that the Agent may,
without notice to or demand upon such Subsidiary Guarantor and without affecting
the liability of such Subsidiary Guarantor under this Subsidiary Guaranty,
foreclose under any Mortgage by nonjudicial sale, and the Subsidiary Guarantor
hereby waives any defense to the recovery by the Agent and the other Secured
Parties against such Subsidiary Guarantor of any deficiency after such
nonjudicial sale and any defense or benefits that may be afforded by applicable
law.
(d) Each Subsidiary Guarantor acknowledges that it will receive
substantial direct and indirect benefits from the financing arrangements
contemplated by the Loan Documents and that the waivers set forth in this
Section 3 are knowingly made in contemplation of such benefits.
SECTION 4. Subrogation. No Subsidiary Guarantor will exercise any
-----------
rights that it may now or hereafter acquire against the Borrower or any other
insider guarantor that arise from the existence, payment, performance or
enforcement of such Subsidiary Guarantor's Obligations under this Subsidiary
Guaranty or any other Loan Document, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution or indemnification and any
right to participate in any claim or remedy of the Agent or any other Secured
Party against the Borrower or any other insider guarantor or any collateral,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, including, without limitation, the right to take or
receive from the Borrower or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, unless and until
all of the Obligations and all other amounts payable under this Subsidiary
Guaranty shall have been paid in full in cash, all Secured Hedge Agreements and
the Commitments shall have expired or terminated. If any amount shall be paid
to any Subsidiary Guarantor in violation of the preceding sentence at any time
prior to the later of the payment in full in cash of the Guaranteed Obligations
and all other amounts payable under this Subsidiary Guaranty and the later of
(i) the Termination Date and (ii) the expiration or termination of all Secured
Hedge Agreements, such amount shall be held in trust for the benefit of the
Agent and the other Secured Parties and shall forthwith be paid to the Agent to
be credited and applied to the Guaranteed Obligations and all other amounts
payable under this Subsidiary Guaranty, whether
<PAGE>
5
matured or unmatured, in accordance with the terms of the Loan Documents, or to
be held as collateral for any Guaranteed Obligations or other amounts payable
under this Subsidiary Guaranty thereafter arising. If (A) any Subsidiary
Guarantor shall make payment to the Agent or any other Secured Party of all or
any part of the Guaranteed Obligations, (B) all of the Guaranteed Obligations
and all other amounts payable under this Subsidiary Guaranty shall be paid in
full in cash and (C) the Termination Date shall have occurred and all Secured
Hedge Agreements shall have expired or terminated, the Agent and the other
Secured Parties will, at such Subsidiary Guarantor's request and expense,
execute and deliver to such Subsidiary Guarantor appropriate documents, without
recourse and without representation or warranty, necessary to evidence the
transfer by subrogation to such Subsidiary Guarantor of an interest in the
Guaranteed Obligations resulting from such payment by such Subsidiary Guarantor.
SECTION 5. Payments Free and Clear of Taxes, Etc. (a) Any and all
-------------------------------------
payments by any Subsidiary Guarantor hereunder shall be made, in accordance with
Section 2.12 of the Credit Agreement, free and clear of and without deduction
for any Taxes. If any Subsidiary Guarantor shall be required by law to deduct
any Taxes from or in respect of any sum payable hereunder to any Lender Party or
the Agent, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 5) such Lender Party or the Agent (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) such Subsidiary Guarantor shall make such
deductions and (iii) such Subsidiary Guarantor shall pay the full amount
deducted to the relevant taxation authority or other governmental authority in
accordance with applicable law.
(b) In addition, each Subsidiary Guarantor agrees to pay any present
or future Other Taxes.
(c) Each Subsidiary Guarantor shall indemnify the Agent and each other
Secured Party for and hold each of them harmless against the full amount of
Taxes and Other Taxes, and for the full amount of taxes of any kind imposed by
any jurisdiction on amounts payable under this Section paid by the Agent or such
other Secured Party (as the case may be) and any liability (including penalties,
additions to tax, interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be made within 30 days from the date the
Agent or such other Secured Party (as the case may be) makes written demand
therefor.
(d) Within 30 days after the date of any payment of Taxes, such
Subsidiary Guarantor shall furnish to the Agent, at its address referred to in
Section 9.02 of the Credit Agreement, the original receipt of payment thereof or
a certified copy of such receipt. In the case of any payment hereunder by or on
behalf of any Subsidiary Guarantor through an account or branch outside the
United States or on behalf of such Subsidiary Guarantor by a payor that is not a
United States person, if such Subsidiary Guarantor determines that no Taxes
<PAGE>
6
are payable in respect thereof, such Subsidiary Guarantor shall furnish, or
shall cause such payor to furnish, to the Agent, at such address, an opinion of
counsel acceptable to the Agent stating that such payment is exempt from Taxes.
For purposes of this subsection (d) and subsection (e) of this Section 5, the
terms "United States" and "United States person" shall have the meanings
------------- --------------------
specified in Section 7701 of the Internal Revenue Code.
(e) Each Lender Party organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of the Credit Agreement in the case of each Initial Lender, initial
Swing Line Bank or Initial Issuing Bank, as the case may be, and on the date of
the Assignment and Acceptance pursuant to which it became a Lender Party in the
case of each other Lender Party, and from time to time thereafter if requested
in writing by any of the Subsidiary Guarantors or the Agent (but only so long
thereafter as such Lender Party remains lawfully able to do so), provide the
Agent and the Subsidiary Guarantors with two (2) duly completed copies of
Internal Revenue Service form 1001 or 4224, as appropriate, or any successor
form prescribed by the Internal Revenue Service, certifying that such Lender
Party is exempt from or is entitled to a reduced rate of United States
withholding tax on payments under the Credit Agreement or the Notes. To the
extent that any such form becomes obsolete with respect to any Lender Party,
such Lender Party shall, upon the reasonable written request of any of the
Subsidiary Guarantors to such Lender Party and the Agent (but only if such
Lender Party is lawfully able to do so) provide two (2) copies of either an
updated or successor form to the Subsidiary Guarantors and the Agent. If the
forms provided by a Lender Party at the time such Lender Party first becomes a
party to the Credit Agreement indicate a United States interest withholding tax
rate in excess of zero, withholding tax at such rate shall be considered
excluded from Taxes unless and until such Lender Party provides the appropriate
forms certifying that a lesser rate applies, whereupon withholding tax at such
lesser rate only shall be considered excluded from Taxes for periods governed by
such form; provided, however, that, if at the date of the Assignment and
-------- -------
Acceptance pursuant to which a Lender Party becomes a party to the Credit
Agreement, the Lender Party assignor was entitled to payments under subsection
(a) of this Section 5 in respect of United States withholding tax with respect
to interest paid at such date, then, to such extent, the term Taxes shall
include (in addition to withholding taxes that may be imposed in the future or
other amounts otherwise includable in Taxes) United States withholding tax, if
any, applicable with respect to the Lender Party assignee on such date. If any
form or document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001 or
4224, that the Lender Party reasonably considers to be confidential, the Lender
Party shall give notice thereof to such Subsidiary Guarantor and shall not be
obligated to include in such form or document such confidential information.
(f) For any period with respect to which a Lender Party has failed to
provide any Subsidiary Guarantor with the appropriate form described in
subsection (e) of this
<PAGE>
7
Section 5 (other than if such Subsidiary Guarantor has failed to timely request
with reasonable notice any appropriate renewal, successor or other form or if
any such form otherwise is not required under subsection (e) of this Section 5),
such Lender Party shall not be entitled to indemnification under subsection (a)
or (c) of this Section 5 with respect to Taxes imposed by the United States;
provided, however, that should a Lender Party become subject to Taxes because of
- - -------- -------
its failure to deliver a form required hereunder, each Subsidiary Guarantor
shall take such steps as such Lender Party shall reasonably request to assist
such Lender Party to recover such Taxes.
(g) If the Agent or any Lender Party, in its sole opinion, determines
that it has finally and irrevocably received or been granted a refund in respect
of any Taxes or Other Taxes as to which indemnification has been paid by any
Subsidiary Guarantor pursuant to Section 5(a) or (c), it shall promptly remit
such refund to such Subsidiary Guarantor, net of all out-of-pocket expenses of
the Agent or such Lender Party; provided, however, that such Subsidiary
-------- -------
Guarantor upon the request of the Agent or such Lender Party, agrees promptly to
return such refund to such party in the event such party is required to repay
such refund to the relevant taxing authority. The Agent or such Lender Party
shall provide such Subsidiary Guarantor with a copy of any notice or assessment
from the relevant taxing authority (deleting any confidential information
contained therein) requiring repayment of such refund. At the request and
expense of any of the Subsidiary Guarantors, the Agent or any Lender Party, as
the case may be, shall use commercially reasonably efforts to seek a refund of
any Taxes or Other Taxes as to which indemnification has been paid by such
Subsidiary Guarantor pursuant to subsection (a) or (c) of this Section 5.
Nothing contained herein shall impose an obligation on the Agent or any Lender
Party to disclose to any party any information regarding tax affairs and
computations.
(h) Any Lender Party claiming any additional amounts payable pursuant
to this Section 5 agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Eurodollar Lending Office if the making of such a change would avoid the need
for, or reduce the amount of, any such additional amounts that may thereafter
accrue and would not, in the reasonable judgment of such Lender Party, be
otherwise disadvantageous to such Lender Party.
(i) Without prejudice to the survival of any other agreement of any
Subsidiary Guarantor hereunder, the agreements and obligations of each
Subsidiary Guarantor contained in this Section 5 shall survive the payment in
full of the Guaranteed Obligations and all other amounts payable under this
Subsidiary Guaranty.
SECTION 6. Representations and Warranties. Each Subsidiary
------------------------------
Guarantor hereby represents and warrants as follows:
<PAGE>
8
(a) Such Subsidiary Guarantor (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases property
or in which the conduct of its business requires it to so qualify or be
licensed except where the failure to so qualify or be licensed could not
have a Material Adverse Effect and (iii) has all requisite corporate power
and authority (including, without limitation, all governmental licenses,
permits and other approvals) to own or lease and operate its properties and
to carry on its business as now conducted and as proposed to be conducted.
All of the outstanding capital stock of such Subsidiary Guarantor has been
validly issued, is fully paid and non-assessable and is owned by a Loan
Party, free and clear of all Liens, except those created under the Loan
Documents.
(b) The execution, delivery and performance by such Subsidiary
Guarantor of this Subsidiary Guaranty are within such Subsidiary
Guarantor's corporate powers, have been duly authorized by all necessary
corporate action, and do not (i) contravene such Subsidiary Guarantor's
charter or bylaws, (ii) violate any law (including, without limitation, the
Securities Exchange Act of 1934), rule, regulation (including, without
limitation, Regulation X of the Board of Governors of the Federal Reserve
System), order, writ, judgment, injunction, decree, determination or award,
(iii) conflict with or result in the breach of, or constitute a default
under, any contract, loan agreement, indenture, mortgage, deed of trust,
lease or other instrument binding on or affecting such Subsidiary Guarantor
or any of its properties or (iv) except for the Liens created under the
Loan Documents, result in or require the creation or imposition of any Lien
upon or with respect to any of the properties of any Subsidiary Guarantor.
No Subsidiary Guarantor is in violation of any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award or in
breach of any such contract, loan agreement, indenture, mortgage, deed of
trust, lease or other instrument, the violation or breach of which could
have a Material Adverse Effect.
(c) After giving effect to the filing of the UCC Financing Statements
contemplated by the Credit Agreement and the Collateral Documents, no
authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or any other third
party is required for (i) the due execution, delivery, recordation, filing
or performance by any Subsidiary Guarantor of this Subsidiary Guaranty or
the other transactions contemplated hereby, (ii) the grant by any
Subsidiary Guarantor of the Liens granted by it pursuant to the Collateral
Documents, (iii) the perfection or maintenance of the Liens created by the
Collateral Documents (including the first priority nature thereof) or (iv)
the exercise by the Agent or any Lender Party of its rights under the Loan
Documents or the remedies in respect of the Collateral pursuant to the
Collateral Documents, except for the authorizations,
<PAGE>
9
approvals, actions, notices and filings listed on Schedule 4.01(d) of the
Credit Agreement, all of which have been duly obtained, taken, given or
made and are in full force and effect. All applicable waiting periods in
connection with the transactions contemplated hereby have expired without
any action having been taken by any competent authority restraining,
preventing or imposing materially adverse conditions upon the rights of the
Subsidiary Guarantors freely to transfer or otherwise dispose of, or to
create any Lien on, any properties now owned or hereafter acquired by any
of them.
(d) This Subsidiary Guaranty and each other Loan Document to which it
is a party has been duly executed and delivered by such Subsidiary
Guarantor. Each of this Subsidiary Guaranty and each other Loan Document to
which it is a party is the legal, valid and binding obligation of such
Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating
to or limiting creditors' rights or by equitable principles generally.
(e) There is no action, suit, investigation, litigation or proceeding
affecting any Subsidiary Guarantor, including any Environmental Action,
pending or threatened before any court, governmental agency or arbitrator
that (i) could have a Material Adverse Effect or (ii) purports to affect
the legality, validity or enforceability of this Subsidiary Guaranty or the
consummation of the transactions contemplated hereby.
(f) There are no conditions precedent to the effectiveness of this
Subsidiary Guaranty that have not been satisfied or waived.
(g) Such Subsidiary Guarantor has, independently and without reliance
upon the Agent or any Lender Party and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Subsidiary Guaranty, and such Subsidiary
Guarantor has established adequate means of obtaining from any other Loan
Parties on a continuing basis information pertaining to, and is now and on
a continuing basis will be completely familiar with, the financial
condition, operations, properties and prospects of such other Loan Parties.
SECTION 7. Covenants. Each Subsidiary Guarantor covenants and agrees
---------
that, so long as any part of the Guaranteed Obligations shall remain unpaid, any
Letter of Credit shall be outstanding, any Lender Party shall have any
Commitment or any Secured Hedge Agreement shall remain in effect, such
Subsidiary Guarantor will at all times perform or observe, and will cause each
of its Subsidiaries to perform or observe, all of the terms, covenants and
agreements that the Loan Documents state that the Borrower is to cause such
Subsidiary Guarantor or such Subsidiaries to perform or observe.
<PAGE>
10
SECTION 8. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Subsidiary Guaranty and no consent to any departure by any Subsidiary
Guarantor therefrom shall in any event be effective unless the same shall be in
writing and signed by the Agent and the Required Lenders, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no amendment, waiver or consent
-------- -------
shall, unless in writing and signed by all of the Secured Parties, (i) reduce or
limit the liability of such Subsidiary Guarantor hereunder or release any
Subsidiary Guarantor hereunder, (ii) postpone any date fixed for payment
hereunder or (iii) amend this Section 8.
SECTION 9. Notices, Etc. All notices and other communications
------------
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered
to it, if to any Subsidiary Guarantor, to the address set forth below such
Subsidiary Guarantor's signature on the signature pages hereof, if to the Agent
or any other Lender Party, at its address specified in the Credit Agreement, or
as to any party at such other address as shall be designated by such party in a
written notice to each other party. All such notices and other communications
shall, when mailed, telegraphed, telecopied, telexed or sent by courier, be
effective when deposited in the mails, delivered to the telegraph company,
transmitted by telecopier, confirmed by telex answerback or delivered to the
overnight courier, respectively. Delivery by telecopier of an executed
counterpart of any amendment or waiver of any provision of this Subsidiary
Guaranty shall be effective as delivery of a manually executed counterpart
thereof.
SECTION 10. No Waiver; Remedies. No failure on the part of the Agent
-------------------
or any other Secured Party to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder 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 11. Right of Set-off. Upon (i) the occurrence and during the
----------------
continuance of any Event of Default and (ii) the making of the request or the
granting of the consent specified by Section 6.01 of the Credit Agreement to
authorize the Agent to declare the Notes due and payable pursuant to the
provisions of said Section 6.01, each Lender Party and each of its respective
Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and otherwise apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender Party or such
Affiliate to or for the credit or the account of any Subsidiary Guarantor
against any and all of the Obligations of such Subsidiary Guarantor now or
hereafter existing under this Subsidiary Guaranty, irrespective of whether such
Lender Party shall have made any demand under this Subsidiary Guaranty and
although such Obligations may be unmatured. Each Lender Party agrees promptly
to notify such Subsidiary Guarantor
<PAGE>
11
after any such set-off and application; provided, however, that the failure to
-------- -------
give such notice shall not affect the validity of such set-off and application.
The rights of each Lender Party and its respective Affiliates under this Section
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) that such Lender Party and its respective Affiliates
may have.
SECTION 12. Indemnification. Without limitation on any other
---------------
Obligations of any Subsidiary Guarantor or remedies of the Secured Parties under
this Subsidiary Guaranty, each Subsidiary Guarantor shall, to the fullest extent
permitted by law, indemnify, defend and save and hold harmless each Secured
Party from and against, and shall pay on demand, any and all losses,
liabilities, damages, costs, expenses and charges (including the fees and
disbursements of such Secured Party's legal counsel) suffered or incurred by
such Secured Party as a result of any failure of any Guaranteed Obligations to
be the legal, valid and binding obligations of any Loan Party enforceable
against such Loan Party in accordance with their terms.
SECTION 13. Continuing Subsidiary Guaranty; Assignments under the
-----------------------------------------------------
Credit Agreement. This Subsidiary Guaranty is a continuing guaranty and shall
- - ----------------
(i) remain in full force and effect until the later of the payment in full in
cash of the Guaranteed Obligations and all other amounts payable under this
Subsidiary Guaranty and the later of the Termination Date and the expiration or
termination of all Secured Hedge Agreements, (ii) be binding upon each
Subsidiary Guarantor, its successors and assigns and (iii) inure to the benefit
of and be enforceable by the Agent and the other Secured Parties and their
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (iv), any Secured Party may assign or otherwise transfer all or
any portion of its rights and obligations under the Credit Agreement (including,
without limitation, all or any portion of its Commitments, the Advances owing to
it and the Note or Notes held by it) to any other Person, and such other Person
shall thereupon become vested with all the benefits in respect thereof granted
to such Secured Party herein or otherwise, in each case as and to the extent
provided in Section 9.07 of the Credit Agreement. No Subsidiary Guarantor shall
have the right to assign its rights hereunder or any interest herein without the
prior written consent of the Secured Parties.
SECTION 14. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.
------------------------------------------------------
(a) This Subsidiary Guaranty shall be governed by, and construed in accordance
with, the laws of the State of New York.
(b) Each Subsidiary Guarantor hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Subsidiary Guaranty or any of the
other Loan Documents to which it is or is to be a party, or
<PAGE>
12
for recognition or enforcement of any judgment, and each Subsidiary Guarantor
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal court. Each Subsidiary
Guarantor agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Subsidiary Guaranty shall
affect any right that any party may otherwise have to bring any action or
proceeding relating to this Subsidiary Guaranty or any of the other Loan
Documents to which it is or is to be a party in the courts of any jurisdiction.
(c) Each Subsidiary Guarantor irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Subsidiary Guaranty or any of the
other Loan Documents to which it is or is to be a party in any New York State or
federal court. Each Subsidiary Guarantor hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(d) TO THE EXTENT PERMITTED BY LAW, EACH SUBSIDIARY GUARANTOR HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO ANY OF THE LOAN DOCUMENTS, THE TRANSACTIONS CONTEMPLATED THEREBY OR
THE ACTIONS OF THE AGENT OR ANY OTHER SECURED PARTY IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
<PAGE>
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this
Subsidiary Guaranty to be duly executed and delivered by its officer thereunto
duly authorized as of the date first above written.
IRON AGE INVESTMENT COMPANY
By: /s/ Keith A. McDonough
-----------------------
Name: Keith A. McDonough
Title: President
FALCON SHOE MFG. CO.
By: /s/ Keith A. McDonough
----------------------
Name: Keith A. McDonough
Title: Vice President
<PAGE>
EXHIBIT 10.8
[Letterhead of W.L. Gore & Associates, Inc.]
TRADEMARK LICENSE
PARTIES:
Iron Age Corporation
Robinson Plaza #3, Suite 400
Pittsburgh, PA 15205 ("Licensee")
and
W.L. Gore & Associates, Inc.
555 Paper Mill Road
P.O. Box 9329
Newark, DE 19714-9329 ("Gore")
WHEREAS:
Licensee has the ability to produce and market high quality products
incorporating advanced fabric and construction technologies, resulting in
products uniquely suited to their intended uses successfully placed into the
hands of satisfied consumers. Licensee desires to produce high quality products
incorporating high technology fabrics, related items, and advanced design and
construction techniques supplied by Gore, and to make use of trademarks owned by
Gore to promote and sell these products. Gore desires to license its
trademark(s) listed on Schedule B ("the Mark") to customers who will supply the
market with high quality products which will produce consumer satisfaction and
enhance the value of the Mark as a brand, producing mutually beneficial results
and growth in the respective businesses of Licensee and Gore.
1. Subject to the remaining terms of this Agreement, including all
Schedules to it, Gore grants to Licensee a non-exclusive, non-transferable
License to use the Mark under the terms and conditions set forth below. The
Mark may be used only on products that are of styles and constructions which
have been approved in advance by Gore, and meet the quality standards contained
in Schedule A. These items are hereinafter referred to as "Products." In
consideration for this License, Licensee agrees to honor the conditions hereof,
and shall pay Gore a one-time royalty of U.S. $1.00.
2. Licensee recognizes Gore's ownership of the Mark and the validity of
this License. Licensee agrees to do nothing inconsistent with such ownership or
to challenge the validity of this License. Licensee agrees not to use the Mark
in any way not specifically permitted by this License.
3. Licensee agrees that Gore make take all reasonable steps necessary to
continuously monitor the quality of the Products. Such steps may include, but
are not limited
<PAGE>
to, inspection of manufacturing operations for Products, inspection and approval
of designs, and testing prototypes or samples of Products submitted to or
otherwise obtained by Gore. Gore will maintain such designs, prototypes and
samples in confidence. It is Licensee's responsibility to obtain Gore's prior
written approval of Products under Gore's quality standards prior to the
production of Products in commercial quantities. Gore will exert its best
efforts to ensure it does not impede the regular design or production schedule
for Products. Licensee agrees to give Gore reasonable advance notice of any
change in design, materials, or manufacturing process or location for an
approved style. Licensee agrees that it will have all Products manufactured only
by a manufacturer certified by Gore for the manufacture of Products.
4. Licensee represents and warrants to Gore that all Products produced
hereunder shall conform to all applicable specifications and standards,
including those set forth in Schedule A; shall be free from defects in materials
and workmanship; and shall be merchantable and fit for the purpose for which
they are intended.
5. If for any reason Licensee, or any certified manufacturer acting on
Licensee's behalf, produces Products which do not meet Gore's quality standards,
those Products shall be disposed of only in a manner approved in writing and in
advance by Gore, and all labels and tags identifying Gore or the Mark will be
removed under Gore's supervision.
6. This License expressly includes the right to use the Mark in
advertising and promotional materials. Licensee agrees to use the Mark only in
the manner set forth in the guide for the proper use of the Mark which is
attached hereto as Schedule B, and, if the Mark is to be used in any manner
instructions for which are not contained in Schedule B, Licensee shall seek
Gore's prior written approval and advice regarding the intended usage.
7. Licensee understands and agrees that approval to use the Mark in
conjunction with a particular brand or label owned by Licensee is limited to
that brand or label, and use of the Mark with a different brand or label owned
by Licensee requires Gore's prior written approval even if the Product design
and construction is not modified. Where this is the case, such brands will be
listed in Schedule C. Any change in design, materials, or manufacturing process
or location for an approved style or brand must be approved in writing by Gore
before the Mark may be applied to Products incorporating such change.
8. Any material change in the record or beneficial ownership of Licensee
shall constitute an attempted transfer of this License which Gore may or may
not, in its sole and absolute discretion, approve.
9. The failure of either party to insist upon strict adherence to any
term of this Agreement on any occasion or for any period of time shall not be
considered a waiver, nor shall such failure deprive that party or limit its
exercise of the right thereafter to insist upon strict adherence to that term or
any other terms of this Agreement.
10. (a) This Agreement shall take effect on the date indicated below and
shall
<PAGE>
continue in force for one (1) year from that date. This Agreement may be
terminated by either party at any time thereafter by giving ninety (90) days'
advance written notice. If this Agreement is not so terminated, then it shall
automatically be renewed for successive one (1) year periods, subject to earlier
termination as provided herein.
(b) This Agreement may be terminated at any time by an agreement in
writing signed by both Parties.
(c) In the event of a breach of this Agreement by either Party at any
time, this Agreement may be terminated by the other Party by giving thirty (30)
days' written notice specifying the breach, provided, however, that the
breaching Party shall have the opportunity to cure the specified breach within
that thirty (30) day period to the satisfaction of the other Party, in which
case this Agreement shall remain in effect.
11. Upon termination of this Agreement, Licensee undertakes to discontinue
immediately any further use of the Mark when Licensee's then-existing stock of
Products which comply with Gore's quality standards is exhausted; to destroy all
labels, labeling and printed material bearing the Mark; and not use any
trademarks similar to the Mark. Licensee further promises that after
termination of this Agreement, Licensee will not claim that the use of the Mark
by Licensee has created any right, title or interest in or to the Mark on
Licensee's part and shall take whatever steps are necessary to ensure that the
Mark and all goodwill connected with the Mark remain Gore's property.
12. All materials, documents, information and equipment which Gore
supplies or discloses to Licensee, whether in writing or orally, shall be
considered proprietary trade secrets of Gore. Licensee agrees not to disclose
any such matters to any third party without Gore's advance written consent or to
use it in any way detrimental to Gore's interests. Licensee further agrees to
make sure that the dissemination of such information among its employees is
restricted to those persons who have a demonstrated need to have access to it to
design, make, promote and sell Products, and then only after securing a pledge
of confidentiality from them. However, confidential information subject to the
restrictions of this paragraph shall not include
(a) information currently in the public domain;
(b) information which becomes public through no fault of Licensee;
(c) information previously known to Licensee prior to its disclosure to
Licensee by Gore, as shown by Licensee's contemporaneous written records; or
(d) information disclosed to Licensee by a third party not in breach of any
agreement.
Gore agrees to give comparable treatment to any of Licensee's proprietary
information which is specifically identified as such in writing at the time of
disclosure. The obligations of each
<PAGE>
party under this paragraph will remain in full force and effect for three (3)
years following any termination of this Agreement.
13. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, U.S.A., not including its choice of law
provisions.
14. This Agreement may be amended only in a written document dated after
the date of this Agreement signed by the party sought to be charged, except for
Schedules A, B and C to this Agreement which can be amended by Gore at its
discretion from time to time by sending a copy of the new Schedule to Licensee.
15. This Agreement and the attached Schedules is intended to be the final
written expression of all the terms included herein and the complete and
exclusive statement of the Parties' agreement on the subject governed hereby.
These terms may not be contradicted by evidence of any prior agreement or of a
contemporaneous oral agreement, may be amended only as provided in paragraph 14
above, and may otherwise be explained, supplemented, modified, altered, waived
or suspended only by a writing signed by both Parties. This Agreement and its
Schedules shall be for purposes of interpretation, construction and all other
purposes be deemed to have been drafted by both Parties.
AGREED TO AND ACCEPTED THIS 15 day of AUGUST , 1994.
------ ----------- --
IRON AGE CORPORATION W.L. GORE & ASSOCIATES, INC.
By: /s/ Don H. Stella By: /s/ Jay Strout
------------------------------ ---------------------------------
Don H. Stella, V.P. Jay Strout
------------------------------- ---------------------------------
(Print Name) (Print Name)
JWB/jes
UNIVTM
1/27/93
Attachments
Schedule A: Quality Standards
Schedule B: Trademark Usage Guide
Schedule C: Customer Brand Name Identification
<PAGE>
SCHEDULE A
GORE-TEX(R) FOOTWEAR QUALITY STANDARDS
End Use Application: Work Footwear
A. Waterproofness
1. All footwear must be constructed with GORE-SEAM tape and Gore Seam
Sealing Machines using current, seam sealing materials or other approved
materials and technology.
2. All booties must be tested after manufacture using a Gore Bootie Testing
Machine (BTM) or other approved test that is set to inflate the bootie
to a pressure of 1 psi. Booties must not leak air bubbles at a rate
greater than 1 bubble per 7 seconds.
3. Licensee is responsible for assuring that all finished footwear is
waterproof.
4. Finished footwear must be tested for waterproofness using either a
hydrostatic water test or another method that has been approved by Gore.
Reduced testing levels will be permitted on production lines which can
be shown to produce 100% waterproof product on a continuing basis. New
test methods may be developed and instituted for in process testing of
footwear.
5. The licensee must work to limit the potential water weight gain of the
finished products by using construction materials which minimize water
absorption and retention.
B. Breathability
1. GORE-TEX(R) footwear must be breathable and meet the criteria in
Addendum A1. Components in the construction of the upper portion of the
product that are completely impermeable to moisture vapor transmission,
are not permitted unless the components have been approved by Gore.
Examples of components that Gore will approve are toe boxes, heel
counters and eyelets.
2. Licensee and Gore will work together to improve the breathability of the
licensee's footwear. This includes participation in Gore's effort to
continually improve breathability standards for licensed footwear.
Participation requires that the licensee make available to Gore finished
footwear for Moisture Vapor Transmission Rate (MVTR) testing.
C. Fit
<PAGE>
1. Waterproof footwear must be constructed using patterns that provide
acceptable donning and comfortable fit.
D. Other Components
1. All components must be appropriate for wet service and any unique, end
use specific, environmental conditions. Examples of unacceptable
components are poorly attached soles, low grade leathers and materials
that are mechanically unstable in water.
E. Model Approval
1. All models of footwear utilizing GORE-TEX(R) fabric must be approved by
Gore prior to production. A sample of each model of footwear,
representative of the product that will be sold by the licensee, must be
submitted to and approved through Gore's footwear laboratory. Model
approval may be revoked if a previously qualified model fails to
maintain conformance to the quality standards and specifications.
2. Gore's evaluation may include, but is not limited to:
a) hydrostatic testing for waterproofness
b) flex testing for waterproofness
c) MVTR testing of finished products for breathability
d) analysis of the pattern and construction for donning, fit,
wicking, height of functional waterproofness, insulation
properties and overall product quality.
e) review of the labeling and distribution plans to ensure the
product if appropriate for its intended end use.
f) the specific test methods and quality specification for a
particular type of footwear as described in Addendum A1.
3. At Gore's discretion, one model number may be used to represent several
others when the models differ only with respect to cosmetic changes.
4. Men's styles should be submitted in sizes 9-10 medium (D), women's
models in sizes 6-8 medium (B).
F. Labeling
1. All licensed models must be clearly labeled with the brand name under
which the product will be sold. Additionally, each piece of footwear
must be clearly labeled as containing GORE-TEX fabric.
<PAGE>
ADDENDUM A1
QUALITY SPECIFICATIONS FOR
WORK GORE-TEX(R) FOOTWEAR
A. TEST OF WATERPROOFNESS
----------------------
1. Footwear must pass greater than or equal to 500,000 flex cycles
without leakage using the Gore water exclusion tester.
B. TEST OF BREATHABILITY
---------------------
1. The minimum requirement for breathability as measured using the
Gore Boot MVTR Test are as follows:
Men's Women's
Size 42 (US 9-10) Size 37 (US 6-8)
----------------- ----------------
Boots
2.5 g/hr. 2.0 g/hr.
Shoes and Chukkas
1.7 g/hr. 1.3 g/hr.
C. DESIGN REQUIREMENTS
-------------------
1. Waterline: The minimum waterproof height is 75% of the total
height. The height is measured from the featherline.
2. Waterproof gusset construction is required for tongues.
3. Padding is required on sharp edges to protect the GORE-TEX(R)
fabric from abrasion or puncture, especially around the heel
counters, toe puffs, eyelets, etc.
4. A permanently attached "GORE-TEX(R)" label is required.
5. All seams must be sealed.
6. Bootie style construction is required.
D. Technical suggestions for materials are available upon request.
<PAGE>
SCHEDULE B
TRADEMARK LICENSE
BETWEEN
IRON AGE CORPORATION
AND
W.L. GORE & ASSOCIATES, INC.
Licensed Trademark(s)
- - ---------------------
"GORE-TEX"
"Guaranteed To Keep You Dry"
<PAGE>
SCHEDULE B
GUIDE FOR PROPER USE OF THE "GORE-TEX" TRADEMARK
As a growing company, W.L. Gore & Associates, Inc. owns many valuable
trademarks which identify and distinguish our products from those of other
companies. Gore's trademarks are well known and signify to our customers that
they are buying quality, state-of-the-art products from a company with a
reputation for innovation, dependability, and integrity. Significant time,
effort, and money has been spent in the research, development, and promotion of
these products.
Unfortunately, trademarks can be lost if they are not used correctly. A
trademark is lost when it become generic and sneaks into the language as a
common name description of the product, as distinguished from the source and
identity of the product. If a trademark becomes generic, the original owner
loses exclusive rights to use the mark. Any competitor can then use the
trademark and take advantage of the advertising and promotion dollars spent by
the former owner. Some famous former trademarks that have become generic are
nylon, escalator, kerosene, and zipper.
Fortunately, it is fairly easy to protect our trademarks. You need only
follow these six rules of proper trademark usage:
1. A trademark should always be used in a manner that will distinguish it from
the surrounding text. Capitalize trademarks completely, use initials caps
with quotes, bold face type, or italics, or as a minimum, use initial caps.
It is preferred that GORE-TEX not be separated, i.e., GORE on one line and
TEX on another. The generic product name should not be capitalized.
Right: Garments of GORE-TEX(R) fabric
Wrong: Garments of gore-tex fabric
2. Always follow trademark with the appropriate trademark notice and footnote.
The appropriate trademark notice should appear at least once in each piece
-------------
of printed matter, preferably the first time the trademark appears. The
footnote usually appears at the bottom of the last page.
Example: GORE-TEX(R) fabric
Footnote: (R)Registered Trademark of W.L. Gore & Associates, Inc.
Example: GORE-TEX insert
Footnote: Trademark of W.L. Gore & Associates, Inc.
3. Most importantly, a trademark is a proper adjective and when used in print
such as in advertising, catalogues, promotions, brochures, hang tags,
radio, etc. must always be followed by its generic or common name. The
trademark should never be used alone when it appears in text.
<PAGE>
Right: GORE-TEX(R) glove insert
Wrong: gloves made of GORE-TEX
When a trademark is used directly on an article, such as a parka, jacket,
shoes, golf suit, etc., manufactured under license to the trademark owner's
specifications, then the article itself supplies the noun and the trademark can
stand alone.
Right: GORE-TEX alone on a label incorporated in a parka,
jacket, rainsuit, etc.
When a trademark is used in print such as in advertising, catalogues,
hangtags, promotions, brochures, radio, etc., in reference to a licensed
product, it must be followed by its generic or common name.
Right: GORE-TEX(R) parka, GORE-TEX(R) gloves
4. Trademarks should never be used in the possessive sense.
Right: The popularity of GORE-TEX(R) products.
Wrong: GORE-TEX's popularity
5. Do not coin new words or terms for a trademark.
Wrong: This fabric has been GORE-TEXED
Wrong: GORE-TEXABLE fabric
6. Trademarks identify and distinguish our products from those of other
companies, therefore, our trademarks must not be combined or intermingled
with the trademarks of other companies.
Right: GORE-TEX(R) golf shoes from ETONIC(R)
GORE-TEX(R) shoes, the ULTRALIGHT collection from
TIMBERLAND/TM/
GORE-TEX(R) parka - EXTREME GEAR from THE NORTH
FACE(R)
Wrong: ETONIC GORE-TEX golf shoes
TIMBERLAND'S GORE-TEX ULTRALIGHTS
THE NORTH FACE GORE-TEX EXTREME GEAR
<PAGE>
SCHEDULE B
Guide To The Proper Use Of The Trademark
"GUARANTEED TO KEEP YOU DRY"
"GUARANTEED TO KEEP YOU DRY" is a slogan trademark to be used in connection
with outerwear manufactured under the auspices of W.L. Gore & Associates, Inc.
It shall only be used on garment styles approved by W.L. Gore & Associates, Inc.
The trademark should be used either in all caps or initial caps with the
registered (R) following:
GUARANTEED TO KEEP YOU DRY(R)
Guaranteed to Keep You Dry(R)
Since slogans do not require the use of a noun, it may be used alone as
above. However, it may also be used in the following manner:
GUARANTEED TO KEEP YOU DRY(R) program
GUARANTEED TO KEEP YOU DRY(R) label
The slogan "GUARANTEED TO KEEP YOU DRY(R)" should never be sued in a non-
trademark manner such as:
This parka is guaranteed to keep you dry.
Alternative wording shall be used, for example:
This parka is engineered so you stay comfortable and dry.
<PAGE>
SCHEDULE C
CUSTOMER BRAND NAME IDENTIFICATION
This section identifies Licensee's brand names which may be used on
Products which carry the Gore Trademarks listed in Schedule B.
Licensed Brand Names:
- - --------------------
Iron Age Safety Shoes
<PAGE>
EXHIBIT 10.9
[Letterhead of W.L. Gore & Associates, Inc.]
TRADEMARK LICENSE
PARTIES:
Falcon Shoe Manufacturing Co.
#2 Cedar Street
Lewiston, ME 04240 ("Licensee")
and
W.L. Gore & Associates, Inc.
555 Paper Mill Road
P.O. Box 9329
Newark, DE 19714-9329 ("Gore")
WHEREAS:
Licensee has the ability to produce and market high quality products
incorporating advanced fabric and construction technologies, resulting in
products uniquely suited to their intended uses successfully placed into the
hands of satisfied consumers. Licensee desires to produce high quality products
incorporating high technology fabrics, related items, and advanced design and
construction techniques supplied by Gore, and to make use of trademarks owned by
Gore to promote and sell these products. Gore desires to license its
trademark(s) listed on Schedule B ("the Mark") to customers who will supply the
market with high quality products which will produce consumer satisfaction and
enhance the value of the Mark as a brand, producing mutually beneficial results
and growth in the respective businesses of Licensee and Gore.
1. Subject to the remaining terms of this Agreement, including all
Schedules to it, Gore grants to Licensee a non-exclusive, non-transferable
License to use the Mark under the terms and conditions set forth below. The
Mark may be used only on products that are of styles and constructions which
have been approved in advance by Gore, and meet the quality standards contained
in Schedule A. These items are hereinafter referred to as "Products." In
consideration for this License, Licensee agrees to honor the conditions hereof,
and shall pay Gore a one-time royalty of U.S. $1.00.
2. Licensee recognizes Gore's ownership of the Mark and the validity of
this License. Licensee agrees to do nothing inconsistent with such ownership or
to challenge the validity of this License. Licensee agrees not to use the Mark
in any way not specifically permitted by this License.
3. Licensee agrees that Gore make take all reasonable steps necessary to
continuously monitor the quality of the Products. Such steps may include, but
are not limited to, inspection of manufacturing operations for Products,
inspection and approval of designs,
<PAGE>
and testing prototypes or samples of Products submitted to or otherwise obtained
by Gore. Gore will maintain such designs, prototypes and samples in confidence.
It is Licensee's responsibility to obtain Gore's prior written approval of
Products under Gore's quality standards prior to the production of Products in
commercial quantities. Gore will exert its best efforts to ensure it does not
impede the regular design or production schedule for Products. Licensee agrees
to give Gore reasonable advance notice of any change in design, materials, or
manufacturing process or location for an approved style. Licensee agrees that it
will have all Products manufactured only by a manufacturer certified by Gore for
the manufacture of Products.
4. Licensee represents and warrants to Gore that all Products produced
hereunder shall conform to all applicable specifications and standards,
including those set forth in Schedule A; shall be free from defects in materials
and workmanship; and shall be merchantable and fit for the purpose for which
they are intended.
5. If for any reason Licensee, or any certified manufacturer acting on
Licensee's behalf, produces Products which do not meet Gore's quality standards,
those Products shall be disposed of only in a manner approved in writing and in
advance by Gore, and all labels and tags identifying Gore or the Mark will be
removed under Gore's supervision.
6. This License expressly includes the right to use the Mark in
advertising and promotional materials. Licensee agrees to use the Mark only in
the manner set forth in the guide for the proper use of the Mark which is
attached hereto as Schedule B, and, if the Mark is to be used in any manner
instructions for which are not contained in Schedule B, Licensee shall seek
Gore's prior written approval and advice regarding the intended usage.
7. Licensee understands and agrees that approval to use the Mark in
conjunction with a particular brand or label owned by Licensee is limited to
that brand or label, and use of the Mark with a different brand or label owned
by Licensee requires Gore's prior written approval even if the Product design
and construction is not modified. Where this is the case, such brands will be
listed in Schedule C. Any change in design, materials, or manufacturing process
or location for an approved style or brand must be approved in writing by Gore
before the Mark may be applied to Products incorporating such change.
8. Any material change in the record or beneficial ownership of Licensee
shall constitute an attempted transfer of this License which Gore may or may
not, in its sole and absolute discretion, approve.
9. The failure of either party to insist upon strict adherence to any
term of this Agreement on any occasion or for any period of time shall not be
considered a waiver, nor shall such failure deprive that party or limit its
exercise of the right thereafter to insist upon strict adherence to that term or
any other terms of this Agreement.
10. (a) This Agreement shall take effect on the date indicated below and
shall continue in force for one (1) year from that date. This Agreement may be
terminated by either party at any time thereafter by giving ninety (90) days'
advance written notice. If this
<PAGE>
Agreement is not so terminated, then it shall automatically be renewed for
successive one (1) year periods, subject to earlier termination as provided
herein.
(b) This Agreement may be terminated at any time by an agreement in
writing signed by both Parties.
(c) In the event of a breach of this Agreement by either Party at any
time, this Agreement may be terminated by the other Party by giving thirty (30)
days' written notice specifying the breach, provided, however, that the
breaching Party shall have the opportunity to cure the specified breach within
that thirty (30) day period to the satisfaction of the other Party, in which
case this Agreement shall remain in effect.
11. Upon termination of this Agreement, Licensee undertakes to discontinue
immediately any further use of the Mark when Licensee's then-existing stock of
Products which comply with Gore's quality standards is exhausted; to destroy all
labels, labeling and printed material bearing the Mark; and not use any
trademarks similar to the Mark. Licensee further promises that after
termination of this Agreement, Licensee will not claim that the use of the Mark
by Licensee has created any right, title or interest in or to the Mark on
Licensee's part and shall take whatever steps are necessary to ensure that the
Mark and all goodwill connected with the Mark remain Gore's property.
12. All materials, documents, information and equipment which Gore
supplies or discloses to Licensee, whether in writing or orally, shall be
considered proprietary trade secrets of Gore. Licensee agrees not to disclose
any such matters to any third party without Gore's advance written consent or to
use it in any way detrimental to Gore's interests. Licensee further agrees to
make sure that the dissemination of such information among its employees is
restricted to those persons who have a demonstrated need to have access to it to
design, make, promote and sell Products, and then only after securing a pledge
of confidentiality from them. However, confidential information subject to the
restrictions of this paragraph shall not include
(a) information currently in the public domain;
(b) information which becomes public through no fault of Licensee;
(c) information previously known to Licensee prior to its disclosure to
Licensee by Gore, as shown by Licensee's contemporaneous written records; or
(d) information disclosed to Licensee by a third party not in breach of any
agreement.
Gore agrees to give comparable treatment to any of Licensee's proprietary
information which is specifically identified as such in writing at the time of
disclosure. The obligations of each party under this paragraph will remain in
full force and effect for three (3) years following any termination of this
Agreement.
<PAGE>
13. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, U.S.A., not including its choice of law
provisions.
14. This Agreement may be amended only in a written document dated after
the date of this Agreement signed by the party sought to be charged, except for
Schedules A, B and C to this Agreement which can be amended by Gore at its
discretion from time to time by sending a copy of the new Schedule to Licensee.
15. This Agreement and the attached Schedules is intended to be the final
written expression of all the terms included herein and the complete and
exclusive statement of the Parties' agreement on the subject governed hereby.
These terms may not be contradicted by evidence of any prior agreement or of a
contemporaneous oral agreement, may be amended only as provided in paragraph 14
above, and may otherwise be explained, supplemented, modified, altered, waived
or suspended only by a writing signed by both Parties. This Agreement and its
Schedules shall be for purposes of interpretation, construction and all other
purposes be deemed to have been drafted by both Parties.
AGREED TO AND ACCEPTED THIS 25 day of JULY , 1994.
------ ----------- --
FALCON SHOE MANUFACTURING CO. W.L. GORE & ASSOCIATES, INC.
By: /s/ Theodore C. Johanson By: /s/ Blair C. Dickerson
----------------------------------- -----------------------------
Theodore C. Johanson Blair C. Dickerson
----------------------------------- --------------------------------
(Print Name) (Print Name)
JWB/jes
UNIVTM
1/27/93
Attachments
Schedule A: Quality Standards
Schedule B: Trademark Usage Guide
Schedule C: Customer Brand Name Identification
<PAGE>
SCHEDULE A
GORE-TEX(R) FOOTWEAR QUALITY STANDARDS
End Use Application: Hunting Footwear
A. Waterproofness
1. All footwear must be constructed with GORE-SEAM tape and Gore Seam
Sealing Machines using current, seam sealing materials or other approved
materials and technology.
2. All booties must be tested after manufacture using a Gore Bootie Testing
Machine (BTM) or other approved test that is set to inflate the bootie
to a pressure of 1 psi. Booties must not leak air bubbles at a rate
greater than 1 bubble per 7 seconds.
3. Licensee is responsible for assuring that all finished footwear is
waterproof.
4. Finished footwear must be tested for waterproofness using either a
hydrostatic water test or another method that has been approved by Gore.
Reduced testing levels will be permitted on production lines which can
be shown to produce 100% waterproof product on a continuing basis. New
test methods may be developed and instituted for in process testing of
footwear.
5. The licensee must work to limit the potential water weight gain of the
finished products by using construction materials which minimize water
absorption and retention.
B. Breathability
1. GORE-TEX(R) footwear must be breathable and meet the criteria in
Addendum A1. Components in the construction of the upper portion of the
product that are completely impermeable to moisture vapor transmission,
are not permitted unless the components have been approved by Gore.
Examples of components that Gore will approve are toe boxes, heel
counters and eyelets.
2. Licensee and Gore will work together to improve the breathability of the
licensee's footwear. This includes participation in Gore's effort to
continually improve breathability standards for licensed footwear.
Participation requires that the licensee make available to Gore finished
footwear for Moisture Vapor Transmission Rate (MVTR) testing.
C. Fit
<PAGE>
1. Waterproof footwear must be constructed using patterns that provide
acceptable donning and comfortable fit.
D. Other Components
1. All components must be appropriate for wet service and any unique, end
use specific, environmental conditions. Examples of unacceptable
components are poorly attached soles, low grade leathers and materials
that are mechanically unstable in water.
E. Model Approval
1. All models of footwear utilizing GORE-TEX(R) fabric must be approved by
Gore prior to production. A sample of each model of footwear,
representative of the product that will be sold by the licensee, must be
submitted to and approved through Gore's footwear laboratory. Model
approval may be revoked if a previously qualified model fails to
maintain conformance to the quality standards and specifications.
2. Gore's evaluation may include, but is not limited to:
a) hydrostatic testing for waterproofness
b) flex testing for waterproofness
c) MVTR testing of finished products for breathability
d) analysis of the pattern and construction for donning, fit,
wicking, height of functional waterproofness, insulation
properties and overall product quality.
e) review of the labeling and distribution plans to ensure the
product if appropriate for its intended end use.
f) the specific test methods and quality specification for a
particular type of footwear as described in Addendum A1.
3. At Gore's discretion, one model number may be used to represent several
others when the models differ only with respect to cosmetic changes.
4. Men's styles should be submitted in sizes 9-10 medium (D), women's
models in sizes 6-8 medium (B).
F. Labeling
1. All licensed models must be clearly labeled with the brand name under
which the product will be sold. Additionally, each piece of footwear
must be clearly labeled as containing GORE-TEX fabric.
<PAGE>
ADDENDUM A1
QUALITY SPECIFICATIONS FOR
HUNTING GORE-TEX(R) FOOTWEAR
A. TEST OF WATERPROOFNESS
----------------------
1. Footwear must pass greater than or equal to 500,000 flex cycles
without leakage using the Gore water exclusion tester.
B. TEST OF BREATHABILITY
---------------------
1. The minimum requirement for breathability as measured using the
Gore Boot MVTR Test are as follows:
Men's Women's
Size 42 (US 9-10) Size 37 (US 6-8)
----------------- ----------------
Boots
2.5 g/hr. 2.0 g/hr.
C. DESIGN REQUIREMENTS
-------------------
1. Waterline: The minimum waterproof height is 75% of the total
height. The height is measured from the featherline.
2. Waterproof gusset construction is required for tongues.
3. Padding is required on sharp edges to protect the GORE-TEX(R)
fabric from abrasion or puncture, especially around the heel
counters, toe puffs, eyelets, etc.
4. A permanently attached "GORE-TEX(R)" label is required.
5. All seams must be sealed.
6. Bootie style construction is required.
D. Technical suggestions for materials are available upon request.
<PAGE>
SCHEDULE B
TRADEMARK LICENSE
BETWEEN
FALCON SHOE MANUFACTURING CO.
AND
W.L. GORE & ASSOCIATES, INC.
Licensed Trademark(s)
- - ---------------------
"GORE-TEX"
"Guaranteed To Keep You Dry"
<PAGE>
SCHEDULE B
GUIDE FOR PROPER USE OF THE "GORE-TEX" TRADEMARK
As a growing company, W.L. Gore & Associates, Inc. owns many valuable
trademarks which identify and distinguish our products from those of other
companies. Gore's trademarks are well known and signify to our customers that
they are buying quality, state-of-the-art products from a company with a
reputation for innovation, dependability, and integrity. Significant time,
effort, and money has been spent in the research, development, and promotion of
these products.
Unfortunately, trademarks can be lost if they are not used correctly. A
trademark is lost when it become generic and sneaks into the language as a
common name description of the product, as distinguished from the source and
identity of the product. If a trademark becomes generic, the original owner
loses exclusive rights to use the mark. Any competitor can then use the
trademark and take advantage of the advertising and promotion dollars spent by
the former owner. Some famous former trademarks that have become generic are
nylon, escalator, kerosene, and zipper.
Fortunately, it is fairly easy to protect our trademarks. You need only
follow these six rules of proper trademark usage:
1. A trademark should always be used in a manner that will distinguish it from
the surrounding text. Capitalize trademarks completely, use initials caps
with quotes, bold face type, or italics, or as a minimum, use initial caps.
It is preferred that GORE-TEX not be separated, i.e., GORE on one line and
TEX on another. The generic product name should not be capitalized.
Right: Garments of GORE-TEX(R) fabric
Wrong: Garments of gore-tex fabric
2. Always follow trademark with the appropriate trademark notice and footnote.
The appropriate trademark notice should appear at least once in each piece
-------------
of printed matter, preferably the first time the trademark appears. The
footnote usually appears at the bottom of the last page.
Example: GORE-TEX(R) fabric
Footnote: (R)Registered Trademark of W.L. Gore & Associates, Inc.
Example: GORE-TEX insert
Footnote: Trademark of W.L. Gore & Associates, Inc.
3. Most importantly, a trademark is a proper adjective and when used in print
such as in advertising, catalogues, promotions, brochures, hang tags,
radio, etc. must always be followed by its generic or common name. The
trademark should never be used alone when it appears in text.
Right: GORE-TEX(R) glove insert
<PAGE>
Wrong: gloves made of GORE-TEX
When a trademark is used directly on an article, such as a parka, jacket,
shoes, golf suit, etc., manufactured under license to the trademark owner's
specifications, then the article itself supplies the noun and the trademark can
stand alone.
Right: GORE-TEX alone on a label incorporated in a parka,
jacket, rainsuit, etc.
When a trademark is used in print such as in advertising, catalogues,
hangtags, promotions, brochures, radio, etc., in reference to a licensed
product, it must be followed by its generic or common name.
Right: GORE-TEX(R) parka, GORE-TEX(R) gloves
4. Trademarks should never be used in the possessive sense.
Right: The popularity of GORE-TEX(R) products.
Wrong: GORE-TEX's popularity
5. Do not coin new words or terms for a trademark.
Wrong: This fabric has been GORE-TEXED
Wrong: GORE-TEXABLE fabric
6. Trademarks identify and distinguish our products from those of other
companies, therefore, our trademarks must not be combined or intermingled
with the trademarks of other companies.
Right: GORE-TEX(R) golf shoes from ETONIC(R)
GORE-TEX(R) shoes, the ULTRALIGHT collection from
TIMBERLAND/TM/
GORE-TEX(R) parka - EXTREME GEAR from THE NORTH
FACE(R)
Wrong: ETONIC GORE-TEX golf shoes
TIMBERLAND'S GORE-TEX ULTRALIGHTS
THE NORTH FACE GORE-TEX EXTREME GEAR
<PAGE>
SCHEDULE B
Guide To The Proper Use Of The Trademark
"GUARANTEED TO KEEP YOU DRY"
"GUARANTEED TO KEEP YOU DRY" is a slogan trademark to be used in connection
with outerwear manufactured under the auspices of W.L. Gore & Associates, Inc.
It shall only be used on garment styles approved by W.L. Gore & Associates, Inc.
The trademark should be used either in all caps or initial caps with the
registered (R) following:
GUARANTEED TO KEEP YOU DRY(R)
Guaranteed to Keep You Dry(R)
Since slogans do not require the use of a noun, it may be used alone as
above. However, it may also be used in the following manner:
GUARANTEED TO KEEP YOU DRY(R) program
GUARANTEED TO KEEP YOU DRY(R) label
The slogan "GUARANTEED TO KEEP YOU DRY(R)" should never be sued in a non-
trademark manner such as:
This parka is guaranteed to keep you dry.
Alternative wording shall be used, for example:
This parka is engineered so you stay comfortable and dry.
<PAGE>
SCHEDULE C
CUSTOMER BRAND NAME IDENTIFICATION
This section identifies Licensee's brand names which may be used on
Products which carry the Gore Trademarks listed in Schedule B.
Licensed Brand Names:
- - --------------------
Dunham
<PAGE>
EXHIBIT 10.10
[Letterhead of W.L. Gore & Associates, Inc.]
MANUFACTURING CERTIFICATION AGREEMENT
PARTIES:
Falcon Shoe Manufacturing Co.
#2 Cedar Street
Lewiston, ME 04240 ("Manufacturer")
and
W.L. Gore & Associates, Inc.
555 Paper Mill Road
P.O. Box 9329
Newark, DE 19714-9329("Gore")
IN CONSIDERATION of the mutual undertakings herein contained, the parties agree
as follows:
1. Agreement for Manufacture: Subject to the terms of this Agreement,
Manufacturer agrees to purchase footwear laminate and GORE-SEAM(TM) tape
and other products ("Articles") only for use in the manufacture,
promotion, sale and distribution of various garments and other articles
of wearing apparel, the designs of which meet Gore's standards for
functional and aesthetic characteristics, attached hereto as Schedule A
("Products").
2. Facilities: To permit Gore to protect and strengthen its trademark(s)
listed in Schedule B (the "Mark"), by ensuring that all Products are
functional and of a uniformly high quality, Manufacturer agrees that
Gore may take all reasonable steps necessary to continuously monitor the
quality of construction of Products produced by Manufacturer.
Manufacturer shall permit Gore or its authorized representatives access
to the Products manufacturing area of Manufacturer's factory and any
other facilities used by Manufacturer, including facilities of any
approved subcontractors, for the production of Products. Manufacturer's
facilities which are certified hereunder are listed in Schedule F.
Following any such inspection, Gore shall share with Manufacturer
comments, suggestions and technical information concerning the most
efficacious means for ensuring that Manufacturer's Products meet all
applicable standards.
3. Design Review and Samples: In order that Gore may confirm and ensure
that Manufacturer's Products are of a uniform high quality and in
accordance with Gore's quality standards, Manufacturer agrees Gore may:
<PAGE>
(a) Inspect the proposed designs of the Products to be made by
Manufacturer;
(b) Inspect and test prototypes or samples of Products;
(c) Inspect and test Articles obtained through normal commercial
channels; and
(d) Take such other steps as Gore may reasonably require to
accomplish these objectives.
Design review, inspection or testing may, following mutual consultation,
take place at Manufacturer's facilities or at Gore's. Following review
or testing of designs, prototypes or samples by Gore, Manufacturer
agrees to make any changes requested by Gore. Manufacturer agrees not to
manufacture or sell commercial quantities of any Product until Gore has
given its written approval of that Product's design and construction.
4. Placing and Filling of Orders: Purchase orders from Manufacturer for
Articles shall be accepted by Gore only on the condition that an
approved Gore customer has placed a specific order with Manufacturer for
the production of Products which require that quantity of Articles. Each
Gore customer must confirm its order with Manufacturer to Gore in
writing. Manufacturer shall only produce and ship the exact quantity of
Products ordered by the Gore customer. Manufacture of Products in excess
of the amount ordered by the Gore customer is prohibited. Following
mutual consultation and agreement with Manufacturer as to quantities and
price, Gore may buy back any excess Articles remaining in Manufacturer's
inventory if it is not needed to complete an order for Products.
5. Approved Styles: Manufacturer understands and agrees that approval to
use the Mark in conjunction with a particular brand or label owned by
Manufacturer is limited to that brand or label, and use of the Mark with
a different brand or label owned by Manufacturer requires Gore's prior
written approval even if the Product design and construction is not
modified. Where this is the case, such brands will be listed in Schedule
C. Any change in design, materials, or manufacturing process or location
for an approved style or brand must be approved in writing by Gore
before The Mark may be applied to Products incorporating such change.
6. Defective Products: If for any reason Manufacturer produces Products
which do not meet the quality standards set forth in Schedule A, the
defective Products shall be disposed of only in a manner expressly
approved in writing by Gore, whether Gore or any other party owns the
Products or claims any property interest in them, after all labels and
tags identifying Gore of the Mark have been removed under Gore's
supervision.
-2-
<PAGE>
7. Sub-Contractors: Manufacturer shall not, without the prior written
consent of Gore, appoint any sub-contractor or otherwise cause any
seam-sealing or final assembly of Products to be performed by any party
other than Manufacturer.
8. Warranties: Manufacturer represents and warrants to Gore that all
Products produced hereunder shall conform to all applicable
specifications and standards including those set forth in Schedule A,
shall be free from defects in materials and workmanship, and shall be
merchantable and fit for the purposes for which they are intended.
9. Accessory Items Bearing the Mark: Manufacturer may enter into agreements
with third parties for the supply of accessory items bearing the Mark
only with the prior written approval of Gore, to ensure that such
accessory items shall be manufactured only in the quantities needed to
meet Manufacturer's specific contracts for Products and shall be sold
only to Manufacturer.
10. Trademark: Manufacturer recognizes and affirms Gore's ownership of the
Mark and acknowledges that the Mark has become famous. Manufacturer
agrees to do nothing inconsistent with Gore's ownership of the Mark and
agrees that its use of the Mark shall inure to the benefit of Gore and
be on Gore's behalf. Nothing herein shall give Manufacturer any right,
title or interest in the Mark, nor shall Manufacturer do, or through
inaction allow to be done, any act contesting or in any way impairing
Gore's right, title or interest in and to the Mark or its validity.
Manufacturer agrees to use the Mark:
(a) Only in the manner set forth in the guide for the proper use of
the Mark which is attached hereto as Schedule B, or
(b) In any other manner approved by Gore in writing and in advance.
Manufacturer agrees not to use the Mark on any Products
displaying any other trademark or brand name unless it is listed
on a schedule to this Agreement or otherwise approved in writing
by Gore.
11. Confidential Information: All materials, documents, information and
equipment which Gore supplies or discloses to Manufacturer, whether in
writing or orally, shall be considered proprietary trade secrets of
Gore. Manufacturer agrees not to disclose any such matters to any third
party without Gore's advance written consent or to use it in any way
detrimental to Gore's interests. Manufacturer further agrees to make
sure that the dissemination of such information among its employees is
restricted to those persons who have a demonstrated need to have access
to it to design, make, promote and sell Products, and then only after
securing a pledge of confidentiality from them. However, confidential
information subject to the restrictions of this paragraph shall not
include
-3-
<PAGE>
(a) information currently in the public domain;
(b) information which becomes public through no fault of
Manufacturer;
(c) information previously known to Manufacturer prior to its
disclosure to Manufacturer by Gore, as shown by its
contemporaneous written records; or
(d) information disclosed to Manufacturer by a third party not in
breach of any agreement.
Gore agrees to give comparable treatment to any of Manufacturer's
proprietary information which is specifically identified as such in
writing at the time of disclosure. The obligations of each party under
this paragraph will remain in full force and effect for three (3) years
following any termination of this Agreement. In order to protect the
Confidential Information, trade secrets, know-how, proprietary
information and other information developed by Gore at great expense and
which Gore will be required to disclose to Manufacturer in order to
implement this Agreement, Manufacturer agrees that it will not
manufacture any garment or other products of any kind containing any
taped waterproof, breathable product other than GORE-TEX products during
the term of this Agreement and for three (3) years after it is
terminated.
12. Term and Termination:
(a) This Agreement shall take effect on the date indicated below and
shall continue in force for one (1) year from that date. This
Agreement may be terminated by either party at any time
thereafter by giving ninety (90) days' advance written notice. If
this Agreement is not so terminated, then it shall automatically
be renewed for successive one (1) year periods, subject to
earlier termination as provided herein.
(b) This Agreement may be terminated at any time by an agreement in
writing signed by both Parties.
(c) In the event of a breach of this Agreement by either party at any
time, this Agreement may be terminated by the other party by
giving (30) days written notice specifying the breach, provided
however, that the breaching party shall have the opportunity to
cure the specified breach within that thirty (30) day period to
the satisfaction of the other party, in which case this Agreement
shall remain in effect.
13. Consequences of Termination: Upon the termination of this Agreement
Manufacturer agrees to:
-4-
<PAGE>
(a) Immediately return to Gore all instruction books, technical
pamphlets, photographs, catalogues, advertising material,
specifications and all other materials or documents sent to
Manufacturer and relating to the business of Gore or any Articles
which Manufacturer may then have in its possession or control;
(b) Immediately deliver to Gore or otherwise dispose of as Gore
directs in writing any Articles or accessories which Manufacturer
may have in its possession or under its control;
(c) Immediately stop manufacturing, distributing, selling, or in any
way dealing with any Articles or any carton, container, packing
or wrapping material, or advertising, promotional or display
material pertaining to the Articles which display either the Mark
or Gore's name.
(d) Immediately discontinue any further use of the Mark when
Manufacturer's then-existing stock of Products which comply with
Gore's quality standards is exhausted; destroy all printed
material bearing the Mark; and not use any trademarks similar to
the Mark.
(e) Manufacturer will not claim that the use of the Mark by
Manufacturer had created any right, title or interest in and to
the Mark or Manufacturer's part and shall take whatever steps are
necessary to ensure that all the goodwill connected with the Mark
remains Gore property.
14. Registration: Whenever registration of this Agreement with the relevant
government authorities is necessary to preserve Gore's rights to the
Mark or under this Agreement, Manufacturer shall properly register this
Agreement. In the event Manufacturer is unable to do so, it shall
immediately notify Gore in writing.
15. Notices: All notices to be given to either party pursuant to this
Agreement shall be deemed to be given when sent if dispatched by telex
with confirmed answer back, by telefax with confirmed answer back, by
prepaid first class mail, or by first class prepaid air mail, return
receipt requested, in all cases to the parties at the following
addresses:
If to Gore: W.L. Gore & Associates, Inc.
Fabrics Division
Attention: Blair Dickerson
100 Airport Road, Building 2
P.O. Box 729
Elkton, MD 21921
Telefax: 410/392-3849
-5-
<PAGE>
with a copy to W.L. Gore & Associates, Inc.
Legal Offices
551 Paper Mill Road
P.O. Box 9206
Newark, DE 19714-9206
Telefax: 302/731-9098
If to Manufacturer: Falcon Shoe Manufacturing Co.
Attention: Ms. Pat Lundholm
#2 Cedar Street
Lewiston, ME 04240
Telefax: _________________
Either party may change its address for receiving notice by giving
written notice of its new address pursuant to this paragraph.
16. Assignment: Gore may assign in whole or in part from time to time its
rights and obligations under this Agreement to any third party. Without
Gore's prior written consent, Manufacturer shall not transfer or assign
this Agreement or any of its rights or obligations hereunder, and any
such purported transfer or assignment shall be void unless Gore, in its
sole and absolute discretion, consents to it in writing. Any material
change in the record or beneficial ownership of Manufacturer shall be
deemed to be an attempted transfer of this Agreement.
17. No Partnership or Agency: Nothing in this Agreement shall be deemed to
create a fiduciary relationship, partnership, joint venture or agency
relationship between the parties. Manufacturer shall have no authority
to bind Gore or to contract in the name of or create any liability of
Gore.
18. Waiver: The failure of either party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a
waiver, nor shall such failure deprive that party or limit its exercise
of the right thereafter to insist upon strict adherence to that term or
any other terms of this Agreement.
19. Language, Governing Law, Jurisdiction: This Agreement is written in the
English language, which shall prevail over any translations hereof, and
shall be governed by and construed in accordance with the laws of the
State of Delaware, U.S.A., not including its choice of law provisions.
20. Amendment: This Agreement may be amended only in a written document
dated after the date of this Agreement signed by the Party sought to be
charged, except for Schedules A, B and F to this Agreement which
Schedules may be amended by Gore at
-6-
<PAGE>
its discretion from time to time by sending a copy of the new Schedule
to Manufacturer.
21. Entire Agreement: This Agreement and the attached Schedules is intended
to be the final written expression of all the terms included herein and
the complete and exclusive statement of the Parties' agreement on the
subject governed hereby. These terms may not be contradicted by evidence
of any prior agreement or of a contemporaneous oral agreement, may be
amended only as provided in the paragraph titled Amendment, and may
otherwise be explained, supplemented, modified, altered, waived or
suspended only by a writing signed by both Parties. This Agreement and
its Schedules shall for purposes of interpretation, construction and all
other purposes be deemed to have been drafted by both Parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives on the date shown above.
FALCON SHOE MANUFACTURING CO. W.L. GORE & ASSOCIATES, INC.
By: /s/ Theodore C. Johanson By: /s/ Blair C. Dickerson
---------------------------- ---------------------------------
Theodore C. Johanson Blair C. Dickerson
---------------------------- ---------------------------------
(Print name) (Print name)
JWB/jes
UNIVMCA
2/9/93
Attachments
Schedule A: Quality Standards
Schedule B: Trademark Usage Guide(s)
Schedule F: List of Manufacturing Location(s)
-7-
<PAGE>
SCHEDULE A
GORE-TEX(R) FOOTWEAR QUALITY STANDARDS
End Use Application: Hunting Footwear
A. Waterproofness
1. All footwear must be constructed with GORE-SEAM(TM) tape and Gore
Seam Sealing Machines using current, seam sealing materials or
other approved materials and technology.
2. All booties must be tested after manufacture using a Gore Bootie
Testing Machine (BTM) or other approved test that is set to
inflate the bootie to a pressure of 1 psi. Booties must not leak
air bubbles at a rate greater than 1 bubble per 7 seconds.
3. Licensee is responsible for assuring that all finished footwear
is waterproof.
4. Finished footwear must be tested for waterproofness using either
a hydrostatic water test or another method that has been approved
by Gore. Reduced testing levels will be permitted on production
lines which can be shown to produce 100% waterproof product on a
continuing basis. New test methods may be developed and
instituted for in process testing of footwear.
5. The licensee must work to limit the potential water weight gain
of the finished products by using construction materials which
minimize water absorption and retention.
B. Breathability
1. GORE-TEX(R) footwear must be breathable and meet the criteria in
Addendum A1. Components in the construction of the upper portion
of the product that are completely impermeable to moisture vapor
transmission, are not permitted unless the components have been
approved by Gore. Examples of components that Gore will approve
are toe boxes, heel counters and eyelets.
2. Licensee and Gore will work together to improve the breathability
of the licensee's footwear. This includes participation in Gore's
effort to continually improve breathability standards for
licensed footwear. Participation requires that the licensee make
available to Gore finished footwear for Moisture Vapor
Transmission Rate (MVTR) testing.
-8-
<PAGE>
C. Fit
1. Waterproof footwear must be constructed using patterns that
provide acceptable donning and comfortable fit.
D. Other Components
1. All components must be appropriate for wet service and any
unique, end use specific, environmental conditions. Examples of
unacceptable components are poorly attached soles, low grade
leathers and materials that are mechanically unstable in water.
E. Model Approval
1. All models of footwear utilizing GORE-TEX(R) fabric must be
approved by Gore prior to production. A sample of each model of
footwear, representative of the product that will be sold by the
licensee, must be submitted to and approved through Gore's
footwear laboratory. Model approval may be revoked if a
previously qualified model fails to maintain conformance to the
quality standards and specifications.
2. Gore's evaluation may include, but is not limited to:
a) hydrostatic testing for waterproofness
b) flex testing for waterproofness
c) MVTR testing of finished products for breathability
d) analysis of the pattern and construction for donning, fit,
wicking, height of functional waterproofness, insulation
properties and overall product quality.
e) review of the labeling and distribution plans to ensure
the product if appropriate for its intended end use.
f) the specific test methods and quality specification for a
particular type of footwear as described in Addendum A1.
3. At Gore's discretion, one model number may be used to represent
several others when the models differ only with respect to
cosmetic changes.
4. Men's styles should be submitted in sizes 9-10 medium (D),
women's models in sizes 6-8 medium (B).
-9-
<PAGE>
F. Labeling
1. All licensed models must be clearly labeled with the brand name
under which the product will be sold. Additionally, each piece of
footwear must be clearly labeled as containing GORE-TEX fabric.
-10-
<PAGE>
ADDENDUM A1
QUALITY SPECIFICATIONS FOR
HUNTING GORE-TEX(R) FOOTWEAR
A. TEST OF WATERPROOFNESS
1. Footwear must pass greater than or equal to 500,000 flex
cycles without leakage using the Gore water exclusion
tester.
B. TEST OF BREATHABILITY
1. The minimum requirement for breathability as measured
using the Gore Boot MVTR Test are as follows:
Men's Women's
Size 42 (US 9-10) Size 37 (US 6-8)
----------------- ----------------
Boots
2.5 g/hr. 2.0 g/hr.
C. DESIGN REQUIREMENTS
1. Waterline: The minimum waterproof height is 75% of the
total height. The height is measured from the featherline.
2. Waterproof gusset construction is required for tongues.
3. Padding is required on sharp edges to protect GORE-TEX(R)
fabric from abrasion or puncture, especially around the
heel counters, toe puffs, eyelets, etc.
4. A permanently attached "GORE-TEX(R)" label is required.
5. All seams must be sealed.
6. Bootie style construction is required.
D. Technical suggestions for materials are available upon request.
-11-
<PAGE>
SCHEDULE B
MANUFACTURING CERTIFICATION AGREEMENT
BETWEEN
FALCON SHOE MANUFACTURING CO.
AND
W.L. GORE & ASSOCIATES, INC.
Licensed Trademark(s)
- - ---------------------
"GORE-TEX"
"Guaranteed To Keep You Dry"
-12-
<PAGE>
SCHEDULE B
GUIDE FOR PROPER USE OF THE "GORE-TEX" TRADEMARK
As a growing company, W.L. Gore & Associates, Inc. owns many valuable
trademarks which identify and distinguish our products from those of other
companies. Gore's trademarks are well known and signify to our customers that
they are buying quality, state-of-the-art products from a company with a
reputation for innovation, dependability, and integrity. Significant time,
effort, and money has been spent in the research, development, and promotion of
these products.
Unfortunately, trademarks can be lost if they are not used correctly. A
trademark is lost when it become generic and sneaks into the language as a
common name description of the product, as distinguished from the source and
identity of the product. If a trademark becomes generic, the original owner
loses exclusive rights to use the mark. Any competitor can then use the
trademark and take advantage of the advertising and promotion dollars spent by
the former owner. Some famous former trademarks that have become generic are
nylon, escalator, kerosene, and zipper.
Fortunately, it is fairly easy to protect our trademarks. You need only
follow these six rules of proper trademark usage:
1. A trademark should always be used in a manner that will distinguish it
from the surrounding text. Capitalize trademarks completely, use
initials caps with quotes, bold face type, or italics, or as a minimum,
use initial caps. It is preferred that GORE-TEX not be separated, i.e.,
GORE on one line and TEX on another. The generic product name should not
be capitalized.
Right: Garments of GORE-TEX(R) fabric
Wrong: Garments of gore-tex fabric
2. Always follow trademark with the appropriate trademark notice and
footnote. The appropriate trademark notice should appear at least once
in each piece of printed matter, preferably the first time the trademark
appears. The footnote usually appears at the bottom of the last page.
Example: GORE-TEX(R) fabric
Footnote: (R)Registered Trademark of W.L. Gore & Associates,
Inc.
Example: GORE-TEX(TM) insert
Footnote: (TM)Trademark of W.L. Gore & Associates, Inc.
3. Most importantly, a trademark is a proper adjective and when used in
print such as in advertising, catalogues, promotions, brochures, hang
tags, radio, etc. must always be
-13-
<PAGE>
followed by its generic or common name. The trademark should never be
used alone when it appears in text.
Right: GORE-TEX(R) glove insert
Wrong: gloves made of GORE-TEX
When a trademark is used directly on an article, such as a parka,
jacket, shoes, golf suit, etc., manufactured under license to the trademark
owner's specifications, then the article itself supplies the noun and the
trademark can stand alone.
Right: GORE-TEX(TM) alone on a label incorporated in a
parka, jacket, rainsuit, etc.
When a trademark is used in print such as in advertising, catalogues,
hangtags, promotions, brochures, radio, etc., in reference to a licensed
product, it must be followed by its generic or common name.
Right: GORE-TEX(R) parka, GORE-TEX(R) gloves
4. Trademarks should never be used in the possessive sense.
Right: The popularity of GORE-TEX(R) products.
Wrong: GORE-TEX's popularity
5. Do not coin new words or terms for a trademark.
Wrong: This fabric has been GORE-TEXED
Wrong: GORE-TEXABLE fabric
6. Trademarks identify and distinguish our products from those of other
companies, therefore, our trademarks must not be combined or
intermingled with the trademarks of other companies.
Right: GORE-TEX(R) golf shoes from ETONIC(R)
GORE-TEX(R) shoes, the ULTRALIGHT(TM) collection
from
TIMBERLAND(TM)
GORE-TEX(R) parka - EXTREME GEAR(TM) from THE NORTH
FACE(R)
Wrong: ETONIC GORE-TEX golf shoes
TIMBERLAND'S GORE-TEX ULTRALIGHTS
THE NORTH FACE GORE-TEX EXTREME GEAR
-14-
<PAGE>
SCHEDULE B
Guide To The Proper Use Of The Trademark
"GUARANTEED TO KEEP YOU DRY"
"GUARANTEED TO KEEP YOU DRY" is a slogan trademark to be used in
connection with outerwear manufactured under the auspices of W.L. Gore &
Associates, Inc. It shall only be used on garment styles approved by W.L. Gore &
Associates, Inc.
The trademark should be used either in all caps or initial caps with the
registered (R) following:
GUARANTEED TO KEEP YOU DRY(R)
Guaranteed to Keep You Dry(R)
Since slogans do not require the use of a noun, it may be used alone as
above. However, it may also be used in the following manner:
GUARANTEED TO KEEP YOU DRY(R) program
GUARANTEED TO KEEP YOU DRY(R) label
The slogan "GUARANTEED TO KEEP YOU DRY(R)" should never be sued in a
non- trademark manner such as:
This parka is guaranteed to keep you dry. Alternative wording shall be
used, for example:
This parka is engineered so you stay comfortable and dry.
-15-
<PAGE>
SCHEDULE F
MANUFACTURING CERTIFICATION AGREEMENT
BETWEEN
FALCON SHOE MANUFACTURING CO.
AND
W.L. GORE & ASSOCIATES, INC.
Manufacturing Location(s)
- - -------------------------
Falcon Shoe Manufacturing Co.
#2 Cedar Street
Lewiston, ME 04240
-16-
<PAGE>
<TABLE>
EXHIBIT 10.11
<S> <C> <C>
2. CONTRACT (Proc. Inst. Ident./No. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQUEST PROJECT NO
7-26-94
5. ISSUED BY 6. ADMINISTERED BY (If other than Item 5)
CODE CODE
GSA, GENERAL PRODUCTS COMMODITY CTR GSA, GENERAL PRODUCTS COMMODITY CTR
GENERAL PROCUREMENT DIV., 7FXGM-M3 GENERAL PROCUREMENT DIV., 7FXGM-M3
819 TAYLOR STREET 819 TAYLOR STREET
FORT WORTH, TX 76102 FORT WORTH, TX 76102
7. NAME AND ADDRESS OF CONTRACTOR (No. street, city, country, State and ZIP Code) 8. DELIVERY
[XX] FOB ORIGIN [ ] OTHER (see below)
IRON AGE CORPORATION
ROBINSON PLAZA THREE, SUITE 400 9. DISCOUNT FOR PROMPT PAYMENT
PITTSBURGH, PA 15205 5%-60 Days:Net 30 Days
Net 67 Days:Shoe Mobile
412/787-4100 Service
10. SUBMIT INVOICES ITEM
(4 copies unless other-
- - ------------------------------------------------------------------------------------------ wise specified). TO THE BLOCK 11
ADDRESS SHOW IN:
CODE FACILITY CODE
- - ------------------------------------------------------------------------------------------------------------------------------------
11. SHIP TO/MARK FOR 12. PAYMENT WILL BE MADE BY
CODE_____________________________________ CODE___________________________
TO BE SHOWN ON ORDERS ISSUED UNDER SEE BLOCK 11
THIS CONTRACT
- - ------------------------------------------------------------------------------------------------------------------------------------
13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETI- 14. ACCOUNTING AND APPROPRIATION DATA
TION
[ ] 10 U.S.C. 2304(c)( ) [ ] 41 U.S.C. 253(c)( ) SEE BLOCK 11
- - ------------------------------------------------------------------------------------------------------------------------------------
15A. ITEM NO. 15B. SUPPLIES/SERVICES 15C. QUANTITY 15D. UNIT 15E. UNIT PRICE 15F. AMOUNT
- - ------------------------------------------------------------------------------------------------------------------------------------
IRON AGE CORPORATION'S offer dated September 17, 1993, submitted in response to Solicitation Number 7FXG-E4-8409-B for Multiple
Award Schedule FSC 84, Part II, Section B, Special Purpose Clothing, as supplemented by Best and Final Offer Letter dated July 11,
1994, and Bid Extension signed 3/22/94 and 6/21/94 is hereby accepted by the Government for special Item Numbers 633-16, 633-18,
633-19, and 633-25.
- - ------------------------------------------------------------------------------------------------------------------------------------
15G. TOTAL AMOUNT OF CONTRACT $ INDEFINITE
- - ------------------------------------------------------------------------------------------------------------------------------------
CONTINUED ON PAGE 2
- - ------------------------------------------------------------------------------------------------------------------------------------
16. TABLE OF CONTENTS
- - ------------------------------------------------------------------------------------------------------------------------------------
W) SEC. DESCRIPTION PAGE(S) W) SEC DESCRIPTION PAGE(S)
- - ------------------------------------------------------------------------------------------------------------------------------------
PART I - THE SCHEDULE PART II - CONTRACT CLAUSES
- - ------------------------------------------------------------------------------------------------------------------------------------
A SOLICITATION/CONTRACT FORM I CONTRACT CLAUSES
- - ------------------------------------------------------------------------------------------------------------------------------------
B SUPPLIES OR SERVICES AND PRICES/COSTS PART III - LIST OF DOCUMENTS. EXHIBITS AND OTHER ATTACH.
- - ------------------------------------------------------------------------------------------------------------------------------------
C DESCRIPTION/SPECS./WORK STATEMENT J LIST OF ATTACHMENTS
- - ------------------------------------------------------------------------------------------------------------------------------------
D PACKAGING AND MARKING PART IV - REPRESENTATIONS AND INSTRUCTIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
E INSPECTION AND ACCEPTANCE K REPRESENTATIONS. CERTIFICATIONS AND
- - ------------------------------------------------------------------- OTHER STATEMENTS OF OFFERORS
F DELIVERIES OR PERFORMANCE -------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
G CONTRACT ADMINISTRATION DATA L INSTRS., CONDS., AND NOTICES TO OFFERORS
- - ------------------------------------------------------------------------------------------------------------------------------------
H SPECIAL CONTRACT REQUIREMENTS M EVALUATION FACTORS FOR AWARD
- - ------------------------------------------------------------------------------------------------------------------------------------
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
- - ------------------------------------------------------------------------------------------------------------------------------------
17. [ ] CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is re- 18. [XX] AWARD (Contractor is not required to sign this document).
quired to sign this document and return _______ copies to Your offer on Solicitation Number 7FXG-E4-93-8409-B. Including
issuing office.) Contractor agrees to furnish and deliver the additions or changes made by you which additions or changes
all items or perform all the services set forth or otherwise are set forth in full above, is hereby accepted as to the Items
identified above and on any continuation sheets for the listed above and on any continuation sheets. This award
consideration stated herein. The rights and obligations consummates the contract which consists of the following documents:
of the parties to this contract shall be subject to and (a) the Government's solicitation and your offer, and (b) this
governed by the following documents: (a) this award/contract, award/contract. No further contractual document is necessary.
(b) the solicitation, if any, and (c) such provisions,
representations, certifications, and specifications, as
are attached or incorporated by reference herein,
(Attachments are listed herein.)
- - ------------------------------------------------------------------------------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER (Type or print) 20A. NAME OF CONTRACTING OFFICER
John Gallagher
- - ------------------------------------------------------------------------------------------------------------------------------------
OF CONTRACTOR 19C. DATE SIGNED 20B. UNITED STATES OF AMERICA 20C. DATE SIGNED
- - ---------------------------------------- ----------------------------------------- 7/26/94
Signature of person authorized to sign) BY Signature of Contracting Officer
- - ------------------------------------------------------------------------------------------------------------------------------------
1-152-8089 26-107 STANDARD FORM 26 (REV. 4-B5)
EDITION UNUSABLE *U.S. GOVERNMENT PRINTING OFFICE: 1992-312-071/50053 Prescribed by GSA
FAR (48 CFA) 53.214(a)
</TABLE>
<PAGE>
Continuation Page, SF26 Page 2 of 4
7FXG-E4-93-8409-B
DANNER SHOE MANUFACTURING CO.
See pages 3 and 4 of this award for pricelist coversheet and accepted terms and
conditions. The Iron Age Safety Shoes Factory Price List effective January 3,
1994, and the Iron Age Safety Shoes National Contract Price List effective
January 3, 1994, are approved, less a 10% discount. See the approved
catalog/pricelist for excluded items. An aggregate discount was not awarded.
The category of customer upon which award is predicated and on which the Price
Reduction Clause will be activated is Distributors/Wholesalers. The Economic
Price Adjustment Clause (522.216-71, Alt. I) has been negotiated into the
proposed contract and applies to Special Item Numbers 633-16, 633-18, 633-19 and
633-25.
The contract period is from May 1, 1994, or date of award, whichever is later,
through April 30, 1998.
<PAGE>
Page 3 of 4
COVERSHEET INFORMATION FOR PRICE LIST
AS REQUIRED BY CLAUSE I-FSS-600-D:
GENERAL SERVICES ADMINISTRATION
FEDERAL SUPPLY SERVICE
AUTHORIZED FEDERAL SUPPLY SCHEDULE CATALOG AND/OR PRICE LIST
SCHEDULE TITLE
FSC Group 84, Part II, Section B
Special Purpose Clothing
FSC CLASS: 8405, 8410, 8430, 8435
CONTRACT NO: GS-07F-8254B CONTRACT PERIOD: Date of Award through
04/31/98
CONTRACTOR: IRON AGE CORPORATION CONTACT : Jim Maloney
ROBINSON PLAZA THREE, STE 400 TELEPHONE: 412/787-4100
PITTSBURGH, PA 15205
BUSINESS SIZE AND TYPE: Small Dealer
- - --------------------------------------------------------------------------------
1a. AWARDED SPECIAL ITEM NUMBER:
FOOTWEAR
633-16 - Men's Over-the-Sock Boots
633-18 - Men's or Women's Overshoes, Rubber
SAFETY SHOES
633-19 - Men's or Women's Safety-Toe Shoes or Boots
ANTI-EXPOSURE COLD WEATHER CLOTHING
633-25 - Boots, Insulated, Waterproof
1b. IDENTIFICATION OF LOWEST PRICED ITEM:
SIN MODEL NET PRICE
--- ----- ---------
633-16 964 $12.56
633-18 220 $ 6.70
633-19 778 $38.66
633-25 112 $57.56
-2-
<PAGE>
2. MAXIMUM ORDER LIMITATION: $40,000 Per SIN
$160,000 Per Order
3. MINIMUM ORDER: $0
4. GEOGRAPHIC COVERAGE: The 50 States, Washington, DC, Puerto Rico and the
Virgin Islands
5. PRODUCTION POINT: See Attached List
6. BASIC DISCOUNT: 10% basic discount off the Iron Age Safety Shoes Factory
Price List effective January 3, 1994, for Direct Sales and a 10% basic discount
off the Iron Age Safety Shoes National Contract Price List effective January 3,
1994 for Shoe Mobile Sales.
7. QUANTITY DISCOUNT: None
8. PAYMENT TERMS: 5% in 60 days, Net in 67 days on direct sales. Net 30 days
on mobile sales.
9. GOVERNMENT COMMERCIAL CREDIT CARD HAS BEEN ACCEPTED with no discount
associated with its use.
10. FOREIGN ITEMS: The Foreign Items accepted are from Designated Countries
under the Trade Agreements Act.
11. TIME OF DELIVERY: 7 - 10 Days, ARO
EMERGENCY DELIVERY: 24 - 48 Hours
12. F.O.B. POINT: Origin
13. ORDERING ADDRESS: Iron Age Corporation
Robinson Plaza Three, Suite 400
Pittsburgh, PA 15205
14. PAYMENT ADDRESS: Iron Age Corporation
P.O. Box 4580
Pittsburgh, PA 15205
15. WARRANTY PROVISIONS: Standard Commercial Warranty. All returns must be
accompanied by a sales receipt. If a manufacturer's defect or material failure
occurs within ninety days of purchase, Iron Age will replace or repair the shoe
absolutely free of charge. If a manufacturer's defect or material failure
occurs within six months of purchase, the customer
-3-
<PAGE>
will be issued a partial credit based on the extent of wear and condition of the
shoes. This credit can only be used towards the purchase of other Iron Age
shoes.
16. EXCLUDED ITEMS: See the approved pricelist for excluded items.
17. - 23. Items Not Awarded
24. RESTOCKING FEE: None
-4-
<PAGE>
EXHIBIT 10.12
AMENDED AND RESTATED MANAGEMENT AGREEMENT
This Amended and Restated Management Agreement (this "Agreement") is
entered into as of the 26th day of February 1997 by and among Iron Age
Corporation, a Delaware corporation (the "Company"), Iron Age Holdings
Corporation, a Delaware corporation, ("Holdings") and Fenway Partners, Inc., a
Delaware corporation ("Fenway").
WHEREAS, IAH Acquisition Corp., a company formed by Fenway ("IAH
Acquisition Corp.,") acquired all of the outstanding capital stock of Iron
Age Holdings Corporation ("Old Iron Age Holdings") (such transactions being
referred to herein as the "Acquisition"), all on the terms and subject to
the conditions of that certain Stock Purchase Agreement dated as of
December 26, 1996 among IAH Acquisition Corp., Old Iron Age Holdings, the
stockholders of Old Iron Age Holdings and certain of their respective
affiliates;
WHEREAS, IAH Acquisition Corp. was a wholly-owned subsidiary of IA
Holdings Corp., a Delaware corporation;
WHEREAS, Fenway provided advisory and other services to IAH
Acquisition Corp. in connection with the Acquisition and the senior secured
financing (the "Senior Financing") that was provided for the Acquisition
pursuant to a credit agreement dated February 26, 1997 by Banque Nationale
de Paris, as agent and initial issuing bank and the lending institutions
from time to time party thereto;
WHEREAS, (i) immediately after the consummation of the Acquisition,
IAH Acquisition Corp. merged with and into Old Iron Age Holdings, (ii)
immediately after such merger, Old Iron Age Holdings, as successor by
merger, merged with and into the Company, (iii) the Company executed an
assumption agreement confirming its assumption of, among other things, all
obligations of IAH Acquisition Corp. hereunder and (iv) IA Holdings Corp.
changed its name to "Iron Age Holdings Corporation";
WHEREAS, pursuant to the Assumption Agreement dated as of February 26,
1997, the Company became successor by merger to IAH Acquisition Corp.; and
WHEREAS, subject to the terms and conditions of this Agreement, the
Company and Holdings desire that Fenway provide certain management and
advisory services to the Company and Holdings, and Fenway desires to
provide such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
<PAGE>
1. SERVICES; PAYMENT OF FEES.
a. Fenway hereby agrees that, during the term of this Agreement (the
"Term"), it will:
(i) provide the Company and Holdings with advice in connection
with the negotiation and consummation of agreements,
contracts, documents and instruments necessary to provide
the Company and Holdings with senior secured financing from
banks or other financial institutions or other entities on
terms and conditions satisfactory to the Company and
Holdings; and
(ii) provide the Company and Holdings with financial, managerial
and operational advice in connection with its day-to-day
operations, including, without limitation:
(1) advice with respect to the investment of funds; and
(2) advice with respect to the development and
implementation of strategies for improving the
operating, marketing and financial performance of the
Company and Holdings.
b. The Company and Holdings hereby agree that, during the Term, the
Company and Holdings will pay to Fenway (or its designee)
management fees in the aggregate as follows (subject to
adjustment as provided below): (i) for the current fiscal year,
two hundred fifty thousand dollars ($250,000); (ii) for next
fiscal year, two hundred fifty thousand dollars ($250,000), (iii)
for the next succeeding fiscal year, two hundred seventy-five
thousand dollars ($275,000), (iv) for the next succeeding fiscal
year, three hundred thousand dollars ($300,000) and (v)
thereafter for the Term of this Agreement, for each subsequent
fiscal year, an amount equal to 1/4 of 1% of net sales for the
immediately preceding fiscal year or such other amount (or
formula) as may be mutually agreed between the Company, Holdings
and Fenway, in each case in exchange for the services provided to
the Company and Holdings by Fenway, as more fully described in
Section 1.a of this Agreement, such fees being payable by the
Company and Holdings quarterly in advance, the first such payment
having been made at or promptly after the closing of the
Acquisition.
c. The Company and Holdings hereby agree that, during the Term, the
Company and Holdings will allow Fenway to participate in the
negotiation and consummation of senior financing for any
acquisition transactions by the Company, Holdings or any of their
direct or indirect subsidiaries, and will pay to Fenway (or an
affiliate of Fenway designated by it) such customary fee as
-2-
<PAGE>
may be charged therefor by Fenway in connection therewith;
provided, however, that in each case such fee shall not exceed
the greater of (i) $1,000,000 or (ii) one and one-half percent
(1-1/2%) of the aggregate transaction value (including
liabilities assumed); and provided further that such fee shall be
due and payable for the foregoing services at the closing of such
transaction, whether or not any such senior financing is actually
committed or drawn upon.
d. The Company and Holdings hereby agree that, in the event of an
acquisition of another business (whether by stock or asset
purchase, merger or otherwise) wherein the acquired entity or
business has an enterprise value in excess of $50,000,000, the
Company and Holdings thereafter will pay to Fenway such increase
to the management fees payable pursuant to Section 1.b above as
is mutually agreed by the Company, Holdings and Fenway (it being
agreed that the amount of any such increase will be negotiated in
good faith between the Company, Holdings and Fenway).
e. The Company hereby agrees to pay to Fenway (or its designee) a
fee in the amount of two million, seventy thousand dollars
($2,070,000) in connection with the structuring of the
Acquisition and the Senior Financing, together with reimbursement
of Fenway's expenses incurred on behalf of the Company through
the Closing Date in connection with the Acquisition, such fees
and expenses being payable by the Company at the closing of the
Acquisition or, if the Acquisition is not consummated, promptly
after the time the Company has abandoned the Acquisition.
f. Notwithstanding the foregoing provisions of this Section 1, the
Company and Holdings shall not make any payment to Fenway under
Section 1.b or 1.d if at the time of such payment:
(i) any Default or Event of Default (each as defined in any
Indenture) has occurred and is continuing or would result
therefrom; or
(ii) the Consolidated Coverage Ratio (as defined in any
Indenture) does not exceed 1.5 to 1.0;
provided, however, that any such payment which is not made
pursuant to this Section 1.f shall accrue until, and shall be
payable at, such time as the conditions in clauses (i) and (ii)
above have been satisfied. For purposes of this Agreement, the
term "Indenture" means the indenture pursuant to which the
Company has issued or may issue subordinated debt in aggregate
principal amount of $100 million or Holdings has issued or may
issue discount notes with gross proceeds of $25 million in a Rule
144A transaction or registered offering.
-3-
<PAGE>
g. Each payment made pursuant to this Section 1 shall be paid by
wire transfer of immediately available federal funds to such
account(s) as Fenway may specify to the Company and Holdings in
writing prior to such payment.
2. TERM. This Agreement shall continue in full force and effect, unless
and until terminated by mutual consent of the parties, for a minimum
of ten years; and thereafter for so long as Fenway (or any successor
or permitted assign, as the case may be) continues to carry on the
business of providing services of the type described in Section 1.a
above; provided, however, that:
a. any party may terminate this Agreement following a material
breach of the terms of this Agreement by another party hereto and
a failure to cure such breach within 30 days following written
notice thereof;
b. this Agreement shall terminate automatically upon the earliest
date upon which the initial Investors (as defined in the
Stockholders Agreement dated as of February 26, 1997 among
Holdings and its initial stockholders) and their respective
affiliates shall cease to retain the power to elect or cause the
election of a majority of the board of directors of the Company
or Holdings; and
c. each of (i) the obligations of the Company or Holdings under
Section 3 below, (ii) any and all accrued and unpaid obligations
of the Company or Holdings owed under Section 1 above and (iii)
the provisions of Section 6 shall survive any termination of this
Agreement to the maximum extent permitted under applicable law.
3. EXPENSES; INDEMNIFICATION.
a. The Company and Holdings agree to pay on demand all expenses
incurred by Fenway and Fenway Partners Capital Fund, L.P. (the
"Fenway Fund") in connection with this Agreement, the Acquisition
and such other transactions and all operations hereunder or
otherwise incurred in connection with the Acquisition or the
Company or Holdings, including but not limited to:
(i) the fees and disbursements of: (1) Ropes & Gray, special
counsel to Fenway and the Fenway Fund, (2) Ernst & Young,
accountant to Fenway and the Fenway Fund, and (3) any other
consultants or advisors retained by Fenway, the Fenway Fund
or either of the parties identified in clauses (1) and (2)
above arising in connection therewith (including but not
limited to the preparation, negotiation and execution of
this Agreement and any other agreement executed in
connection herewith or in connection with the Acquisition,
the Senior Financing or the consummation of the other
transactions contemplated thereby (and any
-4-
<PAGE>
and all amendments, modifications, restructurings and
waivers, and exercises and preservations of rights and
remedies hereunder or thereunder) and the operations of the
Company, Holdings and any of their subsidiaries); and
(ii) any out-of-pocket expenses incurred by Fenway in connection
with the provision of services hereunder or the attendance
at any meeting of the board of directors (or any committee
thereof) of the Company, Holdings or any of their
affiliates.
b. The Company and Holdings hereby agree to indemnify, exonerate and
hold each of Fenway, and the Fenway Fund, and each of their
respective partners, shareholders, affiliates, directors,
officers, fiduciaries, employees and agents and each of the
partners, shareholders, affiliates, directors, officers,
fiduciaries, employees and agents of each of the foregoing
(collectively, the "Indemnitees") free and harmless from and
against any and all actions, causes of action, suits, losses,
liabilities and damages, and expenses in connection therewith,
including without limitation reasonable attorneys' fees and
disbursements (collectively, the "Indemnified Liabilities"),
incurred by the Indemnitees or any of them as a result of, or
arising out of, or relating to the Acquisition, the execution,
delivery, performance, enforcement or existence of this Agreement
or the transactions contemplated hereby (including but not
limited to any indemnification obligations assumed or incurred by
any Indemnitee to or on behalf of Seller, or any of its
accountants or other representatives, agents or affiliates)
except for any such Indemnified Liabilities arising on account of
such Indemnitee's gross negligence or willful misconduct, and if
and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Company and Holdings hereby
agree to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. None of the Indemnitees shall
be liable to the Company, Holdings or any of their affiliates for
any act or omission suffered or taken by such Indemnitee that
does not constitute gross negligence or willful misconduct.
4. ASSIGNMENT, ETC. Neither party shall have the right to assign this
Agreement; provided, however, that notwithstanding the foregoing
prohibition, (a) Fenway may assign all or part of its rights and
obligations hereunder to any affiliate of Fenway which provides
services similar to those called for by this Agreement, in which event
Fenway shall be released of all of its rights and obligations
hereunder, and (b) the provisions hereof for the benefit of the Fenway
Fund shall inure to the benefit of their successors and assigns.
-5-
<PAGE>
5. AMENDMENTS AND WAIVERS. No amendment or waiver of any term, provision
or condition of this Agreement shall be effective, unless in writing
and executed by each of Fenway, Holdings and the Company. No waiver on
any one occasion shall extend to or effect or be construed as a waiver
of any right or remedy on any future occasion. No course of dealing of
any person nor any delay or omission in exercising any right or remedy
shall constitute an amendment of this Agreement or a waiver of any
right or remedy of any party hereto.
6. MISCELLANEOUS.
a. This Agreement shall be governed by and construed in accordance
with the domestic substantive laws of the State of New York
without giving effect to any choice or conflict of law provision
or rule that would cause the application of the domestic
substantive laws of any other jurisdiction.
b. Each of the parties agrees that all actions, suits or proceedings
arising out of or based upon this Agreement or the subject matter
hereof shall be brought and maintained exclusively in the federal
and state courts of the State of New York. Each of the parties
hereto by execution hereof (i) hereby irrevocably submits to the
jurisdiction of the federal and state courts in the State of New
York for the purpose of any action, suit or proceeding arising
out of or based upon this Agreement or the subject matter hereof
and (ii) hereby waives to the extent not prohibited by applicable
law, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, suit or proceeding, any claim that
it is not subject personally to the jurisdiction of the above-
named courts, that it is immune from extraterritorial injunctive
relief or other injunctive relief, that its property is exempt or
immune from attachment or execution, that any such action, suit
or proceeding may not be brought or maintained in one of the
above-named courts, that any such action, suit or proceeding
brought or maintained in one of the above-named courts should be
dismissed on grounds of forum non conveniens, should be
transferred to any court other than one of the above-named
courts, should be stayed by virtue of the pendency of any other
action, suit or proceeding in any court other than one of the
above-named courts, or that this Agreement or the subject matter
hereof may not be enforced in or by any of the above-named
courts. Each of the parties hereto hereby consents to service of
process in any such suit, action or proceeding in any manner
permitted by the laws of the State of New York, agrees that
service of process by registered or certified mail, return
receipt requested, at the address specified in or pursuant to
Section 9 is reasonably calculated to give actual notice and
waives and agrees not to assert by way of motion, as a defense or
otherwise, in any such action, suit or proceeding any claim that
service of process made in accordance with Section 8 does not
constitute good and sufficient service of process. The provisions
of this Section 6.b shall not restrict the ability of any party
to enforce
-6-
<PAGE>
in any court any judgment obtained in a federal or state court of
the State of New York.
c. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE
WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND COVENANTS
THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF
ANY ISSUE, CLAIM, DEMAND, CAUSE OF ACTION, ACTION, SUIT OR
PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE
SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE.
Each of the parties hereto acknowledges that it has been informed
by each other party that the provisions of this Section 6.c
constitute a material inducement upon which such party is relying
and will rely in entering into this Agreement and the
transactions contemplated hereby. Any of the parties hereto may
file an original counterpart or a copy of this Agreement with any
court as written evidence of the consent of each of the parties
hereto to the waiver of its right to trial by jury.
7. MERGER/ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof
and supersedes any prior communication or agreement with respect
thereto.
8. NOTICE. All notices, demands, and communications of any kind which any
party may require or desire to serve upon any other party under this
Agreement shall be in writing and shall be served upon such other
party and such other party's copied persons as specified below by
personal delivery to the address set forth for it below or to such
other address as such party shall have specified by notice to each
other party or by mailing a copy thereof by certified or registered
mail, or by Federal Express or any other reputable overnight courier
service, postage prepaid, with return receipt requested, addressed to
such party and copied persons at such addresses. In the case of
service by personal delivery, it shall be deemed complete on the first
business day after the date of actual delivery to such address. In
case of service by mail or by overnight courier, it shall be deemed
complete, whether or not received, on the third day after the date of
mailing as shown by the registered or certified mail receipt or
courier service receipt. Notwithstanding the foregoing, notice to any
party or copied person of change of address shall be deemed complete
only upon actual receipt by an officer or agent of such party or
copied person.
-7-
<PAGE>
If to the Company or Holdings, to it at:
Robinson Plaza Three
Suite 400
Pittsburgh, PA 15205
Attention: Chief Executive Officer
If to Fenway, to it at:
Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
Attention: Andrea Geisser
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Lauren I. Norton
9. SEVERABILITY. If in any judicial or arbitral proceedings a court or
arbitrator shall refuse to enforce any provision of this Agreement,
then such unenforceable provision shall be deemed eliminated from this
Agreement for the purpose of such proceedings to the extent necessary
to permit the remaining provisions to be enforced. To the full extent,
however, that the provisions of any applicable law may be waived, they
are hereby waived to the end that this Agreement be deemed to be valid
and binding agreement enforceable in accordance with its terms, and in
the event that any provision hereof shall be found to be invalid or
unenforceable, such provision shall be construed by limiting it so as
to be valid and enforceable to the maximum extent consistent with and
possible under applicable law.
10. DISCLAIMER AND LIMITATION OF LIABILITY.
a. Fenway makes no representations or warranties, express or
implied, in respect of the services to be provided by it
hereunder.
b. In no event shall Fenway be liable to the Company, Holdings or
any of their affiliates for any act, alleged act, omission or
alleged omission on the part of Fenway that does not constitute
gross negligence or willful misconduct.
c. In anticipation that the Company, Holdings and Fenway (or one or
more affiliates, associated investment funds or portfolio
companies, or clients of
-8-
<PAGE>
Fenway) may engage in the same or similar activities or lines of
business and have an interest in the same areas of corporate
opportunities and in recognition of the difficulties which may
confront any advisor who desires and endeavors fully to satisfy
such advisor's duties in determining the full scope of such
duties in any particular situation, the provisions of this clause
(c) are set forth to regulate, define and guide the conduct of
certain affairs of the Company and Holdings as they may involve
Fenway. Except as Fenway may otherwise agree in writing after the
date hereof:
(i) Fenway shall have the right to, and shall have no duty
(contractual or otherwise) not to, directly or indirectly:
(1) engage in the same or similar business activities or
lines of business as the Company or Holdings, including
those competing with the Company or Holdings, and (2) do
business with any client or customer of the Company or
Holdings;
(ii) neither Fenway nor any officer, director, employee,
partner, affiliate or associated entity thereof shall be
liable to the Company, Holdings or their affiliates for
breach of any duty (contractual or otherwise) by reason of
any such activities of or of such person's participation
therein; and
(iii) in the event that Fenway acquires knowledge of a potential
transaction or matter that may be a corporate opportunity
for the Company, Holdings and Fenway or any other person,
Fenway shall have no duty (contractual or otherwise) to
communicate or present such corporate opportunity to the
Company or Holdings and, notwithstanding any provision of
this Agreement to the contrary, shall not be liable to the
Company, Holdings or their affiliates for breach of any
duty (contractual or otherwise) by reason of the fact that
Fenway directly or indirectly pursues or acquires such
opportunity for itself, directs such opportunity to another
person, or does not present such opportunity to the Company
or Holdings.
d. In no event will any party hereto be liable to the other for any
indirect, special, incidental or consequential damages, including
lost profits or savings, whether or not such damages are
foreseeable, or for any third party claims (whether based in
contract, tort or otherwise), relating to the services to be
provided by Fenway hereunder.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by each of the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which together shall constitute one and the same
agreement.
-9-
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as an instrument under seal as of the date first above
written by its officer or representative thereunto duly authorized.
IRON AGE CORPORATION
By /s/ Keith McDonough
_______________________________
Name: Keith McDonough
Title: Executive Vice President, CFO
IRON AGE HOLDINGS CORPORATION
By /s/ Andrea Geisser
_______________________________
Name: Andrea Geisser
Title: Vice President
FENWAY PARTNERS, INC.
By /s/ Andrea Geisser
_______________________________
Name: Andrea Geisser
Title: Managing Director
-10-
<PAGE>
EXHIBIT 10.13
- - --------------------------------------------------------------------------------
IRON AGE HOLDINGS
__________________
STOCKHOLDERS AGREEMENT
__________________
DATED AS OF FEBRUARY 26, 1997
- - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
1. DEFINITIONS........................................................................... 2
1.1. Certain Definitions....................................................... 2
1.2. Certain Matters of Construction........................................... 7
1.3. Cross Reference Table..................................................... 8
2. VOTING AGREEMENT...................................................................... 9
2.1. Election of Directors..................................................... 9
2.2. Removal................................................................... 10
2.3. Successors................................................................ 10
2.4. Certain Liquidity Transactions............................................ 10
2.5. Observation Rights........................................................ 11
2.6. The Company............................................................... 11
2.7. Period.................................................................... 11
3. CERTAIN TRANSFER RIGHTS AND RESTRICTIONS.............................................. 11
3.1. Securities................................................................ 11
3.2. Period.................................................................... 14
3.3. Status in Hands of Certain Transferees.................................... 15
3.4. Lock-Up................................................................... 16
3.5. Restriction on Certain Transfers by Fund Investors While Preferred Stock
is Outstanding.................................................................. 16
4. CERTAIN PUT RIGHTS ................................................................... 16
4.1. Put Right................................................................. 16
4.2. Closing; Assignability of Company Purchase Rights; Related Matters........ 17
4.3. Period.................................................................... 18
4.4. Construction.............................................................. 18
5. "TAKE ALONG" RIGHTS .................................................................. 18
5.1. Procedure................................................................. 18
5.2. Certain Legal Requirements................................................ 19
5.3. Further Assurances........................................................ 20
5.4. Closing................................................................... 21
5.5. Period.................................................................... 21
6. CO-SALE RIGHTS........................................................................ 21
6.1. Tag Along................................................................. 21
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
6.2. Certain Legal Requirements................................................ 23
6.3. Further Assurances........................................................ 24
6.4. Closing................................................................... 25
6.5. Excluded Transactions..................................................... 25
6.6. Period.................................................................... 26
7. REGISTRATION RIGHTS................................................................... 26
7.1. Piggyback Registration Rights............................................. 27
7.2. Demand Registration Rights................................................ 28
7.3. Registration on Form S-8........................................... 31
7.4. Certain Other Provisions.................................................. 31
7.5. Indemnification and Contribution.......................................... 36
7.6. Lock-up................................................................... 40
8. CERTAIN FUTURE EQUITY FINANCINGS OF THE COMPANY....................................... 41
8.1. Right of Participation.................................................... 41
8.2. Excluded Transactions..................................................... 47
8.3. Right to Purchase Shares Underlying Series A Options in Certain
Circumstances................................................................... 48
9. DETERMINATION OF FAIR MARKET VALUE.................................................... 48
10. REMEDIES............................................................................. 50
10.1. Generally................................................................ 50
10.2. Deposit.................................................................. 50
11. LEGEND............................................................................... 51
12. AMENDMENT, ETC....................................................................... 52
12.1. No Oral Modifications.................................................... 52
12.2. Written Modifications.................................................... 52
12.3. Automatic Partial Termination............................................ 52
13. MISCELLANEOUS........................................................................ 53
13.1. Authority; Effect........................................................ 53
13.2. Notices.................................................................. 53
13.3. Binding Effect, etc...................................................... 55
13.4. Descriptive Headings..................................................... 55
13.5. Counterparts............................................................. 55
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
13.6. Severability............................................................. 56
14. GOVERNING LAW, ARBITRATION........................................................... 56
14.1. Governing Law............................................................ 56
14.2. Consent to Jurisdiction.................................................. 56
14.3. Waiver of Jury Trial..................................................... 57
14.4. Reliance................................................................. 57
</TABLE>
-iii-
<PAGE>
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (the "Agreement") is made as of February 26,
---------
1997 (the "Original Closing Date"), by and among:
---------------------
(i) IA Holdings Corp., a Delaware corporation (the "Company"),
-------
(ii) Fenway Partners Capital Fund, L.P. (the "Initial Fund Investor"), and
---------------------
each of the other Fund Investors from time to time becoming a party
hereto pursuant to the terms hereof,
(iii) New York Life Insurance Company (the "Initial Mezzanine Investor"),
--------------------------
and each of the other Mezzanine Investors from time to time becoming
a party hereto pursuant to the terms hereof; and
(iv) each of the Management Investors from time to time becoming a party
hereto pursuant to the terms hereof (each of the Fund Investors, the
Mezzanine Investors and the Management Investors, being referred to
herein as an "Investor" and collectively as the "Investors").
-------- ---------
Recitals
--------
1. On or about the Original Closing Date, IAH Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of the Company
("Acquisition"), is acquiring all of the issued and outstanding capital stock of
-----------
Iron Age Holdings Corporation, a Delaware corporation (the "Acquired Company"),
----------------
pursuant to a Stock Purchase Agreement dated as of December 26, 1996, as amended
on or about the Original Closing Date (the "Purchase Agreement"), among the
------------------
Acquired Company, Acquisition and the stockholders of the Acquired Company.
Immediately following such acquisition, Acquisition is being merged with and
into the Acquired Company and, immediately thereafter, the Acquired Company is
being merged with and into Iron Age Corporation, a Delaware corporation and a
wholly-owned subsidiary of the Acquired Company ("Iron Age").
--------
2. Pursuant to a Stock Subscription Agreement dated as of the Original
Closing Date, the Initial Fund Investor has agreed to purchase an aggregate of
approximately 80,291 shares of Common Stock, par value $.01 per share ("Common
------
Stock"), of the Company.
- - -----
<PAGE>
3. Pursuant to the Purchase Agreement, certain Management Investors were
issued options (the "Replacement Options") to purchase an aggregate of
-------------------
approximately 11,528 shares of Common Stock in exchange for exercisable options
of the Acquired Company held by such Management Investors or for other
consideration. In addition, certain Management Investors have been or may be
issued from time to time options (the "Performance-Based Management Options") to
------------------------------------
acquire shares of Common Stock subject to satisfaction of certain conditions.
4. Pursuant to a Securities Purchase Agreement (the "Mezzanine Securities
--------------------
Purchase Agreement") and a Note Subscription Agreement, each dated as of the
- - ------------------
Original Closing Date, the Initial Mezzanine Investor and the Initial Fund
Investor have agreed to purchase (i) an aggregate of 1,500 shares of Series A
Preferred Stock, par value $.01 per share ("Preferred Stock"), of the Company,
---------------
(ii) an aggregate of approximately 8,333 shares of Common Stock, (iii) warrants
(the "Mezzanine Warrants") to purchase an aggregate of approximately 6,962
------------------
shares of Common Stock and (iv) subordinated notes in an aggregate principal
amount of $15,000,000.
5. The parties believe that it is in the best interests of the Company,
and the Investors to: (i) provide that certain shares of Preferred Stock, Common
Stock and Options shall be transferable only upon compliance with the terms
hereof; (ii) provide the Company with certain rights and obligations with
respect to the purchase of shares of Preferred Stock, Common Stock and Options
under certain circumstances; (iii) provide for certain rights and obligations
with respect to the election of directors of the Company; and (iv) set forth
their agreements on certain other matters.
Agreement
---------
Now therefore, in consideration of the foregoing and the mutual agreements
set forth below, the parties hereto, each intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
1.1. Certain Definitions. The following terms shall have the
-------------------
following meanings:
1.1.1. "Affiliate" shall mean, with respect to any specified
---------
Person, any Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with,
the Person specified.
-2-
<PAGE>
1.1.2. "Affiliated Fund" shall mean any limited partnership or
---------------
other Person formed for the purpose of investing in other companies or
businesses and for which Fenway Partners, L.P., a Delaware limited
partnership, or any of its Affiliates, acts as a general partner.
1.1.3. "Board" shall mean the Board of Directors of the Company.
-----
1.1.4. "Cause" shall mean, in the context of termination of the
-----
employment or the directorship of any person, any of the following events
or conditions: (i) such person's failure to perform (other than by reason
of disability) his or her duties and responsibilities to the Company and
its Affiliates which is not remedied within 14 days after receipt of
written notice thereof from the Company, (ii) any act of fraud,
embezzlement or other material dishonesty, (iii) conviction of, or plea of
nolo contendere to, any felony or any other crime involving fraud,
dishonesty or moral turpitude; (iv) conduct that would be reasonably likely
to make the Company or any of its Affiliates subject to civil or criminal
liabilities or (v) such person's failure to take or refrain from taking any
action as specified in written directions of the Board following receipt by
such person of such written directions; provided, however, that if such
-------- -------
person is party to a written employment agreement with the Company or its
subsidiaries containing a definition of "Cause" for termination of
employment, then, with respect to such person, such alternative definition
shall govern for purposes of this Agreement.
1.1.5. "Cost" shall mean, in the context of the Cost of
----
securities subject to the provisions of Section 4, (i) in the case of
Shares, the amount (in the form of subscription price or exercise price or
otherwise) paid to the Company upon issuance of such Shares and (ii) in the
case of Options, and amount equal to the value of the consideration paid
therefor as determined by the Board; in each case adjusted appropriately to
take account of any stock splits, stock dividends, conversions or
consolidations of stock or substantially similar reorganizations of the
Company's capital stock.
1.1.6. "Exchange Act" shall mean Securities Exchange Act of
------------
1934, as amended, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder, all as from time to time in
effect.
1.1.7. "Fair Market Value" shall mean, as of any date, the fair
-----------------
value of any Security or other securities as of the applicable date, as
determined pursuant to Section 9.
-3-
<PAGE>
1.1.8. "Fund Investor" shall mean any Initial Fund Investor and
-------------
any Affiliated Fund or transferee pursuant to Section 6.5 (other than
Section 6.5(c) or 6.5(e)) which, from time to time, acquires Fund
Securities and becomes party to this Agreement by executing and delivering
to the Company an instrument in form satisfactory to the Company pursuant
to which such Person agrees to be bound by the terms of this Agreement to
the same extent as a Initial Fund Investor.
1.1.9. "Fund Majority Holders" shall mean, as of any date, the
---------------------
holders of a majority of the Fund Securities outstanding on such date
(calculated on the basis of Common Stock equivalents by assuming that each
Option were exercised and all shares of Common Stock issuable upon exercise
thereof were issued and outstanding and held by the holder of such Option).
1.1.10. "Fund Securities" shall mean all Shares and Options
---------------
originally issued to (or issued upon conversion of or otherwise with
respect to Shares and Options originally issued to) or held by the Fund
Investors, whenever issued, other than Shares issued to the Initial Fund
Investor pursuant to the Mezzanine Securities Purchase Agreement.
1.1.11. "Independent Investment Banking Firm" means any
-----------------------------------
investment banking firm which is not the beneficial owner of any equity
interest in the Company or any shareholder of the Company.
1.1.12. "Initial Public Offering" shall mean the first public
-----------------------
offering of shares of Common Stock registered on Form S-1 (or any successor
form) under the Securities Act.
1.1.13. "Management Investor" shall mean any director, officer
-------------------
or employee of the Company or any of its Subsidiaries designated by the
Board to be a Management Investor hereunder and any transferee pursuant to
Section 3.1.4 or 3.1.5 who, from time to time, acquires Shares or Options
and becomes party to this Agreement by executing and delivering to the
Company an instrument in form satisfactory to the Company pursuant to which
such person agrees to be bound by the terms of this Agreement as a
Management Investor.
1.1.14. "Management Majority Holders" shall mean, as of any
---------------------------
date, the holders of a majority of the Management Securities outstanding on
such date.
-4-
<PAGE>
1.1.15. "Management Securities" shall mean all Shares originally
---------------------
issued to (or issued upon conversion of or otherwise with respect to Shares
originally issued to) or held by the Management Investors, whenever issued,
including without limitation all Shares issued or issuable pursuant to the
exercise of any Options originally issued to or held by the Management
Investors, whenever issued, and all such Options.
1.1.16. "Members of the Immediate Family" shall mean, with
-------------------------------
respect to any individual, each spouse, parent, brother, sister or child of
such individual, each spouse of any such Person, each child of any of the
aforementioned Persons, each trust created solely for the benefit of one or
more of the aforementioned Persons and each custodian or guardian of any
property of one or more of the aforementioned Persons in his capacity as
such custodian or guardian.
1.1.17. "Mezzanine Investor" shall mean the Initial Mezzanine
------------------
Investor and any other Person which, from time to time, acquires Mezzanine
Securities (including, without limitation, any Mezzanine Securities
acquired from the Initial Fund Investor) and becomes party to this
Agreement by executing and delivering to the Company an instrument in form
satisfactory to the Company pursuant to which such Person agrees to be
bound by the terms of this Agreement to the same extent as the Initial
Mezzanine Investor.
1.1.18. "Mezzanine Majority Holders" shall mean, as of any date,
--------------------------
the holders of a majority of outstanding Mezzanine Securities consisting of
Common Stock issued on such date.
1.1.19. "Mezzanine Securities" shall mean all Shares and all
--------------------
Options (including, without limitation, the Mezzanine Warrants) originally
issued to (or issuable upon conversion or exercise of, or otherwise with
respect to, Shares or Options originally issued to) or held by the
Mezzanine Investors, whenever issued and shall also include any Shares
issued to the Initial Fund Investor pursuant to the Mezzanine Securities
Purchase Agreement.
1.1.20. "MFN Letter Agreement" shall mean the letter agreement
--------------------
dated the Original Closing Date among the Initial Mezzanine Investor,
Acquisition and the Company regarding the terms of any resale of Mezzanine
Securities by the Initial Fund Investor.
1.1.21. "Non-Fund Securities" shall mean all Securities other
-------------------
than Fund Securities, whenever issued.
-5-
<PAGE>
1.1.22. "Options" shall mean any options or warrants or other
-------
rights to subscribe for, purchase or otherwise acquire Common Stock, other
than rights to acquire Shares pursuant to this Agreement, including,
without limitation, the Replacement Options, the Performance-Based
Management Options and the Mezzanine Warrants.
1.1.23. "Permitted Transferee" shall mean, as to each Management
--------------------
Security, a transferee of such Management Security in compliance with
Section 3.1.4 or 3.1.5.
1.1.24 "Person" shall mean any individual, partnership,
------
corporation, company, association, trust, joint venture, unincorporated
organization or entity, or any government, governmental department or
agency or political subdivision thereof.
1.1.25. "Registrable Securities" shall mean (i) all shares of
----------------------
Common Stock, (ii) all shares of Common Stock issuable upon exercise of any
Option and (iii) all shares of Common Stock directly or indirectly issued
or issuable with respect to the securities referred to in clauses (i) and
(ii) above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Registrable Securities, such shares
shall cease to be Registrable Securities when they have been (a)
effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them or (b) distributed
to the public through a broker, dealer or market maker pursuant to Rule
144, in each case in compliance with any applicable provisions of this
Agreement.
1.1.26. "Rule 144" shall mean Rule 144, as from time to time in
--------
effect, promulgated by the Securities and Exchange Commission under the
Securities Act (including without limitation clause (k) thereof).
1.1.27. "Securities" shall mean all Shares and all Options
----------
included in the Fund Securities, the Mezzanine Securities and the
Management Securities.
1.1.28. "Senior Credit Agreement" shall mean the credit
-----------------------
agreement dated as of February 26, 1997 among Acquisition, the Company,
Banque Nationale de Paris as agent and the initial lenders named therein.
-6-
<PAGE>
1.1.29. "Securities Act" shall mean the Securities Act of 1933,
--------------
as amended, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, all as from time to time in effect.
1.1.30. "Series A Option Shares" shall mean shares of Common
----------------------
Stock issuable upon exercise of Series A Options.
1.1.31. "Series A Options" shall have the meaning ascribed to
----------------
that term in the Company's 1997 Stock Option Plan as in effect on the date
hereof.
1.1.32. "Shares" shall mean all shares of Common Stock and also,
------
in the case of Mezzanine Investors, all shares of Preferred Stock.
1.1.33. "Subsidiary" shall mean any Person of which the Company
----------
or other specified Person now or hereafter shall at the time own directly
or indirectly through a Subsidiary at least a majority of the outstanding
capital stock (or other shares of beneficial interest) entitled to vote
generally or control the Board of Directors, including without limitation,
in the case of the Company: Iron Age Corporation, Iron Age Canada Ltd.,
Iron Age Investment Company, Falcon Shoe Mfg. Co., and Iron Age de Mexico
S.A. de C.V.
1.1.34. "Voting Shares" shall mean, with respect to any matter
-------------
to be voted upon, all Shares included in the Securities entitled to vote
with respect to such matter.
1.2. Certain Matters of Construction. In addition to the
-------------------------------
definitions referred to as set forth in the Section 1.1:
(a) The words "hereof", "herein", "hereunder" and words of
similar import shall refer to this Agreement as a whole and not to any
particular Section or provision of this Agreement, and reference to a
particular Section of this Agreement shall include all subsections thereof;
(b) References to a Section, Schedule or Exhibit are to a
Section of, or Schedule or Exhibit to, this Agreement;
(c) Definitions shall be equally applicable to both the
singular and plural forms of the terms defined;
(d) The masculine, feminine and neuter genders shall each
include the other;
-7-
<PAGE>
(e) Except as otherwise provided herein, any Person who holds
Options shall be deemed to be the holder of the Registrable Securities
obtainable upon exercise of the Options in connection with the transfer
thereof or otherwise regardless of any restriction or limitation on such
exercise or conversion; and
(f) Whenever a percentage of one or more types of Securities is
specified, such percentage shall be calculated on the basis of the number
of Registrable Securities represented by such one or more types.
1.3. Cross Reference Table. The following terms defined elsewhere in this
---------------------
Agreement in the Sections set forth below shall have the respective meanings
therein defined:
Term Definition
---- ----------
"Acquired Company" Recitals
"Acquisition" Recitals
"Agreement" Preamble
"Call Management Investor Group" Section 4
"Call Option" Section 4
"Come Along Notice" Section 5.1
"Common Stock" Recitals
"Company" Preamble
"Company Note" Section 4
"Fair Market Value" Section 9
"Fund Designated Directors" Section 2.1
"General Representations" Section 5.3
"Individual Representations" Section 5.3
"Initial Fund Investor" Preamble
"Initial Mezzanine Investor" Preamble
"Initiating Holders" Section 7.2
"Investor" Preamble
"Issuance" Section 8
"Jensen Designated Director" Section 2.1
"Majority Initiating Holders" Section 7.2
"Mezzanine Securities Purchase Agreement" Recitals
"Non-Complying Investor" Section 10.2
"Original Closing Date" Preamble
"Other Offered Securities" Section 8.1
"Participating Buyer" Section 8.1
-8-
<PAGE>
"Participating Seller" Section 5.1
"Preemption Notice" Section 8.1
"Preemptive Portion" Section 8.1
"Preemptive Purchaser Offerees" Section 8.1
"Prime Rate" Section 4.1.2
"Proposed Buyer" Section 5; 6.1
"Proposed Fund Seller" Section 5; 6.1
"Public Offering" Section 7.1
"Purchase Agreement" Recitals
"Requesting Majority Holders" Section 5.5
"Sale" Section 5; 6.1
"Sale Percentage" Section 5; 6.1
"Subject Securities" Section 8.1
"Tag Along Notice" Section 6.1
"Tag Along Offerees" Section 6.1
"Transfer" Section 3.1
2. VOTING AGREEMENT.
2.1. Election of Directors. Each holder of Voting Shares hereby agrees to
---------------------
cast all votes to which such holder is entitled in respect of the Voting Shares
now or hereafter owned by such holder, whether at any annual or special meeting
of stockholders, by written consent or otherwise, to:
(i) fix the number of directors constituting the Board at such number
equal to or greater than three (3), as may be directed from time to
time by the Fund Majority Holders;
(ii) for so long as Donald R. Jensen owns Series A Options (including,
for the purposes of such calculation, any shares of Common Stock
issued upon exercise thereof) owned by him immediately after the
closing under the Purchase Agreement, elect as a member of the Board
Donald R. Jensen or, if he chooses not to serve as a director, such
other individual as may be designated by Donald R. Jensen for
election; provided, however, that any such other individual must be
-------- -------
reasonably acceptable to and approved in advance by the Fund
Majority Holders (Donald R. Jensen or such other individual being
referred to herein in such capacity as the "Jensen Designated
-----------------
Director");
--------
-9-
<PAGE>
(iii) elect as the remaining members of the Board such individuals as may
be designated by the Fund Majority Holders for election after
consultation with the Jensen Designated Director; provided, however,
-------- -------
that, notwithstanding anything herein to the contrary, the Fund
Majority Holders at all times shall have the right in their sole
discretion to designate a majority of the Board for election (the
"Fund Designated Directors").
--------------------------
2.2. Removal. No Fund Designated Director may be removed without the
-------
consent of the Fund Majority Holders, except for Cause as determined in good
faith by decision of all of the directors other than the Fund Designated
Director in question. For so long as Donald R. Jensen continues to hold Series
A Options (including, for the purposes of such calculation, any shares of Common
Stock issued upon exercise thereof) owned by him immediately after the closing
under the Purchase Agreement, no Jensen Designated Director may be removed
without the consent of Donald R. Jensen, except for Cause as determined in good
faith by decision of all of the directors other than the Jensen Designated
Director. No other director may be removed without the consent of either a
majority of the directors then in office or a majority of the then outstanding
Shares entitled to vote thereon.
2.3. Successors. In the event a director shall cease to serve for any
----------
reason, then the Fund Majority Holders shall have the right to nominate a
successor director; provided, however, that no director removed for Cause shall
-------- -------
be renominated or reelected and provided further that if the director that so
-------- -------
ceases to serve is the Jensen Designated Director and following such cessation
Donald R. Jensen continues to hold Series A Options (including, for the purposes
of such calculation, any shares of Common Stock issued upon exercise thereof)
owned by him immediately after the closing under the Purchase Agreement then
Donald R. Jensen shall have the right to nominate such successor. Each holder
of Voting Shares shall, upon receipt of notice identifying such nominee,
promptly take all action necessary to cause the appointment of such nominee to
the Board pursuant to the Company's By-laws and Certificate of Incorporation,
each as amended and in effect from time to time.
2.4. Certain Liquidity Transactions. Each holder of Non-Fund Securities
------------------------------
agrees to cast all votes to which such holder is entitled in respect of the
Voting Shares now or hereafter owned by such holder, and, subject to fiduciary
obligations imposed by applicable law, to cause any directors designated by such
Investor pursuant to Section 2.1 or 2.3 to vote, in the manner specified by the
Fund Majority Holders with respect to: (i) any sale of a substantial portion of
the assets of the Company or any of its Subsidiaries; (ii) any merger or
consolidation involving the Company or any of its Subsidiaries; (iii) any
transaction constituting a change in control of the Company to a Person not an
Affiliate of any Fund Investor; and (iv) any transaction to which Section 5 or 6
applies.
-10-
<PAGE>
2.5. Observation Rights. Nothing in this Agreement is intended or shall be
------------------
construed to affect the board observation rights provided in the Mezzanine
Securities Purchase Agreement.
2.6. The Company. The Company agrees not to give effect to any action by
-----------
any holder of Shares which is in contravention of this Section 2.
2.7. Period. The foregoing provisions of this Section 2 shall expire on
------
the earliest of: (i) the tenth anniversary of the Original Closing Date; (ii)
the date of termination of this Agreement; (iii) the first date on which the
Fund Investors own less than twenty-five percent (25%) of all Fund Securities
owned by them immediately after the closing under the Purchase Agreement; or
(iv) upon the closing of the Initial Public Offering.
3. CERTAIN TRANSFER RIGHTS AND RESTRICTIONS.
3.1. Securities. No holder of any Non-Fund Security shall sell, pledge,
----------
assign, grant a participation interest in, encumber or otherwise transfer or
dispose of any of such Non-Fund Securities to any other Person, whether
directly, indirectly, voluntarily, involuntarily, by operation of law, pursuant
to judicial process (including, without limitation, divorce decree) or otherwise
(a "Transfer"), except as permitted by this Section 3.1. Any attempted Transfer
--------
of Non-Fund Securities not permitted by this Section 3.1 shall be null and void,
and the Company shall not in any way give effect to any such impermissible
Transfer.
3.1.1. Transfers under this Agreement, etc. Any Investor may
-----------------------------------
Transfer any or all Securities held by such Investor: (i) to the Company or
any Person designated by the Company in one or more transactions approved
by the Board, (ii) to any Fund Investor or Affiliate thereof or (iii) on
the terms and subject to the conditions of Sections 4, 5, 6 or 7.
3.1.2. Certain Permitted Transfers of Mezzanine Securities. Subject
---------------------------------------------------
to the provisions of Section 7.5, (a) any holder of Mezzanine Securities
may Transfer any or all shares of Common Stock to the public through a
broker, dealer or market maker pursuant to Rule 144 after the Initial
Public Offering; (b) any Mezzanine Investor may Transfer any or all
Mezzanine Securities held by such Mezzanine Investor to any other Person
who immediately prior to such Transfer is already a Mezzanine Investor; (c)
any Mezzanine Investor may Transfer any or all Mezzanine Securities held by
such Mezzanine Investor to an Affiliate of such Mezzanine Investor with the
prior written consent of the Company (which consent shall not be
unreasonably withheld); and (d)
-11-
<PAGE>
the Initial Fund Investor or its Affiliates may Transfer, in compliance
with the MFN Letter Agreement, Mezzanine Securities issued to the Initial
Fund Investor pursuant to the Mezzanine Securities Purchase Agreement to
any Person who becomes party to this Agreement by executing and delivering
to the Company an instrument in form satisfactory to the Company pursuant
to which such Person agrees to be bound by the terms of this Agreement as a
Mezzanine Investor; provided, however, that in the case of a Transfer of
-------- -------
the type contemplated by clause (b) above such Transfer shall not be
effective until such Affiliate has delivered to the Company a written
acknowledgment and agreement in form and substance satisfactory to the
Company that the Mezzanine Securities to be received by such Affiliate are
subject to all the provisions of this Agreement and that such Affiliate is
bound hereby and a party hereto to the same extent as a Mezzanine Investor.
3.1.3. Transfers of Management Securities Following Initial Public
-----------------------------------------------------------
Offering. Any individual holder of Management Securities may Transfer any
--------
or all of such Securities (other than any Options) to the public through a
broker, dealer or market maker pursuant to Rule 144 after the Initial
Public Offering provided that the Fund Investors shall own at such time
less than twenty-five percent (25%) of all Fund Securities owned by them
immediately prior to the Initial Public Offering.
3.1.4. Transfers of Management Securities to Immediate Family. Any
------------------------------------------------------
individual holder of Management Securities may Transfer any or all of such
Securities to a Member of the Immediate Family of such holder; provided,
--------
however, that no such Transfer shall be effective until such Member of the
-------
Immediate Family has delivered to the Company a written acknowledgment and
agreement in form and substance satisfactory to the Company that the
Securities to be received by such Member of the Immediate Family are
subject to all the provisions of this Agreement and that such Member of the
Immediate Family is bound hereby and a party hereto to the same extent as a
Management Investor; and provided, further, that any transfer of an Option
-------- -------
shall be subject to all of the terms and conditions of (and shall not be
permitted hereunder if prohibited by) such Option, or the plan under which
such Option was issued, in addition to the terms and conditions hereof.
3.1.5. Transfers of Management Securities Upon Death. Upon the death
---------------------------------------------
of any individual holder of Management Securities, the Securities held by
such holder may be distributed by will or other instrument taking effect at
death or by applicable laws of descent and distribution to such holder's
estate, executors, administrators and personal representatives, and then to
such holder's heirs, legatees or distributees, whether or not such
recipients are Members of the Immediate Family of such holder; provided,
--------
-12-
<PAGE>
however, that no such Transfer shall be effective until the recipient has
-------
delivered to the Company a written acknowledgment and agreement in form and
substance satisfactory to the Company that the Securities to be received by
such recipient are subject to all the provisions of this Agreement and that
such recipient is bound hereby and a party hereto to the same extent as a
Management Investor; and provided, further, that any transfer of an Option
shall be subject to all of the terms and conditions of (and shall not be
permitted hereunder if prohibited by) such Option, or the plan under which
such Option was issued, in addition to the terms and conditions hereof.
3.1.6. Certain Other Transfers of Management Securities. Subject to
------------------------------------------------
the provisions of Section 7.6, at any time not earlier than six months
after the closing of any underwritten Public Offering in which the Fund
Investors Transfers to the public a percentage (the "Public Offering Sale
Percentage") of all Common Stock owned by them immediately prior to such
Public Offering, any Management Investor may Transfer up to the Public
Offering Sale Percentage of all Common Stock owned at such time by such
Management Investor which has been registered on Form S-8 pursuant to
Section 7.3 hereof and which has been issued upon exercise of Replacement
Options issued to such Management Investor.
3.1.7. Right of First Refusal. Except as set forth in Sections 3.1.1,
----------------------
3.1.2, 5, 6 or 7 hereof, no holder of Mezzanine Securities shall Transfer
any Mezzanine Securities to any Person, unless such holder (the
"Transferring Holder") first (i) gives the Company not less than thirty
-------------------
(30) days prior written notice of its intent to Transfer such Mezzanine
Securities (the "Offer Notice"), which notice shall set forth the principal
------------
terms of the proposed Transfer, including the type and number of Mezzanine
Securities to be Transferred, the purchase price therefor, the identity of
any proposed transferee, a written bona fide and unconditional offer by
such proposed transferee to consummate the proposed Transfer and any other
material term of the proposed transaction and (ii) offers to Transfer such
Mezzanine Securities to the Company (or, at the Company's option, to any
Person which the Company may designate) or, if applicable as set forth
below, to any other Investor, on the terms set forth in such Offer Notice
(or, in the case of a Transfer all or a portion of the consideration for
which would consist of non-cash items, at the Company's or such other
Investor's option, for cash in an amount equal to the Fair Market Value of
the total consideration proposed to be received in respect of such
Mezzanine Securities). The Company (or such designated Person or any
combination thereof) may elect to purchase all (but not less than all) of
the Mezzanine Securities specified in the Offer Notice at the price and on
the terms specified therein by delivering written notice of such election
to the Transferring Holder within thirty (30) days after receipt by the
Company of the Offer Notice. If the Company (or such
-13-
<PAGE>
designated Person) has not within thirty (30) days after receipt by the
Company of the Offer Notice elected to purchase all of the Mezzanine
Securities specified in the Offer Notice, then the Company shall notify all
Investors (other than the Transferring Holder) of the proposed Transfer and
such other Investors will be permitted to purchase all (but not less than
all) of the Mezzanine Securities specified in the Offer Notice (the
allocation of such Securities among such other Investors who elect to
purchase to be as determined by them or, absent such determination, to be
allocated in proportion to their respective ownership interests in the
Company as determined by the Board of Directors) at the price and on the
terms specified in the Offer Notice by delivering written notice of such
election to the Company within thirty (30) days after the Company's
delivery of the notice to Investors referred to above. If the Company (or
such designated Person) or, if applicable, any other Investor, has elected
to purchase the Mezzanine Securities specified in the Offer Notice from the
Transferring Holder, the Transfer of such shares will be consummated as
soon as practical after the delivery of the election notice, but in any
event within ninety (90) days from the date of the Offer Notice. If neither
the Company (or such designated Person) nor any other Investor has elected
to purchase all of the Mezzanine Securities specified in the Offer Notice
within such 90-day period, the Transferring Holder may, within sixty (60)
days thereafter, Transfer such Mezzanine Securities to the proposed
transferee identified in the Offer Notice at a price no less than the price
per unit specified in the Offer Notice and on other terms no more favorable
in any material respect to the transferees than offered to the Company and
other Investors in the Offer Notice, but only if the Transferring Holder
has received the prior written consent of the Company to such Transfer
(which consent shall not be unreasonably withheld) and has executed and
delivered to the Company an instrument in form satisfactory to the Company
pursuant to which such transferee agrees to be bound by the terms of this
Agreement as a Mezzanine Investor. In the event the Mezzanine Securities
subject to any Offer Notice are not sold within the applicable period
specified above, they shall again become subject to the restrictions on
Transfer contained in this Section 3. The foregoing provisions of this
Section 3.1.7 shall not apply to Transfers by the Initial Fund Investor or
its Affiliates, in compliance with the MFN Letter Agreement, of Mezzanine
Securities issued to the Initial Fund Investor pursuant to the Mezzanine
Securities Purchase Agreement.
3.2. Period. The provisions of this Section 3 shall terminate as follows:
------
(a) the provisions of Section 3.1.6 shall expire on the earliest
to occur of (i) the date on which the Fund Investors shall own less than
twenty-five percent (25%) of all Fund Securities owned by them immediately
after the closing under the Purchase Agreement and (ii) the tenth
anniversary of the Original Closing Date;
-14-
<PAGE>
(b) the provisions of Section 3.5 shall terminate at such time as
all of the Preferred Stock has been redeemed; and
(c) all other provisions of this Section 3 shall expire on the
earliest to occur of (i) the date on which the Fund Investors shall own
less than twenty-five percent (25%) of all Fund Securities owned by them
immediately after the closing under the Purchase Agreement, (ii) the tenth
anniversary of the Original Closing Date; and (iii) the first time after
the IPO when the Mezzanine Investors and the Fund Investors (considered for
such purposes as a group) cease to have the power to cause the election of
a majority of the Board.
3.3. Status in Hands of Certain Transferees. The following rules shall
--------------------------------------
apply to determine the status of Transferred Securities in the hands of the
Transferee:
(a) Securities Transferred pursuant to and in compliance with Section
3.1.2(b) or (c) shall constitute Mezzanine Securities in the hands of
the Transferee;
(b) Securities Transferred pursuant to and in compliance with Section
3.1.4 and Section 3.1.5 shall constitute Management Securities in the
hands of the Transferee;
(c) Securities Transferred to Management Investors pursuant to and in
compliance with Section 3.1.7 shall constitute Management Securities
in the hands of such Transferee;
(d) Securities Transferred to Mezzanine Investors pursuant to and in
compliance with Section 3.1.7 shall constitute Mezzanine Securities
in the hands of such Transferee;
(e) Securities Transferred to the proposed transferee identified in the
Offer Notice pursuant to and in compliance with Section 3.1.7 shall
constitute Mezzanine Securities in the hands of such Transferee;
(f) Any Securities Transferred to any Fund Investor or any Affiliate
thereof pursuant to and in compliance with any provision of this
Agreement shall be Fund Securities in the hands of such Fund
Investor;
(g) Any Securities Transferred pursuant to and in compliance with clause
(i) of Section 3.1.1 to a Person designated by the Board shall have
the status designated by the Board;
(h) Securities Transferred pursuant to and in compliance with Section 5
or Section 6 shall not constitute Securities for any purpose hereof
in the hands of the Proposed Buyer; and
(i) Securities Transferred (i) pursuant to and in compliance with Section
7, (ii) in compliance with this Agreement in any Public Offering or
under Rule 144, or
-15-
<PAGE>
(iii) pursuant to and in compliance with Section 3.1.6 shall in the
hands of the transferee not constitute Securities for any purpose
hereof.
3.4. Lock-Up. Notwithstanding any provision to the contrary contained in
-------
this Section 3, no Transfer may be made pursuant to this Section 3 except in
compliance with the provisions of Section 7.5 hereof.
3.5. Restriction on Certain Transfers by Fund Investors While Preferred
------------------------------------------------------------------
Stock is Outstanding. The Fund Investors will not Transfer any Securities owned
- - --------------------
by them in a (or in connection with) a transaction that would constitute or
result in a Change in Ownership Triggering Event (as such term is defined in the
Company's Certificate of Designation with respect to the Preferred Stock)
without the prior written consent of holders of a majority of the Preferred
Stock then outstanding until such time as the Company has redeemed or offered to
redeem, pursuant to Section 5 of the Company's Certificate of Designation with
respect to the Preferred Stock, all of the Preferred Stock; provided, however,
-------- -------
that nothing in this Section 3.3 is intended, or shall be construed, to restrict
any transfer of Securities pursuant to Section 4.
4. CERTAIN PUT RIGHTS.
4.1. Put Right. At any time until the third anniversary hereof, upon the
---------
death or disability of any Management Investor or any Fund Investor who is a
natural person, the estate of such holder (or the heirs, legatees or
distributees of such holder to whom such Securities have been transferred upon
death) shall have the right to sell to the Company, and upon exercise of such
right the Company shall have the obligation to purchase, all or any portion of
the Management Securities or Fund Securities (as the case may be) held by such
estate (or other specified Person) on the following terms (the "Put Option"):
----------
4.1.1. Notice. Notice of an intention to sell securities pursuant
------
to this Section 4.1 must be delivered to the Company within six (6) months
of the death or disability of the holder of such Securities.
4.1.2. Price. Securities will be purchased pursuant to this Section
-----
4.1 at a price, payable at the Company's sole option in cash or in a six
year note (or, in the event such note is issued prior to payment in full of
all of the obligations under the Senior Credit Agreement and termination of
all commitments to lend thereunder, which matures not earlier than February
26, 2007) issued by the Company, bearing interest payable at the Company's
option either in cash or through issuance of additional pay-in-kind notes
at a fixed rate per annum equal to the Prime Rate (as defined below) in
effect on the date of issuance plus one percent, such interest to be
payable quarterly in
-16-
<PAGE>
arrears, which note shall be prepayable without premium or penalty, and
subordinated to all other debt of the Company and its Subsidiaries on terms
reasonably satisfactory to the holders of such debt and as required by the
Senior Credit Agreement (each a "Company Note", and collectively, the
------------
"Company Notes"), equal to the lower of (a) the Cost of such Securities
-------------
plus an amount generating, in each case, a return on such Cost from the
date of issuance of such Securities to the date of exercise of the Put
Option equal to the rate of interest announced publicly by Banque Nationale
de Paris as its prime rate (the "Prime Rate") in effect on the date of
issuance and (b) the then Fair Market Value of such Securities.
4.1.3. Senior Lenders. The Company shall have no obligation to
--------------
purchase any Shares pursuant to this Section 4.1 if such purchase is
prohibited by or would give rise to any default or event of default under
any agreement (a "Material Loan Agreement") to which the Company or any of
-----------------------
subsidiaries may be or hereafter become a party relating to indebtedness
for borrowed money in a principal amount outstanding (including, without
limitation, unused availability under a line of credit) in excess of
$1,000,000; provided, however, that in such circumstances the obligation to
-------- -------
purchase Shares pursuant to this Section 4.1 shall be extended until such
time as such circumstances no longer exist.
4.2. Closing; Assignability of Company Purchase Rights; Related Matters.
------------------------------------------------------------------
The closing of any purchase pursuant to the exercise of any Put Options pursuant
to this Section 4 shall take place as soon as reasonably practicable at the
principal office of the Company, or at such other time and location as the
parties to such purchase may mutually determine. In the event the price of any
securities to be purchased pursuant to this Section 4 is specified to be Fair
Market Value, such Fair Market Value shall be determined as of the date of the
applicable death or disability. At the closing of any purchase and sale
pursuant to this Section 4, the holder of securities to be sold shall deliver to
the Company a certificate or certificates representing the Securities to be
purchased by the Company duly endorsed, or with stock powers or other
appropriate instruments duly endorsed, for transfer with signature guaranteed,
free and clear of any lien or encumbrance, with any necessary stock transfer tax
stamps affixed, and the Company shall pay to such holder by Company check or
wire transfer of immediately available or next day funds or note, as may be
applicable pursuant to Section 4.1, the purchase price of the securities being
purchased by the Company. The delivery of a certificate or certificates for
Securities by any Person selling securities pursuant to this Section 4 shall be
deemed a representation and warranty by such Person that: (i) such Person has
full right, title and interest in and to such securities; (ii) such Person has
all necessary power and authority and has taken all necessary action to sell
such securities as contemplated; and (iii) such securities are free and clear of
any and all liens or encumbrances. The Company
-17-
<PAGE>
shall have the right, but no obligation, to assign to any holder of Investor
Shares all or any portion of its right to purchase any securities pursuant to
this Section 4.
4.3. Period. The foregoing provisions of this Section 4 shall expire on
------
the date of the Initial Public Offering.
4.4. Construction. The foregoing provisions of this Section 4 are not
------------
intended, and shall not be construed, to eliminate, waive or otherwise affect
the restrictions on transfer, vesting requirements or termination provisions
which may apply to any Security by its terms or under provisions of the option
plan pursuant to which such Security was granted or other governing
documentation (for example, any option certificate evidencing such Security).
5. "TAKE ALONG" RIGHTS. Each holder of Securities hereby agrees, if
requested by the Fund Majority Holders, to Transfer for value (for purposes of
this Section 5, a "Sale") a specified percentage (for purposes of this Section
----
5, the "Sale Percentage") of the Common Stock then owned by or issuable
---------------
(pursuant to any Option) to such holder to any Person other than a Fund Investor
or any of their respective Affiliates (for purposes of this Section 5, the
"Proposed Buyer") in the manner and on the terms set forth in this Section 5 in
--------------
connection with the Sale by one or more holders of Fund Securities
(collectively, the "Proposed Fund Seller") of the Sale Percentage of the total
--------------------
number of Fund Securities held by all holders of Fund Securities (calculated on
a fully diluted basis as if all shares of Common Stock issuable upon exercise of
Options held by any Fund Investor were issued and outstanding) to the Proposed
Buyer; provided, however, that the Fund Investors shall not be entitled to so
-------- -------
require others to participate in any Sale unless the Fund Investors propose to
sell in such Sale a majority of all Common Stock then owned by the Fund
Investors.
5.1. Procedure. If the Fund Majority Holders elect to exercise their
---------
rights under this Section 5, a notice (the "Come Along Notice") shall be
-----------------
furnished by the Proposed Fund Seller to each holder of Securities. The Come
Along Notice shall set forth the principal terms of the proposed Sale insofar as
it relates to the Securities, including the number of Securities to be purchased
from the Proposed Fund Seller, the Sale Percentage, the maximum and minimum
purchase price (which maximum purchase price shall not exceed the minimum price
by more than 110%) and the name of the Proposed Buyer. If the Fund Majority
Holders consummate the Sale referred to in the Come Along Notice, each other
holder of Securities (each a "Participating Seller") shall be bound and
--------------------
obligated to Sell the Sale Percentage of the Securities in the Sale on the same
terms and conditions (subject to all of the provisions of this Agreement) with
respect to each Security sold, as the Proposed Fund Seller shall Sell each Fund
Security in the Sale, and, in the case of Options have the opportunity to either
(i) exercise such Options (if then exercisable) and participate in such Sale as
holders of Common Stock
-18-
<PAGE>
issuable upon such exercise, or (ii) upon the consummation of the Sale, receive
in exchange for such Options (to the extent exercisable at the time of such
Sale) consideration equal to the amount (if greater than zero) determined by
multiplying (1) the same amount of consideration per Share received by the
holders of the Common Stock of the same class of Common Stock for which the
Option is exercisable in connection with the Sale less the exercise price per
share of such Option by (2) the number of shares of Common Stock of such class
issuable upon exercise of such Option. If at the end of the one hundred
twentieth (120th) day following the date of the effectiveness of the Come Along
Notice the Proposed Fund Seller has not completed the Sale, each Participating
Seller shall be released from his obligation under the Come Along Notice, the
Come Along Notice shall be null and void, and it shall be necessary for a
separate Come Along Notice to have been furnished and the terms and provisions
of this Section 5 separately complied with, in order to consummate such Sale
pursuant to this Section 5, unless the failure to complete such Sale resulted
from any failure by any Participating Seller to comply in any material respect
with the terms of this Section 5.
5.2. Certain Legal Requirements. In the event the consideration to be
--------------------------
paid in exchange for Securities in the proposed Sale pursuant to Section 5.1
includes any securities and the receipt thereof by any Investor as a
Participating Seller would require under applicable law (i) the registration or
qualification of such securities or of any person as a broker or dealer or agent
with respect to such securities or (ii) the provision to any participant in the
Sale of any information other than such information as would be required under
Regulation D of the Securities and Exchange Commission or similar rule then in
effect in an offering made pursuant to said Regulation D solely to "accredited
investors" as defined in said Regulation D, the Proposed Fund Seller shall be
obligated only to use reasonable efforts to cause such requirements to have been
complied with to the extent necessary to permit such Participating Seller to
receive such securities. Notwithstanding any provisions of this Section 5, if
such efforts shall not have resulted in such requirements being complied with to
the extent necessary to permit such Participating Seller to receive such
securities, the Proposed Fund Seller shall cause to be paid to such
Participating Seller in lieu thereof, against surrender of the Securities (in
accordance with Section 5.4 hereof) which would have otherwise been Sold by such
Participating Seller to the Proposed Buyer in the Sale, an amount in cash equal
to the Fair Market Value of the securities which such Participating Seller would
otherwise receive. The obligation of the Proposed Fund Seller to use reasonable
efforts to cause such requirements to have been complied with to the extent
necessary to permit a Participating Seller to receive such securities shall be
conditioned on such Participating Seller executing such documents and
instruments, and taking such other actions (including without limitation, if
required by the Proposed Fund Seller on advice of its counsel, agreeing to be
represented during the course of such transaction by a "purchaser
representative" (as defined in said Regulation D) in connection with evaluating
the merits and risks of the prospective investment and
-19-
<PAGE>
acknowledging that he was so represented), as the Proposed Fund Seller shall
reasonably request in order to permit such requirements to have been complied
with. Each Participating Seller agrees to take such actions as the Proposed Fund
Seller shall reasonably request in order to permit such requirements to have
been complied with, and no Participating Seller shall have the right to require
that such Participating Seller receive cash in lieu of securities on grounds
that such requirements have not been complied with. The foregoing provisions of
this Section 5.2 shall not apply to any Investor who is an "accredited investor"
as defined in said Regulation D.
5.3. Further Assurances. Each Participating Seller, and each Investor to
------------------
whom the Securities held by such Participating Seller were originally issued,
shall, whether in his capacity as a Participating Seller, stockholder, officer
or director of the Company, or otherwise, take or cause to be taken all such
actions (subject as to entering into agreements to the provisions of the next
sentence hereof) as may be requested in order expeditiously to consummate each
Sale pursuant to Section 5.1. The Fund Investors shall take or cause to be
taken all such actions as may be reasonably necessary in order expeditiously to
consummate each Sale pursuant to Section 5.1; provided, however, that this
-------- -------
sentence shall not be interpreted so as to obligate such Fund Investors to
consummate any such Sale. Each such Participating Seller or Investor agrees to
execute and deliver such agreements as may be necessary for the Participating
Seller to be subject to the same terms and conditions (subject to all of the
provisions of this Agreement) with respect to each Security sold as the Proposed
Fund Seller shall Sell each Fund Security in the Sale, including, without
limitation, an agreement by such Participating Seller (i) to be subject to such
purchase price escrow, indemnity or adjustment provisions as may apply to
Investors generally, (ii) to be liable in respect of any individual
representations or warranties to be given by selling Investors in the Sale
regarding such matters as legal capacity or due organization of such
Participating Seller, authority to participate in the Sale, and ownership (free
and clear of liens, charges, encumbrances and adverse claims) of Securities to
be sold by such Participating Seller ("Individual Representations") (insofar as
--------------------------
such Individual Representations relate to such Participating Seller) and (iii)
to be liable in respect of any general representations or warranties to be given
by selling Investors in the Sale regarding such matters as the liabilities
(contingent and otherwise), assets, agreements and business of the Company and
its Subsidiaries, the compliance of the Sale with laws and contracts, and the
adequacy of disclosure ("General Representations"); provided, however, that
----------------------- -------- -------
except with respect to Individual Representations, the aggregate amount of the
liability of each Participating Seller in the Sale in respect of
representations, warranties and indemnities shall not exceed the lesser of (i)
such Participating Seller's pro rata portion of any such liability, in
accordance with such Participating Seller's portion of the total number of
Securities included in the Sale (calculated on a Common Stock
-20-
<PAGE>
equivalent basis in case of Securities other than Common Stock, as determined by
the Board in good faith) or (ii) the net proceeds received by such Participating
Seller from the Sale.
5.4 Closing. The closing of a Sale pursuant to Section 5.1 shall take
-------
place at such time and place as the Fund Majority Holders shall specify by
notice to each Participating Seller. At the closing of any Sale under this
Section 5, each Participating Seller shall deliver the certificates evidencing
the Securities to be sold by such Participating Seller, duly endorsed, or with
stock powers or other appropriate instruments duly endorsed, for transfer with
signature guaranteed, free and clear of any liens, encumbrances or adverse
claims, with any stock transfer tax stamps affixed, against delivery of the
applicable consideration.
5.5 Period. The foregoing provisions of this Section 5 shall terminate on
------
the earlier to occur of: (a) the time immediately following the closing of the
Initial Public Offering; and (b) the tenth anniversary of the Original Closing
Date provided, however, that in the event a Come Along Notice shall have become
-------- -------
effective within one hundred twenty (120) days prior to such date, the foregoing
provisions of this Section 5 shall remain in effect until the earlier of (i) the
consummation of the closing of the Sale to which the Come Along Notice relates
and (ii) the one hundred twentieth (120th) day following the effectiveness of
the Come Along Notice.
6. CO-SALE RIGHTS.
6.1 Tag Along. No holder or holders of Fund Securities (for purposes of
---------
this Section 6, collectively, the "Proposed Fund Seller") shall Transfer (for
--------------------
purposes of this Section 6, a "Sale") any Fund Securities to any other Person
----
(the "Proposed Buyer") except in the manner and on the terms set forth in this
--------------
Section 6, and attempted Transfers in violation of this Section 6 shall be null
and void.
6.1.1 Offer. A written notice (the "Tag Along Notice") shall be
----- ----------------
furnished by the Proposed Fund Seller to each holder of Non-Fund Securities
(the "Tag Along Offerees") at least fifteen (15) business days prior to a
------------------
Sale. The Tag Along Notice shall include:
(a) The principal terms of the proposed Sale insofar as it
relates to the Securities, including the number of Securities to be
purchased from the Proposed Fund Seller, the percentage on a fully-
diluted basis (as if all shares of Common Stock issuable upon exercise
of Options held by any Fund Investor were issued and outstanding) of
the total number of Fund Securities held by all holders of Fund
Securities which such number of Securities constitutes (for purposes
of this Section 6, the "Sale Percentage"), the maximum and minimum
---------------
-21-
<PAGE>
purchase price (which maximum purchase price shall not exceed the
minimum price by more than 110%), and the name of the Proposed Buyer;
and
(b) An offer by the Proposed Fund Seller to include, at the
option of each Tag Along Offeree, in the Sale to the Proposed Buyer
such number of Securities of the same class of Securities being sold
by the Proposed Fund Seller in such Sale (not in any event to exceed
the Sale Percentage of the total number of Securities of such class
held by such Tag Along Offeree) owned by each Tag Along Offeree
determined in accordance with Section 6.1.2 hereof, on the same terms
and conditions (subject to all of the provisions of this Agreement),
with respect to each Security being sold, as the Proposed Fund Seller
shall Sell each of its Securities.
6.1.2 Exercise. Each Tag Along Offeree desiring to accept the offer
--------
contained in the Tag Along Notice shall send a written commitment to the
Proposed Fund Seller specifying the number of Securities (not in any event
to exceed the Sale Percentage of the total number of Securities of such
class held by such Tag Along Offeree) which such Tag Along Offeree desires
to have included in the Sale within ten (10) business days after the
effectiveness of the Tag Along Notice (each a "Participating Seller"). Each
--------------------
Tag Along Offeree who has not so accepted such offer shall be deemed to
have waived all of his or her rights with respect to the Sale, and the
Proposed Fund Seller and the Participating Sellers shall thereafter be free
to Sell to the Proposed Buyer, at a price no greater than 105% of the
maximum price set forth in the Tag Along Notice and otherwise on terms not
more favorable in any material respect to them than those set forth in the
Tag Along Notice, without any further obligation to such non-accepting Tag
Along Offerees. If, prior to consummation, the terms of such proposed Sale
shall change with the result that the price shall be greater than 105% of
the maximum price set forth in the Tag Along Notice or the other terms
shall be more favorable in any material respect than as set forth in the
Tag Along Notice, it shall be necessary for a separate Tag Along Notice to
have been furnished, and the terms and provisions of this Section 6
separately complied with, in order to consummate such proposed Sale
pursuant to this Section 6; provided, however, that in the case of such a
-------- -------
separate Tag Along Notice, the applicable period referred to in Section
6.1.1 shall be four (4) business days and the applicable period referred to
above in this Section 6.1.2 shall be two (2) business days.
The acceptance of each Participating Seller shall be irrevocable
except as hereinafter provided, and each such Participating Seller shall be
bound and obligated to Sell in the Sale such number of Securities as such
Participating Seller shall have
-22-
<PAGE>
specified in such Participating Seller's written commitment on the same
terms and conditions (subject to all of the provisions of this Agreement)
with respect to each Security Sold, as the Proposed Fund Seller shall sell
each Fund Security in the Sale, and, in the case of Options have the
opportunity to exercise such Options (if then exercisable) and participate
in such Sale as holders of Common Stock issuable upon such exercise. In the
event the Proposed Fund Seller shall be unable (otherwise than by reason of
the circumstances described in Section 6.2) to obtain the inclusion in the
Sale of all Securities which the Proposed Fund Seller and each
Participating Seller desires to have included in the Sale (as evidenced in
the case of the Proposed Fund Seller by the Tag Along Notice and in the
case of each Participating Seller by such Participating Seller's written
commitment), the number of Securities to be sold in the Sale by the
Proposed Fund Seller and each Participating Seller shall be reduced on a
pro rata basis according to the proportion which the number of Securities
which each such Seller desires to have included in the Sale bears to the
total number of Securities desired by all such Sellers to have included in
the Sale.
If at the end of the one hundred twentieth (120th) day following the
date of the effectiveness of the Tag Along Notice the Proposed Fund Seller
has not completed the Sale as provided in the foregoing provisions of this
Section 6.1, each Participating Seller shall be released from his
obligations under his written commitment, the Tag Along Notice shall be
null and void, and it shall be necessary for a separate Tag Along Notice to
have been furnished, and the terms and provisions of this Section 6
separately complied with, in order to consummate such Sale pursuant to this
Section 6, unless the failure to complete such Sale resulted from any
failure by any Tag Along Offeree to comply in any material respect with the
terms of this Section 6.
6.2 Certain Legal Requirements. In the event the consideration to be paid
--------------------------
in exchange for Securities in the proposed Sale pursuant to Section 6.1 includes
any securities and the receipt thereof by any Investor as a Participating Seller
would require under applicable law (i) the registration or qualification of such
securities or of any person as a broker or dealer or agent with respect to such
securities or (ii) the provision to any participant in the Sale of any
information other than such information as would be required under Regulation D
of the Securities and Exchange Commission or similar rule then in effect in an
offering made pursuant to said Regulation D solely to "accredited investors" as
defined in said Regulation D, the Proposed Fund Seller shall be obligated only
to use reasonable efforts to cause such requirements to have been complied with
to the extent necessary to permit such Participating Seller to receive such
securities. Notwithstanding any provisions of this Section 6, if use of such
efforts shall not have resulted in such requirements being complied with to the
extent necessary to permit such Participating Seller to receive such securities,
the Proposed Fund
-23-
<PAGE>
Seller shall cause to be paid to such Participating Seller in lieu thereof,
against surrender of the Securities (in accordance with Section 6.4 hereof)
which would have otherwise been Sold by such Participating Seller to the
Proposed Buyer in the Sale, an amount in cash equal to the Fair Market Value of
the securities which such Participating Seller would otherwise receive. The
obligation of the Proposed Fund Seller to use reasonable best efforts to cause
such requirements to have been complied with to the extent necessary to permit a
Participating Seller to receive such securities shall be conditioned on such
Participating Seller executing such documents and instruments, and taking such
other actions (including without limitation, if required by the Proposed Fund
Seller on advice of its counsel, agreeing to be represented during the course of
such transaction by a "purchaser representative" (as defined in said Regulation
D) in connection with evaluating the merits and risks of the prospective
investment and acknowledging that he was so represented), as the Proposed Fund
Seller shall reasonably request in order to permit such requirements to have
been complied with. Each Participating Seller agrees to take such actions as the
Proposed Fund Seller shall reasonably request in order to permit such
requirements to have been complied with, and no Participating Seller shall have
the right to require that such Participating Seller receive cash in lieu of
securities on grounds that such requirements have not been complied with. The
foregoing provisions of this Section 6.2 shall not apply to any Investor who is
an "accredited investor" as defined in said Regulation D.
6.3 Further Assurances. Each Participating Seller, and each Investor to
------------------
whom the Securities held by such Participating Seller were originally issued,
shall, whether in his capacity as a Participating Seller, stockholder, officer
or director of the Company, or otherwise, take or cause to be taken all such
actions (subject as to entering into agreements to the provisions of the next
sentence hereof) as may be reasonably requested in order expeditiously to
consummate each Sale pursuant to Section 6.1. The Fund Investors shall take or
cause to be taken all such actions as may be reasonably necessary in order
expeditiously to consummate each Sale pursuant to Section 6.1; provided,
--------
however, that this sentence shall not be interpreted so as to obligate such Fund
- - -------
Investor to consummate any such Sale. Each such Participating Seller or
Investor agrees to execute and deliver such agreements as may be necessary for
the Participating Seller to be subject to the same terms and conditions (subject
to all of the provisions of this Agreement) with respect to each Security sold
as the Proposed Fund Seller shall Sell each Fund Security in the Sale,
including, without limitation, an agreement by such Participating Seller (i) to
be subject to such purchase price escrow, indemnity or adjustment provisions as
may apply to Investors generally, (ii) to be liable in respect of any Individual
Representations to be given by selling Investors in the Sale (insofar as such
Individual Representations relate to such Participating Seller) and (iii) to be
liable in respect of any General Representations to be given by selling
Investors in the Sale; provided, however, that except with respect to Individual
-------- -------
Representations, the aggregate amount of the
-24-
<PAGE>
liability of each Participating Seller in respect of representations, warranties
and indemnities shall not exceed the lesser of (i) such Participating Seller's
pro rata portion of any such liability, in accordance with such Participating
Seller's portion of the total number of Securities included in the Sale or (ii)
the net proceeds received by such Participating Seller from the Sale.
6.4 Closing. The closing of a Sale pursuant to Section 6.1 shall take
-------
place at such time and place as the Fund Majority Holders shall specify by
notice to each Participating Seller. At the closing of any Sale under this
Section 6, each Participating Seller shall deliver the certificates evidencing
the Securities to be sold by such Participating Seller, duly endorsed, or with
stock powers or other appropriate instruments duly endorsed, for transfer with
signature guaranteed, free and clear of any liens, encumbrances or adverse
claims, with any stock transfer tax stamps affixed, against delivery of the
applicable consideration.
6.5 Excluded Transactions. Notwithstanding any provisions of this Section
---------------------
6 to the contrary and subject to the provisions of Section 7 below, the
preceding provisions of this Section 6 shall not restrict any Transfer pursuant
to the provisions of Section 5 or 7 of this Agreement; and no holder of Non-Fund
Securities shall have pursuant to the provisions of this Section 6 any right of
participation or otherwise with respect to:
(a) any Transfer of Fund Securities to a Fund Investor or an
Affiliated Fund; or
(b) any Transfer of Fund Securities to partners, employees or
Affiliates of a Fund Investor or an Affiliated Fund or pro rata to the
partners, employees or Affiliates of a Fund Investor or an Affiliated
Fund or to any trust established for the benefit of any of the
foregoing Persons or the benefit of any Member of the Immediate Family
of any of the foregoing persons; or
(c) any Transfer of Fund Securities to any director, officer or
employee of the Company or its Subsidiaries; or
(d) any Transfer of Fund Securities if, after giving effect to
such Sale, the holders of Fund Securities will continue to own 85% or
more of all Fund Securities owned by them immediately after the
closing under the Purchase Agreement; or
(e) any Transfer of Fund Securities in a Public Offering; or
-25-
<PAGE>
(f) any Transfer by the Initial Fund Investor or its Affiliates
in compliance with the MFN Letter Agreement of Preferred Stock,
Mezzanine Warrants or Shares purchased by the Initial Fund Investor
pursuant to the Mezzanine Securities Purchase Agreement.
Notwithstanding the provisions of the immediately preceding sentence, no
Transfer of Fund Securities pursuant clause (a), (b), (c) or (d) of such
sentence shall be effective until the recipient has delivered to the Company a
written acknowledgment and agreement in form and substance reasonably
satisfactory to the Company that all Fund Securities to be received by such
recipient are subject to all of the provisions of this Agreement and that such
recipient is bound hereby and a party hereto to the same extent as a Initial
Fund Investor or a Management Investor.
6.6 Period. The foregoing provisions of this Section 6 shall expire on
------
the earlier to occur of (i) the first date on which the Fund Investors own less
than twenty-five percent (25%) of all Fund Securities owned by them immediately
after the closing under the Purchase Agreement; and (ii) the time immediately
following the closing of the Initial Public Offering; provided, however, that in
-------- -------
the event a Tag Along Notice shall have become effective within one hundred
twenty (120) days prior to such date, the foregoing provisions of this Section 6
shall remain in effect until the earlier of (i) the consummation of the closing
of the Sale to which the Tag Along Notice relates and (ii) the one hundred
twentieth (120th) day following the effectiveness of the Tag Along Notice.
7. REGISTRATION RIGHTS. The Company will perform and comply, and cause
each of its Subsidiaries to perform and comply, with such of the following
provisions as are applicable to it. Each holder of Securities will perform and
comply with such of the following provisions as are applicable to such holder.
7.1 Piggyback Registration Rights.
-----------------------------
7.1.1 Election. Whenever the Company proposes to register on Form S-
--------
1, S-2 or S-3 (or any successor form) any shares of Common Stock for its
own or others' account under the Securities Act for a public offering (each
a "Public Offering"), the Company shall furnish each holder of Registrable
---------------
Securities prompt notice of its intent to do so. Upon the request of any
such holder given by notice to the Company within twenty (20) days after
the effectiveness of such notice from the Company, the Company will use its
reasonable best efforts to cause to be included in such registration all of
the Registrable Securities which such holder requests, subject however to
the provisions of Section 7.4.1.
-26-
<PAGE>
7.1.2 Further Assurances. Holders of Registrable Securities
------------------
participating in any Public Offering shall take all such actions and
execute all such documents and instruments that are reasonably requested by
the Company to effect the sale of their Registrable Securities in such
Public Offering, including without limitation being parties to the
underwriting agreement entered into by the Company and any other selling
shareholders in connection therewith and being liable in respect of the
representations and warranties being made by each selling shareholder, and
any indemnification agreements and "lock-up" agreements made by each
selling shareholder for the benefit of the underwriters in such
underwriting agreement.
7.1.3 Expenses. The Company shall pay the reasonable expenses of the
--------
holders of Registrable Securities participating in any Public Offering
pursuant to this Section 7.1, other than (i) underwriting discounts and
commissions, if any, (ii) applicable transfer taxes, if any, and (iii) fees
and charges of any attorneys or other advisors (other than attorneys and
advisors retained by the Company to advise it in connection with such
Public Offering and one counsel retained to advise all holders of
Registrable Securities comprising Mezzanine Securities and one counsel
retained to advise all other holders of Registrable Securities in
connection with such Public Offering) retained by any such holders.
7.1.4 Excluded Transactions. Notwithstanding the preceding provisions
---------------------
of this Section 7.1, no holder of Registrable Securities shall have any
right of participation or otherwise with respect to the following Public
Offerings:
(a) Any Public Offering relating primarily to dividend
reinvestment plans, employee benefit plans or otherwise to employees,
directors or independent consultants rendering services to the Company
or any of its Affiliates, or
(b) Any Public Offering constituting an exchange of securities
for securities of any businesses acquired by, or combined with, the
Company or any of its Subsidiaries or otherwise constituting
securities issued as part of the consideration paid in any business
combination or acquisition transaction.
7.2 Demand Registration Rights.
--------------------------
7.2.1 Registration on Request of Holders of Fund Securities. One or
-----------------------------------------------------
more holders of Fund Securities that wish to register securities
representing at least twenty-
-27-
<PAGE>
five percent (25%) of the total amount of Fund Securities then outstanding
(as to such registration, the "Initiating Holders") may, by notice to the
------------------
Company specifying the intended method or methods of disposition, request
that the Company effect the registration under the Securities Act of all or
a specified part of the Registrable Securities held by such Initiating
Holders. The demand registration rights granted pursuant to this Section
7.2.1 may not be exercised on more than four occasions; provided, however,
-------- -------
that in the event the number of shares requested to be included in any such
registration by the Initiating Holders with respect thereto is reduced by
operation of the provisions of Section 7.4.1, the demand registration
rights granted pursuant to this Section 7.2.1 may not be exercised on more
than five (5) occasions. No holder of Fund Securities shall present any
request for registration pursuant to this Section 7.2.1 at any time within
one hundred twenty (120) days after either the furnishing by the Company of
any notice of proposed registration under Section 7.1 or 7.2 hereof (unless
abandoned by notice from the Company or the Majority Initiating Holders, as
applicable) or the consummation of any other Public Offering, without the
prior consent of the Company. Promptly after receipt of such notice, the
Company will give notice of such requested registration to all other
holders of Registrable Securities. The Company will then use its reasonable
best efforts to effect the registration under the Securities Act of the
Registrable Securities which the Company has been requested to register by
such Initiating Holders, and, subject to all of the provisions of this
Section 7, all other Registrable Securities which the Company has been
requested to register pursuant to Section 7.1.1 by notice delivered to the
Company within 20 days after the giving of such notice by the Company
(which request shall specify the intended method of disposition of such
Registrable Securities), all to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid)
of the Registrable Securities which the Company has been so requested to
register.
7.2.2 Registration on Request of Holders of Mezzanine Securities. At
----------------------------------------------------------
any time not earlier than eighteen months after consummation of the Initial
Public Offering, the Mezzanine Majority Holders (as to such registration,
the "Initiating Holders") may, by notice to the Company specifying the
------------------
intended method or methods of disposition, request that the Company effect
the registration under the Securities Act of all or a specified part of the
Registrable Securities held by such holders; provided, however, that the
-------- -------
registration rights granted pursuant to this Section 7.2.2 may only be
exercised if the securities to be included in such registration shall
constitute 20% or more of the Common Stock, including shares of Common
Stock issuable upon exercise of Options, owned by Mezzanine Investors
immediately after the closing under the Purchase Agreement. The demand
registration rights granted pursuant to this Section 7.2.2 may not be
exercised on more than two (2) occasions; provided, however, that in the
-------- -------
event
-28-
<PAGE>
the number of shares requested to be included in any such registration by
the Initiating Holders with respect thereto is reduced by operation of the
provisions of Section 7.4.1, the demand registration rights granted
pursuant to this Section 7.2.2 may not be exercised on more than three (3)
occasions. No holder of Mezzanine Securities shall present any request for
registration pursuant to this Section 7.2.2 at any time within one hundred
twenty (120) days after either the furnishing by the Company of any notice
of proposed registration under Section 7.1 or 7.2 hereof (unless abandoned
by notice from the Company or by holders of at least a majority of the
Registrable Securities held by the Initiating Holders (the "Majority
--------
Initiating Holders"), as applicable) or the consummation of any other
------------------
Public Offering without the prior consent of the Company. Promptly after
receipt of any notice requesting registration of Registrable Securities
pursuant to this Section 7.2.2, the Company will give notice of such
requested registration to all other holders of Registrable Securities. The
Company will then use its reasonable best efforts to effect the
registration under the Securities Act of the Registrable Securities which
the Company has been requested to register by the holders requesting
pursuant to this Section 7.2.2, and, subject to all of the provisions of
this Section 7, all other Registrable Securities which the Company has been
requested to register pursuant to Section 7.1.1 by notice delivered to the
Company within 20 days after the giving of such notice by the Company
(which request shall specify the intended method of disposition of such
Registrable Securities), all to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid)
of the Registrable Securities which the Company has been so requested to
register.
7.2.3 Blackout Provisions. At any time following the Company's
-------------------
receipt of any demand for registration pursuant to Section 7.2.1 or 7.2.2
and prior to the effectiveness of the registration statement filed pursuant
to such provisions, the Company may, by notice to all holders of
Registrable Securities to be included in such registration, elect to delay
the filing of any registration statement or any request for acceleration of
effectiveness thereof or otherwise suspend the registration process for a
period of up to sixty (60) days if, in the judgment of the Board of
Directors such action is in the best interests of the Company (because of
the existence of another Public Offering or because of material non-public
information the disclosure of which would not, absent such registration, be
required and the disclosure of which could be harmful to the Company). The
Company will be under no obligation to disclose the basis for any such
delay, revocation or suspension. At any time during the effectiveness of
any registration statement covering Registrable Securities offered by an
Investor, if such Investor becomes aware of any change materially affecting
the accuracy of the information contained in such registration statement or
the prospectus (as then amended or supplemented) relating to such Investor,
it will immediately notify the Company of
-29-
<PAGE>
such change. Upon receipt of any notice from the Company of the happening
of any event as a result of which any prospectus included in any such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any 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, each holder of
Registrable Securities will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement until such
Holder receives copies of a supplemented or amended prospectus from the
Company and, if so directed by the Company, shall deliver to the Company
(at the Company's expense) all copies, other than one permanent file copy
to be maintained in confidence, then in such holder's possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice. In the event the Company shall give any such
notice, the 90-day period referred to in Section 7.4.2 shall be extended by
a number of days equal to the number of days during the period from the
giving of such notice from the Company to stop trading to the date when the
copies of the supplemented or amended prospectus are sent to holders whose
Registrable Securities are included in such registration statement. In the
event that any other holder of Registrable Securities (including, without
limitation, any Fund Investor) is or becomes subject to blackout provisions
(under any other agreement with the Company regarding registration rights)
which are more favorable in any material respect to such holder than the
blackout provisions to which the Fund Investors and the Mezzanine Investors
are subject under this Section 7.2.3, then the provisions of this Section
7.2.3 shall be deemed to be amended as appropriate to reflect such more
favorable provisions and any related terms and conditions.
7.2.4 Registrations Pursuant to Section 7.2. In the case of a
-------------------------------------
registration pursuant to Section 7.2, whenever the Majority Initiating
Holders shall request that such registration shall be effected pursuant to
an underwritten offering, such registration shall be so effected, and all
Registrable Securities to be included in such registration shall be
included in such underwritten offering, subject to the cutback provisions
of Section 7.4.1. If requested by such underwriters, the Company will enter
into an underwriting agreement with such underwriters for such offering
containing such representations and warranties by the Company and such
other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, customary indemnity and contribution provisions.
7.2.5 Expenses. The Company shall pay the reasonable expenses of the
--------
holders of Registrable Securities participating in any Public Offering
pursuant to this
-30-
<PAGE>
Section 7.2, other than (i) underwriting discounts and commissions, if any,
(ii) applicable transfer taxes, if any, and (iii) fees and charges of any
attorneys or other advisors (other than attorneys and advisors retained by
the Company to advise it in connection with such Public Offering and one
counsel retained to advise each of (x) all holders of Registrable
Securities which are Fund Securities and (y) all holders of Registerable
Securities which are Mezzanine Securities in connection with such Public
Offering) retained by any such holders.
7.3. Registration on Form S-8. After any underwritten Public
------------------------
Offering in which the Fund Investors sell Common Stock, the Company shall
file (and shall use all reasonable efforts to cause to become effective as
soon as practicable following such filing) a registration statement on Form
S-8 covering the Common Stock issuable upon exercise of the Replacement
Options and Performance-Based Management Options; provided, however, that
-------- -------
this Section 7.3 is not intended, and shall not be construed, to permit any
Transfer of any such Common Stock not otherwise permitted pursuant to the
terms of this Agreement.
7.4. Certain Other Provisions.
------------------------
7.4.1. Underwriter's Cutback. In connection with any registration of
---------------------
shares, the underwriter may determine that marketing factors (including,
without limitation, an adverse effect on the per share offering price)
require a limitation of the number of shares to be underwritten.
Notwithstanding any contrary provision of this Section 7 and subject to the
terms of this Section 7.4.1, the underwriter may limit the number of shares
which would otherwise be included in such registration by excluding any or
all Registrable Securities from such registration (it being understood that
the number of shares which the Company seeks to have registered in such
registration shall not be subject to exclusion, in whole or in part, under
this Section 7.4.1). Upon receipt of notice from the underwriter of the
need to reduce the number of shares to be included in the registration, the
Company shall advise all holders of the Company's securities that would
otherwise be registered and underwritten pursuant hereto, and the number of
shares of such securities, including Registrable Securities, that may be
included in the registration shall be allocated in the following manner,
unless the underwriter shall determine that marketing factors require a
different allocation: shares, other than Registrable Securities, requested
to be included in such registration by shareholders shall be excluded; and,
if a limitation on the number of shares is still required, the number of
Registrable Securities that may be included in such registration by holders
of Shares under Section 7.1 shall be allocated among the holders of
Registrable Securities in proportion, as nearly as practicable, to the
respective amounts of Registrable
-31-
<PAGE>
Securities which each such shareholder requested be registered under
Section 7.1 in such registration; and, if a limitation on the number of
shares is still required, the number of Registrable Securities that may be
included in such registration by shareholders under Section 7.2 shall be
allocated among the holders of Registrable Securities in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities
which each such shareholder requested be registered under Section 7.2 in
such registration. If and to the extent the managing underwriters determine
that marketing factors (including, without limitation, an adverse effect on
the per share offering price) require that shares held by Management
Investors not be included in the shares to be underwritten, the Management
Securities may be cut-back in a proportionate amount greater than that
applicable to other Investors. For purposes of any underwriter cutback, all
Registrable Securities held by any holder of Registrable Securities which
is a partnership or corporation shall also include any Registrable
Securities held by the partners, retired partners, shareholders or
affiliated entities of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of
any of the foregoing persons, and such holder and other persons shall be
deemed to be a single selling holder, and any pro rata reduction with
respect to such selling holder shall be based upon the aggregate amount of
Registrable Securities owned by all entities and individuals included in
such selling holder, as defined in this sentence. No securities excluded
from the underwriting by reason of the underwriter's marketing limitation
shall be included in such registration. If any holder of Registrable
Securities disapproves of the terms of the underwriting, it may elect to
withdraw therefrom by written notice to the Company and the underwriter.
The Registrable Securities so withdrawn shall also be withdrawn from
registration. In the event that any other holder of Registrable Securities
(including, without limitation, any Fund Investor) is or becomes subject to
underwriter's cutback provisions (under any other agreement with the
Company regarding registration rights) which are more favorable in any
material respect to such holder than the underwriter's cutback provisions
to which the Fund Investors and the Mezzanine Investors are subject
hereunder, then the provisions of this Section 7.4.1 shall be deemed to be
amended as appropriate to reflect such more favorable provisions and any
related terms and conditions.
7.4.2. Other Actions. If and in each case when the Company is required
-------------
to use its reasonable best efforts to effect a registration of any
Registrable Securities as provided in this Section 7, the Company shall
take appropriate and customary actions in furtherance thereof, including,
without limitation:
-32-
<PAGE>
(i) filing with the Commission a registration statement and
using reasonable efforts to cause such registration statement to
become effective;
(ii) preparing and filing with the Commission such amendments
and supplements to such registration statements as may be required to
comply with the Securities Act and to keep such registration statement
effective for a period not to exceed 90 days from the date of
effectiveness or such earlier time as the Registrable Securities
covered by such registration statement have been disposed of in
accordance with the intended method of distribution therefor or the
expiration of the time when a prospectus relating to such registration
is required to be delivered under the Securities Act;
(iii) use its best efforts to register or qualify such
Registrable Securities under the state securities or "blue sky" laws
of such jurisdictions as the sellers shall reasonably request;
provided, however, that the Company shall not be obligated to file any
-------- -------
general consent to service of process or to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any
jurisdiction in which it would not otherwise be so subject;
(iv) furnish to each selling holder and the underwriters, if
any, such number of copies of such registration statement, any
amendments thereto, any documents incorporated by reference therein,
the prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents as
such selling holder may reasonably request in order to facilitate the
public sale or other disposition of the securities owned by such
selling holder;
(v) within a reasonable time before each filing of the
registration statement or prospectus or amendments or supplements
thereto with the Commission, furnish to counsel selected by the
holders of a majority of the Registrable Securities to be registered
copies of such documents proposed to be filed, and provide such
counsel a reasonable opportunity to review and suggest comments for
the Company's consideration with respect to such material;
(vi) promptly upon becoming aware thereof notify each selling
holder of Registrable Securities, such selling holders' counsel and
any underwriter and (if requested by any such Person) confirm such
notice in writing, of the happening of any event which makes any
statement made in the registration statement or
-33-
<PAGE>
related prospectus untrue or which requires the making of any changes
in such registration statement or prospectus so that they will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were
made not misleading; and, as promptly as practicable thereafter,
prepare and file with the Commission and furnish a supplement or
amendment to such prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Securities, such prospectus will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(vii) if requested by the managing underwriter or underwriters
(if any), any selling holder, or such selling holder's counsel,
promptly incorporate in a prospectus supplement or post-effective
amendment such information regarding such Person or the proposed
offering as such Person reasonably requests to be included therein,
including, without limitation, with respect to the securities being
sold by such selling holder to such underwriter or underwriters, the
purchase price being paid therefor by such underwriter or underwriters
and within respect to any other terms of an underwritten offering of
the securities to be sold in such offering, and promptly make all
required filings of such prospectus supplement or post-effective
amendment;
(viii) make available to each selling holder, any underwriter
participating in any disposition pursuant to a registration statement,
and any attorney, accountant or other agent or representative retained
by any such selling holder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"),
as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors
and employees to supply all information requested by any such
Inspector in connection with such registration statement, in each case
subject to such holder's agreement (in form and substance reasonably
acceptable to the Company) regarding use and confidential treatment of
such information by such holder and the Inspectors;
(ix) enter into any reasonable underwriting agreement required
by the proposed underwriter(s) for the selling holders, in form and
substance reasonably satisfactory to the Company;
-34-
<PAGE>
(x) use reasonable efforts to furnish to each prospective
selling holder a signed counterpart, addressed to the prospective
selling holder, of (A) an opinion of counsel for the Company, dated
the effective date of the registration statement, and (B) a "comfort"
letter signed by the independent public accountants who have certified
the Company's financial statements included in the registration
statement, covering substantially the same matters with respect to the
registration statement (and the prospectus included therein) and (in
the case of the accountants' letter) with respect to events subsequent
to the date of the financial statements, as are customarily covered
(at the time of such registration) in opinions of the Company's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities;
(xi) at any time when the Common Stock of the Company is
listed on a national securities exchange or quoted on any nationally
recognized quotation system, use its best efforts to cause the
securities covered by such registration statement to be listed on such
securities exchange or quoted on such quotation system;
(xii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally
available to its security holders, in each case as soon as
practicable, but not later than 90 days after the close of the period
covered thereby, an earnings statement of the Company which will
satisfy the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any comparable successor provisions); and
(xiii) otherwise cooperate reasonably with, and take such
customary actions as may reasonably be requested by the holders of
Registrable Securities in connection with, such registration.
7.4.3. Selection of Managing Underwriters. In the case of any
----------------------------------
registration proposed by the Company for the Public Offering of securities
for its own account, the managing underwriters, if any, with respect
thereto shall be selected by the Company. In the case of any registration
pursuant to Section 7.2 hereof, the holders of a majority of the
Registrable Securities requested to be included therein hereunder shall
select the managing underwriters, if any, with respect thereto, subject in
each case to approval of such underwriter by the Company (which consent
shall not unreasonably be withheld). Notwithstanding the foregoing
provisions of this Section 7.4.3, in the case of the Initial Public
Offering, the managing underwriter with respect thereto shall be selected
by the Company after consultation with the Fund Majority Holders.
-35-
<PAGE>
7.4.4. Selection of Counsel. Counsel to the Company in connection with
--------------------
any Public Offering shall be selected by the Company, and counsel to the
selling holders of Registrable Securities shall be selected by the holders
of a majority of the Registrable Securities requested pursuant to the
provisions hereof to be included therein, subject in each case to approval
of such counsel by the Company (which consent shall not unreasonably be
withheld).
7.5 Indemnification and Contribution.
--------------------------------
7.5.1. Indemnities of the Company. In the event of any registration of
--------------------------
any Registrable Securities or other debt or equity securities under the
Securities Act, and in connection with any registration statement filed
under the Securities Act, or any other disclosure document produced by or
on behalf of the Company and any of its Subsidiaries, including without
limitation reports required or other documents filed under the Exchange Act
and documents pursuant to which securities of the Company and any of its
Subsidiaries are sold (whether or not for the account of the Company), the
Company will, to the fullest extent permitted by law, and hereby does, and
will cause each of its Subsidiaries, jointly and severally to, indemnify
and hold harmless each seller of Registrable Securities, any other holder
of Securities who is or might be deemed to be a controlling Person of the
Company and any of its Subsidiaries within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, their respective direct
and indirect partners, advisory board members, directors, officers and
shareholders, and each other Person, if any, who controls any such seller
or any such holder within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (each such person being referred to
herein as a "Covered Person"), against any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof), joint or
several, including any of the foregoing incurred in settlement (as provided
herein) of any litigation, commenced or threatened, to which such Covered
Person may be or become subject under the Securities Act, the Exchange Act,
state securities or blue sky laws, common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement of
any material fact contained or incorporated by reference in any
registration statement under the Securities Act, any preliminary prospectus
or final prospectus included therein, or any related summary prospectus, or
any amendment or supplement thereto, or any document incorporated by
reference therein, or any other disclosure document (including without
limitation reports and other documents filed under the Exchange Act) or any
document incorporated by reference therein, (ii) any omission to state
therein a material fact required to be stated
-36-
<PAGE>
therein or necessary to make the statements therein not misleading or (iii)
any violation by the Company and any of its Subsidiaries of any federal,
state or common law rule or regulation applicable to the Company or to any
of its Subsidiaries and relating to action or inaction in connection with
any such registration or disclosure document and will reimburse such
Covered Person for any legal or any other expenses incurred by it in
connection with investigating, preparing or defending any such loss, claim,
damage, liability, action or proceeding; provided, however, that neither
-------- -------
the Company nor any of its Subsidiaries shall be liable to any Covered
Person in any such case to the extent that any such loss, claim, damage,
liability, action or proceeding arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made
in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement or other disclosure
document in reliance upon and in conformity with written information
furnished to the Company or to any of its Subsidiaries through an
instrument duly executed by such Covered Person specifically stating that
it is for use in the preparation thereof. The indemnities of the Company
and each of its Subsidiaries contained in this Section 7.4.1 shall remain
in full force and effect regardless of any investigation made by or on
behalf of such Covered Person and shall survive any transfer of securities.
7.5.2. Indemnities to the Company. The Company and any of its
--------------------------
Subsidiaries may require, as a condition to including any securities in any
registration statement filed pursuant to this Section 7, that the Company
and any of its Subsidiaries shall have received an undertaking satisfactory
to it from the prospective seller of such securities, to indemnify and hold
harmless the Company and any of its Subsidiaries, each director of the
Company or any of its Subsidiaries, each officer of the Company or any of
its Subsidiaries who shall sign such registration statement and each other
Person (other than such seller), if any, who controls the Company and any
of its Subsidiaries within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (each such person also being referred to
herein as a "Covered Person"), with respect to any statement in or omission
from such registration statement (or any violation by the Company of any
federal, state or common law rule or regulation applicable to the Company),
any preliminary prospectus or final prospectus included therein, or any
amendment or supplement thereto, or any other disclosure document
(including without limitation reports and other documents filed under the
Exchange Act) or other document or report, if such statement or omission
was made in reliance upon and in conformity with written information
furnished to the Company or to any of its Subsidiaries through an
instrument executed by such seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement or other
disclosure
-37-
<PAGE>
document. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Company, any of its
Subsidiaries, or any such director, officer or controlling Person and shall
survive any transfer of securities.
7.5.3. Indemnification Procedures. Promptly after receipt by a Covered
--------------------------
Person of notice of the commencement of any action or proceeding involving
a claim of the type referred to in the foregoing provisions of this Section
7.5, such Covered Person will, if a claim in respect thereof is to be made
by such Covered Person against any indemnifying party, give written notice
to each such indemnifying party of the commencement of such action;
provided, however, that the failure of any Covered Person to give notice to
-------- -------
such indemnifying party as provided herein shall not relieve any
indemnifying party of its obligations under the foregoing provisions of
this Section 7.5, except and solely to the extent that such indemnifying
party is actually prejudiced by such failure to give notice. In case any
such action is brought against a Covered Person, each indemnifying party
will be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified, to the extent
that it may wish, with counsel reasonably satisfactory to such Covered
Person (who shall not, except with the consent of the Covered Person, be
counsel to such an indemnifying party), and after notice from an
indemnifying party to such Covered Person of its election so to assume the
defense thereof, such indemnifying party will not be liable to such Covered
Person for any legal or other expenses subsequently incurred by the latter
in connection with the defense thereof; provided, however, that (i) if
-------- -------
counsel for the Covered Person reasonably determines that there may be a
conflict between the positions of such indemnifying party and the Covered
Person in conducting the defense of such action or if counsel for the
Covered Person reasonably concludes that representation of both parties by
the same counsel would be inappropriate due to actual or potential
differing interests between them, then counsel for the Covered Person shall
conduct the defense to the extent reasonably determined by such counsel to
be necessary to protect the interests of the Covered Person and such
indemnifying party shall employ separate counsel for its own defense, (ii)
in any event, the Covered Person shall be entitled at its own expense to
have counsel chosen by such Covered Person participate in, but not conduct,
the defense and (iii) the indemnifying party shall bear the legal expenses
incurred in connection with the conduct of, and the participation in, the
defense as referred to in clause (i) above. If, within a reasonable time
after receipt of the notice, such indemnifying party shall not have elected
to assume the defense of the action, such indemnifying party shall be
responsible for any legal or other expenses incurred by such Covered Person
in connection with the defense of the action, suit, investigation, inquiry
or proceeding. No indemnifying party will consent to entry of any judgment
or enter into any settlement which does not include as
-38-
<PAGE>
an unconditional term thereof the giving by the claimant or plaintiff to
such Covered Person of a release from all liabilities in respect of such
claim or litigation. Each Covered Person and indemnifying party agree to
cooperate with one another in good faith in connection with any such claim
or litigation.
7.5.4. Certain Other Indemnification Provisions. Notwithstanding
----------------------------------------
anything in this Section 7.5 to the contrary, but only with respect to
provisions contained in the foregoing Sections 7.5.1, 7.5.2 and 7.5.3, in
the event that any holder of Registrable Securities (including, without
limitation, any Fund Investor) is subject to indemnification provisions
(pursuant to any other agreement with the Company with respect to
registration rights) which are more favorable in any material respect to
such holder than the indemnification provisions to which the Fund Investors
and the Mezzanine Investors are subject hereunder, then the provisions of
these Sections 7.5.1, 7.5.2 and 7.5.3 shall be deemed to be amended as
appropriate to reflect such more favorable provisions and any related terms
and conditions.
7.5.5. Contribution. If the indemnification provided for in Sections
------------
7.5.1 or 7.5.2 hereof is unavailable to a party that would have been an
indemnified party under any such Section in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof)
referred to therein, then each party that would have been an indemnifying
party thereunder shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate to
reflect the relative fault of such indemnifying party on the one hand and
such indemnified party on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof). The relative fault 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 such
indemnifying party or such indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The parties agree that it would not be
just or equitable if contribution pursuant to this Section 7.5.5 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 preceding sentence. The amount paid or payable by a contributing party
as a result of the losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to above in this Section 7.5.5
shall include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. No Person
-39-
<PAGE>
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
7.5.6. Limitation on Liability of Holders of Registrable Securities.
------------------------------------------------------------
The liability of each holder of Registrable Securities in respect of any
indemnification or contribution obligation of such holder arising under
this Section 7.5 shall not in any event exceed an amount equal to the net
proceeds to such holder (after deduction of all underwriters' discounts and
commissions and all other expenses paid by such holder in connection with
the registration in question) from the disposition of the Registrable
Securities disposed of by such holder pursuant to such registration.
7.6. Lock-up. No holder of Securities (whether or not a seller of
-------
Securities pursuant to such registration statement) shall Transfer any
Securities without the prior written consent of the underwriters managing the
offering (i) for a period beginning fourteen days immediately preceding and
ending on the 180th day following the effectiveness of the registration
statement filed in connection with the Initial Public Offering, and (ii) for a
period beginning fourteen days immediately preceding and ending on the 180th day
following the effectiveness of the registration statement filed in connection
with any subsequent Public Offering, or such lesser period as may be consented
to in writing by the Company and the underwriters managing such subsequent
Public Offering; provided, however, that if the Company and the underwriters
-------- -------
managing the offering determine that a period longer than 180 days following the
effectiveness of such registration statement is necessary to accomplish such
Initial Public Offering or subsequent Public Offering, then the periods
specified in clauses (i) and (ii) of this Section 7.6 shall be such longer
period as determined by such underwriters and as is acceptable to the Company
and the Fund Majority Investors, but in no event shall such longer period exceed
one year with respect to Transfers pursuant to Section 3.1.6; and provided,
--------
further, that the provisions of this Section 7.6 shall not prohibit any
- - -------
Transfers among any Affiliates, provided that the transferee Affiliate agrees to
be bound by the terms of this Agreement, including this Section 7.6.
8. CERTAIN FUTURE EQUITY FINANCINGS OF THE COMPANY. The Company shall
not issue or sell any shares of any of its Common Stock or any securities
convertible into or exchangeable for any shares of its Common Stock, issue or
grant any rights (either preemptive or other) to subscribe for or to purchase,
or any options or warrants for the purchase of, or enter into any agreements
providing for the issuance (contingent or otherwise) of, any of its Common Stock
or any stock or securities convertible into or exchangeable for any shares of
its Common Stock, or grant stock appreciation or other rights equivalent to a
sale of Common Stock, (i) to any Fund Investor or any Affiliated Fund, or any of
their respective
-40-
<PAGE>
Affiliates, or (ii) to any other Person not described in the preceding clause
(i) (each an "Issuance" of "Subject Securities" to a "Proposed Buyer"), except
-------- ------------------ --------------
in compliance with the following provisions of this Section 8.
8.1. Right of Participation.
----------------------
8.1.1. Holders of Mezzanine Securities.
-------------------------------
8.1.1.1. Offer. Not fewer than fifteen (15) business days
-----
prior to the consummation of the Issuance, a notice (the "Preemption
----------
Notice") shall be furnished by the Company to each holder of Mezzanine
------
Securities (the "Preemptive Purchaser Offerees"). The Preemption
-----------------------------
Notice shall include the principal terms of the proposed Issuance,
including without limitation the amount and kind of Subject Securities
to be included in the Issuance, the percentage of the total number of
shares of Common Stock outstanding on a fully-diluted basis as if all
shares of Common Stock issuable upon exercise of Options held by any
Person were issued and outstanding that the Subject Securities
proposed to be sold represent (calculated, in the case of any Subject
Securities that are Options or other convertible instruments on the
basis of the number of shares of Common Stock issuable upon immediate
exercise or conversion of such Subject Securities), the maximum and
minimum price per unit of such Subject Securities (which maximum price
shall not exceed the minimum price by more than 110%), the name of the
Persons to whom the Subject Securities will be Issued (the "Proposed
--------
Buyers"), any other material terms of the proposed Issuance and will
------
include:
(a) in the case of any proposed Issuance of Subject Securities
described in clause (i) or (ii) of the first paragraph of Section 8,
an offer by the Company to Issue to, and at the option of, such
Preemptive Purchaser Offeree, a percentage of the Subject Securities
equal to the portion that the total number of shares of Common Stock
held by such Preemptive Purchaser prior to such proposed Issuance
represents as a percentage of the total number of shares of Common
Stock outstanding as of immediately prior to giving effect to such
Issuance (in each case not including any portion of such Subject
Securities and calculated on a fully diluted basis as if all shares of
Common Stock issuable upon exercise of Options held by any Person were
issued and outstanding; such portion being referred to herein as the
"Basic Preemptive Portion"); and
------------------------
-41-
<PAGE>
(b) only in the case of any proposed Issuance of Subject
Securities described in clause (ii) of the first paragraph of Section
8, if and solely to the extent such proposed Issuance together with
any previous Issuances described in such clause (ii) does not exceed
an aggregate purchase price of $3,000,000, an offer by the Company to
Issue to, and at the option of, such Preemptive Purchaser Offeree, a
portion (the "Special Preemptive Portion") of the Shares to be issued
--------------------------
in such Issuance equal to the number obtained by multiplying:
(i) the lesser of (A) the number obtained by dividing (x)
$3,000,000 minus the aggregate purchase price received by the
Company in any prior Issuance of Subject Securities described in
clause (ii) of the first paragraph of Section 8 by (y) the per
Share price to be received by the Company in such Issuance or (B)
the total number of Shares of Subject Securities being offered in
such Issuance; times
(ii) a fraction, the numerator of which is the total number
of shares of Common Stock held by such Preemptive Purchaser
Offeree prior to such proposed Issuance and the denominator of
which is the total number of shares of Common Stock held by all
Preemptive Purchaser Offerees prior to such proposed Issuance (in
each case not including any portion of such Subject Securities
and calculated on a fully diluted basis as if all shares of
Common Stock issuable upon exercise of Options held by any Person
were issued and outstanding);
provided, however, that in any case where the preceding clause (b) is
-------- -------
applicable, the provisions of clause (b) shall apply prior to
application of the provisions of clause (a) above. The Basic
Preemptive Portion plus, if applicable, the Special Preemptive Portion
allocable to any Preemptive Purchaser Offeree in accordance with the
foregoing provisions of this Section 8.1.1 is referred to herein as
the "Preemptive Portion." Subject to the provisions of this Section
------------------
8, any and all offers to issue to any Preemptive Purchaser Offeree its
preemptive Portion of Subject Securities shall be on the same terms
and conditions, with respect to each unit of Subject Securities issued
to the Preemptive Purchaser Offerees, as apply to the Proposed Buyers
with respect to the units of Subject Securities to be issued to them
in such Issuance.
8.1.2. Holders of Management Securities.
--------------------------------
-42-
<PAGE>
8.1.2.1. Offer. In the case of any proposed Issuance of
-----
Subject Securities described in clause (i) of the first paragraph of
Section 8 after the Company has sold $5,000,000 in such Issuances, not
fewer than fifteen (15) business days prior to the consummation of the
Issuance, a notice (the "Preemption Notice") shall be furnished by the
-----------------
Company to each holder of Management Securities other than any such
holder the preemptive rights of which shall have expired pursuant to
Section 8.3 (the "Preemptive Purchaser Offerees"). The Preemption
-----------------------------
Notice shall include the principal terms of the proposed Issuance,
including without limitation the amount and kind of Subject Securities
to be included in the Issuance, the percentage represented by the
Subject Securities proposed to be sold of the total number of shares
of Common Stock outstanding on a fully-diluted basis, calculated as if
all shares of Common Stock issuable upon exercise of Options held by
any Person were issued and outstanding, and calculated, in the case of
any Subject Securities that are Options or other convertible
instruments, on the basis of the number of shares of Common Stock
issuable upon immediate exercise or conversion of such Subject
Securities, the maximum and minimum price per unit of such Subject
Securities (which maximum price shall not exceed the minimum price by
more than 110%), the name of the Persons to whom the Subject
Securities will be Issued (the "Proposed Buyers"), any other material
---------------
terms of the proposed Issuance and will include an offer by the
Company to Issue to, and at the option of, such Preemptive Purchaser
Offeree, a percentage of the Subject Securities described in clause
(i) of the first paragraph of Section 8 equal to the portion that the
total number of shares of Common Stock held by such Preemptive
Purchaser prior to such proposed Issuance represents as a percentage
of the total number of shares of Common Stock outstanding immediately
prior to giving effect to such Issuance (in each case not including
any portion of such Subject Securities and calculated on a fully
diluted basis as if all shares of Common Stock issuable upon exercise
of Options held by any Person were issued and outstanding; such
portion being referred to herein as the "Basic Preemptive Portion").
------------------------
The Basic Preemptive Portion allocable to any Preemptive
Purchaser Offeree in accordance with the foregoing provisions of this
Section 8.1.2 is referred to herein as the "Preemptive Portion."
------------------
Subject to the provisions of this Section 8, any and all offers to
issue to any Preemptive Purchaser Offeree its preemptive Portion of
Subject Securities shall be on the same terms and conditions, with
respect to each unit of Subject Securities issued to the Preemptive
Purchaser Offerees, as apply to the Proposed Buyers with respect to
the units of Subject Securities to be issued to them in such Issuance.
-43-
<PAGE>
8.1.3. Time and Manner of Exercise by Offerees. Each Preemptive
---------------------------------------
Purchaser Offeree desiring to accept the offer contained in the Preemption
Notice shall send a written commitment to the Company specifying the amount
of Subject Securities (not in any event to exceed the applicable Preemptive
Portion of the respective total amount of Subject Securities to be included
in the Issuance) which such Preemptive Purchaser Offeree desires to be
issued within ten (10) business days after effectiveness of the Preemption
Notice (each Preemptive Purchaser Offeree who so accepts the offer
contained in the Preemption Notice being referred to herein as a
"Participating Buyer"). Each Preemptive Purchaser Offeree who has not so
-------------------
accepted such offer shall be deemed to have waived all of his rights with
respect to the Issuance, and the Company shall thereafter be free to Issue
in the Issuance to the Proposed Buyers, at a price no less than 95% of the
maximum price set forth in the Preemption Notice and otherwise on terms not
substantially more favorable to the Proposed Buyers than as set forth in
the Preemption Notice, without any further obligation to include such non-
accepting Preemptive Purchaser Offerees in the Issuance. If, prior to
consummation, the terms of such proposed Issuance shall change with the
result that the price shall be less than 95% of the maximum price set forth
in the Preemption Notice or the other principal terms shall be
substantially more favorable to the Proposed Buyer than as set forth in the
Preemption Notice, it shall be necessary for a separate Preemption Notice
to have been furnished, and the terms and provisions of this Section 8.1
separately complied with, in order to consummate such proposed Issuance
pursuant to this Section 8.1; provided, however, that in the case of such a
-------- -------
separate Preemption Notice, the applicable period referred to in Sections
8.1.1 and 8.1.2 shall be four (4) business days and the applicable period
referred to in Section 8.1.3 shall be two (2) business days.
The acceptance of each Participating Buyer shall be irrevocable except
as hereinafter provided, and each such Participating Buyer shall be bound
and obligated to acquire in the Issuance on the same terms and conditions
(subject to all of the provisions of this Agreement), with respect to each
unit of Subject Securities Issued, as the Proposed Buyers shall be Issued
each of his, her or its units of Subject Securities, such amount of Subject
Securities as such Participating Buyer shall have specified in such
Participating Buyer's written commitment.
If at the end of the one hundred twentieth (120th) day following the
date on which the Preemption Notice was given the Company has not completed
the Issuance as provided in the foregoing provisions of this Section 8,
each Participating Buyer shall be released from his obligations under the
written commitment, the Preemption Notice shall be null and void, and it
shall be necessary for a separate Preemption Notice to have been furnished,
and the terms and provisions of this Section 8.1 separately
-44-
<PAGE>
complied with, in order to consummate an Issuance pursuant to this Section
8.1, unless the failure to complete the Issuance resulted from any failure
by any Preemptive Purchaser Offeree to comply in any material respect with
the terms of this Section 8.
8.1.4. Certain Legal Requirements. In the event the participation by
--------------------------
any Preemptive Purchaser Offeree as a Participating Buyer would require
under applicable law (i) the registration or qualification of any
securities or of any person as a broker or dealer or agent with respect to
such securities or (ii) the provision to any participant in the Issuance of
any information other than such information as would be required under
Regulation D of the Securities and Exchange Commission or similar rule then
in effect in an offering made pursuant to said Regulation D solely to
"accredited investors" as defined in said Regulation D, the Company shall
be obligated only to use its reasonable best efforts to cause such
requirements to have been complied with to the extent necessary to permit
such Participating Buyer to receive such securities. Notwithstanding any
provisions of this Section 8, if use of reasonable best efforts shall not
have resulted in such requirements being complied with to the extent
necessary to permit such Participating Buyer to receive such securities,
the Company may exclude such Participating Buyer from participation in the
Issuance. The obligation of the Company to use reasonable best efforts to
cause such requirements to have been complied with to the extent necessary
to permit a Participating Buyer to receive such securities shall be
conditioned on such Participating Buyer executing such documents and
instruments, and taking such other actions (including without limitation,
if required by the Company on advice of its counsel, agreeing to be
represented during the course of such transaction by a "purchaser
representative" (as defined in Regulation D) in connection with evaluating
the merits and risks of the prospective investment and acknowledging that
he was so represented), as the Company shall reasonably request in order to
permit such requirements to have been complied with. Each Participating
Buyer agrees to take such actions as the Company shall reasonably request
in order to permit such requirements to have been complied with. The
foregoing provisions of this Section 8.1.4 shall not apply to any Investor
who is an "accredited investor" as defined in said Regulation D.
8.1.5. Special Rules in Certain Circumstances.
--------------------------------------
8.1.5.1. In the event that the participation of each Proposed
Buyer in an Issuance is conditioned upon the purchase by such Proposed
Buyer of any securities (including without limitation debt securities)
other than Subject Securities ("Other Offered Securities"), the
Company may require as a condition to the participation in the
Issuance by the Preemptive Purchaser Offerees that
-45-
<PAGE>
such Preemptive Purchaser Offerees acquire in the Issuance, together
with the Subject Securities to be acquired by them, Other Offered
Securities in the same proportion to the Subject Securities to be
acquired by them as Other Offered Securities are acquired by each
Proposed Buyer in proportion to the Subject Securities acquired in the
Issuance by such Proposed Buyer, on the same terms and conditions
(except as specifically otherwise provided in this Section 8.1) as to
each unit of Subject Securities and Other Offered Securities issued to
the Preemptive Purchaser Offerees, as each of the Proposed Buyers
shall be issued each of his, her or its units of Subject Securities
and Other Offered Securities.
8.1.5.2. Notwithstanding the notice requirements of Sections
8.1.1.1 and 8.1.2.1, in the event the Company determines that it would
be impractical or imprudent under the circumstances of any Issuance
proposed to finance (in whole or in part) any acquisition of or
investment in any Person or business, the Company may proceed with
such issuance prior to complying with the provisions of this Section
8.1, provided that thereafter the Company provides to each Investor
entitled (as set forth in Sections 8.1.1 and 8.1.2) to participate in
such Issuance: (a) prompt notice of such event and the Preemption
Notice required by Section 8.1.1.1 or 8.1.2.1 within 10 Business Days
of the occurrence of such event and (b) an opportunity to purchase
Subject Securities (or securities identical in all material respects
thereto) in the amounts and on the same terms and conditions provided
in this Section 8.1.
8.1.6. Closing. Each Participating Buyer shall take such actions and
-------
execute such documents and instruments as shall be reasonably necessary or
desirable in order to consummate the Issuance expeditiously and on the same
terms and conditions (subject to all of the provisions of this Agreement)
with respect to each unit of Subject Securities Issued, as the Proposed
Buyers shall be Issued each of his, her or its units of Subject Securities;
provided, however, that in the event the consideration payable by the
-------- -------
Proposed Buyers in the Issuance for Subject Securities (or, if applicable,
Other Offered Securities) includes any securities or other property other
than cash, at the option of each Participating Buyer, such Participating
Buyer may deliver, in lieu of such securities or other property other than
cash, cash in the amount equal to the then Fair Market Value of such
consideration constituting securities or other property other than cash.
At the closing of any Issuance under this Section 8.1, each of the
Participating Buyers shall be delivered the notes, certificates or other
instruments evidencing the Subject Securities (and, if applicable, Other
Offered Securities) to be Issued to such
-46-
<PAGE>
Participating Buyer, registered in the name of such Participating Buyer or
his or its designated nominee, free and clear of any Liens, with any
transfer tax stamps affixed, against delivery by such Participating Buyer
of the applicable consideration.
8.2 Excluded Transactions. Notwithstanding the preceding provisions of
---------------------
this Section, the preceding provisions of this Section 8 shall not restrict:
(a) any issuance of Shares, Options, convertible or exchangeable
securities or stock appreciation or similar rights on and after the
date hereof to officers, employees or directors of the Company or its
Subsidiaries or to independent consultants, in each case under stock
purchase or stock option incentive arrangements approved by the Board;
(b) any issuance of securities upon the exercise of any Options,
conversion or exchange of any other convertible or exchangeable
security or conversion of any Shares or any other convertible
securities outstanding on the date hereof or Issued after the date
hereof in compliance with the provisions of this Section 8;
(c) any issuance of Shares pursuant to the Initial Public Offering or any
subsequent Public Offering;
(d) any issuance of securities in an exchange of securities for securities
of any businesses acquired by, or combined with, the Company or any of
its Subsidiaries or otherwise issued as part of the consideration paid
in any business combination or acquisition transaction after the
Original Closing Date; or
(e) any other issuance of securities for consideration not consisting of
cash.
8.3 Right to Purchase Shares Underlying Series A Options in Certain
---------------------------------------------------------------
Circumstances. In the event that the Company does not within the 1997 calendar
- - -------------
year consummate one or more business acquisitions and in connection therewith
issue Subject Securities as described in clause (i) of the first paragraph of
Section 8 (such Issuances being referred to herein as "Add-on Financing
------ ---------
Issuances") having an aggregate value (based on the cash purchase price paid to
- - ---------
the Company in connection with such Issuance(s)) in excess of $5,000,000, the
Initial Fund Investor will have the right to purchase from each holder of Series
A Options (at a price of $363.64 per share) a portion of the shares of Common
Stock issuable upon exercise of the Series A Options held by such holder as
provided in this Section 8.3. If the Initial Fund Investor elects to exercise
such right it will notify the Company of such election by, or as promptly as
practicable after, December 31, 1997. The total number of shares that the
Initial
-47-
<PAGE>
Fund Investor will have a right to purchase shall be in an amount having an
aggregate value (based on the $363.64 per share price payable under this Section
8.3) equal to the amount by which $5,000,000 exceeds the amount of Add-on
Financing Issuances consummated prior to December 31, 1997. The portion of such
total number of shares that each holder of Series A Options shall be obligated
to sell will be his pro rata portion (based on the total number of shares
issuable upon exercise of Series A Options, owned by him as a percentage of all
shares issuable upon exercise of all Series A Options in each case as of
December 31, 1997). The closing of the transfer contemplated by this Section 8.3
shall occur as promptly as practicable following delivery of the Initial Fund
Investors notice of election to exercise its rights under this Section 8.3 and
each holder of Series A Options will exercise such options to the extent
required for it to comply with its obligations hereunder.
8.4 Period. The foregoing provisions of this Section 8 shall terminate in
------
their entirety immediately upon the closing of the Initial Public Offering.
9. DETERMINATION OF FAIR MARKET VALUE. The term "Fair Market Value"
-----------------
shall mean:
(a) For purposes of Section 4 of this Agreement, the fair value of
the applicable Security or other securities as of the applicable date on
the basis of a sale of such Security or securities in an arms length
private sale between a willing buyer and a willing seller, neither acting
under compulsion (or, in the case of an Option, the fair value of the
Shares that may then be purchased by the holder of such Option upon
exercise thereof, determined as described in this Section 9, minus the
exercise price applicable thereto), and on the basis of a private company
which is an on-going concern and not on a "going-public" basis. In
determining such Fair Market Value, no discount shall be taken for the fact
that the Securities in question may constitute a minority interest and no
upward adjustment or discount shall be taken relating to the fact that the
Securities in question are subject to the restrictions and entitled to the
rights provided hereunder. For purposes of Section 4 of this Agreement,
such Fair Market Value shall be determined: (i) in the case of any
Securities or other securities to be valued where the value of such
Securities or other securities is reasonably likely to exceed $5,000,000 in
the aggregate, absent any agreement between the Company and the holders of
a majority of the Securities or other securities in question regarding such
valuation, by an Independent Investment Banking Firm retained by the
Company (the fees and expenses of which shall be the responsibility of the
Company) selected as set forth below and (ii) in all other cases, in good
faith by the Board. In the circumstances identified in clause (i) of the
immediately preceding sentence, the Board shall provide to each of the
holders of Securities or other Persons directly affected by such Fair
Market
-48-
<PAGE>
Value determination a list of three Independent Investment Banking Firms
none of whom shall be an Affiliate of any Investor, and within 15 days of
receipt of such list, the holders of a majority of such holders or other
Persons shall select from such list the Independent Investment Banking Firm
to perform the calculation; provided, however, that in the event an
-------- -------
Independent Investment Banking Firm is not selected within such 15 day
period, the Board shall make such selection.
(b) For purposes of all other provisions of this Agreement, the fair
value of the applicable Security or other securities as of the applicable
date on the basis of a sale of such Security or securities in an arms
length private sale between a willing buyer and a willing seller, neither
acting under compulsion (or, in the case of an Option, the fair value of
the Shares that may then be purchased by the holder of such Option upon
exercise thereof, determined as described in this Section 9, minus the
exercise price applicable thereto). In determining such Fair Market Value,
no discount shall be taken for the fact that the Securities in question may
constitute a minority interest and no upward adjustment or discount shall
be taken relating to the fact that the Securities in question are subject
to the restrictions and entitled to the rights provided hereunder. For
purposes of Sections 5.2, 6.2 and 8.1.5 of this Agreement, such Fair Market
Value shall be determined: (i) in the case of any Securities or other
securities to be valued where the value of such Securities or other
securities is reasonably likely to exceed $5,000,000 in the aggregate,
absent any agreement between the Company and the holders of a majority of
the Securities or other securities in question regarding such valuation, by
an Independent Investment Banking Firm retained by the Company (the fees
and expenses of which shall be the responsibility of the Company) selected
as set forth below and (ii) in all other cases, in good faith by the Board.
In the circumstances identified in clause (i) of the immediately preceding
sentence, the Board shall provide to each of the holders of Securities or
other Persons directly affected by such Fair Market Value determination a
list of three Independent Investment Banking Firms none of whom shall be an
Affiliate of any Investor, and within 15 days of receipt of such list, the
holders of a majority of such holders or other Persons shall select from
such list the Independent Investment Banking Firm to perform the
calculation; provided, however, that in the event an Independent Investment
-------- -------
Banking Firm is not selected within such 15 day period, the Board shall
make such selection.
-49-
<PAGE>
10. REMEDIES.
10.1. Generally. The Company, the Acquired Company and all holders of
---------
Securities shall have all remedies available at law, in equity or otherwise in
the event of any breach or violation of this Agreement or any default hereunder
by the Company, the Acquired Company or any holder of Securities. The parties
acknowledge and agree that in the event of any breach of this Agreement, in
addition to any other remedies which may be available, each of the parties
hereto shall be entitled to specific performance of the obligations of the other
parties hereto and, in addition, to such other equitable remedies (including,
without limitation, preliminary or temporary relief) as may be appropriate in
the circumstances.
10.2. Deposit. Without limiting the generality of Section 10.1, if any
-------
Investor (a "Non-Complying Investor") fails to deliver any certificate or
----------------------
certificates evidencing Securities that may be required to be Transferred
pursuant to any provision of this Agreement in accordance with the terms hereof,
the Company or other Person entitled to purchase or require the Transfer of such
securities may, at its option, in addition to all other remedies it may have,
deposit the price for such Securities with any national bank or trust company
having combined capital, surplus and undivided profits in excess of one hundred
million dollars ($100,000,000) and which has agreed to act as escrow agent in
the manner contemplated by this Section 10.2 and shall furnish or make available
to all interested Persons satisfactory evidence of such deposit and thereupon
the Company shall cancel on its books the certificate or certificates
representing such Securities and, in the case of any such Transfer of Securities
to a Person other than the Company issue, in lieu thereof and in the name of
such Person, a new certificate or certificates representing such Securities and
thereupon all of the Non-Complying Investor's rights in and to such Securities
shall terminate. Thereafter, upon delivery to the Company by such Non-Complying
Investor of the certificate or certificates evidencing such Securities (duly
endorsed, or with stock powers or other appropriate instruments of transfer duly
endorsed, for transfer, with signature guaranteed, free and clear of any liens
or encumbrances, and with all applicable stock transfer tax stamps affixed), the
Company shall instruct the escrow agent referred to above to deliver the
purchase price (without any interest from the date of the closing to the date of
such delivery, any such interest to accrue to the Person who deposited the
purchase price for such Securities) to such Non-Complying Investor.
11. LEGEND. Each certificate representing Securities shall have the
following legend endorsed conspicuously thereupon:
"The securities represented by this certificate were issued in a
private placement, without registration under the Securities Act of 1933,
as amended (the "Act"), and may
-50-
<PAGE>
not be sold, assigned, pledged or otherwise transferred in the absence of
an effective registration under the Act covering the transfer unless
pursuant to an exemption from the registration requirements thereunder."
"The securities represented by this certificate are subject to
restrictions on voting and transfer and requirements of sale as set forth
in the Stockholders Agreement dated as of February 26, 1997, as amended and
in effect from time to time, and constitute Securities as defined in such
Stockholders Agreement. The Company will furnish a copy of such agreement
to the holder of this certificate without charge upon written request."
Each certificate representing Fund Securities shall have the following
legend endorsed conspicuously thereupon:
"The securities represented by this certificate were originally issued
to, or issued with respect to shares originally issued to, the following
Fund Investor on or about February 26, 1997: _______________________."
Each certificate representing Mezzanine Securities shall have the following
legend endorsed conspicuously thereupon:
"The securities represented by this certificate were originally issued
to, or issued with respect to shares originally issued to, the following
Mezzanine Investor on or about February 26, 1997:_____________________."
Each certificate representing Management Securities shall have the
following legend endorsed conspicuously thereupon:
"The shares of stock represented by this certificate were originally
issued to, or issued with respect to shares originally issued to, the
following Management Investor on or about February 26,
1997:___________________."
Any person who acquires Securities which are not subject to all or part of
the terms of this Agreement shall have the right to have such legend (or the
applicable portion thereof) removed from certificates representing such
Securities.
-51-
<PAGE>
12. AMENDMENT, ETC.
12.1. No Oral Modifications. This Agreement may not be orally amended,
---------------------
modified, extended or terminated, nor shall any oral waiver of any of its terms
be effective.
12.2. Written Modifications. This Agreement may be amended, modified,
---------------------
extended or terminated, and the provisions hereof may be waived, by an agreement
in writing signed by the Fund Majority Holders, the holders of sixty six and
two-thirds percent (66-2/3%) of all Mezzanine Securities then outstanding and
the holders of a majority of all Securities then outstanding and each such
amendment, modification, extension, termination and waiver shall be binding upon
each party hereto and each holder of Securities subject hereto; provided,
--------
however, that no such amendment, modification, extension, termination or waiver
- - -------
which adversely affects the holders of any one or more of the following types of
Securities: Fund Securities, Mezzanine Securities or Management Securities
shall be effective unless and until the consent of the holders of a majority of
such type or types of Securities similarly effected has been obtained, voting
together as a single group, and no amendment, modification, extension,
termination or waiver of any of the provisions of Sections 3, 4, 5, 6, 7, 8, 9,
10 or 12 hereof or the definitions of terms as used therein will be effective
with respect to the holders of Non-Fund Securities unless and until the consent
of the holders of not less than 50% of such Non-Fund Securities has been
obtained. In addition, each party hereto and each holder of Securities subject
hereto may waive any of its rights hereunder by an instrument in writing signed
by such party or holder.
12.3. Automatic Partial Termination. The provisions of Sections 2, 3, 4,
-----------------------------
5, 6 and 8 of this Agreement shall terminate and be of no further force or
effect at the termination times specified in such sections; provided, however,
that no such termination shall relieve any Person of liability for any breach of
such sections prior to such termination.
13. MISCELLANEOUS.
13.1. Authority; Effect. Each party hereto represents and warrants to and
-----------------
agrees with each other party that the execution and delivery of this Agreement
has been duly authorized on behalf of such party and does not violate any
agreement or other instrument applicable to such party or by which its assets
are bound. This Agreement does not, and shall not be construed to, give rise to
the creation of a partnership among any of the parties hereto, or to constitute
any of such parties members of a joint venture or other association.
13.2. Notices. Notices and other communications provided for in this
-------
Agreement shall be in writing and shall be effective (i) when two (2) days shall
have elapsed (exclusive of Saturdays, Sundays and banking holidays in the City
of New York) from their deposit for
-52-
<PAGE>
overnight delivery with Federal Express or other bonded courier (charges
prepaid), addressed to the party or parties sought to be charged with notice of
the same at the respective addresses set forth or referred to below, subject to
written notice of change of address given by any party to each other party, (ii)
when three (3) days shall have elapsed (exclusive of Saturdays, Sundays and
banking holidays in the City of New York) from their deposit in the U.S. mail,
postage prepaid and registered or certified, addressed to the party or parties
sought to be charged with notice of the same at the respective addresses set
forth or referred to below, subject to written notice of change of address given
by any party to each other party, (iii) if delivered or sent by facsimile
transmission, upon confirmation of transmission at the respective fax numbers
set forth below (subject to written notice of change of facsimile number given
by any party to each other party) or (iv) if earlier, upon receipt.
If to the Company, to it at:
Iron Age Holdings Corporation
Robinson Plaza Three
Suite 400
Pittsburgh, PA 15205
Fax Number: (412) 787-8112
Attention: Chief Financial Officer
with a copy to each of:
Fenway Partners, L.P.
157 West 57th Street
New York, NY 10019
Fax Number: (212) 581-1205
Attention: Andrea Geisser
and
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Fax Number: (617) 951-7050
Attention: Patrick Diaz
-53-
<PAGE>
If to the Fund Investors, to them at:
c/o Fenway Partners, L.P.
157 West 57th Street
New York, NY 10019
Fax Number: (212) 581-1205
Attention: Andrea Geisser
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Fax Number: (617) 951-7050
Attention: Patrick Diaz
If to New York Life Insurance Company in its
capacity as a Mezzanine Investor, to them at:
New York Life Insurance Company
51 Madison Avenue
New York, NY 10010
Fax Number: (212) 447-4122
Attention: Adam G. Clemens and Andy Steuerman
with a copy to:
Goodwin, Procter & Hoar L.L.P.
Exchange Place
Boston, Massachusetts 02109
Fax Number: (617) 523-1231
Attention: Kevin Dennis and E. Mattson Sibble
If to any other Investor, to such Investor at the address set forth in the
stock record book of the Company.
Notice to the holder of record of any shares of capital stock shall be
deemed to be notice to the holder of such shares for all purposes hereof.
-54-
<PAGE>
13.3. Binding Effect, etc. This Agreement constitutes the entire agreement
-------------------
of the parties with respect to its subject matter, supersedes all prior or
contemporaneous oral or written agreements or discussions with respect to such
subject matter, and shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, representatives, successors and
assigns. No provision of this Agreement providing for the expiration of any
provision by lapse of time or upon the occurrence of specified events or
otherwise shall relieve any Person of liability for breach or violation prior to
such expiration.
13.4. Descriptive Headings. The descriptive headings of this Agreement are
--------------------
for convenience of reference only, are not to be considered a part hereof and
shall not be construed to define or limit any of the terms or provisions hereof.
13.5. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one instrument.
13.6. Severability. If in any judicial or arbitral proceedings a court or
------------
arbitrator shall refuse to enforce any provision of this Agreement, then such
unenforceable provision shall be deemed eliminated from this Agreement for the
purpose of such proceedings to the extent necessary to permit the remaining
provisions to be enforced. To the full extent, however, that the provisions of
any applicable law may be waived, they are hereby waived to the end that this
Agreement be deemed to be valid and binding agreement enforceable in accordance
with its terms, and in the event that any provision hereof shall be found to be
invalid or unenforceable, such provision shall be construed by limiting it so as
to be valid and enforceable to the maximum extent consistent with and possible
under applicable law.
14. GOVERNING LAW, ARBITRATION.
14.1. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic substantive laws of the State of Delaware without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.
14.2. Consent to Jurisdiction. Each of the parties agrees that all
-----------------------
actions, suits or proceedings arising out of or based upon this Agreement or the
subject matter hereof may be brought and maintained in the federal and state
courts of the State of New York. Each of the parties hereto by execution hereof
(i) hereby irrevocably submits to the jurisdiction of the federal and state
courts in the State of New York for the purpose of any action, suit or
-55-
<PAGE>
proceeding arising out of or based upon this Agreement or the subject matter
hereof and (ii) hereby waives to the extent not prohibited by applicable law,
and agrees not to assert, by way of motion, as a defense or otherwise, in any
such action, suit or proceeding, any claim that he or it is not subject
personally to the jurisdiction of the above-named courts, that he or it is
immune from extraterritorial injunctive relief or other injunctive relief, that
his or its property is exempt or immune from attachment or execution, that any
such action, suit or proceeding may not be brought or maintained in one of the
above-named courts, that any such action, suit or proceeding brought or
maintained in one of the above-named courts should be dismissed on grounds of
forum non conveniens, should be transferred to any court other than one of the
- - ----- --- ----------
above-named courts, should be stayed by virtue of the pendency of any other
action, suit or proceeding in any court other than one of the above-named
courts, or that this Agreement or the subject matter hereof may not be enforced
in or by any of the above-named courts. Each of the parties hereto hereby
consents to service of process in any such suit, action or proceeding in any
manner permitted by the laws of the State of New York, agrees that service of
process by registered or certified mail, return receipt requested, at the
address specified in or pursuant to Section 13.2 is reasonably calculated to
give actual notice and waives and agrees not to assert by way of motion, as a
defense or otherwise, in any such action, suit or proceeding any claim that such
service of process does not constitute good and sufficient service of process.
14.3. Waiver of Jury Trial. To the extent not prohibited by applicable law
--------------------
which cannot be waived, each of the parties hereto hereby waives, and covenants
that he or it will not assert (whether as plaintiff, defendant, or otherwise),
any right to trial by jury in any forum in respect of any issue, claim, demand,
cause of action, action, suit or proceeding arising out of or based upon this
Agreement or the subject matter hereof, in each case whether now existing or
hereafter arising and whether in contract or tort or otherwise. Any of the
parties hereto may file an original counterpart or a copy of this Section 14.3
with any court as written evidence of the consent of each of the parties hereto
to the waiver of his or its right to trial by jury.
14.4. Reliance. Each of the parties hereto acknowledges that he or it has
--------
been informed by each other party that the provisions of Section 14 constitute a
material inducement upon which such party is relying and will rely in entering
into this Agreement and the transactions contemplated hereby.
-56-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Agreement (or caused this Agreement to be executed on its behalf by its officer
or representative thereunto duly authorized) under seal as of the date first
written above.
THE COMPANY IA HOLDINGS CORP.
By /s/ Andrea Geisser
____________________________________
Title: Vice President
THE INITIAL FUND INVESTOR FENWAY PARTNERS CAPITAL FUND, L.P.
By: Fenway Partners, L.P., its general
partner
By: Fenway Partners Management, Inc.,
its general partner
By: /s/ Andrea Geisser
__________________________________
An Authorized Signatory
THE INITIAL MEZZANINE INVESTOR NEW YORK LIFE INSURANCE COMPANY
By /s/ Andrew Steuerman
__________________________________
Title: Assistant Vice President
-57-
<PAGE>
By their execution hereof, each of the undersigned agrees to be bound by
the provisions of the foregoing Stockholders Agreement as a Management Investor.
THE INITIAL MANAGEMENT INVESTORS
/s/ Donald R. Jensen
____________________________________
Donald R. Jensen, individually
/s/ William J. Mills
____________________________________
William J. Mills, individually
/s/ Keith A. McDonough
____________________________________
Keith A. McDonough, individually
/s/ Willie J. Taaffe
____________________________________
Willie J. Taaffe, individually
/s/ Joseph Sebes
____________________________________
Joseph Sebes, individually
/s/ John Engel
____________________________________
John Engel, individually
-58-
<PAGE>
EXHIBIT 10.14
AMENDMENT NO. 1 TO
STOCKHOLDERS AGREEMENT
Amendment No. 1, dated as of March 25, 1997 (this "Amendment"), to the
---------
Stockholders Agreement (the "Agreement") dated as of February 26, 1997 by and
---------
among (i) Iron Age Holdings Corporation, a Delaware corporation formerly known
as IA Holdings Corp. (the "Company"), (ii) Fenway Partners Capital Fund, L.P.
-------
(the "Initial Fund Investor") and each of the other Fund Investors (as defined
---------------------
in the Agreement), if any, from time to time party thereto, (iii) New York Life
Insurance Company, a New York life insurance company (the "Initial Mezzanine
-----------------
Investor") and each of the other Mezzanine Investors (as defined in the
- - --------
Agreement), if any, from time to time party thereto, and (iv) each of the
Management Investors (as defined in the Agreement) from time to time party
thereto. Capitalized terms used and not otherwise defined in this Amendment are
used herein as defined in the Agreement.
WHEREAS, the Initial Fund Investor intends to Transfer to American Home
Assurance Company ("AHAC") the securities purchased by the Initial Fund Investor
----
pursuant to the Mezzanine Securities Purchase Agreement (subject to, among other
things, the agreement of AHAC to join the Agreement as a Mezzanine Investor);
WHEREAS, the Initial Fund Investor has acquired, pursuant to a Stock
Subscription Agreement dated as of March 14, 1997 (the "March 1997 Subscription
-----------------------
Agreement") an additional 10,999.89 shares of Common Stock (the "March 1997
- - ---------
Additional Shares") of which the Initial Fund Investor intends to transfer: (i)
989.99 shares to the Initial Mezzanine Investor, (ii) 495 shares to AHAC and
(iii) 1,374.99 shares to Banque Nationale de Paris or an affiliate thereof
designated by BNP and acceptable to the Company and the Initial Fund Investor
("BNP") (subject to, among other things, the agreement of BNP to join the
---
Agreement as a Designated Investor);
WHEREAS, in connection with such transactions the parties have agreed to
amend certain provisions of the Agreement and to consent to and acknowledge
certain matters, all as hereinafter provided; and
WHEREAS, this Amendment has been approved by the Company, the Initial Fund
Investor (which as of the date hereof is the only Fund Investor, and which, in
addition to holding Fund Securities, holds a portion of the Mezzanine Securities
currently outstanding), the Initial Mezzanine Investor (which as of the date
hereof holds all of the Mezzanine Securities currently outstanding that are not
held by the Initial Fund Investor) and by the Management Investors whose
signatures appear on the signature pages of this Amendment;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
hereinafter set forth, and other good and valuable consideration the receipt
and sufficiency of which are hereby acknowledged, the Agreement is hereby
amended and modified as follows:
<PAGE>
1. Amendment to Section 12.2. Section 12.2 of the Agreement is hereby amended
-------------------------
by deleting from the third line thereof the words "sixty-six and two-thirds
percent (66-2/3%)" and substituting therefor the words "seventy percent
(70%)".
2. Agreements Regarding Sales of Securities by the Initial Fund Investor.
---------------------------------------------------------------------
With respect to the issuance by the Company to the Initial Fund Investor of
the March 1997 Additional Shares and the resale by the Initial Fund
Investor of up to 2,859.98 of such shares to the Initial Mezzanine
Investor, AHAC and BNP as contemplated by the recitals to this Amendment,
the parties hereby agree:
a. All Investors hereby consent to such issuance and resale and (except
as provided in Section 2(b) of this Amendment) waive any and all
rights to preemptive or other notice of such issuance;
b. Any and all rights to preemptive offer of any such securities or other
opportunity to participate in such issuances, sales or purchases
(pursuant to Section 8.1.1.1, Section 8.1.5.2 or otherwise) are hereby
waived; provided, that as contemplated by the recitals to this
Amendment the Initial Fund Investor offers to the Initial Mezzanine
Investor, within thirty (30) days of the date hereof, an opportunity
to purchase 989.99 of the March 1997 Additional Shares for a purchase
price of $360,000.00;
c. For purposes of the Agreement (including, without limitation, Section
8.1.1.1 (b) thereof), none of such issuances or sales will be deemed
to constitute an "Issuance of Subject Securities described in clause
(ii) of the first paragraph of Section 8";
d. For purposes of Section 8.1.2.1 of the Agreement (including, without
limitation, the first sentence thereof) and Section 8.3 of the
Agreement (including, without limitation, the first sentence thereof),
the Company's issuance of March 1997 Additional Shares will be deemed
to constitute the first $4,000,000 in Issuances of Subject Securities
described in clause (i) of the first paragraph of Section 8 of the
Agreement.
e. For purposes of Section 3.3 of the Agreement, the resale by the
Initial Fund Investor:
i. of up to 989.99 of the March 1997 Additional Shares to the
Initial Mezzanine Investor shall be treated as a Transfer to a
Mezzanine Investor under Section 3.1.2(b);
ii. of up to 495 of the March 1997 Additional Shares to AHAC shall be
treated as a Transfer to a Mezzanine Investor under Section
3.1.2(b);
-2-
<PAGE>
iii. of up to 1,374.99 of the March 1997 Additional Shares to BNP
shall be treated as a Transfer under Section 3.1.1(i).
3.A Designated Investors. The Agreement is amended as follows to create a new
--------------------
class of stockholders called Designated Investors:
a. The preamble is amended by deleting clauses (iii) and (iv) thereof and
replacing such provisions with the following clauses (iii), (iv) and
(v):
"(iii) New York Life Insurance Company (the "Initial Mezzanine
-----------------
Investor"), and each of the other Mezzanine Investors from
--------
time to time becoming a party hereto pursuant to the terms
hereof;
(iv) each of the Designated Investors (if any) from time to time
becoming a party hereto pursuant to the terms hereof; and
(v) each of the Management Investors from time to time becoming a
party hereto pursuant to the terms hereof (each of the Fund
Investors, the Mezzanine Investors, the Designated Investors
and the Management Investors, being referred to herein as an
"Investor" and collectively as the "Investors")."
-------- ---------
b. Section 1.1 is amended by inserting new Section 1.1.5a and 1.1.5b
after Section 1.1.5, to read as follows:
"1.1.5a. "Designated Investors" shall mean any stockholder designated
--------------------
as such by the Company that, from time to time, acquires Shares or
Options and becomes party to this Agreement by executing and
delivering to the Company an instrument in form satisfactory to the
Company pursuant to which such person agrees to be bound by the terms
of this Agreement as a Designated Investor."
"1.1.5b. "Designated Securities" shall mean all Shares and Options
---------------------
originally issued to (or issuable upon conversion or exercise of, or
otherwise with respect to, Shares or Options originally issued to) or
held by the Designated Investors, whenever issued."
c. Section 1.1.27 is amended by inserting the phrase", the Designated
Securities," after the phrase "the Mezzanine Securities."
d. Section 2 is amended by inserting a new Section 2.4a after Section
2.4, to read as follows:
-3-
<PAGE>
"2.4a. Designated Investors. Except to the extent provided in
--------------------
Sections 2.1 and 2.3 above with respect to elections of certain
directors, in Section 2.4 with respect to certain liquidity
transactions, and in Section 12.2 with respect to certain
modifications of this Agreement, each holder of Designated Securities
agrees to cast all votes to which such holder is entitled in respect
of the Voting Shares now or hereafter owned by such holder in the same
proportion as Fund Shares are voted by the Fund Majority Holders in
connection with all other matters brought for a vote of stockholders
of the Company."
e. Section 3.1 is amended by inserting a new Section 3.1.8, to read in
its entirety as follows:
"3.1.8. Certain Permitted Transfers of Designated Securities. Any
----------------------------------------------------
Designated Investor may Transfer any and all Designated Securities
held by such Designated Investor to any other Person who immediately
prior to such Transfer is already a Designated Investor."
f. Section 3.3 is amended by appending a new paragraph (j) to the end
thereof, to read in its entirety as follows:
"(j) Securities Transferred to Designated Investors pursuant to and
in compliance with Section 3.1.8 shall constitute Designated
Securities in the hands of such Transferees."
g. Section 11 is amended by inserting the following paragraphs
immediately before the last paragraph thereof:
"Each certificate representing Designated Securities shall have
the following legend endorsed conspicuously thereupon:
"The securities represented by this certificate were originally
issued to, or issued with respect to shares originally issued to , the
following Designated Investor:____________________________________."
h. Section 12.2 is amended by inserting the phrase ", Designated
Securities" after the phrase "Fund Securities, Mezzanine Securities".
3.B Clerical Amendment. Section 8.1.2.1 of the Agreement is hereby amended by
------------------
deleting from the sixth and seventh lines of the first sentence thereof the
phrase "other than any such holder the preemptive rights of which shall
have expired pursuant to Section 8.3."
4. Miscellaneous. This Amendment may be executed in multiple
-------------
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one
-4-
<PAGE>
instrument. This Amendment shall be governed by and construed in accordance with
the domestic substantive laws of the State of Delaware without giving effect to
any choice or conflict of laws provision or rule that would cause the
application of the domestic substantive laws of any other jurisdiction.
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Amendment (or caused this Amendment to be executed on its behalf by its officer
or representative thereunto duly authorized) under seal as of the date first
written above.
THE COMPANY IRON AGE HOLDINGS CORPORATION
By /s/ Andrea Geisser
-----------------------------------------
Title: Vice President
THE INITIAL FUND INVESTOR FENWAY PARTNERS CAPITAL FUND, L.P.
By: Fenway Partners, L.P., its general
partner
By: Fenway Partners Management, Inc.,
its general partner
By: /s/ Andrea Geisser
------------------------------------
An Authorized Signatory
THE INITIAL MEZZANINE INVESTOR NEW YORK LIFE INSURANCE COMPANY
By /s/ Andrew H. Steuerman
--------------------------------
Title: Investment Manager
-5-
<PAGE>
THE INITIAL MANAGEMENT INVESTORS:
/s/ Donald R. Jensen
----------------------------------------
Donald R. Jensen, individually
/s/ William J. Mills
-----------------------------------------
William J. Mills, individually
/s/ Keith A. McDonough
------------------------------------------
Keith A. McDonough, individually
/s/ Willie J. Taaffe
------------------------------------------
Willie J. Taaffe, individually
/s/ Joseph Sebes
------------------------------------------
Joseph Sebes, individually
/s/ John Engel
------------------------------------------
John Engel, individually
-6-
<PAGE>
Exhibit 10.15
Instrument of Joinder to the
STOCKHOLDERS AGREEMENT
of
Iron Age Holdings Corporation
Reference is made to the Stockholders Agreement dated as of February 26,
1997, as amended and in effect from time to time (the "Stockholders Agreement")
among Iron Age Holdings Corporation, a Delaware corporation formerly known as IA
Holdings Corp. (the "Company"), its initial stockholders and the other persons
from time to time parties thereto. Capitalized terms used and not otherwise
defined in this instrument are used herein as defined in the Stockholders
Agreement.
WHEREAS, pursuant to a Securities Sale Agreement dated as of March 25, 1997
(the "SSA") by and between the Initial Fund Investor and American Home Assurance
Company (the "New Mezzanine Investor"), the New Mezzanine Investor is to
acquire, among other things, certain equity securities originally issued by the
Company to the Initial Fund Investor pursuant to that certain Securities
Purchase Agreement dated as of February 26, 1997, among the Company, Iron Age
Corporation, as successor by merger to IAH Acquisition Corp., New York Life
Insurance Company and the Initial Fund Investor; and
WHEREAS, it is a condition of such sale that the New Mezzanine Investor
become a Mezzanine Investor for purposes of the Stockholders Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned does hereby confirm, covenant, agree and declare
that the New Mezzanine Investor will be bound by all of the terms and conditions
of the Stockholders Agreement applicable thereunder to Mezzanine Investors and
that all Shares and Options owned by the New Mezzanine Investor (including,
without limitation, the Warrant, as defined in the SSA) will be subject to the
provisions of the Stockholders Agreement applicable to Mezzanine Securities.
This Instrument shall be governed by, and construed in accordance with, the
domestic substantive laws of the State of Delaware without giving effect to any
choice or conflict of law provisions or rule that would cause the application of
the domestic substantive laws of any other jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
executed and delivered as of this March 25, 1997 by its officer thereunto duly
authorized.
AMERICAN HOME ASSURANCE COMPANY
By: /s/ David B. Pinkerton
----------------------------------
Title: Vice President
Acknowledged:
Iron Age Holdings Corporation
By /s/ Andrea Geisser
----------------------------
Name: Andrea Geisser
Title: Vice President
-2-
<PAGE>
EXHIBIT 10.16
INSTRUMENT OF JOINDER TO THE
STOCKHOLDERS AGREEMENT
OF
IRON AGE HOLDINGS CORPORATION
Reference is made to the Stockholders Agreement dated as of February 26,
1997, as amended and in effect from time to time (the "Stockholders Agreement")
among Iron Age Holdings Corporation, a Delaware corporation formerly known as IA
Holdings Corp. (the "Company"), its initial stockholders and the other persons
from time to time parties thereto. Capitalized terms used and not otherwise
defined in this instrument are used herein as defined in the Stockholders
Agreement.
WHEREAS, pursuant to a Securities Transfer Agreement dated as of March 25,
1997 (the "STA") by and between the Initial Fund Investor and Banque Nationale
de Paris (the "Designated Investor"), the Designated Investor is to acquire,
among other things, 1,374.99 shares of Common Stock originally issued by the
Company to the Initial Fund Investor pursuant to that certain Subscription
Agreement dated as of March 14, 1997, between the Company and the Initial Fund
Investor; and
WHEREAS, it is a condition of such sale that the Designated Investor become
a Designated Investor for purposes of the Stockholders Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned does hereby confirm, covenant, agree and declare
that the Designated Investor will be bound by all of the terms and conditions of
the Stockholders Agreement applicable thereunder to Designated Investors and
that all Shares and Options owned by the Designated Investor will be subject to
the provisions of the Stockholders Agreement applicable to Designated Investor
Securities.
This Instrument shall be governed by, and construed in accordance with, the
domestic substantive laws of the State of Delaware without giving effect to any
choice or conflict of law provisions or rule that would cause the application of
the domestic substantive laws of any other jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
executed and delivered as of this March 25, 1997 by its officer thereunto duly
authorized.
BANQUE NATIONALE DE PARIS
By: /s/ Mark T. Daniel /s/ Stephen P. Kovacs
---------------------------------------------
Title: VP AVP
Acknowledged:
Iron Age Holdings Corporation
By /s/ Andrea Geisser
-------------------------
Name: Andrea Geisser
Title: Vice President
-2-
<PAGE>
EXHIBIT 10.17
1997 STOCK OPTION PLAN
1. Purpose
The purpose of this 1997 Stock Option Plan (the "Plan") is to advance the
----
interests of IA Holdings Corp., a Delaware corporation the name of which is to
be changed to Iron Age Holdings Corporation (the "Company"), by enhancing the
-------
ability of the Company and its Subsidiaries to attract and retain directors,
employees, consultants or advisers who are in a position to make significant
contributions to the success of the Company; to reward such individuals for
their contributions; and to encourage such individuals to take into account the
long-term interests of the Company. The Plan provides for the award of options
to purchase shares of the Company's Common Stock, par value $.01 per share (the
"Stock").
-----
Options granted pursuant to the Plan may be incentive stock options as
defined in Section 422 of the Internal Revenue Code of 1986 (as from time to
time amended, the "Code") (any option that is intended to qualify as an
----
incentive stock option being referred to herein as an "incentive option"), or
----------------
options that are not incentive options, or both. Options granted pursuant to the
Plan shall be presumed to be non-incentive options unless expressly designated
as incentive options.
2. ELIGIBILITY FOR AWARDS
Persons eligible to receive awards under the Plan shall be all directors,
including directors who are not employees, of the Company and all executive
officers of the Company and its Subsidiaries and other employees, consultants
and advisers who, in the opinion of the Board, are in a position to make a
significant contribution to the success of the Company and its Subsidiaries.
Incentive options shall be granted only to "employees" as defined in the
provisions of the Code or regulations thereunder applicable to incentive stock
options. Persons selected for awards under the Plan are referred to herein as
"participants".
------------
3. ADMINISTRATION
The Plan shall be administered by the Board of Directors (the "Board") of
-----
the Company or, if applicable, its successors. The Board shall have authority,
not inconsistent with the express provisions of the Plan, (a) to grant awards
consisting of options to such participants as the Board may select; (b) to
determine the time or times when awards shall be granted and the number and type
of Option Shares (as defined below) subject to each award; (c) to determine
which options are, and which options are not, incentive options; (d) to
determine the terms and conditions of each award; (e) to prescribe the form or
forms of any instruments evidencing awards and any other instruments required
under the Plan and to change such forms from time
<PAGE>
to time; (f) to adopt, amend and rescind rules and regulations for the
administration of the Plan; and (g) to interpret the Plan and any award granted
hereunder and to decide any questions and settle all controversies and disputes
that may arise in connection with the Plan or any award granted hereunder. Such
determinations of the Board shall be conclusive and shall bind all parties.
Subject to Section 8, the Board shall also have the authority, both generally
and in particular instances, to waive compliance by a participant with any
obligation to be performed by him or her under an award, to waive any condition
or provision of an award, and to amend or cancel any award (and if an award is
canceled, to grant a new award on such terms as the Board shall specify);
provided, however, that except as expressly provided in the Plan or in an award
granted hereunder, the Board may not take any action with respect to an
outstanding award that would adversely affect the rights of the participant
under such award without such participant's consent.
The Board may, in its discretion, delegate some or all of its powers with
respect to the Plan to a committee (the "Committee"), in which event all
---------
references in this Plan (as appropriate) to the Board shall be deemed to refer
to the Committee. The Committee, if one is appointed, shall consist of at least
two directors. A majority of the members of the Committee shall constitute a
quorum, and all determinations of the Committee shall be made by a majority of
its members. Any determination of the Committee under the Plan may be made
without notice or meeting of the Committee by a writing signed by a majority of
the Committee members.
4. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on the date on which it is approved by the
shareholders of the Company. Grants of awards under the Plan may be made prior
to that date (but after Board adoption of the Plan), subject to approval of the
Plan by such shareholders.
No awards shall be granted under the Plan after the completion of ten years
from the date on which the Plan was adopted by the Board, but awards previously
granted may extend beyond that date.
5. SHARES SUBJECT TO THE PLAN
(a) Number of Shares. Subject to adjustment as provided in Section 5(c),
the aggregate number of shares of Stock that may be delivered upon the exercise
of awards granted under the Plan (the "Option Shares") shall be 20,244.70;
-------------
11,527.78 of which shall be for Series A Options and 8,716.92 of which shall be
for Series B Options. Each award granted under the Plan shall be designated as a
Series A Option, a Series B Option, or any combination of the foregoing. If any
award granted under the Plan terminates without having been exercised in full,
or upon exercise is satisfied other than by delivery of Stock, the number of
shares of Stock as to which such award was not exercised shall be available for
future grants of awards for Option Shares, within the limits set forth in this
Section 5(a).
-2-
<PAGE>
(b) Stock to be Delivered. Stock delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in its
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event the Company (i) pays a dividend on
the Stock in shares of Stock or makes a distribution on the Stock in shares of
Stock, (ii) subdivides its outstanding shares of Stock into a greater number of
shares, (iii) combines its outstanding shares of Stock into a smaller number of
shares, (iv) makes a distribution on the Stock in shares of its capital stock
other than Stock, (v) issues by reclassification of its Stock any shares of its
capital stock, or (vi) changes its capital stock, then the number and kind of
shares of stock or securities of the Company subject to awards then outstanding
or subsequently granted under the Plan, the exercise price of such awards, the
maximum number of shares or securities that may be delivered under the Plan, and
other relevant provisions shall be appropriately adjusted by the Board, whose
determination shall be binding on all Persons.
The Board may also adjust the number of shares subject to outstanding
awards and the exercise price and other terms of outstanding awards, to take
into consideration (i) any change in the fiscal year of the Company, (ii) any
change in accounting practices or principles of the Company or its Subsidiaries,
(iii) extraordinary dividends, (ii) any direct or indirect acquisition by the
Company or its Subsidiaries of any business enterprise (whether by merger,
consolidation, share exchange, sale or acquisition of stock or assets or similar
transaction) or any internal development or expansion of any business by the
Company or its Subsidiaries, (iii) any merger or combination involving the
Company or any of its Subsidiaries and any Affiliate of the Company or any
direct or indirect acquisition of the Company or any of its Subsidiaries by any
Affiliate of the Company, (iv) any additional capital contribution by Fenway
Partners Capital Fund, L.P. ("Fenway") or its Affiliates to the Company or (v)
------
any other event if it is determined by the Board that such adjustment is
necessary, advisable or appropriate so that the options granted hereunder
constitute a continuing incentive; provided that no such adjustment shall be
made in the case of an incentive option, without the consent of the participant,
if it would constitute a modification, extension or renewal of the option within
the meaning of Section 424(h) of the Code.
6. TERMS AND CONDITIONS OF OPTIONS
(a) Exercise Price of Options. The exercise price of each option
shall be determined by the Board but in the case of an incentive option shall
not be less than 100% (110%, in the case of an incentive option granted to a
ten-percent shareholder) of the fair market value of the Stock at the time the
option is granted; nor shall the exercise price be less, in the case of an
original issue of authorized stock, than par value. For this purpose, "fair
market value" in the case of incentive options shall have the same meaning as it
does in the provisions of the Code and the regulations thereunder applicable to
incentive options; and "ten-percent shareholder" shall mean any participant who
at the time of grant owns directly, or by
-3-
<PAGE>
reason of the attribution rules set forth in section 424(d) of the Code is
deemed to own, stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or of any of its parent or Subsidiary
corporations.
(b) Duration of Options. An option shall be exercisable during such period
or periods as the Board may specify. The latest date on which an option may be
exercised (the "Final Exercise Date") shall be the date which is ten years (five
-------------------
years, in the case of an incentive option granted to a "ten-percent shareholder"
as defined in (a) above) from the date the option was granted or such earlier
date as the Board may specify at the time the option is granted.
(c) Exercise of Options.
(1) Unless the Board shall specify other times at, and conditions upon,
which an option shall become exercisable ("Vest"), options granted
----
pursuant to this Plan shall Vest as set forth in this Section
6(c)(1).
(i) Series A Options. Each Series A Option shall Vest entirely
immediately on the date such Series A Option is granted but shall
not be exercised by any recipient prior to December 31, 1997.
(ii) Series B Options.
(A) (I) With respect to 64.91% of the Option Shares for
which a Series B Option has been granted (the "Basic B Option
--------------
Shares"), such Series B Option shall Vest as to 20% of the
------
Basic B Option Shares (the "Annual Portion") on the Release
--------------
Date (as defined in Section 10) with respect to each of the
fiscal years ending on the dates listed below if the Actual
Earnings (as defined in Section 10) for such fiscal year shall
equal or exceed the amount set forth below opposite such
fiscal year (each, "Target Earnings") :
---------------
Fiscal Year Ending on the Target
last Saturday in January Earnings
------------------------ --------
1998 $19,800,000
1999 $21,400,000
2000 $23,300,000
2001 To be determined by the Board
2002 To be determined by the Board
For any fiscal year (a "Shortfall Year") in which the Actual
--------------
Earnings fail to equal or exceed the Target Earnings for such
fiscal year as set forth
-4-
<PAGE>
above, such Series B Option shall expire with respect to the
Annual Portion for such Shortfall Year on the Release Date with
respect to such Shortfall Year; provided, however, that if the
-------- -------
Actual Earnings for such Shortfall Year exceed 90% of the Target
Earnings for such Shortfall Year as set forth above, such Series
B Option shall Vest at the Release Date for such Shortfall Year
as to the Annual Portion for such Shortfall Year in increments of
one-tenth of such Annual Portion for each 1% (or portion thereof)
of the Target Earnings for such Shortfall Year by which Actual
Earnings for such Shortfall Year exceed 90% of the Target
Earnings for such Shortfall Year; and provided, further, that if
-------- -------
the amount of Actual Earnings for the fiscal year next succeeding
such Shortfall Year (a "Subsequent Year") equals or exceeds the
---------------
sum of (x) the Target Earnings for such Subsequent Year as set
forth above plus (y) the amount by which Target Earnings for such
Shortfall Year as set forth above exceeded Actual Earnings for
such Shortfall Year, the Annual Portion for such Shortfall Year
shall, to the extent not already Vested under the provisions of
the first proviso to this sentence, Vest at the Release Date for
such Subsequent Year. In no event shall such Series B Option for
Basic B Option Shares Vest (x) with respect to any fiscal year as
to more than the sum of the Annual Portion for such fiscal year
plus such portion of the Annual Portion for the preceding year as
shall not previously have become Vested, or (y) with respect to
all fiscal years as to more than the aggregate of all Basic B
Option Shares for which such Series B Option has been granted.
(II) If Fenway shall agree to sell or otherwise directly
or indirectly transfer for value, whether by merger,
consolidation, share exchange, sale or acquisition of stock or
assets or similar transaction, its entire equity interest in the
Company to a Person other than an Affiliate of Fenway (a "Sale
----
Transaction") and the proceeds to be received by Fenway for the
-----------
common equity of the Company held by it pursuant to such Sale
Transaction (net of any related expenses) shall equal or exceed
the initial purchase price thereof plus the annual internal rate
of return (the "IRR") set forth in the table below from the date
---
of original issuance of such common equity to the date of
consummation of such Sale Transaction, then each Series B Option
shall Vest (without duplication of any Vesting that has then
occurred pursuant to Section 6(c)(1)(ii)(A)(I)) as hereinafter
described as to the percentage of the Basic B Option Shares (set
forth in the table below opposite the corresponding IRR) as to
which the Series B Option has not theretofore expired, whether or
not Vested (the "Early Sale Option"), it being understood that
-----------------
any Basic B Option Shares as to which the Option has expired
because of the occurrence of a Shortfall Year but which might
subsequently become
-5-
<PAGE>
Vested under the provisions of Section 6(c)(1)(ii)(A)(I) hereof
relating to the Subsequent Year shall be deemed expired for
purposes of determining the number of shares as to which such
Early Sale Option may be exercised:
Percent of
----------
IRR Series B Option Shares
--- ----------------------
Less than 23% 0%
23% to less than 24% 20%
24% to less than 25% 30%
25% to less than 26% 60%
26% to less than 27% 80%
27% or more 100%
(III) Such Early Sale Option shall be exercisable in
whole or in part during the period (i) beginning on the date (not
later than the twentieth (20th) day prior to the date of
consummation of the Sale Transaction) on which the Company shall
furnish the Employee a notice (an "Early Sale Notice") setting
-----------------
forth the projected date of consummation of the Sale Transaction,
the minimum price per share of Common Stock for the Sale
Transaction and the number of shares, if any, as to which such
Early Sale Option is exercisable by virtue of such Sale
Transaction and (ii) ending on the date (not earlier than the
fifteenth (15th) day following the delivery of such Early Sale
Notice) as the Company may specify in such Early Sale Notice (the
"Early Sale Option Exercise Period"). To the extent such Early
---------------------------------
Sale Option with respect to any proposed Sale Transaction shall
not have been exercised on or prior to the expiration of such
Early Sale Option Exercise Period with respect to such proposed
Sale Transaction, such Early Sale Option with respect to such
proposed Sale Transaction shall expire and terminate. The Company
may at any time following the delivery of an Early Sale Notice
with respect to a proposed Sale Transaction furnish the Employee
a further notice informing the Employee of Fenway's intent not to
proceed to the consummation of such proposed Sale Transaction,
whereupon such Early Sale Option with respect to such proposed
Sale Transaction shall expire and terminate, whether or not
previously exercised by the Employee, and the Company shall not
in any event have any obligation
-6-
<PAGE>
to issue any Option Shares pursuant to any exercise of such Early
Sale Option except against payment by the Employee therefor
simultaneously with the consummation of such Sale Transaction.
(B) With respect to 35.09% of the Option Shares for which a
Series B Option has been granted (the "Extra B Option Shares"),
---------------------
each Series B Option shall Vest as and to the extent set forth in
this Section 6(c)(1)(ii)(B) only in connection with the
consummation by Fenway of a Sale Transaction. If the proceeds to
be received by Fenway for the common equity of the Company held
by it pursuant to such Sale Transaction (net of any related
expenses) shall equal or exceed the initial purchase price
thereof plus the annual IRR set forth in the table below from the
date of original issuance of such common equity to the date of
consummation of such Sale Transaction, then such Series B Option
shall Vest as to the percentage, set forth in the table below
opposite the corresponding IRR, of the Extra B Option Shares:
Percent of
----------
IRR Option Shares
--- -------------
Less than 31% 0%
31% to less than 32% 20%
32% to less than 33% 30%
33% to less than 34% 60%
34% to less than 35% 80%
35% or more 100%
Such Series B Option shall be exercisable as to the percentage of
the Extra B Option Shares specified above in whole or in part
during the period (i) beginning on the date (not later than the
twentieth (20th) day prior to the date of consummation of the
Sale Transaction) on which the Company shall furnish the Employee
a notice (a "Sale Notice") setting forth the projected date of
-----------
consummation of the Sale Transaction, the minimum price per share
of Common Stock for the Sale Transaction and the number of Extra
B Option Shares, if any, as to which the Series B Option is
exercisable by virtue of such Sale Transaction and (ii) ending on
the date (not earlier than the fifteenth (15th) day following the
delivery of such Sale Notice) as the Company may specify in such
Sale Notice (the "Sale Exercise Period"). To the extent a Series
--------------------
B Option which Vests as set forth herein in connection with any
proposed Sale
-7-
<PAGE>
Transaction shall not have been exercised on or prior to the
expiration of the Sale Exercise Period with respect to such
proposed Sale Transaction, such Series B Option for Extra B
Option Shares with respect to such proposed Sale Transaction
shall expire and terminate. The Company may at any time following
the delivery of a Sale Notice with respect to a proposed Sale
Transaction furnish the Employee a further notice informing the
Employee of Fenway's intent not to proceed to the consummation of
such proposed Sale Transaction, whereupon the Series B Option for
Extra B Option Shares which Vested in connection with such
proposed Sale Transaction shall no longer be Vested, whether or
not previously exercised by the Employee, and the Company shall
not in any event have any obligation to issue any Option Shares
pursuant to any exercise of the Series B Option except against
payment by the Employee therefor simultaneously with the
consummation of such Sale Transaction.
Without limiting the generality of the foregoing, the Board may
specify a different time or times and different conditions with
respect to the Vesting of any Series A Options and Series B Options
Options granted in the same stock option award. In the case of an
option not immediately Vested in full, the Board may at any time
accelerate the time at which all or any part of the option may Vest.
(2) During the participant's lifetime, an option may be exercised only by
the participant (unless the participant is disabled and a legal
representative has been appointed for the participant, in which event
the option may be exercised on the participant's behalf by such legal
representative). Following the death of the participant, an option may
be exercised by the participant's estate or any trust established
solely for the benefit of one or more of the participant's heirs (such
estate and each such trust being referred to herein collectively as
the "Estate"). Any Person entitled to exercise an option in accordance
------
with the terms hereof and desiring to do so shall exercise an option
by delivering a written notice to the Company signed by such Person
and shall be accompanied by (i) such documents as may be required by
the Board and (ii) payment in full as specified below in Section 6(d)
for the number of shares for which the option is exercised. Such
notice shall state the number of shares in respect to which such
option is being exercised and shall contain the acknowledgment and
agreement of the participant (or the Estate or the participant's legal
representative, if applicable) that such shares of Stock are subject
to the Stockholders Agreement.
(3) In the case of an option that is not an incentive option, the Board
shall have the right to require that the participant exercising the
option remit to the Company an amount sufficient to satisfy any
federal, state, or local withholding tax
-8-
<PAGE>
requirements (or make other arrangements satisfactory to the Company
with regard to such taxes) prior to the delivery of any certificates
representing Stock pursuant to the exercise of the option. If
permitted by the Board, either at the time of the grant of the option
or the time of exercise, the participant may elect, at such time and
in such manner as the Board may prescribe, to satisfy such withholding
obligation by (i) delivering to the Company Stock owned by such
individual having a fair market value equal to such withholding
obligation, or (ii) requesting that the Company withhold from the
Stock to be delivered upon the exercise a number of shares of Stock
having a fair market value equal to such withholding obligation.
In the case of an incentive option, if at the time the option is
exercised the Board determines that under applicable law and
regulations the Company could be liable for the withholding of any
federal or state tax with respect to a disposition of the Stock
received upon exercise, the Board may require as a condition of
exercise that the participant exercising the option agree (i) to
inform the Company promptly of any disposition (within the meaning of
section 424(c) of the Code and the regulations thereunder) of Stock
received upon exercise, and (ii) to give such security as the Board
deems adequate to meet the potential liability of the Company for the
withholding of tax, and to augment such security from time to time in
any amount reasonably deemed necessary by the Board to preserve the
adequacy of such security.
(4) If an option is exercised by the executor or administrator of a
deceased participant, or by the Person or Persons to whom the option
has been transferred by the participant's will or the applicable laws
of descent and distribution, the Company shall be under no obligation
to deliver Stock pursuant to such exercise until the Company is
satisfied as to the authority of the Person or Persons exercising the
option.
(d) Payment for and Delivery of Stock. Stock purchased upon exercise of an
option under the Plan shall be paid for in cash or by certified check, bank
draft or money order payable to the order of the Company or by any other method
of payment as the Board may allow from time to time.
(e) Rights as Stockholder; Delivery of Stock. A participant shall not have
the rights of a shareholder with regard to awards under the Plan unless and
until a certificate or certificates representing the purchased shares of Stock
are duly issued and delivered to the participant. No adjustment shall be made
for dividends or other rights for which the record date is prior to the date
upon which such stock certificate is issued.
Upon exercise of an option, the Company shall not be obligated to deliver
any certificates representing the Stock (i) until, in the opinion of the
Company's counsel, the Act
-9-
<PAGE>
and all other applicable federal, state and foreign laws and regulations have
been complied with, (ii) if the outstanding Stock is at the time listed on any
stock exchange, until the shares to be delivered have been listed or authorized
to be listed on such exchange upon official notice of issuance and (iii) until
all other legal matters in connection with the issuance and delivery of such
Stock have been approved by the Company's counsel. If the sale of Stock has not
been registered under the Act, the Company may require, as a condition to
exercise of the option, (A) such representations, warranties or agreements as
the Company may deem necessary or desirable in order or assure compliance with
the Act and all other applicable federal, state and foreign laws and regulations
or as may otherwise be reasonably requested by the Company and (B) that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
(f) Nontransferability of Awards; Transfer of Stock. No award may be
transferred other than by will or by the laws of descent and distribution. In
the absence of an effective registration statement under the Act relating
thereto, the Company shall not be required to register a transfer of Stock
purchased upon the exercise of an award hereunder on its books unless the
Company shall have been provided with a legal opinion satisfactory to it in form
and substance from counsel reasonably satisfactory to it prior to such transfer
that registration under the Act is not required in connection with the
transaction resulting in such transfer. Each certificate evidencing such Stock
or issued upon any transfer of such Stock shall bear an appropriate restrictive
legend, except that such certificate shall not bear such a restrictive legend if
the opinion of counsel referred to above is to the further effect that such
legend is not required in order to establish compliance with the provisions of
the Act. Nothing in this paragraph shall modify or otherwise effect the
provisions applicable to the Option Shares under, or the obligations of the
participants pursuant to, the Stockholders Agreement.
(g) Death. Except as set forth in a stock option award, if a participant
dies, each award held by the participant immediately prior to death may be
exercised, to the extent it was Vested immediately prior to death, by his
executor or administrator, or by the Person or Persons to whom the award is
transferred by will or the applicable laws of descent and distribution, at any
time within the period ending 90 days after the participant's death but in no
event beyond the Final Exercise Date. All awards held by a participant
immediately prior to death that are not then Vested shall terminate on the date
of death.
(h) Other Termination of Service. Except as set forth in a stock option
award, if an employee's employment with the Company and its Subsidiaries
terminates for any reason, other than death, all awards held by the employee
that are not then Vested shall terminate. Except as set forth in a stock option
award, awards that are Vested on the date employment terminates shall continue
to be exercisable for a period of 30 days (or such longer period as the Board
may determine, but in no event beyond the Final Exercise Date) unless the
employee was discharged for Cause in which event the Board may terminate such
awards immediately upon the employee's discharge. After completion of such 30
day period, such awards shall terminate to the extent not previously exercised,
expired or terminated, unless otherwise specified in the stock option award. For
purposes of this Section 6(h), employment shall not
-10-
<PAGE>
be considered terminated (i) in the case of sick leave or other bona fide leave
of absence approved for purposes of the Plan by the Board, so long as the
employee's right to reemployment is guaranteed either by statute or by contract,
or (ii) in the case of a transfer of employment between the Company and a
Subsidiary or between Subsidiaries, or to the employment of a corporation (or a
parent or subsidiary corporation of such corporation) issuing or assuming an
award in a transaction to which section 424(a) of the Code applies.
In the case of a participant who is not an employee, provisions relating to
the exercisability of awards following termination of service shall be specified
in the stock option award. If not so specified, all awards held by such
participant that are not then Vested shall terminate upon termination of
service. Awards that are Vested on the date the participant's service terminates
shall continue to be exercisable for a period of 30 days (or such longer period
as the Committee may determine, but in no event beyond the Final Exercise Date)
unless the participant's service was terminated for Cause. After completion of
such period, such awards shall terminate to the extent not previously exercised,
expired or terminated.
Except as set forth in a stock option award, the following events or
conditions, as determined by the Board in its reasonable judgment, shall
constitute "Cause" for termination: (i) the conduct of a participant in the
-----
performance of his duties and responsibilities in a manner materially adverse to
the Company or any of its Subsidiaries or shareholders; (ii) an undisclosed
material conflict of interest or any other material breach by a participant of
any of the provisions of any employment, nondisclosure/noncompete/inventions or
other agreement, if any, between such participant and the Company or any of its
Subsidiaries, (iii) fraud, embezzlement or other material dishonesty with
respect to the Company or any of its Subsidiaries or shareholders, (iv)
conviction of, or plea of nolo contendere to, any felony or any other crime
involving dishonesty or moral turpitude or (v) failure to execute a directive of
a participant's superior or the Board (if such directive is consistent with such
participant's position and not in violation of generally accepted moral, ethical
or professional standards); provided, however, that if such participant is party
to a written employment agreement with the Company or its Subsidiaries
containing a definition of "cause" for termination of employment, then, with
respect to such participant, such alternative definition shall govern for
purposes of this Plan..
(i) Mergers, etc. Except as set forth in a stock option award, in the
event of a consolidation or merger in which the Company is not the surviving
corporation or which results in the acquisition of substantially all the
Company's outstanding capital stock by a single Person or entity or by a group
of Persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets, all outstanding awards shall
thereupon terminate, provided that at least 10 days prior to the effective date
of any such merger, consolidation or sale of assets, the Board, in its sole
discretion, may either (i) make all outstanding awards exercisable immediately
prior to consummation of such merger, consolidation or sale of assets or (ii) if
there is a surviving or acquiring corporation, arrange, subject to consummation
of the merger, consolidation or sale of assets, to have that corporation
-11-
<PAGE>
or an affiliate of that corporation grant to participants replacement awards
which in the case of incentive awards satisfy, in the determination of the
Board, the requirements of section 424(a) of the Code. The Board may grant
awards under the Plan in substitution for awards held by employees, consultants
or advisers of another corporation who concurrently become employees,
consultants or advisers of the Company or a Subsidiary of the Company as the
result of a merger or consolidation of that corporation with the Company or a
Subsidiary of the Company, or as the result of the acquisition by the Company or
a Subsidiary of the Company of property or stock of that corporation. The
Company may direct that substitute awards be granted on such terms and
conditions as the Board considers appropriate in the circumstances.
7. EMPLOYMENT RIGHTS
Neither the adoption of the Plan nor the grant of awards shall confer upon
any participant any right to continue as a director of, an employee of, or
consultant or adviser to, the Company or any parent or Subsidiary or affect in
any way the right of the Company or parent or Subsidiary to terminate such
participant at any time. Except as specifically provided by the Board in any
particular case, the loss of existing or potential profit in awards granted
under this Plan shall not constitute an element of damages in the event of
termination of the relationship of a participant even if the termination is in
violation of an obligation of the Company to the participant by contract or
otherwise.
8. CERTAIN DETERMINATIONS AND MODIFICATIONS.
Determinations of the amount of Actual Earnings, IRR and all other matters
in connection with this Plan and Options granted hereunder shall be made in good
faith by the Board of Directors and such determination, if made in good faith,
shall be conclusive and binding upon all the parties. In the event of any direct
or indirect acquisition by the Company or any of its Subsidiaries of any
business enterprise (an "Acquired Business") for an aggregate purchase price in
-----------------
excess of $2,000,000, whether by merger, consolidation, share exchange, sale or
acquisition of stock or assets or similar transaction, financed in whole or in
part, directly or indirectly, from or in anticipation of any part of the
proceeds of any indebtedness directly or indirectly incurred or to be incurred
or any equity or other securities directly or indirectly issued or to be issued
by Company or any of its Subsidiaries or Affiliates (an "Acquisition
-----------
Transaction"), each participant shall, if requested by the Company, make such
- - -----------
amendments and modifications hereto as may be necessary or appropriate to ensure
that the participant's right to receive, and the Vesting of, any Option Shares
hereunder depends upon the results of operations of Company and its Subsidiaries
in existence on February 26, 1997 as of immediately prior to such Acquisition
Transaction on a stand alone basis, without any augmentation or reduction by the
operating results of any Acquired Business as a result of such Acquisition
Transaction.
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
-12-
<PAGE>
Neither adoption of the Plan nor the grant of awards to a participant shall
affect the Company's right to make awards to such participant that are not
subject to the Plan, to issue to such participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued.
The Board may at any time discontinue granting awards under the Plan. With
the consent of the participant, the Board may at any time cancel an existing
award in whole or in part and grant another award for such number of shares as
the Board specifies. The Board may at any time or times amend the Plan or any
outstanding award for the purpose of satisfying the requirements of Section 422
of the Code or of any changes in applicable laws or regulations or for any other
purpose that may at the time be permitted by law, or may at any time terminate
the Plan as to any further grants of awards; provided, however, that except as
-------- -------
expressly provided in the Plan or in an award granted hereunder, no such
amendment shall adversely affect the rights of any participant (without his or
her consent) under such award.
10. DEFINITIONS
When used in the Plan, the following terms shall have the meanings
specified:
"Acquired Business" shall have the meaning set forth in Section 8 hereof.
-----------------
"Acquisition Corp." shall have the meaning set forth in Section 10
-----------------
hereof.
"Acquisition Transaction" shall have the meaning set forth in Section 8
-----------------------
hereof.
"Actual Earnings" shall mean, for any period, the sum, determined on a
---------------
consolidated basis, of (a) net income (or net loss) measured on a first-in
first-out method of accounting, (b) Interest Expense, (c) income tax expense,
(d) depreciation expense, (e) amortization expense, (f) extraordinary or unusual
losses deducted in calculating net income less extraordinary or unusual gains
added in calculating net income and non-cash expenses associated with any
variable stock plan plus the management fee paid under the Management Agreement
dated February 26, 1997 between Iron Age Corporation and Fenway Partners, Inc.,
(g) fees and expenses incurred by the Company and Acquisition Corp. in
connection with the Acquisition Transactions and (h) directors fees and similar
expenses in excess of $100,000 incurred by the Company at the direction of the
members of the Board representing the majority stockholders of the Company, in
each case determined in accordance with GAAP (as such term is defined in the
Credit Agreement dated February 26, 1997 hereof among the Company, IAH
Acquisition Corp. ("Acquisition Corp.") and the banks named therein).
"Act" shall mean the Securities Act of 1933, as amended, and the rules
---
and regulations promulgated thereunder.
-13-
<PAGE>
"Affiliate" shall mean, with respect to any specified Person, any other
---------
Person which directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person (for
the 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, means 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).
"Annual Portion" shall have the meaning set forth in Section 6(c) hereof.
--------------
"Basic B Option Shares" shall have the meaning set forth in Section 6(c)
---------------------
hereof.
"Board" shall have the meaning set forth in Section 3 hereof.
-----
"Cause" shall have the meaning set forth in Section 6(h) hereof.
-----
"Code" shall have the meaning set forth in Section 1 hereof.
----
"Committee" shall have the meaning set forth in Section 3 hereof.
---------
"Company" shall have the meaning set forth in Section 1 hereof.
-------
"Early Sale Notice" shall have the meaning set forth in Section 6(c)
-----------------
hereof.
"Early Sale Option" shall have the meaning set forth in Section 6(c)
-----------------
hereof.
"Early Sale Option Exercise Period" shall have the meaning set forth in
---------------------------------
Section 6(c) hereof.
"Estate" shall have the meaning set forth in Section 6(c) hereof.
------
"Extra B Option Shares" shall have the meaning set forth in Section 6(c)
---------------------
hereof.
"Fenway" shall have the meaning set forth in Section 5 hereof.
------
"Final Exercise Date" shall have the meaning set forth in Section 6(b)
-------------------
hereof.
"incentive option" shall have the meaning set forth in Section 1 hereof.
----------------
"Interest Expense" shall mean, for any period, the amount by which (i)
----------------
interest expense (including the interest component on obligations under
capitalized leases but excluding (1) paid-in-kind interest, (2) commitment fees
paid to lenders and (3) amortization of original issue
-14-
<PAGE>
discount created upon the issuance of debt), whether paid or accrued, on all
debt of the Company and its Subsidiaries for such period, including, without
limitation and without duplication, (a) interest expense in respect of debt
resulting from advances under Iron Age Corporation's senior credit facility, (b)
interest expense in respect of subordinated debt (other than paid-in-kind
interest) and (c) any net payment payable in connection with currency or
interest rate hedge agreements less any net credits received in connection with
----
such hedge agreements exceeds (ii) interest income, whether paid or accrued, of
the Company and its Subsidiaries for such period.
"IRR" shall have the meaning set forth in Section 6(c) hereof.
---
"Option Shares" shall have the meaning set forth in Section 5 hereof.
-------------
"participants" shall have the meaning set forth in Section 2 hereof.
------------
"Person" shall mean any individual, partnership, corporation, company,
------
association, trust, joint venture, unincorporated organization or entity, or any
government, governmental department or agency or political subdivision thereof.
"Plan" shall have the meaning set forth in Section 1 hereof.
----
"Release Date" shall mean, with respect to a given fiscal year of the
------------
Company, the date on which the Company's audited financial statements for such
fiscal year have been released to the shareholders of the Company.
"Sale Exercise Period" shall have the meaning set forth in Section 6(c)
--------------------
hereof.
"Sale Notice" shall have the meaning set forth in Section 6(c) hereof.
-----------
"Sale Transaction" shall have the meaning set forth in Section 6(c)
----------------
hereof.
"Series A Option" shall have the meaning set forth in Section 5 hereof.
---------------
"Series B Option" shall have the meaning set forth in Section 5 hereof.
---------------
"Shortfall Year" shall have the meaning set forth in Section 6(c) hereof.
--------------
"Stock" shall have the meaning set forth in Section 1 hereof.
-----
"Stockholders Agreement" shall mean the Stockholders Agreement dated as
----------------------
of February 26, 1997 among the Company and the other parties named therein, as
amended, restated, supplemented or otherwise modified from time to time.
-15-
<PAGE>
"Subsequent Year" shall have the meaning set forth in Section 6(c)
---------------
hereof.
"Subsidiary" means a corporation in which the Company owns, directly or
----------
indirectly, stock possessing 50% or more of the total combined voting power of
all classes of stock.
"Target Earnings" shall have the meaning set forth in Section 6(c)
---------------
hereof.
"Vest shall have the meaning set forth in Section 6(c) hereof.
----
February 26, 1997
-16-
<PAGE>
EXHIBIT 10.18
IA HOLDINGS CORP.
IAH ACQUISITION CORP.
-------------------------------------
SECURITIES PURCHASE AGREEMENT
------------------------------------
February 26, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I. DEFINITIONS...................................................................5
Section 1.01 Definitions.....................................................5
ARTICLE II. PURCHASE AND SALE OF SHARES..................................................11
Section 2.01 Description of Securities......................................11
Section 2.02 Purchase and Sale..............................................11
Section 2.03 Closing........................................................11
ARTICLE III. REPRESENTATIONS AND WARRANTIES................................................11
Section 3.01 Representations and Warranties..................................12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
OF THE MEZZANINE INVESTORS.........................16
Section 4.01 Making of Representations and Warranties.......................16
Section 4.02 Organization and Good Standing.................................16
Section 4.03 Authorization and Non-Contravention............................16
Section 4.04 Knowledge and Experience.......................................17
Section 4.05 Investment Intent..............................................17
Section 4.06 Unregistered Securities Legend.................................17
Section 4.07 Source of Funds................................................18
Section 4.08 Investment Banking; Brokerage Fees.............................19
ARTICLE V. COVENANTS OF THE COMPANIES......................................................19
Section 5.01 Distributions or Redemptions...................................20
Section 5.02 Financial Statements and Reports...............................20
Section 5.03 Notice of Defaults.............................................21
Section 5.04 Notice of Litigation...........................................21
Section 5.05 Communications with Independent Public Accountants.............21
Section 5.06 Miscellaneous..................................................22
Section 5.07 Existence and Business.........................................22
Section 5.08 Taxes and Other Obligations....................................22
Section 5.09 Insurance......................................................22
Section 5.10 Records and Accounts...........................................23
Section 5.11 Inspection.....................................................23
Section 5.12 Transactions with Affiliates...................................23
Section 5.13 Board Observation Rights.......................................23
ARTICLE VI. CONDITIONS.....................................................................23
Section 6.01 Conditions to the Obligations of the Mezzanine Investors.......23
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 6.02 Conditions to the Obligations of IA Holdings...................25
ARTICLE VII. MISCELLANEOUS.................................................................26
Section 7.01 Confidentiality Covenant.......................................26
Section 7.02 Indemnities....................................................27
Section 7.03 Governing Law..................................................27
Section 7.04 Notices........................................................27
Section 7.05 Merger.........................................................29
Section 7.06 Successor and Assigns..........................................29
Section 7.07 Fees and Expenses..............................................29
Section 7.08 Publicity and Disclosures......................................30
Section 7.09 Captions and Gender............................................30
Section 7.10 Counterparts...................................................30
Section 7.11 Certain Remedies; Severability.................................30
Section 7.12 Amendments; Waivers............................................31
Section 7.13 Further Assurances.............................................31
Section 7.14 Consent to Jurisdiction........................................31
Section 7.15 Waiver of Jury Trial...........................................31
</TABLE>
<PAGE>
Exhibit List
- - ------------
Exhibit A - List of Mezzanine Investors Purchasing Securities
Exhibit B - Certificate of Designations for Series A Preferred Stock
Exhibit C - Form of Warrant
Exhibit D - Form of Stockholders' Agreement
Schedules
- - ---------
Schedule 3.01(a) Capitalization
Schedule 3.01(b) Subsidiaries
Schedule 3.01(d) Authorizations, Actions, Notices, Approvals, and Filings
Schedule 3.01(m) Open Years
<PAGE>
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT is made as of this 26th day of
February, 1997, by and among IA Holdings Corp., a Delaware corporation ("IA
Holdings"), IAH Acquisition Corp., a Delaware corporation ("IAH Acquisition"),
and the investors named herein and appearing under the heading of "Mezzanine
Investors" on Exhibit A hereto (each, a "Mezzanine Investor" and, collectively,
the "Mezzanine Investors").
WHEREAS, IAH Acquisition has entered into a Stock Purchase Agreement,
dated December 26, 1996, by and among IAH Acquisition, Iron Age Holdings
Corporation, a Delaware corporation ("Iron Age Holdings"), and the stockholders
of Iron Age named therein, as amended by Amendment No. 1 to the Purchase
Agreement, dated February 26, 1997 (as amended, the "Purchase Agreement"),
pursuant to which IAH Acquisition has agreed to purchase all of the issued and
outstanding capital stock of Iron Age from its stockholders;
WHEREAS, as a condition to the closing of the Purchase Agreement, IAH
Acquisition, as Borrower, and IA Holdings, as Parent Guarantor, must enter into
a Senior Credit Agreement (as defined below);
WHEREAS, the Purchase Agreement and the Senior Credit Agreement
contemplate that the Company will also enter into a subordinated debt financing
and obtain additional financing pursuant to the issuance of certain equity
securities; and
WHEREAS, IA Holdings has agreed to sell to the Mezzanine Investors and
the Mezzanine Investors have agreed to purchase from IA Holdings certain shares
of IA Holdings' preferred stock and common stock, as well as warrants to
purchase additional shares of common stock, on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and conditions herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01 Definitions. In addition to any terms defined elsewhere in
this Agreement, unless otherwise specifically provided herein, the following
terms shall have the following meanings for all purposes when used in this
Agreement, and in any agreement, certificate, report, or other document made or
delivered in connection with this Agreement.
"Affiliate" shall mean (i) any director or officer of IA Holdings
or any of its Subsidiaries and (ii) any Person that controls, is
controlled by, or is under common control with IA Holdings or any of its
Subsidiaries. For purposes of this definition,
-5-
<PAGE>
"control" of a Person shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of its management and
policies, whether through the ownership of voting securities, by
contract, or otherwise.
"Agreement" shall mean this Securities Purchase Agreement, as
amended or supplemented from time to time. References to Articles,
Sections, Exhibits, Schedules, and the like refer to the Articles,
Sections, Exhibits, Schedules, and the like of this Agreement unless
otherwise indicated, as amended and supplemented from time to time.
"CERCLIS" shall mean the Comprehensive Environmental Response
Compensation and Liability Information System maintained by the U.S.
Environmental
Protection Agency.
"Certificate of Designations" shall mean the Certificate of
Designations for the Series A Preferred Stock, as the same may be
amended from time to time.
"Closing" shall mean the sale, delivery, and purchase of the
Securities pursuant to this Agreement.
"Closing Date" shall mean February 26, 1997, or such other date
as mutually agreed between IA Holdings and the Mezzanine Investors,
provided that on such date all of the conditions specified in Article VI
have been satisfied or waived.
"Common Shares" shall mean the shares of Common Stock of IA
Holdings issued to the Mezzanine Investors pursuant to this Agreement.
"Common Stock" shall mean the common stock, par value $.01 per
share, of IA Holdings.
"Companies" shall mean IA Holdings and IAH Acquisition.
"Confidential Information" shall have the meaning set forth in
Section 7.01.
"Consolidated" and "Consolidating," and "consolidated" and
"consolidating" when used with reference to any term shall mean that
term (or the terms "combined" and "combining", as the case may be, in
the case of partnerships, joint ventures, and Affiliates that are not
Subsidiaries) as applied to the accounts of IA Holdings (or other
specified Person) and all of its Subsidiaries (or other specified
Persons), or such of its Subsidiaries as may be specified, consolidated
(or combined) in accordance with generally accepted accounting
principles and with appropriate deductions for minority interests in
Subsidiaries, as required by generally accepted accounting principles.
-6-
<PAGE>
"EBITDA" means, for any period, the sum, determined on a
Consolidated basis, of (a) net income (or net loss) measured on a
first-in, first-out method of accounting, (b) interest expense, (c)
income tax expense, (d) depreciation expense, (e) amortization expense
and (f) extraordinary or unusual losses deducted in calculating net
income less extraordinary or unusual gains added in calculating net
income and, to the extent deducted in calculating net income (or net
loss), non-cash expenses associated with any variable stock plan plus
the management fee paid under the Management Agreement, in each case
determined in accordance with GAAP for such period.
"Environmental Action" shall mean any action, suit, demand,
demand letter, claim, notice of non-compliance or violation, notice of
liability or potential liability, investigation, proceeding, consent
order or consent agreement relating in any way to any Environmental Law,
any Environmental Permit or Hazardous Material or arising from alleged
injury or threat to health, safety or the environment, including,
without limitation, (a) by any governmental or regulatory authority for
enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any governmental or regulatory authority or third
party for damages, contribution, indemnification, cost recovery,
compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, writ, judgment,
injunction, decree or judicial or agency interpretation, policy or
guidance relating to pollution or protection of the environment, health,
safety or natural resources, including, without limitation, those
relating to the use, handling, transportation, treatment, storage,
disposal, release or discharge of Hazardous Materials.
"Environmental Permit" shall mean any permit, approval,
identification number, license, or other authorization required under
any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fenway" shall mean Fenway Partners Capital Fund, L.P., a
Delaware limited partnership.
"Fiscal Year" shall mean a fiscal year of IA Holdings and its
Consolidated Subsidiaries ending on the last Saturday in January of any
calendar year.
"Generally accepted accounting principles" or "GAAP" shall mean
generally accepted accounting principles as defined by controlling
pronouncements of the
-7-
<PAGE>
Financial Accounting Standards Board consistent with those applied in
preparation of the financial statements referred to in Section 5.02.
"Hazardous Materials" shall mean (a) petroleum or petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas
and (b) any other chemicals, materials or substances designated,
classified or regulated as hazardous or toxic or as a pollutant or
contaminant under any Environmental Law.
"IA Holdings" shall mean IA Holdings Corp., a Delaware
corporation, and any successor thereto.
"IAH Acquisition" shall mean IAH Acquisition Corp., a Delaware
corporation and a wholly owned Subsidiary of IA Holdings, and any
successor thereto.
"IPO" shall mean any initial offering by IA Holdings or IAH
Acquisition of its capital stock or equity securities pursuant to an
effective registration statement under the Securities Act.
"Iron Age" shall mean Iron Age Holdings Corporation, a Delaware
corporation and any successor thereto.
"Junior Securities" shall mean any Preferred Stock, Common Stock
or any other equity securities of IA Holdings which rank junior as to
liquidation rights, dividend rights, and redemption rights to the Series
A Preferred Stock.
"Lien" means any lien, security interest, or other charge or
encumbrance of any kind, or any type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way, or other encumbrance
on title to real property.
"Majority Holder" shall mean the holder of a combined majority of
the Securities issued pursuant to this Agreement and the senior
subordinated notes issued pursuant to the Note Purchase Agreement, as
measured by the purchase price at the Closing of this Agreement and the
Note Purchase Agreement for such Securities and senior subordinated
notes.
"Management Agreement" shall mean that certain Management
Agreement, dated as of February 26, 1997, by and between IAH Acquisition
and Fenway Partners, Inc., as amended or supplemented from time to time.
"Margin Stock" shall mean "margin" stock as defined in Regulation
G of the Board of Governor's of The Federal Reserve System.
-8-
<PAGE>
"Material Adverse Effect" means a material adverse effect on the
business, condition (financial or otherwise), operations, performance,
properties or prospects of IA Holdings and its Subsidiaries on a
consolidated basis taken as a whole.
"Mezzanine Investors" shall mean the initial holders of the
Securities and (the "Initial Mezzanine Investors") and any other Person
which, from time to time, acquires Securities and becomes a party to the
Stockholders' Agreement by executing and delivering to IA Holdings an
instrument in form satisfactory to IA Holdings pursuant to which such
Person agrees to be bound by the terms of the Stockholders' Agreements
to the same extent as the Initial Mezzanine Investors.
"Note Purchase Agreement" shall mean that certain Note Purchase
Agreement dated as of February 26, 1997, by and among IAH Acquisition
and the Mezzanine Investors, as amended or supplemented from time to
time.
"NYL" shall mean New York Life Insurance Company and its
Affiliates, successors, and assigns.
"Officer's Certificate" shall mean a certificate signed in the
name of the Company by its Chief Executive Officer or its Chief
Financial Officer.
"Pension Plan" shall mean an employee benefit plan or other plan
maintained for the employees of IA Holdings or any of its Subsidiaries
as described in Section 4021(a) of ERISA.
"Person" shall mean an individual, corporation, partnership,
joint venture, association, estate, joint stock company, trust,
organization, business, or a government or agency or political
subdivision thereof.
"Preferred Stock" shall mean, with respect to any corporation,
capital stock issued by such corporation that is entitled to a
preference or priority over any other capital stock issued by such
corporation upon any distribution of such corporation's assets, whether
by dividend or upon liquidation.
"Purchase Agreement" shall have the meaning set forth in the
recitals hereof.
"Related Agreements" shall mean this Agreement, the Warrants, and
the Stockholders Agreement, each as from time to time amended or
supplemented.
"Required Holders" shall mean the holder or holders of 51% of the
Series A Preferred Shares from time to time outstanding.
-9-
<PAGE>
"Securities" shall mean the Series A Preferred Shares, the Common
Shares, and the Warrants originally issued to (or issuable upon
conversion or exercise of, or otherwise with respect to, Series A
Preferred Shares, Common Shares, and Warrants originally issued to) the
Mezzanine Investors pursuant to this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Senior Credit Agreement" shall mean that certain Credit
Agreement dated as of February 26, 1997 by and among IAH Acquisition, as
Borrower, IA Holdings, as Parent Guarantor, Banque Nationale de Paris,
as Agent, and the other lenders from time to time party thereto, as
lenders, as amended, modified, or supplemented from time to time,
together with any such agreement which refinances, extends, or refunds
the debt thereunder.
"Series A Preferred Shares" shall mean the shares of Series A
Preferred Stock of IA Holdings issued to the Mezzanine Investors
pursuant to this Agreement.
"Series A Preferred Stock" shall mean the Series A Preferred
Stock, par value $.01 per share, of IA Holdings having the rights,
preferences, privileges, and other terms set forth in the Certificate of
Designations.
"Significant Subsidiary" shall mean any Subsidiary (a) whose
assets constituted greater than 10% of the consolidated assets of IA
Holdings and its Subsidiaries as reflected in the most recent audited
consolidated and unaudited consolidating financial statements of the
same date of IA Holdings and its Subsidiaries delivered pursuant to
Section 5.02(b), or (b) whose EBITDA for the most recent fiscal year for
which audited financial statements of IA Holdings and its Subsidiaries
have been delivered pursuant to Section 5.02(c) constituted greater than
10% of the consolidated EBITDA of IA Holdings and its Subsidiaries for
such fiscal year or (c) which is otherwise designated by IA Holdings as
a Significant Subsidiary in an Officer's Certificate delivered to the
Mezzanine Investors; provided, however, that until the financial
statements for the fiscal year ending January, 1998 are delivered,
Significant Subsidiary shall mean Falcon Shoe Mfg. Co.
"Stockholders Agreement" shall mean the Stockholders Agreement,
dated as of February 26, 1997, among IA Holdings and the other Persons
from time to time party thereto.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust, or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall or
might have
-10-
<PAGE>
voting power upon the occurrence of any contingency), (b) the interest
in the capital or profits of such limited liability company,
partnership, or joint venture or (c) the beneficial interest in such
trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries, or by one or more of such Person's other Subsidiaries.
"Warrants" shall mean the warrants of IA Holdings issued pursuant
to this Agreement representing the right to purchase additional shares
of Common Stock at the exercise price set forth therein.
ARTICLE II. PURCHASE AND SALE OF SHARES
Section 2.01 Description of Securities. IA Holdings has authorized the
issuance and sale to the Mezzanine Investors of: (i) 1,500 Series A Preferred
Shares having the rights, preferences, and other terms set forth in the
Certificate of Designations for the Series A Preferred Shares attached hereto as
Exhibit B; (ii) 8,333.34 Common Shares; and (iii) Warrants to purchase an
aggregate of 6,962.49 additional shares of Common Stock, in the form attached
hereto as Exhibit C.
Section 2.02 Purchase and Sale. Subject to the terms and conditions of
this Agreement and in reliance upon the representations, warranties, and
covenants herein set forth, at the Closing, IA Holdings shall issue and sell to
the Mezzanine Investors, and the Mezzanine Investors shall purchase from IA
Holdings, (i) the number of Series A Preferred Shares set forth opposite the
name of each such Mezzanine Investor in Exhibit A hereto for the purchase price
of $9,933.33 for each Series A Preferred Share; (ii) the number of Common Shares
set forth opposite the name of each such Mezzanine Investor in Exhibit A hereto
for the purchase price of $363.64 for each Common Share; and (iii) Warrants to
purchase the number of Common Shares set forth opposite the name of such
Mezzanine Investor in Exhibit A hereto for the purchase price set forth on
Exhibit A hereto.
Section 2.03 Closing. The Closing shall take place at the offices of
Shearman & Sterling, 599 Lexington Avenue, New York, New York concurrently with
the closing of the transactions contemplated by the Senior Credit Agreement and
the Note Purchase Agreement, subject to the satisfaction or waiver of all of the
conditions to Closing set forth herein or therein. At the Closing, IA Holdings
shall deliver to each Mezzanine Investor a certificate or instrument, as
appropriate, representing the Securities being acquired by such Mezzanine
Investor in such Mezzanine Investor's name or in the name of its nominee against
payment of the purchase price therefor to IA Holdings by wire transfer in
immediately available funds.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
-11-
<PAGE>
Section 3.01 Representations and Warranties. In order to induce the
Mezzanine Investors to enter into this Agreement and purchase the Securities as
contemplated hereby, IA Holdings and IA Acquisition hereby make the following
representations and warranties:
(a) IA Holdings and each of its Significant Subsidiaries (i) is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (ii) is duly
qualified and in good standing as a foreign corporation in each other
jurisdiction in which it owns or leases property or in which the conduct
of its business requires it to so qualify or be licensed except where
the failure to so qualify or be licensed could not reasonably be
expected to have a Material Adverse Effect and (iii) has all requisite
corporate power and authority to own or lease and operate its properties
and to carry on its business as now conducted and as proposed to be
conducted. All of the outstanding capital stock of IA Holdings has been
duly authorized and validly issued and is fully paid and non-assessable
and is owned as of the Closing Date in the amounts and types specified
in Schedule 3.01(a). All of the outstanding capital stock of IAH
Acquisition has been duly authorized and validly issued and is fully
paid and non-assessable and is owned as of the Closing Date by IA
Holdings.
(b) Set forth on Schedule 3.01(b) hereto is a complete and
accurate list of all Subsidiaries of IA Holdings, showing as of the
Closing Date (as to each such Subsidiary) the jurisdiction of its
incorporation, the number of shares of each class of capital stock
authorized, and the number outstanding, on the Closing Date and the
percentage of the outstanding shares of each such class owned (directly
or indirectly) by IA Holdings and each of its Subsidiaries and the
number of shares covered by all outstanding options, warrants, rights of
conversion or purchase and similar rights at the Closing Date. All of
the outstanding capital stock of all of such Subsidiaries is owned by IA
Holdings or one or more of its Subsidiaries. Each Subsidiary has all
requisite corporate power and authority (including, without limitation,
all governmental licenses, permits and other approvals) to execute and
deliver any Related Agreements to which it is a party.
(c) The execution, delivery and performance by IA Holdings of
this Agreement, and each other Related Agreement to which it is or is to
be a party, and the consummation of the Acquisition and the other
transactions contemplated hereby and thereby, are within IA Holdings
corporate powers, having been duly authorized by all necessary corporate
action, and do not (i) contravene IA Holdings' charter or bylaws, (ii)
violate any law (including, without limitation, the Securities Exchange
Act of 1934 and the Racketeer Influenced and Corrupt Organizations
Chapter of the Organized Crime Control Act of 1970), rule, regulation
(including, without limitation, Regulation X of the Board of Governors
of the Federal Reserve System), order, writ, judgment, injunction,
decree, determination or award, (iii) conflict with or result in the
breach of, or constitute a default under, any contract, loan agreement,
indenture, mortgage, deed
-12-
<PAGE>
of trust, lease or other instrument binding on or affecting IA Holdings
or any of its properties or (iv) result in or require the creation or
imposition of any Lien upon or with respect to any of the properties of
IA Holdings. IA Holdings is not in violation of any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award or in breach of any such contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument, the violation or
breach of which could reasonably be expected to have a Material Adverse
Effect.
(d) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for the due execution, delivery, or
performance by IA Holdings of this Agreement, or any other Related
Agreement to which it is or is to be a party, or for the consummation of
the Acquisition or the other transactions contemplated hereby or
thereby, except for the authorizations, approvals, actions, notices, and
filings listed on Schedule 3.01(d), all of which have been duly
obtained, taken, given, or made and are in full force and effect. All
applicable waiting periods in connection with the Acquisition and the
other transactions contemplated hereby and thereby have expired without
any action having been taken by any competent authority restraining,
preventing or imposing materially adverse conditions upon the
Acquisition or the rights of IA Holdings and its Subsidiaries freely to
transfer or otherwise dispose of, or to create any Lien on, any
properties now owned or hereafter acquired by any of them.
(e) This Agreement has been, and each other Related Agreement
when delivered hereunder will have been, duly executed and delivered by
IA Holdings. This Agreement is, and each other Related Agreement when
delivered hereunder will be, the legal, valid and binding obligation of
IA Holdings, enforceable against IA Holdings in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
limiting creditors' rights or by equitable principles generally.
(f) The Consolidated balance sheets of Iron Age and its
Subsidiaries as at January 27, 1996 and the related statements of income
and cash flows of Iron Age Holdings Corporation and its Subsidiaries for
the fiscal year then ended, accompanied by an opinion acceptable to the
Mezzanine Investors of Ernst & Young LLP, independent public
accountants, and the Consolidated balance sheets of Iron Age Holdings
Corporation and its Subsidiaries as at December 28, 1996, and the
related statements of income and cash flows of Iron Age and its
Subsidiaries for the 11 months then ended, duly certified by the chief
financial officer of Iron Age, copies of which have been furnished to IA
Holdings, fairly present, subject, in the case of said balance sheet as
at December 28, 1996, and said statements of income and cash flows for
the 11 months then ended, to year-end audit adjustments, the
Consolidated financial condition of Iron Age as at such dates and the
results of the operations of Iron Age and its Subsidiaries for the
periods ended on such dates, all in accordance with generally
-13-
<PAGE>
accepted accounting principles applied on a consistent basis. Since
January 27, 1996 and October 31, 1996 there has been no event,
development or circumstance that has had, or could be reasonably
expected to have, a material adverse effect on the business, condition
(financial or otherwise), operations or performance of Iron Age and its
Subsidiaries taken as a whole.
(g) There is no action, suit, investigation, litigation or
proceeding affecting IA Holdings or any of its Subsidiaries, including
any Environmental Action, pending or, to the know of IA Holdings,
threatened before any court, governmental agency or arbitrator that (i)
could reasonably be expected to have a Material Adverse Effect or (ii)
purports to affect the legality, validity or enforceability of the
Acquisition, this Agreement, or any other Related Agreement or the
consummation of the transactions contemplated hereby.
(h) Neither IA Holdings nor any of its Subsidiaries is engaged in
the business of extending credit for the purpose of purchasing or
carrying Margin Stock, and no proceeds of the purchase of any of the
Securities will be used to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any
Margin Stock.
(i) The operations and properties of IA Holdings and each of its
Subsidiaries comply in all material respects with all applicable
Environmental Laws and Environmental Permits, all past claims of
non-compliance with such Environmental Laws and Environmental Permits
have been resolved without ongoing obligations or costs, and no
circumstances exist that could form the basis of an Environmental Action
against IA Holdings or any of its Significant Subsidiaries or any of
their respective properties that could reasonably be expected to have a
Material Adverse Effect.
(j) None of the properties currently or, to the knowledge of IA
Holdings and its Significant Subsidiaries, formerly owned or operated by
IA Holdings or any of its Significant Subsidiaries is listed or proposed
for listing on the NPL or on the CERCLIS or any analogous foreign, state
or local list or is adjacent to any such property; there are no and
never have been any underground or aboveground storage tanks or any
surface impoundments, septic tanks, pits, sumps or lagoons in which
Hazardous Materials are being or have been treated, stored or disposed
on any property currently owned or operated by IA Holdings or any of its
Significant Subsidiaries or, to the best of its knowledge, on any
property formally owned or operated by IA Holdings or any of its
Significant Subsidiaries; there is no asbestos or asbestos-containing
material on any property currently owned or operated by IA Holdings or
any of its Significant Subsidiaries; and Hazardous Materials have not
been released, discharged or disposed of on any property currently or
formerly owned or operated by IA Holdings or any of its Significant
Subsidiaries, in each case where any such event could reasonably be
expected to have a Material Adverse Effect.
-14-
<PAGE>
(k) Neither IA Holdings nor any of its Significant Subsidiaries
is undertaking, and has not completed, either individually or together
with other potentially responsible parties, any investigation or
assessment or remedial or response action relating to any actual or
threatened release, discharge or disposal of Hazardous Materials at any
site, location or operation, either voluntarily or pursuant to the order
of any governmental or regulatory authority or the requirements of any
Environmental Law; and all Hazardous Materials generated, used, treated,
handled or stored at, or transported to or from, any property currently
or formerly owned or operated by IA Holdings or any of its Significant
Subsidiaries have been disposed of in a manner not reasonably expected
to result in material liability to IA Holdings or any of its Significant
Subsidiaries, in each case where any such event could reasonably be
expected to have a Material Adverse Effect.
(l) IA Holdings and each of its Significant Subsidiaries and
Affiliates has filed, has caused to be filed or has been included in all
tax returns (Federal, state, material local and foreign) required to be
filed and has paid all taxes shown thereon to be due (other than as
permitted under Section 5.08), together with applicable interest and
penalties, except where the failure to so file could not reasonably be
expected to have a Material Adverse Effect.
(m) Set forth on Schedule 3.01(m) hereto is a complete and
accurate list, as of the Closing Date, of each taxable year of IA
Holdings and each of its Significant Subsidiaries and Affiliates for
which Federal income tax returns have been filed and for which the
expiration of the applicable statute of limitations for assessment or
collection has not occurred by reason of extension or otherwise (an
"Open Year").
(n) There is no unpaid amount, as of the Closing Date, of
adjustments to the Federal income tax liability of IA Holdings and each
of its Significant Subsidiaries and Affiliates proposed by the Internal
Revenue Service with respect to Open Years that could reasonably be
expected to have a Material Adverse Effect. No issues have been raised
by the Internal Revenue Service in respect to Open Years that, in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
(o) There is no unpaid amount, as of the Closing Date, of
adjustments to the state, local and foreign tax liability of IA Holdings
and its Significant Subsidiaries and Affiliates proposed by all state,
local and foreign taxing authorities (other than amounts arising from
adjustments to Federal income tax returns, if any, or adjustments being
contested in good faith) that could reasonably be expected to have a
Material Adverse Effect. No issues have been raised by such taxing
authorities that, in the aggregate, could reasonably be expected to have
a Material Adverse Effect.
-15-
<PAGE>
(p) Neither IA Holdings nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended. Neither the
sale of the Securities nor the application of the proceeds or repayment
thereof by IA Holdings, nor the consummation of the other transactions
contemplated hereby, will violate any provision of such Act or any rule,
regulation or order of the Securities and Exchange Commission
thereunder.
(q) IA Holdings and its Subsidiaries on a consolidated basis are
Solvent.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
OF THE MEZZANINE INVESTORS
Section 4.01 Making of Representations and Warranties. AS a material
inducement to IA Holdings and IAH Acquisition to enter into this Agreement and
consummate the transactions contemplated hereby, each of the Mezzanine Investors
hereby makes to IA Holdings and IAH Acquisition, severally and not jointly, the
representations and warranties contained in this Article IV.
Section 4.02 Organization and Good Standing. The Mezzanine Investor is
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of organization, and such Mezzanine Investor has all requisite
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby.
Section 4.03 Authorization and Non-Contravention. The execution,
delivery, and performance of this Agreement and all agreements, documents, and
instruments contemplated hereby have been duly authorized by all necessary
corporate or other action of the Mezzanine Investor. This Agreement and all
documents executed by the Mezzanine Investor and (assuming the due
authorization, execution, and delivery by the other parties hereto and thereto)
are the valid and binding obligations of such Mezzanine Investor, enforceable in
accordance with their terms, except as enforceability thereof may be subject to
the laws of general application relating to bankruptcy, insolvency, and the
relief of debtors and rules and laws governing specific performance, injunctive
relief, and other equitable remedies. The execution by the Mezzanine Investor of
this Agreement and the performance by the Mezzanine Investor of any transaction
contemplated hereby will not: (i) violate, conflict with, or result in a default
under any material contract or obligation to which such Mezzanine Investor is a
party or by which it or its assets are bound, or any provision of the
organizational documents of such Mezzanine Investor, or cause the creation of
any encumbrance upon any of the material assets of such Mezzanine Investor; (ii)
violate or result in a violation of, or constitute a default (whether after the
giving of notice, lapse of time, or both) under, any provision of any law,
regulation, or rule, or any order of, or any restriction imposed by, any court
or other governmental agency applicable to such Mezzanine Investor; (iii)
require from such Mezzanine Investor any notice to, declaration or filing with,
or consent or approval of any governmental
-16-
<PAGE>
authority or other third party; or (iv) accelerate any obligation under, or give
rise to a right of termination of, any material agreement, permit, license, or
authorization to which such Mezzanine Investor is a party or by which such
Mezzanine Investor is bound.
Section 4.04 Knowledge and Experience. The Mezzanine Investor represents
that it (i) has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of the investment
contemplated by this Agreement and making an informed investment decision with
respect thereto, and (ii) is an "accredited investor" as such term is defined in
Rule 501(a) under the Securities Act. The Mezzanine Investor understandings,
agrees, and acknowledges that the Securities have not been and are not being
registered under the Securities Act or under the "blue sky" laws of any
jurisdiction and that IA Holdings, in issuing the Securities, is relying upon,
among other things, the representations of such Mezzanine Investor contained in
this Article IV.
Section 4.05 Investment Intent. The Mezzanine Investor is acquiring the
Securities for its own account for investment, and not with a present view to,
or for resale in connection with, any "distribution" thereof within the meaning
of the Securities Act. The Mezzanine Investor was not formed or organized for
the purpose of acquiring the Securities.
Section 4.06 Unregistered Securities Legend. The Mezzanine Investor
understands that (i) because the Securities have not been registered under the
Securities Act, it cannot dispose of any or all of the Securities unless such
Securities are subsequently registered under the Securities Act or exemptions
from such registration are available, and (ii) the Securities are subject to the
terms of the Stockholders Agreement. The Mezzanine Investor understands that
each instrument or certificate representing the Securities issuable hereunder
will bear the following restrictive legend or one substantially similar thereto:
"The securities represented by this certificate were issued in a
private placement, without registration under the Securities Act
of 1933, as amended (the "Act"), and may not be sold, assigned,
pledged, or otherwise transferred in the absence of an effective
registration under the Act covering the transfer or pursuant to
an exemption therefrom."
"The securities represented by this certificate are subject to
restrictions on voting and transfer and requirements of sale as
set forth in the Stockholders Agreement, dated as of February 26,
1997, as amended and in effect from time to time, and constitute
Securities as defined in such Stockholders Agreement. IA Holdings
will furnish a copy of such agreement to the holder of this
certificate without charge upon written request."
"The securities represented by this certificate were originally
issued to, or issued with respect to securities originally issued
to, the following
-17-
<PAGE>
Mezzanine Investor on or about February 26, 1997:
-----------------------.
Section 4.07 Source of Funds. Each Mezzanine Investor individually (but
not on behalf of any other Mezzanine Investor) represents that at least one of
the following statements is an accurate representation as to each source of
funds (a "Source") to be used by such Mezzanine Investor to pay the purchase
price of the Securities to be purchased by such Mezzanine Investor hereunder:
(a) the Source is an "insurance company general account" as such
term is used in Prohibited Transaction Exemption ("PTE") 95-60 issued by
the United States Department of Labor and the amount of reserves and
liabilities (as defined in the annual statement for life insurance
companies approved by the National Association of Insurance
Commissioners (the "NAIC Annual Statement") and before reduction for
credits on account of any reinsurance ceded on the coinsurance basis)
(the "Reserves and Liabilities") for the general account contracts held
by or on behalf of any employee benefit plan, together with the amount
of the Reserves and Liabilities for the general account contracts held
by or on behalf of any other employee benefit plans maintained by the
same employer (or any "affiliate" thereof within the meaning of Section
V(a)(1) of PTE 95-60), doe snot exceed 10% of the total Reserves and
Liabilities of such general account plus surplus, as set forth in the
NAIC Annual Statement filed with the state of domicile of the insurance
company maintaining such general account; or
(b) the Source is a separate account that is maintained solely in
connection with such Purchaser's fixed contractual obligations under
which the amounts payable, or credited, to any employee benefit plan (or
its related trust) that has any interest in such separate account (or to
any participant or beneficiary of such plan (including any annuitant))
are not affected in any manner by the investment performance of the
separate account; or
(c) the Source does not include assets allocated to any separate
account maintained by such Mezzanine Investor in which any employee
benefit plan (or its related trust) has any interest, other than a
separate account that is maintained solely in connection with such
Mezzanine Investor's fixed contractual obligations under which the
amounts payable, or credited, to such plan and to any participant or
beneficiary of such plan (including any annuitant) are not affected in
any manner by the investment performance of the separate account; of
(d) the Source is either (i) an insurance companies pooled
separate account, within the meaning of Prohibited Transaction Exemption
("PTE") 90-1 (issued January 29, 1990), or (ii) a bank collective
investment fund, within the meaning of the PTE 91- 38 (issued July 12,
1991) and, except as such Mezzanine Investor has disclosed to IA
Holdings in writing pursuant to this Section 4.07, no employee benefit
plan or group of
-18-
<PAGE>
plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
(e) the Source constitutes assets of an "investment fund" (within
the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of
the QPAM Exemption), no employee benefit plan's asset that are included
in such investment fund, when combined with the assets of all other
employee benefit plans established or maintained by the same employer or
by an affiliate (within the meaning of Section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization and
managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM
Exemption are satisfied, neither the QPAM nor a person controlling or
controlled by the QPAM (applying the definition of "control" in Section
V(e) of the QPAM Exemption) owns a 5% or more interest in IA Holdings
and (1) the identity of such QPAM and (2) the names of all employee
benefit plans whose assets are included in such investment fund have
been disclosed to the Company in writing pursuant to this Section 4.07;
or
(f) the Source is a governmental plan; or
(g) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee benefit
plans, each of which has been identified to the Company in writing
pursuant to this Section 4.07; or
(h) the Source does not include assets of any employee benefit
plan, within the meaning of U.S. Department of Labor Regulation Section
2510.03-101, other than a plan exempt from the coverage of ERISA or of
Section 4975 of the Code.
As used in this Section 4.07, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
Section 4.08 Investment Banking; Brokerage Fees. No Mezzanine Investor
has incurred or become liable for any broker's or finder's fee, banking fees, or
similar compensation relating to or in connection with the transactions
contemplated hereby.
ARTICLE V. COVENANTS OF THE COMPANIES
Other than with the consent of Mezzanine Investors holding a majority of
the Series A Preferred Shares and except as set forth in Section 5.09 below. IA
Holdings and each of its Subsidiaries (which term shall be deemed to include,
for purposes of this Article V, any subsidiary or subsidiaries of IA Holdings
formed after the date of this Agreement) shall
-19-
<PAGE>
comply with the following covenants, from and after the date hereof, until no
Series A Preferred Shares remain outstanding.
Section 5.01 Distributions or Redemptions. Except as otherwise expressly
provided in the Certificate of Designations attached as Exhibit B hereto, so
long as any Series A Preferred Shares remain outstanding, without the prior
written consent of the Required Holders. IA Holdings shall not, nor shall it
permit any Subsidiary to, redeem, purchase, or otherwise acquire directly or
indirectly any Junior Securities, nor shall IA Holdings directly or indirectly
declare or pay any dividend or make any distribution upon any Junior Securities.
Section 5.02 Financial Statements and Reports. From time to time prior
to an IP, IA Holdings shall furnish to each holder of Series A Preferred Shares:
(a) As soon as available in any event within 45 days after the
end of each quarter of each Fiscal Year, consolidated and consolidating
balance sheets of IA Holdings and its Subsidiaries as of the end of such
quarter, and consolidated and consolidating statements of income and a
consolidated statement of cash flows of IA Holdings and its Subsidiaries
for the period commencing at the end of the previous Fiscal Quarter and
ending with the end of such fiscal quarter and consolidated and
consolidating statements of income and a consolidated statement of cash
flows of IA Holdings and its Subsidiaries for the period commencing at
the end of the previous Fiscal Year and ending with the end of such
quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding
Fiscal Year, all in reasonable detail and duly certified (subject to
year-end audit adjustments) by IA Holdings' chief financial officer as
having been prepared in accordance with generally accepted accounting
principles consistent with those applied in the most recent annual
audit, together with (i) an Officer's Certificate stating that no
default under the Senior Credit Agreement or the Note Purchase Agreement
has occurred or is continuing or, if such a default has occurred or is
continuing, a statement as to the nature thereof and the action that IA
Holdings and its Subsidiaries have taken and propose to take with
respect thereto, and (ii) in the event of any change from GAAP in the
accounting principles used in the preparation of such financial
statements, a statement of reconciliation conforming such financial
statements to GAAP;
(b) As soon as available and in any event within 90 days after
the end of each Fiscal Year, a copy of the annual audit report for such
year for IA Holdings and its Subsidiaries, including therein
consolidated (and IA Holdings' prepared unaudited consolidating) balance
sheets of IA Holdings and its Subsidiaries as of the end of such Fiscal
Year and consolidated (and IA Holdings' prepared unaudited
consolidating) statements of income and a consolidated (and IA Holdings'
prepared unaudited consolidating) statement of cash flows of IA Holdings
and its Subsidiaries for such Fiscal Year, accompanied as to such
consolidated statements, by an opinion of Ernst & Young LLP or other
independent public accountants of recognized standing, together
-20-
<PAGE>
with (i) an Officer's Certificate stating that no default under the
Senior Credit Agreement or Note Purchase Agreement has occurred or is
continuing or, if such a default has occurred or is continuing, a
statement as to the nature thereof and the action that IA Holdings and
its Subsidiaries have taken and propose to take with respect thereto,
and (ii) in the event of any change from GAAP in the accounting
principles used in the preparation of such financial statements, a
statement of reconciliation conforming such financial statements to
GAAP;
(c) As soon as available and in any event no later than (i) at
all times when the Senior Credit Agreement is outstanding, five days
after delivery to the Agent under the Senior Credit Agreement or (ii) at
any time when the Senior Credit Agreement is no longer outstanding, 30
days prior to the end of each Fiscal Year, forecasts prepared by the
management of IA Holdings, in form reasonably acceptable to the
Mezzanine Investors, of balance sheets, income statements, and cash flow
statements on a monthly basis for the Fiscal Year following such Fiscal
Year then ended and on an annual basis for each Fiscal Year thereafter
until February 2005.
Section 5.03 Notice of Defaults. As soon as possible, and in any event
within five (5) days after becoming aware of any default under the Senior Credit
Agreement or the Note Purchase Agreement, IA Holdings shall furnish to each
holder of Series A Preferred Shares an Officer's Certificate setting forth the
details of such default and the action which IA Holdings has taken or proposes
to take with respect thereto.
Section 5.04 Notice of Litigation. From time to time prior to an IPO,
promptly after the commencement thereof, IA Holdings shall furnish each holder
of Series A Preferred Shares written notice of all actions, suits, and
proceedings before any court or government department, commission, board,
bureau, agency, or instrumentality, domestic or foreign, affecting IA Holdings
or any of its Subsidiaries, which (i) if adversely determined would have a
Material Adverse Effect, or (ii) purports to affect the legality, validity, or
enforceability of this Agreement, or any Related Agreement or consummation of
the transactions contemplated hereby or thereby.
Section 5.05 Communications with Independent Public Accountants. At any
reasonable time and from time to time upon request and prior to an IPO, IA
Holdings shall provide each Mezzanine Investor and any of its agents or
representatives reasonable access to the independent public accountants of IA
Holdings and its Subsidiaries to discuss the financial condition of IA Holdings
or such Subsidiary, including, without limitation, any recommendations of such
independent public accountants concerning the management, finances, financial
controls or operations of IA Holdings or such Subsidiary. Such access shall
include, without limitation, upon request copies of any written recommendations
concerning the management, finances, financial controls, or operations of IA
Holdings or such Subsidiary received from such independent public accountants.
-21-
<PAGE>
Section 5.06 Miscellaneous. Subject to the provisions of Section 7.01,
IA Holdings shall provide each Mezzanine Investor with such other information as
the Mezzanine Investors may from time to time reasonably request respecting the
business, properties, prospects, condition or operations, financial or
otherwise, of IA Holdings or any of its Subsidiaries.
Section 5.07 Existence and Business. IA Holdings and each of its
Significant Subsidiaries will (i) except as permitted pursuant to Section 8.1
and Section 9.5 of the Note Purchase Agreement, preserve and maintain its
corporate existence and qualify and remain qualified as a foreign corporation in
each jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect, (ii) preserve and maintain in full force and effect all rights,
licenses, patents, and franchises, to the extent the failure to maintain the
same would have a Material Adverse Effect (iii) comply in all material respects
with all valid and applicable statutes, rules and regulations necessary for the
conduct of business, to the extent the failure to comply with the same would
have a Material Adverse Effect, and (iv) engage only in the businesses which IA
Holdings and its Subsidiaries are conducting on the date of this Agreement and
other businesses related thereto.
Section 5.08 Taxes and Other Obligations. IA Holdings and each of its
Subsidiaries (a) will duly pay and discharge, or cause to be paid and
discharged, before the same shall become in arrears, all taxes, assessments, and
other governmental charges, imposed upon it and its properties, sales, and
activities, or upon the income or profits therefrom, as well as the claims for
labor, materials, or supplies, to the extent the failure to pay and discharge
the same would have a Material Adverse Effect; provided, however, that IA
Holdings and any Significant Subsidiary may contest any such charges or claims
in good faith so long as an adequate reserve therefor has been established and
is maintained if and as required by generally accepted accounting principles,
and (b) will promptly pay or cause to be paid when due, or in conformance with
customary trade terms, all lease obligations, trade debt, and all other
indebtedness incident to its operations, as to which its failure to pay would
have a Material Adverse Effect.
Section 5.09 Insurance. IA Holdings and each of its Significant
Subsidiaries (i) will keep its principal assets which are of an insurable
character insured by financially sound and reputable insurers against loss or
damage by fire, explosion or hazards to the extent and in a manner customary for
companies in similar businesses similarly situated, and (ii) will maintain with
financially sound and reputable insurers insurance against other hazards and
risks and liability to persons and property to the extent and in a manner
customary for companies in similar businesses similarly situated; provided,
however, that it may effect workmen's compensation insurance through an
insurance fund operated by such state or jurisdiction and may also be a
self-insurer with respect to workmen's compensation and with respect to group
medical benefits under any medical benefit plan. On request of the Required
Holders from time to time, IA Holdings will render to the Mezzanine Investors a
statement in reasonable details as to all insurance coverage required by this
Section.
-22-
<PAGE>
Section 5.10 Records and Accounts. IA Holdings shall maintain
comprehensive and accurate records and accounts in accordance with generally
accepted accounting principles consistently applied. IA Holdings shall maintain
reserves in accordance with generally accepted accounting principles.
Section 5.11 Inspection. Subject to the provisions of Section 7.01
hereof, at any reasonable time and from time to time prior to an IPO, IA
Holdings shall permit each Mezzanine Investor and any of its agents or
representatives reasonable access to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of, IA
Holdings and its Subsidiaries and to discuss the affairs, finances, and accounts
of IA Holdings and its Subsidiaries with any of their respective officers or
directors and with IA Holdings' independent accountants.
Section 5.12 Transactions with Affiliates. IA Holdings shall conduct,
and cause each of its Subsidiaries to conduct, all transactions otherwise
permitted hereunder and under the other Related Agreements with any of their
Affiliates on terms that are fair and reasonable and no less favorable to such
person than it would obtain in a comparable arm's-length transaction with a
person not an Affiliate. Nothing herein is intended or shall be construed to
limit the performance by IA Holdings or any of its Affiliates of obligations
under the Management Agreement, a copy of which has been made available to the
Mezzanine Investors on or before the date hereof, or (b) to restrict the ability
of IA Holdings or any Significant Subsidiary to enter into any transaction not
expressly prohibited herein in the ordinary course of business and which would
not reasonably be expected to have a Material Adverse Effect.
Section 5.13 Board Observation Rights. The Majority Holder shall have
the right to designate one individual to attend all meetings of the Board of
Directors of IA Holdings and each of its Subsidiaries as an observer (the "Board
Observer"). The Board Observer will have the right to receive notice of all
meetings of the Board of Directors of IA Holdings and each of such meetings and
to attend and observe all such meetings, but will have no voting rights as a
Board member or otherwise. The Board Observer shall be entitled to reimbursement
of all travel expenses incurred in connection with attending such Board
meetings. The right of the Person who is the Majority Holder to designate the
Board Observer shall terminate upon the earlier of: (i) the effective date of
the IPO; or (ii) the date at which such Person is no longer the Majority Holder.
ARTICLE VI. CONDITIONS
Section 6.01 Conditions to the Obligations of the Mezzanine Investors.
The obligations of the Mezzanine Investors to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, prior to or at
the Closing, of the following conditions precedent:
-23-
<PAGE>
(a) Representations; Warranties; Covenants. Each of the
representations and warranties of IA Holdings and its Subsidiaries made
pursuant to this Agreement shall be true and correct in all material
respects on and as of the Closing Date (it being understood that
representations and warranties made "as of the date hereof" shall also
be deemed to have been made as of the Closing Date); IA Holdings and its
Subsidiaries shall, on or before the Closing Date, have performed and
satisfied all of its covenants and agreements set forth herein which by
the terms hereof are to be performed and satisfied on or before the
Closing Date; and IA Holdings shall have delivered to the Mezzanine
Investors an Officer's Certificate dated as of the Closing Date
certifying to the foregoing effect.
(b) Opinion of Counsel and Other Documents. On the Closing Date,
the Mezzanine Investors shall have received (i) an opinion of Ropes &
Gray, counsel for IA Holdings and its Subsidiaries, dated as of the
Closing Date, such opinion to be reasonably satisfactory to the legal
counsel for the Mezzanine Investors, and (ii) such other certificates
and documents with respect to IA Holdings and its Subsidiaries as
counsel for the Mezzanine Investors shall have reasonably requested.
(c) No Actions or Proceedings. There shall exist no action, suit,
investigation, litigation, or proceeding affecting IA Holdings or any of
its Subsidiaries pending or threatened before any court, governmental
agency, or arbitrator that (i) could reasonably be expected to have a
Material Adverse Effect or (ii) purports to affect the legality,
validity, or enforceability of this Agreement or the consummation of the
transactions contemplated by this Agreement, and which would be in the
reasonable judgment of the Mezzanine Investors make it inadvisable to
consummate such transactions. No law or regulation shall be in effect
and no court order shall have been entered in any action or proceeding
instituted by any party which enjoins, restrains, or prohibits this
Agreement or the consummation of the transactions contemplated hereby.
(d) Approvals and Consents. IA Holdings and its Subsidiaries
shall have made all filings with and notifications of governmental
authorities, regulatory agencies, and other entities required to be made
by it in connection with the execution and delivery of this Agreement
and the performance by it of the transactions contemplated hereby, and
the Mezzanine Investors shall have received copies of all required
authorizations, waivers, consents, and permits necessary for the
consummation of the transactions contemplated by this Agreement, in form
and substance reasonably satisfactory to the Mezzanine Investors, from
all third parties.
(e) Other Agreements and Deliveries. IA Holdings and its
Subsidiaries shall have delivered and entered into the Senior Credit
Agreement, the Note Purchase Agreement, and all other documents and
instruments to be delivered or entered into in connection therewith or
in connection with this Agreement, all in form and substance
satisfactory to the Mezzanine Investors and their counsel, and all
conditions precedent
-24-
<PAGE>
to the initial extension of credit under the Senior Credit Agreement and
the purchase of the notes under the Note Purchase Agreement shall have
been satisfied.
(f) Material Adverse Changes. There shall not have been any
change or series of changes since the date of the most recent balance
sheet of IA Holdings and its Subsidiaries delivered to the Mezzanine
Investors that, in the reasonable business judgment of the Mezzanine
Investors acting in good faith, have had a Material Adverse Effect or
could reasonably be anticipated to have a Material Adverse Effect on the
Companies.
(g) Expenses. All expenses incurred in connection with the
transactions contemplated by this Agreement shall have been paid in
accordance with Section 7.06.
(h) Certificate of Designations. The Certificate of Designations
shall have been filed with the Secretary of State of Delaware and shall
have become effective prior to Closing to effect the rights,
preferences, and privileges of the Mezzanine Investors contemplated by
this Agreement, including without limitation the rights, preferences,
and privileges in the form set forth in Exhibit B attached hereto.
(i) Warrant. IA Holdings shall have executed and delivered the
Warrants in substantially the form attached hereto as Exhibit C.
(j) Stockholders' Agreement. IA Holdings, the Mezzanine
Investors, and Fenway shall have entered into a Stockholders' Agreement
in substantially the form attached hereto as Exhibit D.
Section 6.02 Conditions to the Obligations of IA Holdings. The
obligation of IA Holdings to consummate the transactions contemplated by this
Agreement is subject to the fulfillment, prior to or at the Closing, of the
following additional conditions precedent:
(a) Representations; Warranties; Covenants. Each of the
representations and warranties of the Mezzanine Investors contained in
this Agreement shall be true and correct in all material respects on and
as of the Closing Date, with the same effect as though made on and as of
the Closing Date (it being understood that representations and
warranties made "as of the date hereof" shall also be deemed to have
been made as of the Closing Date), and the Mezzanine Investors shall, on
or before the Closing Date, have performed and satisfied all of their
covenants and agreements set forth herein which by the terms hereof are
to be performed and satisfied by the Mezzanine Investors on or before
the Closing Date.
(b) No Actions or Proceedings. There shall exist no action, suit,
investigation, litigation, or proceeding affecting the Mezzanine
Investors pending or threatened before any court, governmental agency,
or arbitrator that purports to affect
-25-
<PAGE>
the legality, validity, or enforceability of this Agreement or the
consummation of the transactions contemplated by this Agreement. No law
or regulation shall be in effect and no court order shall have been
entered in any action or proceeding instituted by any party which
enjoins, restrains, or prohibits this Agreement or the consummation of
the transactions contemplated hereby.
(c) Approvals and Consents. IA Holdings shall have made all
filings with an notifications of governmental authorities, regulatory
agencies, and other entities required to be made by it in connection
with the execution and delivery of this Agreement and the performance of
the transactions contemplated hereby, and IA Holdings shall have
received all required authorizations, waivers, consents, and permits
necessary for the consummation of the transactions contemplated by this
Agreement, in form and substance reasonable satisfactory to IA Holdings,
from all third parties.
ARTICLE VII. MISCELLANEOUS.
Section 7.01 Confidentiality Covenant. Each of the Mezzanine Investors
will not, and will not permit any of its respective directors, officers,
employees, agents or representatives (collective, "Representatives") to disclose
any confidential or proprietary information relating to the Company that is
conspicuously labeled "CONFIDENTIAL" furnished to the Mezzanine Investors by or
on behalf of IA Holdings or any of its Affiliates or Representatives
("Confidential Information") or use any Confidential Information for any purpose
other than in evaluating IA Holdings and its Subsidiaries in connection with its
investment in the Securities and its evaluation of such investment; provided,
however, that:
(a) Confidential Information may be disclosed to any of the
Representatives of a Mezzanine Investor who have a need to know such
information in connection with the transactions contemplated hereby and
the monitoring of such investment and who are directed, and agree, to
comply with the provisions of this Section 7.01 that apply to the
Mezzanine Investors;
(b) Confidential Information may be disclosed to any Permitted
Transferee (as such term is defined in the Stockholders' Agreement) to
which any Mezzanine Investor sells or offers to sell any Securities (or
any interest in Securities) and who agrees to comply with the provisions
of this Section 7.01 that apply to the Mezzanine Investors; and
(c) As used herein, the term "Confidential Information" shall not
include any information that is or becomes generally available to the
public (other than as a result of disclosure in violation hereof) or any
information received by a Mezzanine Investor or any of its
Representatives from a third party not bound by a duty of
confidentiality to IA Holdings or any of its Affiliates.
-26-
<PAGE>
In addition, Confidential Information may be disclosed if required by legal
process or by applicable law (including, without limitation, as may be required
in any report, statement, or testimony required to be submitted to any
municipal, state, provincial, or federal regulatory body having or claiming to
have jurisdiction over any party or any of such party's affiliates or to the
United States National Association of Insurance Commissioners or similar
organizations or their successors).
Section 7.02 Indemnities.
(a) IAH Acquisition will indemnify, exonerate and hold each
Mezzanine Investor and each of the respective partners, shareholders,
Affiliates, directors, officers, fiduciaries, employees and agents and
each of the partners, shareholders, affiliates, directors, officers,
fiduciaries, employee and agents of each of the foregoing (collectively,
the "Indemnitees") free and harmless from and against any and all
actions, causes of action, suits, losses, liabilities and damages, and
expenses in connection therewith, including without limitation
reasonably attorneys' fees and disbursements (collectively, the
"Indemnified Liabilities"), incurred by the Indemnities or any of them
as a result of, arising out of, or relating to any breach of any
representation, warranty or agreement by IA Holdings or IAH Acquisition
or any misrepresentation by IA Holdings or IAH Acquisition set forth in
Section 3.01(a), (b), or (e) of this Agreement except for any such
Indemnified Liabilities that arise on account of such Indemnitees, gross
negligence or willful misconduct as determined by a court of competent
jurisdiction in a final judgment. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, IA Holdings
hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. None of the Indemnitees shall be liable to IA
Holdings or any of its Subsidiaries or Affiliates for any act or
omission suffered or taken by such Indemnitee that does not constitute
either breach of this Agreement or gross negligence or willful
misconduct.
(b) Each Mezzanine Investor agrees to indemnify and hold harmless
IA Holdings from and against all losses, damages, liabilities and
expenses (including without limitation reasonable attorneys fees and
charges) resulting from any breach of any representation, warranty or
agreement of such indemnifying party or any misrepresentation by such
indemnifying party in this Agreement.
Section 7.03 Governing Law. This Agreement shall be construed under and
governed by the internal laws of the State of New York without regard to its
conflict of laws provisions.
Section 7.04 Notices. Any notice, request, demand, or other
communication required or permitted hereunder shall be in writing and shall be
deemed to have been duly given upon receipt, or if delivered or sent by
facsimile transmission, upon confirmation or transmission, or if sent by
overnight courier, the second day after deposit, in each case to the appropriate
-27-
<PAGE>
addresses and facsimile numbers set forth below (or to such other addresses or
facsimile numbers as a party may designate as to itself by notice to the other
parties).
To the Mezzanine Investors: New York Life Insurance Company
-------------------------- 51 Madison Avenue
New York, NY 10010
Attn: Investment Department-Private
Finance Group Room 206
Fax Number: (212) 447-4122
with copies to: New York Life Insurance company
51 Madison Avenue
New York, NY 10010
Attn: Office of the General Counsel,
Room 1104
Fax Number: (212) 576-8340
and
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
Attn: Kevin M. Dennis, Esq.
Fax Number: (617) 523-1231
To IA Holdings: Iron Age Holdings Corporation
------------- Robinson Plaza Three, Suite 400
Pittsburgh, PA 15205
Attn: President
with copies to: IA Holdings Corp.
c/o Fenway Partners, Inc.
152 West 57th Street, 59th Floor
New York, NY 10019
Attn: Andrea Geisser
Fax Number: (212) 581-1205
and
Ropes & Gray
One International Place
Boston, MA 02110
Attn: John Ayer, Esq. and Patrick Diaz,
Esq.
Fax Number: (617) 951-7050
-28-
<PAGE>
Section 7.05 Merger. This Agreement and the other Related Agreements
contemplated hereby constitute the entire agreement of IA Holdings and its
Subsidiaries and the Mezzanine Investors and express the entire understanding of
IA Holdings and its Subsidiaries and the Mezzanine Investors with respect to the
Securities.
Section 7.06 Successor and Assigns.
(a) This Agreement shall bind and shall be enforceable by the
respective successors and assigns of the parties hereto. The
representations and warranties made by the Companies in this Agreement
shall bind the Companies' successors and assigns.
(b) Subject to the terms of the Related Agreements, each
Mezzanine Investor shall have the right from time to time and at any
time to sell, assign, transfer, negotiate, and grant participation
interests in all or any part of the Securities and its rights under this
Agreement or any other Related Agreement to one or more Permitted
Transferees (as such term is defined in the Stockholders' Agreement);
provided, however, that (i) each such transfer complies in all material
respects with all applicable securities laws and with the applicable
terms of the Related Agreements, and (ii) each such Permitted Transferee
by acceptance of any Securities or any interest therein confirms for
itself the representations and warranties set forth in Article IV with
respect to itself and its purchase of Securities. In the case of any
such sale, assignment, transfer, negotiation, or participation in all or
any portion of the Securities and its rights under any other Related
Agreement, the assignee, transferee, or recipient thereof shall have, to
the extent of such sale, assignment, transfer, negotiation, or
participation, the same rights, benefits, and obligations as such
Mezzanine Investor hereunder. IA Holdings hereby acknowledges and agrees
that any such sale, assignment, or other disposition described in this
Section 7.06(b) (other than participations) will give rise to direct
obligations of IA Holdings to the buyer, assignee, or transferee, as the
case may be, as if such buyer, assignee, or transferee were an original
signatory to this Agreement.
Section 7.07 Fees and Expenses. All of the fees and expenses of IA
Holdings and its Subsidiaries incurred in connection with or relating to or
arising out of the negotiation and preparation of this Agreement and the
consummation of the transactions contemplated hereby shall be paid by IA
Holdings and no expenses of IA Holdings and its Subsidiaries relating in any way
to the transactions contemplated hereby (including without limitation
consulting, accounting, or other professional expenses of the Companies) shall
be charged to or paid by the Mezzanine Investors. IA Holdings agrees to pay on
demand all of the Mezzanine Investors' reasonable expenses in preparing,
executing, delivering, and administering the Related Agreements, all amendments
thereto, and all related documents and instruments, including, without
limitation, the reasonable fees and out-of-pocket expenses of the Mezzanine
Investors' special counsel, Goodwin, Procter & Hoar LLP. IA Holdings also agrees
to pay all stamp and other taxes in connection with the execution and delivery
of the Related Agreements and related instruments and documents.
-29-
<PAGE>
Section 7.08 Publicity and Disclosures. None of the parties hereto nor
any of their respective stockholders, subsidiaries, affiliates, officers,
directors, or employees shall issue or cause the publication of any press
release or other announcement with respect to this Agreement or the other
transactions contemplated hereby without the prior written consent of the other
parties hereto, which consent shall not be unreasonably withheld, except (i) to
the extent disclosure is required by any applicable law or regulation or by any
court or authorized administrative or governmental agency, and (ii) IA Holdings
may issue or cause the publication of press releases or other announcements with
respect to this Agreement or the other transactions contemplated hereby,
provided that any such press release or announcement shall not mention NYL's
participation with respect to this Agreement or the other transactions
contemplated hereby without NYL's prior written consent which may be withheld in
its sole discretion.
Section 7.09 Captions and Gender. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
Section 7.10 Counterparts. This Agreement and all amendments to this
Agreement may be executed in several counterparts, each of which shall be an
original. The several counterparts shall constitute a single Agreement.
Section 7.11 Certain Remedies; Severability. It is specifically
understood and agreed that (i) any breach of this Agreement by any of the
parties hereto will result in irreparable injury to IA Holdings and the
Mezzanine Investors, as applicable, that the remedy at law alone will be an
inadequate remedy for such breach and that, without limitation of any other
remedy for such breach and that, in addition to any other remedy it may have,
the aggrieved party shall be entitled to enforce the specific performance of
this Agreement by the breaching party and to seek both temporary and permanent
injunctive relief, without the necessity of proving actual damages, but without
limitation of their rights to recover such damages, and (ii) the sole remedy for
any breach of a covenant contained in Article V hereof shall be specific
performance and no Person shall seek any other remedy in connection with any
such breach. In case any of the provisions contained in this Agreement shall for
any reason be held to be invalid, illegal, or unenforceable in any respect, any
such invalidity, illegality, or unenforceability shall not affect any other
provision of this Agreement, but this Agreement shall be construed as if such
invalid, illegal, or unenforceable provision had been limited or modified
(consistent with its general intent) to the extent necessary to make it valid,
legal, and enforceable, or if it shall not be possible to so limit or modify
such invalid, illegal, or unenforceable provision or part of a provision, this
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision or part of a provision had never been contained in this Agreement.
-30-
<PAGE>
Section 7.12 Amendments; Waivers. Any party may waive any provision,
covenant, or condition intended for its benefit in its discretion, but delay on
the part of any party in exercising any right, power, or privilege hereunder
shall not operate as a waiver thereof, nor shall any waiver on the part of any
party of any such right, power, or privilege preclude any further exercise
thereof or the exercise of any other such right, power, or privilege. This
Agreement may be amended only upon the prior written consent of IA Holdings and
the Mezzanine Investors.
Section 7.13 Further Assurances. In addition to the actions, contracts,
and other agreements and documents specifically required to be taken or
delivered pursuant to this Agreement, each of the parties hereto shall execute
such contracts and other agreements and documents and other papers and take such
further actions as may be reasonably required or desirable to carry out the
provisions hereof and the transactions contemplated hereby.
Section 7.14 Consent to Jurisdiction. Each of the parties hereto hereby
agrees that all actions, suits, and proceedings arising out of or based upon
this Agreement or the subject matter hereof may be brought and maintained in the
federal and state courts of the State of New York. Each of the parties hereto by
execution hereof: (i) hereby irrevocably submits to the jurisdiction of the
federal and state courts in the State of New York for the purpose of any action,
suit, or proceeding arising out of or based upon this Agreement or the subject
matter hereof; and (ii) hereby waives to the extent not prohibited by applicable
law, and agrees not to assert, by way of motion, as a defense or otherwise, in
any such action, suit, or proceeding, any claim that he or it is not subject
personally to the jurisdiction of the above-named courts, that he or it is
immune from extraterritorial injunctive relief or other injunctive relief, that
his or its property is exempt or immune from attachment or execution, that any
such action, suit, or proceeding may not be brought or maintained in one of the
above-named courts, that any such action, suit, or proceeding brought or
maintained in one of the above-named courts should be dismissed on the grounds
of forum non conveniens, should be transferred to any court other than one of
the above-named courts, should be stayed by virtue of the pendency of any other
action, suit, or proceeding in any court other than one of the above-named
courts, or that this Agreement or the subject matter hereof may not be enforced
in or by any of the above-named courts. Each of the parties hereto hereby
consents to service of process in any such action, suit, or proceeding in any
manner permitted by the laws of the State of New York, agrees that service of
process by registered or certified mail, return receipt requested, to the
persons and at the addresses set forth in Section 7.04 above, is reasonably
calculated to give actual notice, and waives and agrees not to assert by way of
motion, as a defense or otherwise, in any such action, suit, or proceeding any
claim that such service of process does not constitute good and sufficient
service of process.
Section 7.15 Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES,
AND COVENANTS THAT NEITHER HE OR IT, NOR ANY ASSIGNEE OR SUCCESSOR THERETO, WILL
ASSERT (WHETHER AS A PLAINTIFF,
-31-
<PAGE>
DEFENDANT, OR OTHERWISE) ANY RIGHT TO (i) A JURY TRIAL IN ANY FORUM IN RESPECT
OF ANY ISSUE, CLAIM, DEMAND, CAUSE OF ACTION, ACTION, SUIT, OR PROCEEDING
ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR
TORT OR OTHERWISE, OR (ii) CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS
SECTION 7.15 HAVE BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO, AND THESE
PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NONE OF THE PARTIES HERETO HAS
AGREED WITH OR REPRESENTED TO ANY OTHER PARTY HERETO THAT THE PROVISIONS OF THIS
SECTION 7.15 WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. ANY OF THE PARTIES
HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 7.15 WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH OF THE PARTIES HERETO TO THE
WAIVER OF HIS OR ITS RIGHT TO A JURY TRIAL.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Securities Purchase Agreement to be executed as of the date set forth above.
MEZZANINE INVESTORS:
NEW YORK LIFE INSURANCE COMPANY, a
New York corporation
By: /s/ Andrew H. Steuerman
---------------------------------
Name: Andrew H. Steuerman
---------------------------------
Title: Assistant Vice President
---------------------------------
FENWAY PARTNERS CAPITAL FUND, L.P., a
Delaware limited partnership
By: Fenway Partners L.P., its general
partner
By: Fenway Partners Management, Inc.,
its general partner
By: /s/ Andrea Geisser
-----------------------
-32-
<PAGE>
COMPANIES:
IA HOLDINGS CORP., a Delaware corporation
By: /s/ Andrea Geisser
----------------------------
Name: Andrea Geisser
----------------------------
Title: Vice President
----------------------------
IAH ACQUISITION CORP., a Delaware corporation
By: /s/ Andrea Geisser
----------------------------
Name: Andrea Geisser
----------------------------
Title: Vice President
----------------------------
-33-
<PAGE>
EXHIBIT A
TO
SECURITIES PURCHASE AGREEMENT
LIST OF MEZZANINE INVESTORS
AND SECURITIES PURCHASED
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------
Number of
Number of Common
Series A Number of Shares
Name and Preferred Shares Common Shares Underlying Aggregate
Address Purchased Purchased Warrants Payment
Purchased
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York Life 1,000 5,555.56 4,641.66 $12,020,203
Insurance Co.
51 Madison Ave.
New York, NY
10010
- - ------------------------------------------------------------------------------------------------
Fenway Partners 500 2,777.78 2,320.83 $ 6,010,100
Capital Fund L.P.
152 West 57th St.
59th Floor
New York, NY
10019
- - ------------------------------------------------------------------------------------------------
Total 1,500 8,333.34 6,962.49 $18,030,303
- - ------------------------------------------------------------------------------------------------
</TABLE>
-34-
<PAGE>
EXHIBIT B
---------
Certificate of Designation, Preferences And Rights
of the
SERIES A PREFERRED STOCK
of
IA HOLDINGS CORP.
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
I, Andrea Geisser, Vice President, of IA Holdings Corp., a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), in accordance with Section 151 of the Delaware General
Corporation Law, certify:
FIRST: The Certificate of Incorporation of the Corporation authorizes the
issuance of up to 15,000 shares of preferred stock, par value $.01 per share, in
one or more series, with such voting powers, designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as may be stated and expressed in a
resolution or resolutions providing for the creation and issuance of any such
series adopted by the Board of Directors of the Corporation (the "Board of
Directors") prior to the issuance of any shares of such series, pursuant to
authority expressly vested in the Board of Directors by the Certificate of
Incorporation of the Corporation.
SECOND: The Board of Directors, by unanimous written consent dated
February 25, 1997, duly adopted the following resolution authorizing the
creation of a new series of such preferred stock, to be known as "Series A
Preferred Stock," stating that 10,000 shares of the authorized and unissued
preferred stock shall constitute such series, and setting forth a statement of
the voting powers, designation, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations and
restrictions thereof as follows:
BE IT RESOLVED, that the terms of the Series A Preferred Stock shall be as
follows:
Section 1. Designation and Number. The designation of the first series of
the authorized preferred stock, par value $.01 per share, of the Corporation
shall be Series A Preferred Stock (the "Series A Preferred Stock"). The number
of shares initially constituting the Series A Preferred Stock shall be 10,000.
<PAGE>
Section 2. Dividends.
---------
2A. General Obligation. When, as and if declared by the Board of
Directors and to the extent permitted by law, the Corporation shall pay
preferential dividends to the holders of the Series A Preferred Stock as
provided in this Section 2. Dividends on each share of the Series A Preferred
Stock (a "Class A Preferred Share") shall accrue from the date of issuance of
such Class A Preferred Share at the rate of fifteen and one-half percent (15-
1/2%) per annum of the Liquidation Value thereof; provided, however, that such
dividend rate shall be subject to increase in the following circumstances and
manner:
(i) In the event that any Class A Preferred Shares are not
redeemed on or before February 26, 2007 (as contemplated by Section 5A)
then the dividend rate applicable on such shares shall thereafter accrue
until redemption of such shares at the following rates for the following
periods:
Period Rate
February 27, 2007 to March 26, 2007 15- 1/2%
March 27, 2007 to September 26, 2007 16- 1/2%
September 27, 2007 to March 26, 2008 17- 1/2%
March 27, 2008 to September 26, 2008 18- 1/2%
September 27, 2008 to March 26, 2009 19- 1/2%
Thereafter until redeemed 20%
(ii) From and after any Change in Ownership Triggering Event, in
the event that any Class A Preferred Shares with respect to which the
holder thereof has requested redemption and complied with the notice and
other delivery requirements of Section 5E are not so redeemed on the Change
in Ownership Redemption Date then (subject to the provisions of Section 5E
regarding rescission of redemption requests) the dividend rate applicable
to such shares shall thereafter accrue from the Change in Ownership
Redemption Date with respect to such shares until redemption of such shares
at the rate of: seventeen and one-half percent (17- 1/2%) per annum for
the six-month period commencing on such Change in Ownership Redemption
Date, eighteen and one-half percent (18- 1/2%) for the next succeeding six-
month period, nineteen and one-half percent (19- 1/2%) for the next
succeeding six-month period and 20% thereafter until redeemed.
All such dividends shall accrue whether or not they have been declared and
whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends, and such dividends shall be
cumulative such that all accrued and unpaid dividends shall be fully paid, or
shall be declared with funds irrevocably set apart for payment or shall be paid
through issuance of additional Class A Preferred Shares (as hereinafter
provided), before any cash dividends may be paid with respect to any Junior
Securities. The date on which the Corporation initially issues any Class A
Preferred Share shall be deemed to be its "date of
-2-
<PAGE>
issuance" regardless of the number of times transfer of such Class A Preferred
Share is made on the stock records maintained by or for the Corporation and
regardless of the number of certificates which may be issued to evidence such
Class A Preferred Share.
2B. Dividend Payments. Subject to the limitations set forth in Section
2A, dividends on the Series A Preferred Stock shall be payable in cash or, at
the option of the Corporation, in whole or in part in additional Class A
Preferred Shares (including fractional shares) on the last day of January of
each year (each such date a "Dividend Payment Date") beginning in January 1998.
In the event the Corporation elects to pay such dividends in the form of
additional Class A Preferred Shares, the Corporation may, but shall not be
obligated to, pay cash in lieu of any fractional shares issuable in connection
with such dividends.
2C. Distribution of Partial Dividend Payments. Except as otherwise
provided herein, if at any time the Corporation pays less than the total amount
of dividends then accrued with respect to the Series A Preferred Stock, such
payment shall be distributed pro rata among the holders thereof based upon the
aggregate accrued but unpaid dividends on the Class A Preferred Shares held by
each such holder.
Section 3. Liquidation. Upon any liquidation, dissolution or winding up
of the Corporation (whether voluntary or involuntary), each holder of Series A
Preferred Stock shall be entitled to be paid, before any distribution or payment
is made upon any Junior Securities, an amount in cash equal to the aggregate
Liquidation Value of all Class A Preferred Shares held by such holder (plus all
accrued and unpaid dividends thereon), and the holders of Series A Preferred
Stock shall not be entitled to any further payment. If upon any such
liquidation, dissolution or winding up of the Corporation the Corporation's
assets to be distributed among the holders of the Series A Preferred Stock are
insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid under this Section 3, then the entire assets
available to be distributed to the holders of the Series A Preferred Stock shall
be distributed pro rata among such holders based upon the aggregate Liquidation
Value (plus all accrued and unpaid dividends) of the Series A Preferred Stock
held by each such holder. Prior to the liquidation, dissolution or winding up
of the Corporation, the Corporation shall declare for payment all accrued and
unpaid dividends with respect to the Series A Preferred Stock, but only to the
extent of funds of the Corporation legally available for the payment of
dividends. Not less than 20 days prior to the payment date stated therein, the
Corporation shall mail written notice of any such liquidation, dissolution or
winding up to each record holder of Series A Preferred Stock, setting forth in
reasonable detail the amount of proceeds to be paid with respect to each Class A
Preferred Share, each share of Common Stock and each other equity security of
the Corporation in connection with such liquidation, dissolution or winding up.
Whenever the distribution provided for in this Section 3 shall be payable in
property other than cash, the value of such distribution shall be the Fair
Market Value of such property.
Section 4. Priority of Series A Preferred Stock on Dividends and
Redemptions. So long as any Series A Preferred Stock remains outstanding,
without the prior written consent of the holders of two thirds (66-2/3%) of the
Class A Preferred Shares then outstanding, the
-3-
<PAGE>
Corporation shall not, nor shall it permit any Subsidiary to, redeem, purchase
or otherwise acquire directly or indirectly any Junior Securities, nor shall the
Corporation directly or indirectly pay or declare any dividend or make any
distribution upon any Junior Securities; provided, however, that (i) the
Corporation may repurchase or redeem any Junior Securities from any Mezzanine
Investor pursuant to the provisions of Section 3.1.7 of the Stockholders
Agreement as in effect on the date hereof, (ii) the Corporation may repurchase
or redeem any Junior Securities held by any officers, directors or employees of
the Corporation or its Subsidiaries (or by any Member of the Immediate Family
(as defined in the Stockholders Agreement) of any such officer, director or
employee, or, after the death of any such holder, by any such holder's estate,
executors, administrators and personal representatives or any such holder's
heirs, legatees or distributees) and (iii) the Corporation may declare and pay
any dividend and make any distributions which are payable solely in the form of
additional Junior Securities.
Section 5. Redemptions.
5A. Mandatory and Optional Redemption. On February 26, 2007, the
Corporation shall redeem each Class A Preferred Share then outstanding (the
"Mandatory Redemption"), subject to the limitations set forth in Section 5B
below. In addition, the Corporation may, at its option, at any time and from
time to time, redeem all or any portion of the Class A Preferred Shares then
outstanding (each an "Optional Redemption"). Upon either a Mandatory Redemption
or an Optional Redemption, the Corporation shall pay out of funds legally
available therefor a price per Class A Preferred Share equal to the Redemption
Price.
5B. Redemption Payments. For each Class A Preferred Share which is to be
redeemed hereunder, the Corporation shall be obligated on the Redemption Date to
pay out of funds legally available therefor to the holder of such Class A
Preferred Share (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Class A Preferred Share) an amount
equal to the Redemption Price; provided, however, that Mandatory Redemptions
shall only be made to the extent that funds of the Corporation are legally
available for such purposes after: (i) all obligations under the Senior Credit
Agreement and all other Designated Senior Debt (collectively, the "Senior Credit
Obligations") have been paid in full and all commitments to lend additional
amounts thereunder or under any other agreement with respect to Designated
Senior Debt shall have been canceled (or such redemption has been consented to
by the lenders under the Senior Credit Agreement and any other holders of
Designated Senior Debt to the extent required thereunder) and (ii) the
Subordinated Notes have been paid in full (or such redemption has been consented
to by the holders thereof). If the funds of the Corporation available, after
fulfillment of the conditions set forth in clauses (i) and (ii) of the
immediately preceding sentence (such fulfillment being referred to herein as the
"Satisfaction of the Specified Credit Obligations"), for redemption of Class A
Preferred Shares on any Redemption Date are insufficient to redeem the total
number of Class A Preferred Shares to be redeemed on such date, those funds
which are available after the Satisfaction of the Specified Credit Obligations
shall be used to redeem the maximum possible number of Class A Preferred Shares
pro rata among the holders of the Class A Preferred Shares to be redeemed
-4-
<PAGE>
based upon the aggregate Redemption Price of such Class A Preferred Shares held
by each such holder. At any time thereafter when additional funds of the
Corporation are available (after Satisfaction of the Specified Credit
Obligations) for the redemption of Class A Preferred Shares, such funds shall
thereafter be used to redeem the balance of the Class A Preferred Shares which
the Corporation has become obligated to redeem on any Redemption Date but which
it has not redeemed.
5C. Notice of Redemption. Except as otherwise provided herein, the
Corporation shall mail written notice of each redemption of any Series A
Preferred Stock to each record holder thereof not more than 60 nor less than 10
days prior to the date on which such redemption is to be made. In case fewer
than the total number of Class A Preferred Shares represented by any certificate
are redeemed, a new certificate representing the number of unredeemed Class A
Preferred Shares shall be issued to the holder thereof without cost to such
holder within five business days after surrender of the certificate representing
the redeemed Class A Preferred Shares.
5D. Dividends After Redemption Date. No Class A Preferred Shares shall be
entitled to any dividends accruing after the date on which the Redemption Price
of such Class A Preferred Share is paid (or made available for payment to) to
the holder of such Class A Preferred Share. On such date, all rights of the
holder of such Class A Preferred Share shall cease, and such Class A Preferred
Share shall no longer be deemed to be issued and outstanding.
5E. Special Redemptions. If a Change in Ownership Triggering Event has
occurred or the Corporation obtains knowledge that a Change in Ownership
Triggering Event is likely to occur, the Corporation shall give prompt written
notice of such Change in Ownership Triggering Event describing in reasonable
detail the material terms and date of consummation thereof to each holder of
Series A Preferred Stock, provided that: (i) at any time prior to an initial
Public Offering such notice shall be given at least five days prior to the
occurrence of such Change in Ownership Triggering Event and (ii) at any time
after an initial Public Offering such notice shall be given within ten days
after the occurrence of such Change in Ownership Triggering Event. The holders
of the Series A Preferred Stock then outstanding may require the Corporation to
redeem all or any portion of the Series A Preferred Stock owned by such holders
at a price per Class A Preferred Share (payable from funds legally available
therefor after Satisfaction of the Specified Credit Obligations) equal to the
Redemption Price by giving written notice to the Corporation of such election
prior to the later of: (a) 21 days after receipt of the Corporation's notice
and (b) five days prior to the consummation of the Change in Ownership
Triggering Event (the "Expiration Date").
Upon receipt of such election(s), the Corporation shall be obligated to
redeem the aggregate number of Class A Preferred Shares specified therein on the
later of: (a) the Business Day upon which the Change in Ownership Triggering
Event occurs or (b) the fifth Business Day after the Corporation's receipt of
such election(s) (the later of such dates being referred to herein as the
"Change in Ownership Redemption Date"); provided, however, that the Corporation
shall not be obligated to consummate such redemption except to the extent that
funds of the
-5-
<PAGE>
Corporation are legally available for such purpose after Satisfaction of the
Specified Credit Obligations. If any proposed Change in Ownership Triggering
Event does not occur, all requests for redemption in connection therewith shall
be automatically rescinded, or if there has been a material change in the terms
or the timing of the transaction, any holder of Series A Preferred Stock may
rescind such holder's request for redemption by delivering written notice
thereof to the Corporation prior to the consummation of the transaction. The
Company will give prompt notice to all holders of Class A Preferred Shares of
any material change in the terms or timing of any proposed Change in Ownership
Triggering Event. In the event of any such automatic or volitional rescission,
the increase in dividend rate contemplated by Section 2A(ii) shall not apply to
any Series A Preferred Shares the subject of such rescission.
5F. No Reissuance of Series A Preferred Stock. No share or shares of the
Series A Preferred Stock acquired by the Corporation by reason of redemption,
purchase or otherwise shall be reissued, and all such shares shall be canceled,
retired and eliminated from the shares which the Corporation shall be authorized
to issue.
Section 6. Voting and Other Rights.
6A. Voting. Except as otherwise provided herein and as otherwise required
by applicable law, the Series A Preferred Stock shall have no voting rights.
The number of Class A Preferred Shares entitled to vote on any matter shall be
determined as of the record date for the determination of shareholders entitled
to vote on such matter or, if no such record date is established, at the date
such vote is taken or any written consent of shareholders is solicited. Except
to the extent otherwise required by law, the holders of Series A Preferred Stock
shall vote together as a single class on all matters.
6B. Other Rights. In addition to any rights provided by law, without the
written consent of the holders of two thirds (66-2/3%) of the Class A Preferred
Shares then outstanding, the Corporation shall not:
(i) authorize any proposed amendment to the Corporation's
Certificate of Incorporation (including this Certificate of Designation)
that would increase or decrease the aggregate number of authorized shares
of Series A Preferred Stock, increase or decrease the par value of any
shares of Series A Preferred Stock, or alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to
adversely affect them; or
(ii) authorize, issue or sell, or obligate itself to authorize,
issue or sell, any class or series of preferred stock that is senior to or
pari passu with the Series A Preferred Stock with respect to dividends,
liquidation preferences or redemption rights (other than additional shares
of Series A Preferred Stock which are issued in lieu of cash dividends
pursuant to Section 2).
-6-
<PAGE>
Section 7. Registration of Transfer. The Corporation shall keep at its
principal office a register for the registration of Series A Preferred Stock.
Upon the surrender of any certificate representing Series A Preferred Stock at
such place, the Corporation shall, at the request of the record holder of such
certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the aggregate
the number of Class A Preferred Shares represented by the surrendered
certificate. Subject to any stockholder or other agreements between the
Corporation and the holders of Series A Preferred Stock, each such new
certificate shall be registered in such name and shall represent such number of
Class A Preferred Shares as is requested by the holder of the surrendered
certificate and shall be substantially identical in form to the surrendered
certificate, and dividends shall accrue on the Series A Preferred Stock
represented by such new certificate from the date to which dividends have been
fully paid on such Series A Preferred Stock represented by the surrendered
certificate.
Section 8. Replacement. Upon receipt of evidence reasonably satisfactory
-----------
to the Corporation of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing Series A Preferred Stock, and in the
case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Corporation, or, in the case of any such
mutilation upon surrender of such certificate, the Corporation shall (at its
expense) execute and deliver in lieu of such certificate a new certificate of
like kind representing the number of Class A Preferred Shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate, and dividends
shall accrue on the Series A Preferred Stock represented by such new certificate
from the date to which dividends have been fully paid on such lost, stolen,
destroyed or mutilated certificate.
Section 9. Definitions. As used in this Certificate, the following terms
are used with the meanings ascribed thereto in this Section 9.
"Change in Ownership Triggering Event" means, for purposes of Section 5E,
any of the following: (i) at any time prior to a Public Offering Fenway and its
affiliates shall cease to retain the right to elect a majority of the Board of
Directors, (ii) at any time after a Public Offering Fenway, the Mezzanine
Investors and the respective affiliates of Fenway and the various Mezzanine
Investors shall cease to have the power to elect a majority of the Board of
Directors or (iii) at any time the Corporation sells all or substantially all of
its assets (including through sale of all or substantially all of the stock of
its Subsidiaries or sale of all or substantially all of the assets of the
Corporation and its Subsidiaries, taken as a whole).
"Closing Date" means the first day on which any shares of Class A Preferred
Stock are issued and sold pursuant to the Securities Purchase Agreement.
"Common Stock" means, collectively, the Corporation's Common Stock and any
capital stock of any class of the Corporation hereafter authorized which is not
limited to a fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate
-7-
<PAGE>
in dividends or in the distribution of assets upon any liquidation, dissolution
or winding up of the Corporation.
"Designated Senior Debt" shall have the meaning set forth in the Note
Purchase Agreement.
"Fair Market Value" means the fair market value determined (i) in the case
of any property to be valued where the value of such property is reasonably
likely to exceed $5,000,000 in the aggregate, absent any agreement between the
Corporation and the holders of two-thirds (66-2/3%) of the Preferred Stock then
outstanding, by an Independent Investment Banking Firm retained by the
Corporation (the fees and expenses of which shall be the responsibility of the
Corporation) selected as set forth below and (ii) in all other cases, in good
faith by the Board of Directors. In the circumstances identified in clause (i)
of the immediately preceding sentence, the Board of Directors shall provide to
each holder of the Preferred Stock subject to such distribution a list of three
Independent Investment Banking Firms none of whom shall be an Affiliate of the
Corporation, and within 15 days of receipt of such list, the holders of a
majority of the Preferred Stock subject to such distribution shall select from
such list the Independent Investment Banking Firm to perform the calculation;
provided, however, that in the event an Independent Investment Banking Firm is
not selected within such 15 day period, the Board of Directors shall make such
selection.
"Fenway" means Fenway Partners Capital Fund., L.P., a Delaware limited
partnership.
"IAH" means IAH Acquisition Corp.,a Delaware corporation and a subsidiary
of the Corporation.
"Independent Investment Banking Firm" means any investment banking firm
which is not the beneficial owner of any equity interest in the Company or any
shareholder of the Company.
"Junior Securities" means any Common Stock or any other equity securities
of the Corporation which rank junior as to liquidation rights, dividend rights
and redemption rights to the Series A Preferred Stock.
"Liquidation Value" of any Class A Preferred Share as of any particular
date shall be equal to $10,000.
"Mezzanine Investors" shall have the meaning set forth in the Stockholders
Agreement.
"Note Purchase Agreement" means the Note Purchase Agreement dated on or
about February 26, 1997 among IAH, New York Life Insurance Company and Fenway
(as amended and in effect from time to time), a copy of which is maintained at
the Corporation's headquarters and is available to holders of Series A Preferred
Shares upon request.
-8-
<PAGE>
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its capital
stock or equity securities to the public pursuant to an effective registration
statement under the Securities Act of 1933, as then in effect, or any comparable
statement under any similar federal statute then in force.
"Redemption Date" as to any Class A Preferred Share means the date
specified in the notice of any redemption at the Corporation's option or at the
holder's option; provided that no such date shall be a Redemption Date unless
the Redemption Price of such Class A Preferred Share is actually paid (or made
available for payment) in full on such date, and if not so paid in full, the
Redemption Date shall be the date on which such amount is fully paid (or made
available for payment).
"Redemption Price" means, for each Class A Preferred Share, the Liquidation
Value thereof (plus all accrued and unpaid dividends thereon).
"Securities Purchase Agreement" means the Securities Purchase Agreement
dated on or about February 26, 1997 among the Corporation, IAH, New York Life
Insurance Company and Fenway (as amended and in effect from time to time), a
copy of which is maintained at the Corporation's headquarters and is available
to holders of Series A Preferred Shares upon request.
"Senior Credit Agreement" shall have the meaning provided in the Note
Purchase Agreement.
"Stockholders Agreement" means the Stockholders Agreement dated on or about
February 26, 1997 among the Corporation and the stockholders named therein, as
amended and in effect from time to time, a copy of which is maintained at the
Corporation's headquarters and is available to holders of Series A Preferred
Shares upon request.
"Subordinated Notes" means the 12.5% Subordinated Notes of IAH issued
pursuant to the Securities Purchase Agreement.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of 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 that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any
-9-
<PAGE>
Person or one or more Subsidiaries of that person or a combination thereof. For
purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control the managing general partner of such
limited liability company, partnership, association or other business entity.
Section 10. Amendment and Waiver. No amendment, modification or waiver
shall be binding or effective with respect to any provision hereof without the
prior written consent of the holders of a majority of the Series A Preferred
Stock outstanding at the time such action is taken; provided that no such action
shall change (a) the rate at which or the manner in which dividends on the
Series A Preferred Stock accrue or the times at which such dividends become
payable or the amount payable on redemption of the Series A Preferred Stock or
the times at which redemption of Series A Preferred Stock is to occur or (b) the
percentage required to approve any change described in clause (a) above, without
the prior written consent of the holders of one hundred percent (100%) of the
Series A Preferred Stock then outstanding; and provided further that no change
in the terms hereof may be accomplished by merger or consolidation of the
Corporation with another corporation or entity unless the Corporation has
obtained the prior written consent of the holders of the applicable percentage
of the Series A Preferred Stock then outstanding.
Section 11. Notices. Any notice or other communication referred to herein
shall be in writing, addressed as hereinafter provided, and shall be deemed
effective (x) when delivered or (y) if sent by overnight courier, two Business
Days after the same shall have been deposited with such courier, or (z) if
delivered or sent by facsimile transmission, upon confirmation of transmission.
Such notices or other communication shall be addressed as follows: (i) if to
the Corporation, at its principal executive offices and (ii) if to any
stockholder, at such holder's address as it appears in the stock records of the
Corporation (unless otherwise indicated by any such holder).
Section 12. Adjustment. All numbers and amounts set forth herein which
refer to share prices or amounts or liquidation preference related amounts,
shall be appropriately adjusted (as determined by the Board of Directors) to
reflect any stock splits, stock dividends, combinations of shares and other
recapitalizations affecting the Series A Preferred Stock.
-10-
<PAGE>
In witness whereof, said IA Holdings Corp. has caused this Certificate of
Designation, Preferences and Rights to be executed by an officer of said
Corporation thereunto duly authorized, this 25 day of February 1997.
IA HOLDINGS CORP.
By /s/ Andrea Geisser
----------------------------------
Title: Vice President
-11-
<PAGE>
Exhibit C to
Securities Purchase Agreement
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED,
SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A REGISTRATION IS IN EFFECT
OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE SUBJECT TO THE PROVISIONS
OF A STOCKHOLDERS AGREEMENT DATED AS OF FEBRUARY 26, 1997 (THE
"STOCKHOLDERS AGREEMENT") WHICH, AMONG OTHER THINGS, RESTRICTS THE TRANSFER
OF THIS WARRANT OR ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
AND REQUIRES THE SALE OF THIS WARRANT OR SUCH SHARES IN CERTAIN
CIRCUMSTANCES. THE ISSUER WILL FURNISH A COPY OF THE STOCKHOLDERS
AGREEMENT TO THE HOLDER OF THIS INSTRUMENT WITHOUT CHARGE UPON WRITTEN
REQUEST.
IA HOLDINGS CORP.
COMMON STOCK PURCHASE WARRANT
No. R-001 February 26, 1997
THIS IS TO CERTIFY THAT _____________, a ___________, or registered
assigns (the "Holder") is entitled, at any time prior to the Expiration Time (as
hereinafter defined), to purchase from IA HOLDINGS CORP., a Delaware corporation
(the "Company"), the name of which on or about the date hereof will be changed
to "Iron Age Holdings Corporation," _____ duly authorized, validly issued, fully
paid and nonassessable shares of the Common Stock, par value $.01 per share, of
the Company, at a purchase price equal to three hundred sixty-three and 64/100
dollars ($363.64) per Original Share, all subject to the terms, conditions and
adjustments set forth below in this Common Stock Purchase Warrant (this
"Warrant", such term to include any such warrants issued in substitution
therefor). This Warrant was originally issued pursuant to the 1997 Mezzanine
Securities Purchase Agreement.
1. EXERCISE OF WARRANT.
1.1. Manner of Exercise; Payment. This Warrant may be exercised by
the Holder, in whole or in part during normal business hours on any Business Day
on or prior to the Expiration Time, by surrender of this Warrant to the Company
at its office maintained pursuant to Section 7.2(a), accompanied by a
subscription in substantially the form attached to this Warrant as Exhibit A
duly executed by the Holder and accompanied by payment by certified or official
bank check payable to the order of the Company in the amount obtained by
multiplying (a) the sum of (i) the number of Original Shares designated in such
subscription, and (ii) the cumulative increase in the number of shares
obtainable upon exercise of this warrant as provided in Section
<PAGE>
2.4 by (b) the Exercise Price; and the Holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock specified in said subscription, subject to
adjustment in accordance with Section 2. In lieu of payment of the exercise
price by certified or official bank check as provided above, the Holder may
elect a cashless exercise. In the case of such cashless exercise, the Holder
shall surrender this Warrant for cancellation and receive in exchange therefor
the full number of duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock specified in its subscription, subject to adjustment in
accordance with Section 2, less the number of shares with an aggregate Fair
Market Price equal to the aggregate Exercise Price that would have been payable
upon such exercise absent election of the cashless exercise alternative. Any
such cashless exercise election shall be indicated by checking the appropriate
box on the subscription.
1.2. When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected on the next Business Day after this Warrant shall
have been surrendered to the Company as provided in Section 1.1, and at such
time the Person or Persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such exercise as
provided in Section 1.3 shall be deemed to have become the holder or holders of
record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable
after each exercise of this Warrant, in whole or in part, and in any event
within five (5) Business Days thereafter (or, in the case of a cashless exercise
as contemplated by Section 1.1 within five (5) Business Days of the final
determination of Fair Market Price of shares issuable upon exercise thereof),
the Company at its expense will cause to be issued in the name of and delivered
to the Holder or, subject to Section 7, as the Holder (upon payment by the
Holder of any applicable transfer taxes) may direct:
(a) a certificate or certificates representing the aggregate number
of duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock to which the Holder shall be entitled upon such exercise plus,
in lieu of any fractional share to which the Holder would otherwise be
entitled, cash in an amount equal to the same fraction of the Fair Market
Price per share on the Business Day next preceding the date of such
exercise; and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, dated the date hereof and calling in the aggregate on the
face or faces thereof for the number of Original Shares equal to the number
of Original Shares called for in the introductory paragraph of this Warrant
minus the number of Original Shares designated by the Holder upon such
exercise as provided in Section 1.1.
2. ADJUSTMENT OF EXERCISE PRICE AND/OR NUMBER OF SHARES. In order to protect
the rights granted under this Warrant, the Exercise Price shall be subject to
adjustment from time to time as provided in this Section 2, and the number of
Warrant Shares obtainable
-2-
<PAGE>
upon exercise of this Warrant shall be subject to adjustment from time to time
as provided in this Section 2.
2.1. Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, or combines (by reverse stock split or otherwise) its outstanding share
of Common Stock into a smaller number of shares, the number of Warrant Shares
obtainable upon exercise of this Warrant shall be proportionately adjusted so
that the number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of such subdivision or combination shall become
equal to the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event would own or be entitled to receive in respect
of such shares upon the happening of such event.
2.2. Reorganization, Reclassification, Consolidation, Merger or Sale. In
the event of any reorganization, reclassification, consolidation or merger of
the Company with or into another corporation where the Company is not the
surviving corporation or where there is a conversion of or distribution with
respect to the Common Stock outstanding immediately prior to such consolidation
or merger, sale or other disposition of all or substantially all of the
Company's assets to another Person or other similar transaction which is
effected in such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities or assets
("Other Property") with respect to or in exchange for Common Stock (any such
transaction being referred to herein as an "Organic Change"), prior to the
consummation of such Organic Change, the Company shall make appropriate
provision to insure that the Holder shall thereafter have the right to receive,
upon exercise of this Warrant, in lieu of the Warrant Shares immediately
theretofore acquirable and receivable upon the exercise of this Warrant, only
such Other Property as may be issuable or payable with respect to or in exchange
for the number of Warrant Shares immediately theretofore acquirable and
receivable upon exercise of this Warrant (and payment or satisfaction of the
Exercise Price) in connection with such Organic Change. In any such case, the
Company shall make appropriate provision with respect to the Holders' rights and
interests to insure that the provisions of this Section 2 and Section 3 shall
thereafter continue to be applicable to this Warrant. The Company shall not
effect any such Organic Change unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from consolidation or
merger or the entity acquiring such assets assumes by written instrument the
obligation to deliver to the Holder such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the Holder may be entitled to
acquire.
2.3. Certain Other Distributions. If at any time after the date hereof the
Company shall pay any dividend or otherwise distribute in respect of the Common
Stock any:
(a) cash;
(b) evidences of indebtedness, shares of stock or other securities or
property of any nature whatsoever, or
-3-
<PAGE>
(c) other warrants or rights to subscribe for or purchase any evidences of
indebtedness, shares of stock or other securities or property of any nature
whatsoever,
then, to the extent that such dividend or distribution does not result in any
adjustment pursuant to Sections 2.1 and 2.2:
(i) in the case of a distribution of cash, the Exercise Price shall
be reduced by an amount equal to the per share amount of the cash dividend;
an d
(ii) in the case of any other distribution, the Company shall provide
the holder with ten (10) Business Days' prior written notice of such
distribution and make appropriate provisions to insure that the Holder
shall thereafter have the right to receive, upon exercise of this Warrant
(and payment or satisfaction of the Exercise Price), in addition to the
Warrant Shares immediately theretofore acquirable and recoverable upon
exercise of this Warrant, either (A) such evidences of indebtedness, shares
of stock, warrants, rights to subscribe or other property as would have
been receivable by the Holder had this Warrant been exercised prior to the
time the Company took a record of holders of Common Stock for purposes of
entitling them to receive such dividend or distribution, or (b) an amount
of cash equal to the fair market value of the property described in clause
(A) as of the date of such distribution, calculated in the same manner as
Fair Market Price.
The adjustment provided for in this Section 2.3 shall under no
circumstances reduce the aggregate Exercise Price payable in connection with any
exercise of this Warrant below the aggregate par value of shares issuable upon
such exercise.
2.4. Exercise of Certain Management Stock Options. Whenever options
granted by the Company under Sections 6(c)(1)(ii)(A) of the 1997 Stock Option
Plan of the Company become exercisable pursuant to the terms of such plan, the
number of Warrant Shares obtainable upon exercise of this Warrant shall be
increased by a number equal to the product of (a) 6.95% of the number of shares
that become issuable as a result of such vesting, and (b) a fraction, the
numerator of which is the number of shares listed in the introductory paragraph
of this Warrant, and the denominator of which is 6,962.49.
2.5. Continuing Effect. The provisions of Section 2.1, 2.2, 2.3, and 2.4
shall similarly apply to successive transactions or events of the types
specified therein.
2.6. Computation of Adjustments. In each case of any adjustment or
readjustment of the Exercise Price or in the number of Warrant Shares issuable
upon the exercise of this Warrant, the Company will promptly compute such
adjustment or readjustment in accordance with the terms of this Warrant, such
computation to be determined in good faith by the Board of Directors of the
Company, and furnish a certificate showing such computations in reasonable
detail to the Holder.
-4-
<PAGE>
3. RESTRICTIONS ON CORPORATE ACTION; NOTICE OF CERTAIN EVENTS.
3.1. Restrictions on Corporate Action. The Company will not, by amendment
of its certificate of incorporation or through any transfer of assets,
dissolution, or other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms. Without limiting the
generality of the foregoing, the Company will at all times reserve and keep
available, solely for issuance and delivery upon exercise of the Warrants, the
number of shares of Common Stock necessary to satisfy the rights of the holders
of the Warrants to purchase Warrant Shares. All shares of Common Stock issuable
upon exercise of any Warrants shall be duly authorized and, when issued upon
such exercise (and payment or satisfaction of the Exercise Price), shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
3.2. Notice of Certain Events. The Company will notify the Holder, in
accordance with the provisions of Section 9 below, at least twenty (20) days
prior to any of the following events: (i) any Initial Public Offering or any
sale or other disposition (including, without limitation, by merger or
consolidation) of a majority of the capital stock or assets of the Company to
any Person that is not an Affiliate of the Company, (ii) the date on which the
Company closes its books or takes a record (A) with respect to any pro rata
dividend, distribution or subscription offer to holders of Common Stock, or (B)
for determining rights to vote with respect to, or participate in, any Organic
Change, dissolution or liquidation.
The Company's obligations under this Section 3 shall terminate at the
Expiration Time.
4. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the Holder any rights as a stockholder of
the Company or as imposing any obligation on the Holder to purchase any
securities or as imposing any liabilities on the Holder as a stockholder of the
Company, whether such obligation or liabilities are asserted by the Company or
by creditors of the Company.
5. RESTRICTIONS ON TRANSFER.
5.1. Restrictive Legends. Except as otherwise permitted by this Section
5, each certificate for Warrant Shares issued upon the exercise of any Warrant,
each certificate issued upon the direct or indirect transfer of any such
securities, and each Warrant issued upon direct or indirect transfer or in
substitution for this Warrant pursuant to Section 7 shall be transferable only
upon satisfaction of the conditions specified in the Stockholders Agreement and
in this Section 5 and shall be stamped or otherwise imprinted with legends in
substantially the form appearing at the beginning of this Warrant or as required
by the Stockholders Agreement.
5.2. Notice of Proposed Transfer. Prior to any transfer of any Restricted
Securities which are not registered under an effective registration statement
under the Securities Act, the holder thereof will give written notice to the
Company of such holder's intention to effect such
-5-
<PAGE>
transfer and to comply in all other respects with this Section 5.2. Each such
notice shall describe the manner and circumstances of the proposed transfer.
The holder giving such notice will submit a copy thereof to the counsel
designated in such notice. The Company shall provide such notice to its own
counsel. The following provisions shall then apply:
(i) If the proposed transfer may be effected without registration of
such Restricted Securities under the Securities Act, such holder shall
thereupon be entitled (subject to compliance with the transfer restrictions
of the Stockholders Agreement) to transfer such Restricted Securities in
accordance with the terms of the notice delivered by such holder to the
Company. Each certificate representing such Restricted Securities issued
upon or in connection with such transfer shall bear the restrictive legends
required by Section 5.1, unless the applicable restrictions on transfer
shall have ceased and terminated as to such Restricted Securities pursuant
to Section 5.3.
(ii) If the proposed transfer may not legally be effected without
registration of such Restricted Securities under the Securities Act, the
Company will promptly so notify the holder thereof and thereafter such
holder shall not be entitled to transfer such Restricted Securities until
either (x) receipt by the Company of a further notice from such holder
pursuant to the foregoing provisions of this Section 5.2 and fulfillment of
the provisions of clause (i) above or (y) such Restricted Securities have
been effectively registered under the Securities Act.
5.3. Termination of Restrictions. Subject to any transfer restrictions in
---------------------------
the Stockholders Agreement, the restrictions imposed by this Section 5 hereof
upon the transferability of Restricted Securities shall cease and terminate as
to any particular Restricted Securities (a) when such Restricted Securities
shall have been effectively registered under the Securities Act, or (b) when
such restrictions are no longer required in order to insure compliance with the
Securities Act or Sections 3 and 11 of the Stockholders Agreement. Whenever
such restrictions shall cease and terminate as to any Restricted Securities, the
holder thereof shall be entitled to receive from the Company, without expense
(other than applicable transfer taxes, if any), new securities of like tenor not
bearing the applicable legends required by Section 5.1.
6. AVAILABILITY OF INFORMATION. From such time, if any, as the Company may
have filed a registration statement pursuant to the requirements of Section 12
of the Exchange Act or a registration statement pursuant to the requirements of
the Securities Act until such time as the Company may have terminated
registration of its securities by filing a certificate on Form 15 or otherwise
in accordance with applicable law, the Company will comply with the reporting
requirements of Sections 13 and 15(d) of the Exchange Act and with all other
public information reporting requirements of the Commission (including Rule 144
promulgated by the Commission under the Securities Act) from time to time in
effect and relating to the availability of an exemption from the Securities Act
for the sale of any Restricted Securities. The Company will also cooperate with
all reasonable requests by holders of any Restricted Securities for such
information as may be necessary for such holders to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an
-6-
<PAGE>
exemption from the Securities Act for the sale of any Restricted Securities.
The Company will furnish to each holder of any Warrants, promptly upon request
by the Holder, copies of all financial statements, reports, notices and proxy
statements, sent or made available generally by the Company to its stockholders,
and copies of all regular and periodic reports and all registration statements
and prospectuses filed by the Company with any securities exchange or with the
Commission.
7. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
7.1. Ownership of Warrants. The Company may treat the person in whose
name this Warrant is registered on the register kept at the office of the
Company maintained pursuant to Section 7.2(a) as the owner and holder thereof
for all purposes, notwithstanding any notice to the contrary, except that, if
and when this Warrant is properly assigned in compliance with the provisions of
Section 5 hereof and any applicable provisions contained in the Stockholders
Agreement, the Company shall register such transfer on the books of the Company
referred to in Section 7.2 and provided, however, that if this Warrant is
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes, notwithstanding
any notice to the contrary. Subject to Section 5 hereof and to the provisions
of the Stockholders Agreement, a Warrant, if properly assigned, may be exercised
by a new holder without a new Warrant first having been issued.
7.2. Office; Transfer and Exchange of Warrants.
(a) The Company will maintain an office (which may be an agency
maintained at a bank) in the United States of America where notices,
presentations and demands in respect of this Warrant may be made upon it.
Such office shall be maintained at Robinson Plaza Three, Suite 400,
Pittsburgh, Pennsylvania until such time as the Company shall notify the
holders of the Warrants of any change of location of such office within the
United States of America.
(b) The Company shall cause to be kept at its office maintained
pursuant to Section 7.2(a) a register for the registration and transfer of
the Warrants. The names and addresses of holders of Warrants, the
transfers thereof and the names and addresses of transferees of Warrants
shall be registered in such register. The Person in whose name any Warrant
shall be so registered shall be deemed and treated as the owner and holder
thereof for all purposes of this Warrant, and the Company shall not be
affected by any notice or knowledge to the contrary.
(c) Upon the surrender of this Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to Section 7.2(a), the Company at its expense will
(subject to compliance with the provisions of the Stockholders Agreement
and Section 5 hereof, if applicable) execute and deliver to or upon the
order of the Holder a new Warrant or Warrants of like tenor, in the name of
such holder or as the Holder (upon payment by the Holder of any
-7-
<PAGE>
applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the
face or faces of the Warrant or Warrants so surrendered.
7.3. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and upon delivery of indemnity reasonably satisfactory to the Company in
form and amount or, in the case of any such mutilation, upon surrender of such
Warrant for cancellation at the office of the Company maintained pursuant to
Section 7.2(a), the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor and dated the date hereof.
8. DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
Affiliate: With respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person
(it being understood that for purposes of the above definition, the term
"control" (including with correlative meaning 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 and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise).
Business Day: Any day other than a Saturday or a Sunday or a day on which
commercial banking institutions are required or permitted to be closed in New
York, New York or Pittsburgh, Pennsylvania. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
Closing Date: February 26, 1997.
Commission: The Securities and Exchange Commission or any other federal
agency then administering the Securities Act and other federal securities laws.
Common Stock: The Common Stock, par value $.01 per share, of the Company
as constituted on the Closing Date, and any stock into which such Common Stock
may thereafter be changed, and shall also include (i) any capital stock of the
Company of any class (regardless how denominated) issued to holders of shares of
Common Stock upon any reclassification of such Common Stock which is not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation following an Organic Change received by or
distributed to the holders of Common Stock in the circumstances contemplated by
Section 2.2.
Company: As defined in the introduction to this Warrant, such term to
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with Section 3.
-8-
<PAGE>
Exchange Act: The U.S. Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Exercise Price: An amount equal to $363.64 per Original Share, subject to
adjustment pursuant to Section 2.3.
Expiration Date: The date on which the Expiration Time occurs.
Expiration Time: 5:00 P.M., Pittsburgh, Pennsylvania time, on February 26,
2007
Fair Market Price: On any date specified herein, either (a) if the shares
of Common Stock are publicly traded on such date, the average of the daily
closing prices of such Common Stock for the twenty (20) consecutive trading days
ending on such date, or (b) the amount per share of Common Stock equal to the
fair value thereof determined either by agreement between the Company and the
Required Holders or absent such agreement in good faith by the Board of
Directors of the Company as of a date which is within fifteen (15) days of the
date as of which the determination is to be made; provided that the Company
shall send notice of such determination to all Holders affected directly thereby
within five (5) Business Days after such determination by the Board. If the
Required Holders disagree in writing with a determination made under clause (b)
by the Board of Directors of the Company within ten (10) Business Days of notice
thereof, and the amount in dispute is reasonably likely to exceed $5,000,000,
the Fair Market Price shall be determined by an Independent Investment Banking
Firm retained by the Company (the fees and expenses of which shall be the
responsibility of the Company) selected as set forth in the immediately
following sentence. The Company shall select three Independent Investment
Banking Firms none of which shall be an Affiliate of the Company, and within ten
(10) Business Days of the receipt of such list, the holders of a majority of the
Warrants disputing such Fair Market Price determination shall choose one of the
listed firms to make such valuation. If such holders do not make a selection
within such ten (10) Business Day period, the Board of Directors of the Company
shall make such selection.
Holder: As defined in the introduction to this Warrant.
Independent Investment Banking Firm: Any investment banking firm which is
not the beneficial owner of any equity interest in the Company or any
shareholder of the Company.
Initial Public Offering: The Company's initial sale of Common Stock in an
underwritten public offering registered under the Securities Act.
1997 Mezzanine Securities Purchase Agreement: The Securities Purchase
Agreement dated as of February 26, 1997 among the Company, IAH Holdings Corp.,
New York Life Insurance Company, and Fenway Partners Capital Fund, L.P.
-9-
<PAGE>
Original Share: A share of Common Stock as constituted on the Closing Date
before giving effect to the adjustments in Section 2.
Organic Change: As defined in Section 2.2.
Other Property: As defined in Section 2.2.
Person: A corporation, an association, a partnership, a business trust, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
Required Holders: The Holders of Warrants exercisable for in excess of
two-thirds (66-2/3%) of the aggregate number of Warrant Shares then purchasable
upon exercise of this Warrant and all other warrants issued pursuant to the 1997
Mezzanine Securities Purchase Agreement and then outstanding.
Restricted Securities: All of the following: (a) any Warrants bearing the
applicable legend or legends referred to in Section 5.1, (b) any shares of
Common Stock which have been issued upon the exercise of Warrants and which are
evidenced by a certificate or certificates bearing the applicable legend or
legends referred to in such Section, (c) unless the context otherwise requires,
any shares of Common Stock which are at the time issuable upon the exercise of
Warrants and which, when so issued, will be evidenced by a certificate or
certificates bearing the applicable legend or legends referred to in such
Section.
Securities Act: The Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Warrant Shares: The shares of Common Stock issuable upon exercise of the
Warrants.
Warrants: As defined in the introduction to this Warrant.
9. NOTICES. Any notice or other communication in connection with this Warrant
shall be in writing, addressed as hereinafter provided, and shall be deemed
effective (x) when delivered, or (y) if sent by overnight courier, two (2)
Business Days after the same shall have been deposited with such courier, or (z)
if delivered or sent by facsimile transmission, upon confirmation of
transmission. Such notices or other communications shall be addressed as
follows: (a) if to any holder of any Warrant, at the registered address of such
holder as set forth in the register kept at the office of the Company maintained
pursuant to Section 7.2(a); or (b) if to the Company, to the attention of its
President at its office maintained pursuant to Section 7.2(a); provided,
however, that the exercise of any Warrant shall be effective in the manner
provided in Section 1.
-10-
<PAGE>
10. AMENDMENT, ETC. This Warrant and all other warrants issued pursuant to the
1997 Mezzanine Securities Purchase Agreement may be modified or amended or the
provisions hereby waived with the written consent of the Company and the
Required Holders, provided that no such Warrant may be modified or amended to
reduce the number of shares of Common Stock for which such Warrant is
exercisable or to increase the price at which such shares may be purchased upon
exercise of such Warrant (before giving effect to any adjustment as provided
therein) without the prior written consent of the Holder thereof.
11. MISCELLANEOUS. This Warrant shall be construed and enforced in accordance
with and governed by the laws of State of Delaware. The section headings in
this Warrant are for purposes of convenience only and shall not constitute a
part hereof.
IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase
Warrant to be signed by its duly authorized office under its corporate seal.
IA HOLDINGS CORP.
By:_______________________________
Title:
-11-
<PAGE>
Exhibit A to Warrant
--------------------
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To IRON AGE HOLDINGS CORPORATION
(formerly known as IA Holdings Corp.)
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, __________/1/ shares of
the Common Stock covered by the within Warrant and requests that the
certificates for such shares be issued in the name of, and delivered to,
________________ whose address is _________________________.
_____ The undersigned herewith makes payment in full therefor of
the Exercise Price therefor (or $_______ in the aggregate);
or
_____ The undersigned hereby elects to effect a cashless exercise
as contemplated by Section 1.1 of the Warrant and instructs
the Company to reduce the number of shares issuable upon
exercise as provided in the penultimate sentence of Section
1.1.
(check only one of the spaces provided above)
Dated: __________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of Warrant)
__________________________________________
(Street Address)
__________________________________________
(City) (State) (Zip Code)
- - -----------------------------
/1/ Insert here the number of shares called for in the introductory
paragraph of this Warrant (or, in the case of a partial exercise, the portion
thereof as to which this Warrant is being exercised), in either case without
making any adjustment for additional shares of Common Stock or any other stock
or other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of a
partial exercise, a new Warrant or Warrants will be issued and delivered,
representing the unexercised portion of the Warrant, to the holder surrendering
the Warrant.
-i-
<PAGE>
Exhibit B to Warrant
--------------------
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto ____________________ the right
represented by such Warrant to purchase _______/1/ Original Shares of Common
Stock of IRON AGE HOLDINGS CORPORATION, a Delaware corporation formerly known as
IA Holdings Corp. (the "Company") to which such Warrant relates (or such other
shares of Common Stock purchasable upon exercise of such Warrant in respect of
such Original Shares), and appoints _________________________ Attorney to make
such transfer on the books of the Company maintained for such purpose, with full
power of substitution in the premises.
Dated: _________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of Warrant)
_________________________________________
(Street Address)
_________________________________________
(City) (State) (Zip Code)
Signed in the presence of:
_________________________
/1/ Insert here the number of shares called for in the introductory
paragraph of this Warrant (or, in the case of a partial assignment, the portion
thereof as to which this Warrant is being assigned), in either case without
making any adjustment for additional shares of Common Stock or any other stock
or other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of a
partial assignment, a new Warrant or Warrants will be issued and delivered,
representing the unassigned portion of the Warrant, to the holder surrendering
the Warrant.
-ii-
<PAGE>
SCHEDULES TO THE SECURITIES PURCHASE AGREEMENT DATED AS OF FEBRUARY 26, 1997.
- - ---------
<PAGE>
SCHEDULE 3.01(A)
----------------
CAPITALIZATION
--------------
IA HOLDINGS CORP. INVESTOR GROUP*
--------------------------------
A. Primary Investments
--------------------
Number of Outstanding Shares of
-------------------------------
Owner Common Stock Preferred Stock
- - ----- ------------ ---------------
Fenway Partners Capital Fund, L.P. 80,291.66 0
B. Mezzanine Investments
---------------------
Owner Number of Outstanding Shares of
- - ----- -------------------------------
Common Stock Preferred Stock
------------ ---------------
Fenway Partners Capital Fund, L.P. 2,777.78 500
New York Life Insurance Company 5,555.56 1,000
Total Outstanding 88,625.00 1,500
_____________________________
* All of the stockholders of IA Holdings Corp. have entered into a Stockholders'
Agreement dated February 26, 1997 ("Agreement") and the shares listed below are
subject to the terms of that Agreement.
-2-
<PAGE>
SCHEDULE 3.01(B)
----------------
IA HOLDINGS CORP. SUBSIDIARIES
------------------------------
<TABLE>
<CAPTION>
===================================================================================
TYPE OF # OF SHARES # OF OWNED
CORPORATION OUTSTANDING STOCK OUTSTANDING SHARES BY
- - ----------- ----------------- ----------- ISSUED --
- - ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IAH Acquisition Corp. Common Stock 3000 100 IA
(a Delaware corporation) Holdings
Corp.
(100%)
===================================================================================
</TABLE>
-3-
<PAGE>
SCHEDULE 3.01(D)
----------------
AUTHORIZATIONS, ACTIONS, NOTICES, APPROVALS, AND FILINGS
--------------------------------------------------------
Termination of the Amended and Restated Credit Agreement dated January 27, 1995
by and between Iron Age Corporation and PNC Bank N.A. as Agent.
Termination of indebtedness owed to Butler Capital Corporation under the
Acquisition Financing Agreement dated January 29, 1990 and as restated effective
through November 20, 1995.
Consent of Gore relating to the Falcon/Gore License Agreement dated July 24,
1994 between Falcon Shoe Mfg. Co. and W.L. Gore & Associates, Inc.
Consent of Gore relating to the Iron Age/Gore License Agreement dated August 15,
1994 between Iron Age Corporation and W.L. Gore & Associates, Inc.
Consent of Gore relating to the Manufacturing Certification Agreement dated July
24, 1994 (the "Falcon/Gore Manufacturing Agreement") between Falcon Shoe Mfg.
Co. and W.L. Gore & Associates, Inc.
Consent of CIT Group/Amplicon Leasing relating to the CIT Group/Amplicon Leasing
Security Agreement coverning equipment relating to the Mobile Point of Sale
Agreement.
Consent of Amplicon Financial relating to the Master Lease Agreement by and
between Amplicon, Inc. and Iron Age Corporation.
Consent of Von-Land Corporation Limited under a lease dated June 11, 1991 and a
renewal lease dated November 23, 1995 between Von-Land Corporation Limited and
Iron Age Canada Ltd. for office space located at 475 N. Rivermede Road, Unit 2,
Concord, Ontario LYK3RZ.
Consent of Roy Continental, landlord of the Lewiston, Maine property at 2 Cedar
Street.
Authorization under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
-4-
<PAGE>
SCHEDULE 3.01(M)
----------------
OPEN YEARS
----------
January 25, 1997
January 27, 1996
January 28, 1995
January 29, 1994
-5-
<PAGE>
EXHIBIT 10.19
================================================================================
________________________________
STOCK PURCHASE AGREEMENT
among
IRON AGE HOLDINGS CORPORATION,
THE STOCKHOLDERS OF
IRON AGE HOLDINGS CORPORATION,
and
IAH ACQUISITION CORP.
Dated as of December 26, 1996
________________________________
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS......................................................... 1
1.1. Certain Matters of Construction............................... 1
1.2. Cross Reference Table......................................... 2
1.3. Certain Definitions........................................... 4
2. ACQUISITION......................................................... 10
3. PAYMENT AND CLOSING................................................. 11
3.1. Purchase Price................................................ 11
3.2. Time and Place of Closing..................................... 11
3.3. Delivery...................................................... 11
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS....................... 11
4.1. Organization and Authority.................................... 12
4.2. Authorization and Enforceability.............................. 12
4.3. Non-Contravention, Etc........................................ 12
4.4. Title to Stock................................................ 13
5. REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY.............. 13
5.1. Corporate Matters, etc........................................ 13
5.2. Financial Statements, etc..................................... 15
5.3. Change in Condition........................................... 16
5.4. Environmental Matters, etc.................................... 18
5.5. Real and Personal Property.................................... 18
5.6. Intangibles................................................... 19
5.7. Certain Contractual Obligations............................... 20
5.8. Insurance, etc................................................ 22
5.9. Litigation, etc............................................... 22
5.10. Compliance with Laws, etc..................................... 22
5.11. Tax Matters................................................... 23
5.12. Employee Benefit Plans........................................ 24
5.13. Brokers, etc.................................................. 26
5.14. Affiliate Transactions........................................ 26
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER......................... 26
6.1. Corporate Matters, etc........................................ 27
6.2. Financial Condition, etc...................................... 27
6.3. Investment Intent, Related Matters............................ 28
6.4. Litigation.................................................... 28
6.5. Brokers, etc.................................................. 28
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7. CERTAIN AGREEMENTS OF THE PARTIES.................................. 28
7.1. Access to Premises and Information........................... 28
7.2. Confidentiality Covenant..................................... 29
7.3. Operation of Business, Related Matters....................... 29
7.4. Preparation for Closing...................................... 31
7.5. Payment of Transfer Taxes and Other Charges.................. 33
7.6. Support Services, etc........................................ 33
7.7. Further Assurances........................................... 33
7.8. Financial Information........................................ 33
7.10. Other Offers................................................. 34
8. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE BUYER................. 34
8.1. Representations, Warranties and Covenants.................... 34
8.2. Legality; Governmental Authorization; Litigation............. 35
8.3. Third Party Consents......................................... 35
8.4. Opinion of Counsel........................................... 35
8.6. General...................................................... 36
9. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE SELLERS............... 36
9.1. Representations, Warranties and Covenants.................... 36
9.2. Payment of BCC Debt, etc..................................... 37
9.3. Legality; Government Authorization; Litigation............... 37
9.4. Opinion of Counsel........................................... 37
9.5. General...................................................... 37
10. EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS...................... 37
10.1. Employment of Affected Employees............................. 37
10.2. Substantially Equivalent Benefits............................ 38
10.3. WARN......................................................... 38
10.4. Third-Party Rights........................................... 39
10.5. Indemnity.................................................... 39
11. INDEMNIFICATION.................................................... 39
11.1. Indemnification.............................................. 39
11.2. Time Limitation on Indemnification........................... 40
11.3. Monetary Limitations on Indemnification...................... 41
11.4. Third Party Claims, etc...................................... 41
11.5. Certain Other Indemnity Matters.............................. 42
12. CONSENT TO JURISDICTION; JURY TRIAL WAIVER......................... 43
12.1. Consent to Jurisdiction...................................... 43
12.2. WAIVER OF JURY TRIAL......................................... 44
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
13. TERMINATION........................................................ 44
13.1. Termination of Agreement.................................... 44
13.2. Effect of Termination....................................... 45
13.3. Time of Essence............................................. 45
14. MISCELLANEOUS...................................................... 45
14.1. Entire Agreement; Waivers................................... 45
14.2. Amendment or Modification................................... 46
14.3. Investigation; No Additional Representations................ 46
14.4. Severability................................................ 46
14.5. Successors and Assigns...................................... 47
14.6. Seller's Representative..................................... 47
14.7. Notices..................................................... 48
14.8. Public Announcements........................................ 49
14.9. Headings, etc............................................... 50
14.10. Disclosure.................................................. 50
14.11. Knowledge................................................... 50
14.12. Third Party Beneficiaries................................... 50
14.13. Counterparts................................................ 50
14.14. Governing Law............................................... 50
14.15. Strict Construction......................................... 50
14.16. Expenses.................................................... 50
</TABLE>
-iii-
<PAGE>
EXHIBITS
Exhibit 6.2 Commitment Letter
Exhibit 8.4 Form of Sellers' Counsel Opinion
Exhibit 9.4 Form of Buyer's Counsel Opinion
SCHEDULES
Schedule 1 - Selling Shareholders, Shares
Schedule 4.3 - Sellers' Exceptions to Non-Contravention
Schedule 5.1.2 - Company Exceptions to Non-Contravention
Schedule 5.1.3 - Title to Stock
Schedule 5.1.4 - Subsidiaries
Schedule 5.2.3 - Liabilities
Schedule 5.3.1 - Accounting Changes Since Balance Sheet Date
Schedule 5.3.2 - Changes in Condition Since the Balance Sheet Date
Schedule 5.4 - Environmental Matters
Schedule 5.5.1 - Personal Property
Schedule 5.5.2 - Real Property
Schedule 5.6 - Intellectual Property Rights
Schedule 5.7 - Contractual Obligations
Schedule 5.8 - Insurance
Schedule 5.9 - Litigation Matters
Schedule 5.10 - Compliance with Law
Schedule 5.11 - Tax Matters
Schedule 5.12 - Employee Benefits
Schedule 5.14 - Affiliate Transactions
Schedule 8.3 - Third Party Consents
Schedule 10.1 - Employee Payments
-iv-
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the 26th day
---------
of December, 1996, among Iron Age Holdings Corporation, a Delaware corporation
(the "Company"), each stockholder or holder of options or warrants of the
-------
Company, listed on Schedule 1 hereto (each singularly, a "Seller" or "Selling
---------- ------ -------
Party", and collectively, the "Sellers" or "Selling Parties" of the Company),
- - ----- ------- ---------------
and IAH Acquisition Corp. a Delaware corporation (the "Buyer").
-----
Recitals
--------
1. Each of the Sellers respectively owns the number of issued and
outstanding shares of Class A common stock of the Company, par value $.01 per
share (the "Class A Common Stock"), Class B-1 common stock of the Company, par
--------------------
value $.01 per share (the "Class B-1 Common Stock"), Class B-2 common stock of
----------------------
the Company, par value $.01 per share (the "Class B-2 Common Stock") and Class
----------------------
B-3 Common Stock of the Company, $.01 par value per share (the "Class B-3 Common
----------------
Stock", collectively referred to herein with the Class B-1 Common Stock and
- - -----
Class B-2 Common Stock as the "Class B Common Stock" and the Class B Common
--------------------
Stock is collectively referred to with the Class A Common Stock as the
"Shares"), and options and warrants to purchase Class A Common Stock (the
------
"Options and Warrants"), in each case as set forth opposite such Seller's name
- - ---------------------
on Schedule 1 hereto.
----------
2. The Sellers desire to sell and transfer the Shares, Options and
Warrants to the Buyer and the Buyer desires to acquire (the "Purchase") the
--------
Shares, Options and Warrants from the Sellers, all upon the terms and subject to
the conditions set forth in this Agreement.
Agreement
---------
Therefore, in consideration of the foregoing and the mutual agreements and
covenants set forth below, the parties hereto hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
1.1 Certain Matters of Construction. In addition to the definitions
-------------------------------
referred to or set forth below in this Section 1:
<PAGE>
(a) The words "hereof", "herein", "hereunder" and words of similar
import shall refer to this Agreement as a whole and not to any particular
Section or provision of this Agreement, and reference to a particular
Section of this Agreement shall include all subsections thereof.
(b) The words "party" and "parties" shall refer to the Sellers, the
Company and the Buyer.
(c) Definitions shall be equally applicable to both the singular and
plural forms of the terms defined, and references to the masculine,
feminine or neuter gender shall include each other gender.
(d) Accounting terms used herein and not otherwise defined herein are
used herein as defined by Generally Accepted Accounting Principles (as
defined below) in effect as of the date hereof, consistently applied.
(e) All references in this Agreement to any Exhibit or Schedule shall,
unless the context otherwise requires, be deemed to be a reference to an
Exhibit or Schedule as such may be amended in accordance with Section 7.4.4
hereof, as the case may be, to this Agreement, all of which are made a part
of this Agreement.
(f) The word "including" shall mean including without limitation.
1.2 Cross Reference Table. The following terms defined elsewhere in this
---------------------
Agreement in the Sections set forth below shall have the respective meanings
therein defined:
<TABLE>
<CAPTION>
Term Definition
---- ----------
<S> <C>
"Agreement" Preamble
"Audited Financials" Section 5.2.1
"Balance Sheet" Section 5.2.1
"BCC Sellers" Section 14.6
"Buyer" Preamble
"Buyer Indemnitee" Section 11.1
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C>
"Cash Consideration" Section 3.1
"Closing" Section 3.2
"Closing Date" Section 3.2
"Commitment Letter" Section 8.5
"Company" Preamble
"Company Plans" Section 5.12
"Confidentiality Agreement" Section 7.2
"Debt Payment" Section 3.1
"Contracts" Section 5.7
"Excess Amount" Section 11.3
"Final Termination Date" Section 13.1(d)
"Financial Statements" Section 5.2.1
"Financing" Section 8.5
"Financing Source" Section 8.5
"HSR Act" Section 6.1.3
"Indemnifying Party" Section 11.1
"Indemnitee" Section 11.1
"Individual Sellers" Section 14.6
"Interim Financials" Section 5.2.1
"IRS" Section 5.11
"Leases" Section 5.5.2
"Licenses" Section 5.6
"Options" Recitals
"Permits" Section 5.10
"Personalty Leases" Section 5.5.1
"Purchase" Recitals
"Purchase Price" Section 3.1
"Real Property" Section 5.5.2
"Reserved Claims" Section 11.2
"Securities Act" Section 6.3
"Seller" Preamble
"Sellers" Preamble
"Seller Indemnitee" Section 11.1
"Seller's Percentage" Section 3.1
"Selling Party" Preamble
"Shares" Recitals
"Warrants" Recitals
</TABLE>
-3-
<PAGE>
1.3. Certain Definitions. The following terms shall have the following
-------------------
meanings:
1.3.1. Action. The term "Action" shall mean any material claim,
------
action, cause of action or suit (in contract, tort or otherwise),
proceeding by any Person or by or before any Governmental Authority.
1.3.2. Affected Employees. The term "Affected Employees" shall mean
------------------
all current employees of any of the Iron Age Companies as of the Closing
Date, including any such person who is on an approved leave of absence.
1.3.3. Affiliate. The term "Affiliate" shall mean, as to the Company
---------
(or other specified Person), each Person directly or indirectly
controlling, controlled by or under common control with the Company (or
such specified Person). For purposes of this definition, the term
"control" (including the terms "controlling," "controlled by" and "under
common control with") means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities or otherwise.
1.3.4. Balance Sheet Date. The term "Balance Sheet Date" shall mean
------------------
October 31, 1996.
1.3.5. BCC ISI. The term "BCC ISI" shall mean BCC Industrial
-------
Services, Inc., a Delaware corporation.
1.3.6. BCC Debt. The term "BCC Debt" shall mean all debt (including,
--------
without limitation, all outstanding principal, prepayment premiums, if any,
and accrued interest, fees and expenses related thereto) of the Iron Age
Companies to MLA I, MLA II, MLA III, SLA I and SLA II.
1.3.7. Business. The term "Business" shall mean the business of the
--------
Iron Age Companies as such business is currently conducted.
1.3.8. Business Day. The term "Business Day" shall mean any day on
------------
which banking institutions in New York, New York are customarily open for
the purpose of transacting business.
-4-
<PAGE>
1.3.9. By-laws. The term "By-laws" shall mean the corporate by-laws
-------
of a corporation, as from time to time in effect.
1.3.10. Charter. The term "Charter" shall mean the certificate or
-------
articles of incorporation or organization or other charter or
organizational documents of any Person (other than an individual), each as
from time to time in effect.
1.3.11. COBRA. The term "COBRA" refers to the provisions of the
-----
Consolidated Omnibus Budget Reconciliation Act of 1985 relating to
continuation of health benefits in certain circumstances.
1.3.12. Code. The term "Code" shall mean the federal Internal Revenue
----
Code of 1986, as amended.
1.3.13. Contractual Obligation. The term "Contractual Obligation"
----------------------
shall mean, with respect to any Person, any material contract, agreement,
deed, mortgage, lease, license, indenture, note, bond, or other material
document or instrument (including, without limitation, any material
document or instrument evidencing or otherwise relating to any indebtedness
but excluding the Charter and By-laws of such Person) to which or by which
such Person is legally bound.
1.3.14. Debt. The term "Debt" of any Person shall mean all obligations
----
of such Person (i) for borrowed money, (ii) evidenced by notes, bonds,
debentures or similar instruments, other than operating leases, (iii)
representing the deferred purchase price of property or assets, (iv)
constituting capitalized lease obligations, and (v) in the nature of
guarantees of obligations of the type described in clauses (i) through (iv)
above of any other Person.
1.3.15. Enforceable. The term "Enforceable" shall mean, with respect
-----------
to any Contractual Obligation, that such Contractual Obligation is the
legal, valid and binding obligation of the Person in question, enforceable
against such Person in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
other laws affecting creditors' rights generally and general principles of
equity (whether considered in a proceeding at law or in equity).
-5-
<PAGE>
1.3.16. Environmental Laws. The term "Environmental Laws" shall mean
------------------
any federal, state or local law as in effect as of the date hereof relating
to (i) releases or threatened releases of Hazardous Substances and (ii) the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances.
1.3.17. ERISA. The term "ERISA" shall mean the federal Employee
-----
Retirement Income Security Act of 1974 or any successor statute, as amended
and as in effect as of the date hereof.
1.3.18. Falcon. The term "Falcon" shall mean Falcon Shoe Mfg. Co. and
------
the assets and properties related thereto.
1.3.19. Generally Accepted Accounting Principles. The term "Generally
----------------------------------------
Accepted Accounting Principles" shall mean generally accepted accounting
principles in the United States as in effect and applied in the preparation
of the Financial Statements.
1.3.20. Goldman Sachs. The term "Goldman Sachs" shall mean Goldman,
-------------
Sachs & Co.
1.3.21. Government Contract. The term "Government Contract" means a
-------------------
contract between the Company and the federal government of the United
States of America or any subdivision or agency thereof, which is subject to
the provisions of the Assignment of Claims Act.
1.3.22. Governmental Authority. The term "Governmental Authority"
----------------------
shall mean any federal, state or local government, any regulatory or
administrative agency (or any department, bureau or division thereof) or
court of competent jurisdiction under the laws of the United States or any
state of the United States.
1.3.23. Governmental Order. The term "Governmental Order" shall mean
------------------
any material decree, stipulation, determination or award entered by any
Governmental Authority.
-6-
<PAGE>
1.3.24. Hazardous Substances. The term "Hazardous Substances" shall
--------------------
mean (i) substances defined in or regulated as toxic or hazardous under the
following federal statutes and their state counterparts, as well as these
statutes' implementing regulations, in each case, as amended and as in
effect as of the date hereof: the Hazardous Materials Transportation Act,
the Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act, the Safe
Drinking Water Act, the Asbestos Hazard Emergency Response Act, the Atomic
Energy Act, the Toxic Substances Control Act, the Federal Insecticide,
Fungicide, and Rodenticide Act, and the Clean Air Act; (ii) petroleum and
petroleum products, including crude oil and any fractions thereof; (iii)
natural gas, synthetic gas and any mixtures thereof; (iv) PCBs and (v)
asbestos.
1.3.25. Intangibles. The term "Intangibles" shall mean all of the
-----------
following: (i) patents and patent applications and all forms and
equivalents thereof; (ii) rights to file patent applications and other
interests in inventions and discoveries, whether reduced to practice or
not, on which no patent application has been filed; (iii) copyrights and
all related and equivalent rights, including copyright registrations, and
applications for copyright registration; (iv) common law and other
trademarks, trade names, trade dress, and service marks, and registrations
and applications for registration thereof; (v) rights in industrial designs
and the like, and registrations and applications for registration thereof;
(vi) trade secrets; (vii) methods, processes, computer software, designs,
drawings, laboratory notebooks, technical data, know-how research and
development data, market reports, consumer investigations, product surveys,
distribution methods, and customer lists, whether or not secret and whether
or not reduced to writing; and (viii) licenses to or under and shop rights
in any of the foregoing.
1.3.26. Iron Age Companies. The term "Iron Age Companies" shall mean,
-------------------
collectively, the Company and its Subsidiaries (each of which individually
is sometimes referred to herein as an "Iron Age Company").
1.3.27. Legal Requirement. The term "Legal Requirement" shall mean any
-----------------
material federal, state or local statute, ordinance, code, rule or
regulation, or any material Governmental Order, or any material license,
franchise, consent, approval, permit or similar right granted under any of
the foregoing.
-7-
<PAGE>
1.3.28. Lien. The term "Lien" shall mean any mortgage, pledge, lien,
----
security interest, attachment or encumbrance, provided, however, that the
-------- -------
term "Lien", when used with reference to the assets (other than the capital
stock of any Subsidiary) of the Company or any Subsidiary, shall not
include (i) statutory liens for Taxes, (ii) encumbrances in the nature of
zoning restrictions, easements, rights or restrictions of record on the use
of real property if the same do not materially detract from the value of
the property encumbered thereby or materially impair the use of such
property in the Business as currently conducted or proposed to be
conducted, (iii) statutory or common law liens to secure landlords, lessors
or renters under leases or rental agreements confined to the premises
rented, (iv) deposits or pledges made in connection with, or to secure
payment of, worker's compensation, unemployment insurance, old age pension
programs mandated under applicable Legal Requirements or other social
security, (v) statutory or common law liens in favor of carriers,
warehousemen, mechanics and materialmen, statutory or common law liens to
secure claims for labor, materials or supplies and other like liens, and,
when used with reference to the capital stock of the Company or any
Subsidiary, shall not include any restrictions on transfer of securities
imposed by applicable state and federal securities laws.
1.3.29. Losses. The term "Losses" shall mean any and all losses,
------
damages, deficiencies, awards, assessments, amounts paid in good faith
settlement, judgments, fines, penalties, costs and expenses (including,
without limitation, reasonable legal costs and expenses); provided,
--------
however, that the amount of any such Losses for the purposes of
-------
indemnification hereunder shall be determined net of the sum of any amounts
recovered by any Indemnitee under insurance policies with respect to such
Loss and the present value (based on a discount factor equal to the
applicable federal rate as determined under Section 1274(d)(1) of the Code)
of any Tax Benefit reasonably expected to be realized by the Indemnitee (or
any consolidated, combined or unitary group of which the Indemnitee is also
a member) arising from the incurrence or payment of such loss. Buyer and
Sellers agree that any indemnification payments under the Agreement shall
be considered an adjustment to the Purchase Price. Buyer agrees to make
all reasonable efforts to recover and cause its Affiliates to recover
amounts reasonably recoverable under insurance policies with respect to any
such Loss.
-8-
<PAGE>
1.3.30. Material Adverse Effect. The term "Material Adverse Effect"
-----------------------
shall mean any change in or effect on the business of any of the Iron Age
Companies which has a material adverse effect on the business, assets,
earnings or financial condition of the Iron Age Companies taken as a whole.
1.3.31. MLA I. The term "MLA I" means Mezzanine Lending Associates I,
-----
L.P., a Delaware limited partnership.
1.3.32. MLA II. The term "MLA II" means Mezzanine Lending Associates
------
II, L.P., a Delaware limited partnership.
1.3.33. MLA III. The term "MLA III" means Mezzanine Lending Associates
-------
III, L.P., a Delaware limited partnership.
1.3.34. Ordinary Course of Business. The term "Ordinary Course of
---------------------------
Business" shall mean the ordinary course of the Iron Age Companies'
business consistent with current custom and practice.
1.3.35. Person. The term "Person" shall mean any individual,
------
partnership, corporation, association, trust, joint venture, unincorporated
organization or other entity other than any Governmental Authority.
1.3.36. PNC. The term "PNC" shall mean PNC Bank, National Association.
---
1.3.37. PNC Debt. The term "PNC Debt" shall mean all debt (including
--------
without limitation, all outstanding principal, prepayment premiums, if any,
and accrued interest, fees and expenses related thereto) of the Iron Age
Companies to PNC and Society National Bank.
1.3.38. SLA I. The term "SLA I" means Senior Lending Associates I,
-----
L.P., a Delaware limited partnership.
1.3.39. SLA II. The term "SLA II" means Senior Lending Associates II,
------
L.P., a Delaware limited partnership.
-9-
<PAGE>
1.3.40. Subsidiary. The term "Subsidiary" shall mean any Person of
----------
which the Company (or other specified Person) shall own directly or
indirectly through a Subsidiary, a nominee arrangement or otherwise at
least a majority of the outstanding capital stock (or other shares of
beneficial interest) entitled to vote generally or shall otherwise control.
1.3.41. Tax Benefit. The term "Tax Benefit" shall mean any reduction
-----------
in tax realized by any Person attributable to the consummation of the
transactions contemplated by this Agreement, which Tax Benefit shall be
determined after first taking all other items of income, gain, loss,
deduction or credit of such Person into account.
1.3.42. Taxes. The term "Tax" shall mean any (and in the plural
-----
"Taxes" shall mean all) federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales,
use, transfer, registration, value added, excise, severance, stamp,
occupation, premium, profit, windfall profit, customs, duties, real
property, personal property, capital stock, social security, employment,
unemployment, disability, payroll, license, employee, and other taxes,
withholding taxes, assessments, imposts, levies, and other charges of every
kind and nature arising under or imposed by any Legal Requirement,
including, without limitation, all interest, penalties and additions with
respect to any of the foregoing.
1.3.43. Tax Return. The term "Tax Return" shall mean all federal,
----------
state, local, and foreign Tax returns, Tax reports, claims for refund of
Tax, and declarations of estimated Tax, or other statement relating to
Taxes and any schedule or attachments to any of the foregoing or amendments
thereto, including (where permitted or required) consolidated, combined or
unitary returns for any group of entities.
1.3.44. WARN. "WARN" shall mean the Worker Adjustment and Retraining
----
Notification Act of 1988.
2. ACQUISITION. Upon the terms, subject to the conditions, and in reliance on
the representations, warranties and covenants set forth herein, on the Closing
Date, each of the Sellers agrees to sell, transfer and deliver to the Buyer the
number of Shares, Options and Warrants, as the case may be, set forth opposite
such Seller's name in Schedule 1 hereto and
----------
-10-
<PAGE>
the Buyer agrees to purchase and acquire from each of the Sellers such Shares,
Options and Warrants for the consideration specified in Section 3 hereof.
---------
3. PAYMENT AND CLOSING.
3.1. Purchase Price. In consideration of the sale and transfer of the
--------------
Shares, Options and Warrants by the Sellers to the Buyer at the Closing the
Buyer will pay by wire transfer of immediately available funds an aggregate
amount equal to $138,000,000 (the "Purchase Price"). The Purchase Price shall
--------------
be payable at the Closing (i) by wire transfer of immediately available funds,
to such accounts as the holders of the BCC Debt and the PNC Debt may specify, of
payment in full of the outstanding BCC Debt and PNC Debt, respectively (the
"Debt Payment"), and (ii) by wire transfer of immediately available funds, to
- - -------------
such account or accounts as the Sellers may specify, of the balance of the
Purchase Price (the "Cash Consideration"). The Cash Consideration shall be
------------------
allocated among each of the Sellers in the respective percentages (each a
"Seller's Percentage") set forth on Schedule 1.
- - -------------------- ----------
3.2. Time and Place of Closing. The closing (the "Closing") shall take
------------------------- -------
place at the conference center of Ropes & Gray, 885 Third Avenue, New York, New
York, at 10:00 a.m. (local time) on a date jointly specified by the parties
which date shall be not later than five Business Days after the satisfaction or
waiver of all conditions precedent set forth in Sections 8 and 9 hereof or at
such other time or place upon which the parties may agree (the day on which the
Closing takes place being referred to herein as the "Closing Date").
------------
3.3. Delivery. At the Closing, each of the Sellers shall deliver to the
--------
Buyer the certificate or certificates evidencing all of the Shares, Options and
Warrants held by such Seller against delivery by the Buyer to (a) the holders of
the BCC Debt and PNC Debt, their respective portions of the Debt Payment and (b)
the Sellers, the Cash Consideration.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. In order to induce the Buyer
to enter into and perform this Agreement and to consummate the transactions
contemplated hereby, each of the Sellers, severally and not jointly, represents
and warrants to the Buyer, but only with respect to such Seller and the Shares,
Options and Warrants owned by such Seller that, except as set forth in the
Schedules to this Agreement:
-11-
<PAGE>
4.1. Organization and Authority.
--------------------------
(a) In the case of each of SLA I, SLA II, MLA I, MLA II and MLA III,
such Seller is a limited partnership, duly formed, legally existing and in
good standing under the laws of the State of Delaware and each Seller has
full power and authority to enter into this Agreement, to carry out and
perform its obligations hereunder and to consummate the transactions
contemplated hereby.
(b) In the case of BCC ISI, such Seller is a corporation, duly
formed, legally existing and in good standing under the laws of the State
of Delaware and has full power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby.
4.2. Authorization and Enforceability. This Agreement has been duly
--------------------------------
authorized, executed and delivered by, and is Enforceable against, such Seller.
4.3. Non-Contravention, Etc. Except as set forth in Schedule 4.3 hereto,
---------------------- ------------
the execution and delivery of this Agreement by such Seller and the consummation
by such Seller of the Closing hereunder in accordance with the terms and
conditions of this Agreement do not and will not conflict with or result in the
breach of any of the terms or provisions of, or constitute a default under, any
Contractual Obligation to which such Seller is a party or by which such Seller
is, or the Shares, Options and Warrants to be sold by such Seller hereunder are,
bound or any Legal Requirement applicable to such Seller or to the Shares,
Options and Warrants to be sold by such Seller. The existence of any such
conflict, whether or not set forth on Schedule 4.3, shall not constitute a
------------
failure on the part of such Seller to comply with the requirements of Section
8.1.1 hereof to the extent that any such conflict shall have been waived prior
to the Closing in writing by the other party to such Contractual Obligation or
by the appropriate Governmental Authority. No consent is required to be
obtained by such Seller in connection with the execution, delivery and
performance of this Agreement by such Seller or the sale of the Shares, Options
and Warrants to be sold by such Seller as contemplated hereby, except as set
forth in Schedule 4.3 and other than any consent where the failure of such
------------
Seller to obtain such consent would not materially and adversely affect the
Seller's ability to consummate the Closing hereunder in accordance with the
terms and conditions of this Agreement, would not prevent such Seller from
performing in all material respects any of its
-12-
<PAGE>
obligations under this Agreement and would not materially and adversely affect
the Business or the financial condition or earnings of the Iron Age Companies on
a consolidated basis.
4.4. Title to Stock. Such Seller is the sole record and beneficial owner
--------------
of and has good and valid title to the Shares, Options and Warrants set forth
opposite such Seller's name on Schedule 1 hereto which will be sold by such
----------
Seller as contemplated hereby, free and clear of any Liens.
5. REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY. In order to induce
the Buyer to enter into and perform this Agreement and to consummate the
transactions contemplated hereby, the Company represents and warrants to the
Buyer that, except as set forth in the Schedules:
5.1. Corporate Matters, etc.
----------------------
5.1.1. Organization, Power and Standing of the Company; Authorization.
--------------------------------------------------------------
The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and the Company has
the corporate power and authority to own, operate or lease its properties
and to carry on its business in all material respects as currently
conducted. This Agreement has been duly authorized, executed and delivered
by, and is Enforceable against, the Company.
5.1.2. Non-Contravention, etc. Except for items listed on Schedule
---------------------- --------
5.1.2, neither the execution, delivery or performance of this Agreement nor
-----
the consummation of the Closing hereunder in accordance with the terms and
conditions of this Agreement does or will constitute, result in or give
rise to (i) a material breach, violation or default under any Legal
Requirement applicable to any Iron Age Company, (ii) a material breach of
or a default under any Charter or By-Laws provision of any Iron Age
Company, (iii) the imposition of any material Lien upon any asset of any
Iron Age Company or (iv) a material breach of or a default under (or the
acceleration of, or the right of any Person to accelerate, the time for
performance of any material obligation under), or the right of any Person
to terminate, modify, or cancel, any Contractual Obligation of any Iron Age
Company. Except as set forth in Schedule 5.1.2, no approval, consent,
waiver, authorization or other order of, and no declaration, filing,
registration, qualification or recording with, any Governmental Authority
or Person is
-13-
<PAGE>
required to be obtained or made by or on behalf of any Iron Age Company in
connection with the execution, delivery or performance of this Agreement
and the consummation of the Closing hereunder in accordance with the terms
and conditions of this Agreement, except those (i) which shall have been
obtained or made on or prior to, and shall be in full force and effect at,
the Closing Date and (ii) where failure to obtain such approval, consent,
waiver, authorization or other order, or to make such declaration, filing,
registration, qualification or recording has not had and is not reasonably
expected to have a Material Adverse Effect.
5.1.3. Title to Stock. The entire authorized capital stock of the
--------------
Company consists of (i) 30,000 shares of Class A common stock of which
6,020 shares are issued and outstanding and 15,714 shares are reserved for
issuance upon exercise of the Options and Warrants and (ii) 95,000 shares
of Class B common stock of which 95,000 shares are issued and outstanding.
The Shares constitute all of the issued and outstanding shares of capital
stock of the Company and are duly authorized, validly issued and are fully
paid and nonassessable. The Shares, Options and Warrants are held of record
by the Sellers as set forth on Schedule 1 hereto. Except for this Agreement
----------
or as set forth on Schedule 5.1.3, and the Options and the Warrants, there
--------------
is no Contractual Obligation pursuant to which the Company has granted any
option, warrant or other right to any Person to acquire the shares of
common stock or any other securities of, or equity interests in, the
Company or any of its Subsidiaries or any stock appreciation, phantom
stock, or similar rights with respect to the Company or any of its
Subsidiaries.
5.1.4. Subsidiaries. Schedule 5.1.4 sets forth a true and complete
------------ --------------
list of all Subsidiaries of the Company, including the name and
jurisdiction of incorporation or organization of each such Subsidiary. Each
Subsidiary listed on Schedule 5.1.4 is a corporation duly incorporated and
--------------
validly existing under the laws of its respective jurisdiction of
incorporation, has the corporate power and authority to own, operate or
lease the properties and assets now owned, operated or leased by such
Subsidiary and to carry on its business in all material respects as
currently conducted, and each Iron Age Company is duly qualified as a
foreign corporation in each jurisdiction indicated on Schedule 5.1.4. Each
--------------
Subsidiary listed on Schedule 5.1.4 is wholly-owned by the Company (either
--------------
directly or indirectly by way of ownership through another Subsidiary
listed on Schedule 5.1.4). The Company or another Subsidiary, as the case
--------------
may be,
-14-
<PAGE>
has good title to all of the capital stock of each Subsidiary listed on
Schedule 5.1.4, free and clear of any Liens except as set forth on Schedule
5.1.4.
5.1.5. Charter and By-laws. The Company has heretofore delivered or
-------------------
made available to the Buyer true and complete copies of the Charter and By-
laws of each Iron Age Company, in each case as in effect on the date
hereof.
5.2. Financial Statements, etc.
-------------------------
5.2.1. Financial Information. The Buyer has been furnished with each
---------------------
of the following:
(a) The consolidated audited balance sheets of the Company and its
consolidated Subsidiaries as of January 31, 1996, 1995 and 1994 and the
related statements of earnings and shareholders equity and cash flows for
each of the fiscal years then ended, accompanied by the notes thereto and
the report thereon of Ernst & Young (collectively, the "Audited Financials"
------------------
and, together with the Interim Financials (as defined in paragraph (b)
below), the "Financial Statements").
--------------------
(b) The unaudited consolidated balance sheet (the "Balance Sheet")
-------------
of the Company and its consolidated Subsidiaries as of the Balance Sheet
Date and related unaudited consolidated statements of earnings and cash
flows for the nine-month period then ended (collectively the "Interim
-------
Financials").
----------
5.2.2. Character of Financial Information. Except as set forth in
----------------------------------
Schedule 5.2.2 or disclosed in such Financial Statements, the Financial
--------------
Statements were prepared in accordance with Generally Accepted Accounting
Principles consistently applied throughout the periods specified therein
and present fairly, in all material respects, the consolidated financial
position and consolidated results of operations and cash flows of the
Company and its Subsidiaries as of the dates and for the periods specified
therein in conformity with Generally Accepted Accounting Principles. The
representation in the immediately preceding sentence with respect to the
Interim Financials is further subject to an absence of footnotes and to
normal year-end adjustments, which, to the Company's knowledge, are not
expected to be, in the aggregate, material.
-15-
<PAGE>
5.2.3. Absence of Certain Liabilities. Except as referred to in
------------------------------
Schedule 5.2.3 or this Agreement, to the knowledge of the Company, no Iron Age
- - --------------
Company has any material liabilities, whether absolute, accrued or contingent,
and whether due or to become due or otherwise, other than, to the extent the
existence thereof is consistent with all other representations and warranties of
the Company in this Agreement, the following:
(i) liabilities of any Iron Age Company set forth on or
reflected or provided for in any of the Financial Statements (or referred
to specifically in the notes thereto and not by reference to any general
category of unspecified commitments and contingencies);
(ii) liabilities of any Iron Age Company incurred in the
Ordinary Course of Business since January 31, 1996;
(iii) liabilities of any Iron Age Company in respect of the
Contracts (as defined in Section 5.7) or in respect of any contractual
obligations or agreements not required to be scheduled pursuant to this
Agreement;
(iv) liabilities of any Iron Age Company in respect of any
Company Plan (as defined in Section 5.12), or in respect of Taxes (as
defined in Section 1.3.42); and
(vi) liabilities of any Iron Age Company to any other Iron
Age Company.
5.3 Change in Condition.
-------------------
5.3.1. Accounting Practices. Except for the matters set forth in
--------------------
Schedule 5.3.1, since the Balance Sheet Date the Company has not made or
--------------
agreed to make, and has not permitted any of its Subsidiaries to make or
agree to make, any material change in its methods of accounting or
accounting practices.
5.3.2. Since Balance Sheet Date. Except for matters set forth in
------------------------
Schedule 5.3.2 (and except as otherwise expressly contemplated by the terms
--------------
of this Agreement) since
-16-
<PAGE>
the Balance Sheet Date the Business has been conducted only in the Ordinary
Course of Business and:
(a) Other than transactions between or among the Company and its
Subsidiaries, neither the Company nor any of its Subsidiaries has:
(i) entered into any Contractual Obligation other than this
Agreement relating to (A) the sale of any capital stock or
equity interest in any Iron Age Company, (B) the purchase
of assets constituting all or a substantial part of a
business or (C) any merger, consolidation or other business
combination;
(ii) settled or agreed to settle any Action in excess of
$100,000 or any claim of any other Person in excess of
$100,000;
(iii) mortgaged, pledged or subjected to any Lien any of their
assets other than (A) conditional sales or similar security
interests granted in connection with the lease or purchase
of equipment or supplies in the Ordinary Course of
Business, (B) Liens disclosed on Schedule 5.5.1 hereto and
--------------
(C) Liens securing liabilities not in excess, in the
aggregate, of $250,000;
(iv) sold, leased, transferred or exchanged property having a
fair market value in excess of $250,000 for less than the
fair value thereof; or
(v) declared or paid any dividends or made or agreed to make
any other distributions on, or repurchased, redeemed or
agreed to repurchase or redeem, any shares of its capital
stock (other than as expressly contemplated by the terms of
this Agreement).
(b) None of the Iron Age Companies has entered into any Contractual
Obligation to do any of the actions referred to in clause (a) above; and
-17-
<PAGE>
(c) There has not been any material adverse change in the Business,
earnings or financial condition of the Iron Age Companies, taken as a
whole, other than changes resulting from general economic, conditions or
circumstances affecting the Iron Age Companies not materially more
adversely than its competitors.
5.4. Environmental Matters, etc. Except as set forth in Schedule 5.4 or
-------------------------- ------------
except as has not had and is not reasonably expected to have a Material Adverse
Effect, each of the Iron Age Companies is as of the date hereof and has been (x)
since January 1, 1991, with respect to all Iron Age Companies other than Falcon;
and (y) since August 1, 1994 with respect to Falcon, in compliance in all
material respects with all Environmental Laws. Except as set forth in Schedule
--------
5.4, (x) there is no Action pending and, (y) to the knowledge of the Company,
- - ---
there is no Action threatened against and no inquiry or investigation pending of
any Iron Age Company in respect of (i) noncompliance by any Iron Age Company
with any Environmental Laws or (ii) the release or threatened release into the
environment of any Hazardous Substance by any Iron Age Company or (iii) the
handling, storage, use, transportation or disposal of any Hazardous Substance by
any Iron Age Company. Except as set forth in Schedule 5.4, (x) since January 1,
------------
1991 with respect to all Iron Age Companies other than Falcon, and (y) since
August 1, 1994 with respect to Falcon, no Iron Age Company has obtained any
Phase I or Phase II environmental report regarding any property owned, leased or
used, or previously owned, leased or used, by any Iron Age Company.
5.5 Real and Personal Property.
--------------------------
5.5.1. Each Iron Age Company has valid title to all of its material
personal property (other than Intangibles), and such material personal
property (other than Intangibles) is not subject to any Lien except as set
forth on Schedule 5.5.1 hereto. Except for any instances which individually
--------------
or in the aggregate have not had and are not reasonably expected to have a
Material Adverse Effect, (i) all leases and licensing agreements for
personal property (other than Intangibles) ("Personalty Leases") leased or
licensed by any of the Iron Age Companies requiring payments by any Iron
Age Company of more than $50,000 in any one year are valid and in full
force and effect, and are listed on Schedule 5.5.1; (ii) the Iron Age
Companies have performed in all material respects all obligations required
to be performed by them under such Personalty Leases; (iii) no event or
condition exists which constitutes or, with the giving of notice or the
passage of time or both, would constitute a material default by
-18-
<PAGE>
any of the Iron Age Companies as lessee or licensee under such Personalty
Leases; and (iv) except as set forth on Schedule 5.1.2., no consent of any
---------------
party to such Personalty Leases is required in connection with the
execution, delivery and performance of this Agreement. To the knowledge of
the Company, no event or condition exists which constitutes or, with the
giving of notice or the passage of time or both, would constitute a
material default by any Person other than an Iron Age Company under such
Personalty Leases.
5.5.2. Schedule 5.5.2 sets forth a list of all real property owned by
--------------
any of the Iron Age Companies, and all real property leased to the Iron Age
Companies (the "Real Property"). Except as set forth on Schedule 5.5.2,
------------- --------------
each Iron Age Company has good and valid title to all Real Property owned
by it, free and clear of any Liens. Except for any instances which
individually or in the aggregate have not had and are not reasonably
expected to have a Material Adverse Effect, (i) all leases (the "Leases")
------
of Real Property leased to the Iron Age Companies are valid and in full
force and effect; (ii) the Iron Age Companies have performed in all
material respects all obligations required to be performed by them under
such Leases; and (iii) no event or condition exists which constitutes or,
with the giving of notice or passage of time or both, would constitute a
material default by any of the Iron Age Companies as lessee under such
Leases and (iv) except as set forth in Schedule 5.1.2., no consent of any
---------------
party to such Leases is required in connection with the execution, delivery
and performance of this Agreement. To the knowledge of the Company, no
event or condition exists which constitutes or, with the giving of notice
or the passage of time or both, would constitute a material default by any
Person other than an Iron Age Company under such Leases.
5.5.3. The Real Property and all of the personal property (other than
Intangibles) owned, leased or licensed by the Iron Age Companies and the
Intangibles owned, leased, licensed or used by the Iron Age Companies
together are generally sufficient for the operation of the Business as
currently conducted.
5.6 Intangibles. Schedule 5.6 lists all significant trademarks, product
----------- ------------
names, service marks, logos and copyrights (including registrations and
applications therefor) that are owned, licensed or used by any of the Iron Age
Companies, other than commercially available software programs and sales
brochures, product literature and catalogs used in the Ordinary Course of
Business. Schedule 5.6 also lists each license or other Contractual Obligation
------------
under
-19-
<PAGE>
which any Intangible listed on Schedule 5.6 is licensed by the Iron Age
------------
Companies (the "Licenses"). Except as disclosed on Schedule 5.6 or Schedule 5.7
-------- ------------ ------------
there is no license or other Contractual Obligation under which the Company is a
licensor with respect to any Intangibles. To the knowledge of the Company, (i)
use by the Iron Age Companies of the Intangibles does not infringe any rights of
any third party and (ii) no activity of any third party infringes upon the
rights of the Iron Age Companies with respect to any of the Intangibles, in each
case except where such infringement has not had and is not reasonably expected
to have a Material Adverse Effect.
5.7 Certain Contractual Obligations. Set forth on Schedule 5.7 hereto is
------------------------------- ------------
a true and complete list of all of the following Contractual Obligations of the
Iron Age Companies:
(a) All collective bargaining agreements and all written employment or
consulting agreements pursuant to which services are rendered or to be
rendered to the Iron Age Companies (other than the Company Plans)
involving, in each case, payments in excess of $75,000 in any year;
(b) All Contractual Obligations under which any Iron Age Company is or
will after the Closing be restricted in any material respect from carrying
on any business anywhere in the world (other than use restrictions
contained in any of the Leases, Personalty Leases and Licenses);
(c) All Contractual Obligations (but excluding options for shares) to
sell or otherwise dispose of any assets having a fair market value in
excess of $250,000 except in the Ordinary Course of Business;
(d) All Contractual Obligations between any Iron Age Company on the
one hand and any Affiliate of any Iron Age Company (other than the Iron Age
Companies) on the other hand;
(e) All Contractual Obligations (including, without limitation,
partnership and joint venture agreements) under which (i) any Iron Age
Company has any liability or obligation for Debt or constituting or giving
rise to a guarantee of any liability or obligation of any Person (other
than any Iron Age Company) or (ii) any Person has any liability or
obligation constituting or giving rise to a guarantee of any liability or
-20-
<PAGE>
obligation of any Iron Age Company, in either case involving any Debt or
Liability in excess of $250,000 individually;
(f) All Contractual Obligations entered into since January 1, 1990
pursuant to which any Iron Age Company incurred an obligation to pay any
amounts in excess of $250,000 in respect of indemnification obligations,
purchase price adjustment or otherwise in connection with any (i)
acquisition or disposition of assets constituting a business or securities
representing a controlling interest in any Person, (ii) merger,
consolidation or other business combination, or (iii) series or group of
related transactions or events of a type specified in subclauses (i)
through (ii);
(g) All Contractual Obligations (including Government Contracts)
pursuant to which any Iron Age Company may be expected to perform services
with a value in excess of $250,000 and which cannot be canceled by any Iron
Age Company within 30 days, except for customer purchase orders received in
the Ordinary Course of Business;
(h) All Contractual Obligations pursuant to which any Iron Age Company
may be obligated to pay for goods and services to be delivered or performed
in excess of $250,000 per year, except for purchase orders issued in the
Ordinary Course of Business;
(i) Any partnership or joint venture agreement involving potential
liability in excess of $100,000;
(j) Any material confidentiality agreement under which any Iron Age
Company has any obligation of confidentiality and;
(k) Any other Contractual Obligation creating obligations or
liabilities on the part of any Iron Age Company in excess of $250,000 per
year, or creating the right on the part of the Iron Age Companies to
receive payment of more than $250,000 per year, except for purchase orders
issued or received in the Ordinary Course of Business.
Each of the Contractual Obligations listed or required to be listed on Schedule
--------
5.7 hereto, that has not been fully performed as of the date hereof, shall be
- - ---
referred to herein collectively as
-21-
<PAGE>
the "Contracts". Except as set forth in Schedule 5.1.2, no consent of any party
--------- --------------
to any such Contract is required in connection with, nor will any party to such
Contract obtain the right to terminate, modify, or cancel such Contract as a
result of, the execution, delivery and performance of this Agreement. No breach
or default in performance by any Iron Age Company under any of the Contracts has
occurred and is continuing and no event has occurred which with notice or lapse
of time or both would constitute such a breach or default, other than any breach
or default which has not had and is not reasonably expected to have a Material
Adverse Effect. To the knowledge of the Company, no material breach or default
by any other Person under any of the Contracts has occurred and is continuing,
and no event has occurred which with notice or lapse of time or both would
constitute such a material breach or default.
5.8. Insurance, etc. Schedule 5.8 is a true and accurate list as of the
-------------- ------------
date hereof of all significant policies or binders of insurance covering the
operations of the Iron Age Companies. The Company has delivered or made
available to the Buyer true and accurate copies of all such policies or binders
as in effect on the date hereof. To the knowledge of the Company, none of the
Iron Age Companies is in any material default with respect to its obligations
under any of such policies.
5.9. Litigation, etc. Except as set forth on Schedule 5.9 or as has not
--------------- ------------
had and is not reasonably expected to have a Material Adverse Effect, as of the
date hereof (x) there is no Action pending and, (y) to the knowledge of the
Company, there is no Action threatened against and no inquiry or investigation
pending of any Iron Age Company. There is no Action pending or, to the
knowledge of the Company, threatened which seeks rescission of or seeks to
enjoin the consummation of this Agreement or any of the transactions
contemplated hereby.
5.10. Compliance with Laws, etc. The operations of the Business are and (x)
-------------------------
since January 1, 1991 with respect to all Iron Age Companies other than Falcon,
and (y) since August 1, 1994 with respect to Falcon, have been, in compliance in
all material respects with applicable Legal Requirements, except as set forth in
Schedule 5.10 or as has not had and is not reasonably expected to have a
- - -------------
Material Adverse Effect. The Iron Age Companies have been granted all licenses,
permits, consents, approvals, franchises and other authorizations under any
Legal Requirement necessary for and material to the conduct of the Business,
except where the failure to obtain such licenses, permits, consents, approvals,
franchises or other authorization has not had and is not reasonably expected to
have a Material Adverse Effect (the "Permits"). Since January 1, 1996, the
-------
Company has not received any notice that any
-22-
<PAGE>
Governmental Authority or other licensing authority will revoke, cancel,
rescind, materially modify or refuse to renew in the ordinary course any of the
Permits. Except as set forth in Schedule 5.10, all such Permits are in full
-------------
force and effect on the date hereof. Except as set forth on Schedule 5.1.2, no
--------------
consent of any Governmental Authority is required to be obtained by any Iron Age
Company under any Permit in connection with, nor will any Governmental Authority
obtain the right to terminate, modify or cancel any Permit as a result of, the
execution, delivery and performance of this Agreement.
5.11. Tax Matters.
-----------
Except as set forth on Schedule 5.11:
-------------
(i) Each of the Iron Age Companies has timely filed or has had
timely filed on its behalf all material Tax Returns that it
was required to file on or before the date hereof (or the
Closing Date), and has timely paid all Taxes shown thereon
as owing or otherwise owed by any Iron Age Company, except
where the failure to file Tax Returns or to pay Taxes has
not had and is not reasonably expected to have a Material
Adverse Effect;
(ii) all deficiencies asserted in writing and any assessments
made as a result of any examinations of the Tax Returns
referred to in clause (i) by the Internal Revenue Service
("IRS") or the appropriate state, local or foreign taxing
---
authority have been paid in full;
(iii) none of the Iron Age Companies has received any written
notice of any audit, claim, deficiency or assessment
pending or proposed with respect to Taxes of any of the
Iron Age Companies;
(iv) none of the Iron Age Companies is party to any written
agreements or waivers extending the statutory period of
limitation applicable to any Taxes of the Iron Age
Companies;
-23-
<PAGE>
(v) to the Company's knowledge, none of the Iron Age Companies
(A) files or is required to file any combined,
consolidated or unitary federal, state, local or foreign
Tax Returns (other than Tax Returns filed by a group the
common parent of which was the Company) and (B) is a party
to any Contractual Obligation relating to the allocation
or sharing of Taxes;
(vi) each Iron Age Company has withheld and paid all Taxes
required to have been withheld and paid in connection with
amounts paid or owing to any shareholder, employee,
creditor, independent contractor, or other third party;
(vii) other than Liens for Taxes not yet due and payable, there
are no Liens on any of the assets of any Iron Age Company
that arose in connection with any failure (or alleged
failure) to pay any Tax; and
(viii) the unpaid Taxes of each Iron Age Company do not exceed
the reserve for Tax liability set forth on the Balance
Sheet as adjusted for the passage of time since the
Balance Sheet Date in accordance with the past custom and
practice of the Company.
5.12. Employee Benefit Plans. Except as set forth on Schedule 5.12:
---------------------- -------------
(a) Schedule 5.12 lists each significant employee benefit plan,
-------------
program or policy (including, without limitation, each "employee benefit
plan" within the meaning of section 3(3) of ERISA) that is maintained or
otherwise contributed to by the Company or any of its Subsidiaries or as to
which any Iron Age Company has any liability or obligation (collectively,
"Company Plans").
-------------
(b) With respect to each of the Company Plans, the Company has made
available to the Buyer a current, accurate and complete copy thereof and,
to the extent applicable, (i) any related trust agreement, annuity contract
or other funding instrument; (ii) any summary plan description, (iii) the
two most recent annual Forms 5500 (if applicable) with respect to such
Company Plans and (iv) if such Company Plan
-24-
<PAGE>
is intended to be a qualified single employer plan under Section 401(a) of
the Code, the most recent favorable determination letter received from the
Internal Revenue Service.
(c) Except as set forth in Schedule 5.12, (i) each Company Plan is in
-------------
compliance in all material respects with the applicable provisions, if any,
of ERISA, the Code and any other applicable laws or regulations except
where such noncompliance has not had and is not reasonably expected to have
a Material Adverse Effect; (ii) each Company Plan that is intended to be
qualified within the meaning of section 401(a) of the Code has received a
favorable determination letter as to its qualification and satisfies the
requirements of a "qualified plan" under the Code; (iii) no "reportable
event" (as such term is used in section 4043 of ERISA), "prohibited
transaction" (as such term is used in section 4975 of the Code or section
406 of ERISA) or "accumulated funding deficiency" (as such term is used in
section 412 or 4971 of the Code) has heretofore occurred with respect to
any Company Plan that has had or is reasonably expected to have a Material
Adverse Effect; (iv) no material litigation or administrative or other
proceedings involving the Company Plans have occurred or are, to the
knowledge of the Company, threatened which has had or is reasonably
expected to have a Material Adverse Effect; (v) each Iron Age Company has
complied with the health care continuation requirements of Section 601, et.
--
seq. of ERISA with respect to employees and their spouses, former spouses
---
and dependents, except where failure to comply has not had and is not
reasonably expected to have a Material Adverse Effect; and (vi) no Iron Age
Company has obligations under any Company Plan to provide health benefits
to former employees of a Iron Age Company except as specifically required
by law.
(d) No Iron Age Company maintains or contributes to any "multiemployer
plan" (as such term is defined in section 3(37) of ERISA) or has incurred
any material withdrawal liability with respect to any such plan that
remains unsatisfied.
(e) All contributions, premiums or other payments (including all
employer contributions and employee salary reduction contributions) which
are due from any Iron Age Company have been paid to each of the Company
Plans, and all contributions, premiums or other payments payable by any
Iron Age Company for any period ending on or before the Closing which are
not yet due have been paid to each such Company
-25-
<PAGE>
Plan or accrued on the Balance Sheet, as adjusted for the passage of time
since the Balance Sheet Date in accordance with the past custom and
practice of the Company.
(f) All required reports and descriptions (including Form 5500 annual
reports, summary annual reports, and summary plan descriptions) have been
properly filed with the appropriate Governmental Authority or distributed
appropriately with respect to each of the Company Plans.
(g) Except as set forth on Schedule 5.12, no Iron Age Company
maintains any defined benefit plans within the meaning of ERISA.
5.13. Brokers, etc. Except for payments to be made by the Sellers to
------------
Goldman Sachs, no broker, finder, investment bank or similar agent is entitled
to any brokerage or finder's fee in connection with the transactions
contemplated by this Agreement based upon agreements or arrangements made or
actions taken by or on behalf of the Sellers, the Company or any of their
respective Affiliates.
5.14. Affiliate Transactions. Except as set forth on Schedule 5.14, and
---------------------- -------------
except for the Company Plans, no Iron Age Company has any obligation or
liability to any Affiliate of the Company that is not an Iron Age Company and
since the Balance Sheet Date no Iron Age Company has engaged in any transaction
with any Affiliate of the Company.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER. In order to induce each Seller
to enter into and perform this Agreement and to consummate the transactions
contemplated hereby, the Buyer represents and warrants to each Seller as
follows:
6.1. Corporate Matters, etc.
----------------------
6.1.1. Organization, Power and Standing of the Buyer. The Buyer is a
---------------------------------------------
corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has full power and
authority, corporate and
-26-
<PAGE>
otherwise, to enter into this Agreement, to carry out and perform its
obligations hereunder and to consummate the transactions contemplated
hereby.
6.1.2. Authorization and Enforceability. This Agreement has been duly
--------------------------------
authorized, executed and delivered by, and is Enforceable against, the
Buyer.
6.1.3. Non-Contravention, etc. The execution, delivery and
----------------------
performance of this Agreement by the Buyer and the consummation by the
Buyer of the Closing hereunder in accordance with the terms and conditions
of this Agreement does not and will not conflict with or result in the
breach of any terms or provisions of, or constitute a default, under any
Contractual Obligation of or the Charter or By-Laws of the Buyer or a
breach of any Legal Requirement applicable to the Buyer. Except for
satisfaction of the notification requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), no consent
-------
is required to be obtained or made by or on behalf of the Buyer in
connection with the execution, delivery or performance of this Agreement
and the consummation of the transactions contemplated hereby, except (i)
for items which shall have been obtained or made on or prior to, and shall
be in full force and effect at, the Closing Date and (ii) where failure to
obtain such consent would not materially and adversely affect the Buyer's
ability to consummate the Closing hereunder in accordance with the terms
and conditions of this Agreement and would not prevent the Buyer from
performing in all material respects any of its obligations under this
Agreement.
6.2. Financial Condition, etc. Assuming Buyer had received the proceeds of
------------------------
the Financing, the Buyer will have as of the Closing sufficient funds in an
aggregate amount sufficient to (i) pay the Purchase Price and all contemplated
fees and expenses related to the transactions contemplated by this Agreement to
be paid by the Company or Buyer and (ii) provide adequate working capital for
the Business. Attached as Exhibit 6.2 hereto is a true and complete copy of the
Commitment Letter. As of the date hereof, Buyer knows of no reason why the
conditions to the Financing would not be satisfied.
6.3. Investment Intent, Related Matters. The Buyer is purchasing the
----------------------------------
Shares, Options and Warrants for its own account and has the present intention
of holding the Shares, Options and Warrants for investment purposes and not with
a view to, or for sale in connection with, any distribution thereof in violation
of any federal or state securities laws. The Buyer is
-27-
<PAGE>
an Accredited Investor within the definition set forth in Rule 501(a) of the
Securities Act of 1933, as amended (the "Securities Act").
--------------
6.4. Litigation. To the knowledge of the Buyer, as of the date hereof,
----------
there is no Action pending or threatened (i) against the Buyer or any of its
Affiliates which has had a material adverse effect on the ability of the Buyer
to perform its obligations under this Agreement or (ii) which seeks rescission
of or seeks to enjoin the consummation of this Agreement or any of the
transactions contemplated hereby.
6.5. Brokers, etc. No broker, finder, investment bank or similar agent is
-------------
entitled to any brokerage or finder's fee in connection with the transactions
contemplated by this Agreement based upon agreements or arrangements made or
actions taken by or on behalf of the Buyer or any of its Affiliates.
7. CERTAIN AGREEMENTS OF THE PARTIES.
7.1. Access to Premises and Information. Prior to the Closing, the Company
----------------------------------
agrees that it will cause the Iron Age Companies to permit the Buyer, the
Financing Source and their respective representatives to have reasonable access
to the officers and other management personnel of the Iron Age Companies and the
documents, books and records of the Iron Age Companies and to make copies during
normal business hours of such financial and other information with respect to
the Iron Age Companies as the Buyer shall reasonably request; provided, however,
-------- -------
that (i) all such requests (and all other requests contemplated pursuant to this
Section 7.1) shall be made through Goldman Sachs or through one or more
employees or other agents of the Company who may, from time to time, be
designated in writing by the Sellers' Representative or its representatives as
appropriate contact Persons for such inquiries and (ii) the Buyer shall cause
Goldman Sachs or the Sellers' Representative to be notified at least two days
prior to any visits to the headquarters or other offices of the Company or any
of its Subsidiaries. The Buyer shall exercise its rights under this Section 7.1
in a manner that is reasonable and does not unreasonably interfere with the
operations of any of the Iron Age Companies.
7.2. Confidentiality Covenant. The Confidentiality Agreement dated
------------------------
October 8, 1996 as amended through the date hereof (the "Confidentiality
---------------
Agreement") by and between Fenway Partners, Inc. and Goldman Sachs on behalf of
- - ---------
the Company and the Sellers is hereby
-28-
<PAGE>
confirmed and acknowledged as a continuing obligation of the parties. Each
Seller will not, and will not permit any of its respective Affiliates to
disclose to any Persons or to use any information concerning the business or
affairs of any Iron Age Company ("Confidential Information"), except in the
Ordinary Course of Business or as required by Legal Requirement or in connection
with performing their obligations or enforcing their rights under this
Agreement. The term Confidential Information does not include information which
(i) becomes generally available to the public other than as a result of a
disclosure by any Seller or its respective representatives, or (ii) becomes
available after the Closing to any Seller on a non-confidential basis from a
source other than any Iron Age Company or its advisors, provided such source is
not bound by a confidentiality agreement with, or other legal contractual or
fiduciary obligation of secrecy to Buyer or any Iron Age Company. In the event
that any Seller or any Affiliate of a Seller is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, such Seller will notify the Buyer
promptly of the request or requirement so that the Buyer may seek, at its
expense, an appropriate protective order.
7.3. Operation of Business, Related Matters. From the date hereof and on
--------------------------------------
and prior to the Closing Date, except as otherwise permitted or required by this
Agreement, the Company will cause the Iron Age Companies to conduct the Business
in the Ordinary Course of Business and substantially as presently operated and
use reasonable efforts to maintain the value of the Business as a going concern.
From the date hereof and on and prior to the Closing Date no Seller will sell,
pledge or otherwise encumber his or its Shares, Options or Warrants, or enter
into any agreement to do so, without the prior written consent of the Buyer.
From the date hereof and prior to the Closing Date, except as expressly
contemplated by the terms of this Agreement, the Company will cause the Iron Age
Companies not to, without the prior written consent of Buyer, which consent will
not be withheld in bad faith:
(a) enter into any transactions otherwise than on an arms' length
basis with any Seller or any other Affiliate of the Iron Age Companies
(other than as contemplated by this Agreement and transactions in the
Ordinary Course of Business among the Iron Age Companies);
-29-
<PAGE>
(b) pay any compensation other than in the Ordinary Course of Business
or increase any compensation of any officer or employee other than such
increases in compensation for employees as may be made in the Ordinary
Course of Business;
(c) incur any Debt (including, without limitation, any capital lease)
except in the Ordinary Course of Business;
(d) amend the Charter or Bylaws of any Iron Age Company or sell, lease
or otherwise dispose of any material assets (except (i) for sales or other
dispositions of inventory or excess equipment in the Ordinary Course of
Business and (ii) as may otherwise be permitted by the terms of this
Agreement);
(e) make any material change in the Business or operations of any of
the Iron Age Companies;
(f) make any capital expenditure in excess of $250,000 with respect to
the Business or enter into any contract or commitment therefor;
(g) enter into any Contractual Obligation involving more than $100,000
outside the Ordinary Course of Business;
(h) settle or agree to settle any Action in excess of $100,000 or any
claim of any other Person in excess of $100,000;
(i) enter into any Contractual Obligation relating to the sale of any
capital stock or equity interest in any Iron Age Company or make any
capital investment in, or any loan to, or any acquisition of the securities
or a substantial portion of the assets of, any other Person that is not an
Iron Age Company;
(j) declare, set aside, or pay any dividend or distribution with
respect to its capital stock or redeem, purchase, or otherwise acquire any
of its capital stock (other than as expressly contemplated by the terms of
this Agreement); or
(k) mortgage, pledge or subject to any Lien any of their assets other
than (A) conditional sales or similar security interests granted in
connection with the lease or
-30-
<PAGE>
purchase of equipment or supplies in the Ordinary Course of Business, or
(B) Liens securing liabilities not in excess, in the aggregate, of $250,000
or (c) Liens disclosed on Schedule 5.5.1 hereto;
--------------
(l) sell, lease, transfer or exchange property having a fair market
value in excess of $250,000 for less than the fair market value thereof; or
(m) enter into any Contractual Obligation to do any of the actions
referred to in this Section 7.3.
The Buyer shall respond with reasonable promptness to any and all requests
by the Sellers for consent(s) for any Iron Age Company to take any of the
actions specified in this Section 7.3.
7.4 Preparation for Closing. The Buyer on the one hand and the Sellers on
-----------------------
the other hand will each use all reasonable best efforts to bring about the
fulfillment of each of the conditions precedent to the obligations of the other
set forth in this Agreement subject to the following:
7.4.1 HSR Filing. Promptly upon execution and delivery of this
----------
Agreement, each of Buyer and the Company will prepare and file, or cause to
be prepared and filed, with the appropriate Governmental Authorities, a
notification with respect to the transactions contemplated by this
Agreement pursuant to the HSR Act, supply all information requested by
Governmental Authorities in connection with the HSR notification and
cooperate with each other in responding to any such request. Buyer shall
be solely responsible for all filing fees required to be paid by it in
connection therewith. Sellers shall be solely responsible for all filing
fees required to be paid by Sellers or the Company in connection therewith.
7.4.2 Consents, etc. Prior to the Closing Date, the Company shall use
-------------
reasonable efforts (but the Company and the Sellers shall have no
obligation to pay any fees or incur any expenses) to secure required
written consents or waivers under or with respect to the Contracts
indicated on Schedule 8.3. If requested by the Company in connection with
------------
their attempts to obtain such consents, the Buyer shall execute
-31-
<PAGE>
and deliver an agreement of assignment, assumption and attornment with
respect to and/or guarantee of the obligations under such Contracts.
7.4.3 Disclosure. From time to time, on and prior to the Closing
----------
Date, the Buyer shall promptly notify the Sellers upon becoming aware of
any fact, occurrence or event that would cause any of the representations
and warranties contained in Sections 4 or 5 hereof to be inaccurate or
incomplete in any material respect. From time to time, on and prior to the
Closing Date, the Sellers and the Company shall promptly notify the Buyer
upon becoming aware of any fact, occurrence or event that would cause any
of the representations and warranties contained in Sections 4 or 5 hereof
to be inaccurate or incomplete in any material respect. Notwithstanding the
foregoing provisions of this Section 7.4.3, neither the Sellers, the Buyer
nor the Company shall be deemed to have breached this Section 7.4.3 with
respect to any disclosure required herein if any disclosure required
hereunder is made by such Person prior to the Closing.
7.4.4 Supplemental Schedules. The Sellers may (but will not be
----------------------
required to), from time to time prior to or on the Closing Date, by notice
in accordance with this Agreement, supplement or amend the Schedules,
including without limitation one or more supplements or amendments to
correct any matter arising after the date of this Agreement which would
otherwise constitute a breach of any representation, warranty or covenant
herein contained; provided, however, that subject to the further provisions
-------- -------
of this Section 7.4.4, no supplement or amendment will affect the rights or
obligations of the parties to this Agreement. In the event supplemental or
amended schedules shall be delivered by Sellers to the Buyer on or after
the fourth Business Day prior to the Closing Date then in effect, such
Closing Date may, at the option of the Buyer, be deferred up to four
Business Days, and in the event such deferral of the Closing Date would
cause the Closing Date to be after the Final Termination Date, such Final
Termination Date shall be automatically deferred to the day after such
deferred Closing Date. If any of the matters disclosed in any such
supplement or amendment would constitute a material breach of any
representation, warranty or covenant herein contained before giving effect
to any such supplemental or amended schedule, then Buyer shall have the
right to terminate this Agreement with such termination being Buyer's sole
remedy relating to matters set forth in such amendments or supplements.
Notwithstanding any other provision hereof, in the event the Buyer does not
exercise its termination right, each supplement or amendment of any
Schedule will be effective to
-32-
<PAGE>
cure and correct for all purposes any breach of any representation,
warranty or covenant relating to such Schedule not having read at all times
as so supplemented and amended.
7.5 Payment of Transfer Taxes and Other Charges. The Buyer shall be
-------------------------------------------
responsible for and shall pay all stock transfer Taxes, real property transfer
Taxes, sales Taxes, documentary stamp Taxes, recording charges and other similar
Taxes (excluding any income Taxes) arising in connection with the transactions
contemplated by this Agreement. Each of the parties hereto shall prepare and
file, and shall fully cooperate with each other party with respect to the
preparation and filing of, any Tax Returns and other filings relating to any
such Taxes or charges as may be required.
7.6 Support Services, etc. The Buyer acknowledges that BCC ISI provides
---------------------
or makes available to the Iron Age Companies certain administrative and support
services at a cost of $10,417 per month. The Buyer acknowledges that such
services, as well as the Consulting Services Agreement between the Company and
BCC ISI, will be terminated as of the Closing Date. All amounts owing to BCC ISI
for such services have been paid by the Company through October 31, 1996.
7.7 Further Assurances. Each party, upon the request from time to time
------------------
of any other party hereto after the Closing, and at the expense of the
requesting party but without further consideration, will do each and every act
and thing as may be necessary or reasonably requested to consummate the
transactions contemplated hereby in an orderly fashion.
7.8 Financial Information. On or prior to the Closing, the Company shall
---------------------
deliver to the Buyer, as promptly as practicable after they become available to
the Company, copies of (i) monthly earnings reports and month-end balance sheet
data and (ii) any quarterly unaudited consolidated balance sheets and statements
of earnings and cash flows.
7.9 Financing. Buyer agrees to use its reasonable best efforts to
---------
consummate the Financing.
7.10. Other Offers. Neither any Iron Age Company nor any Seller shall
------------
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to or participate in any negotiations or discussions
concerning, or enter into any transaction
-33-
<PAGE>
involving, any acquisition or purchase of all or a substantial portion of the
assets of, or a substantial equity interest in, any Iron Age Company, or any
business combination with any Iron Age Company, except as contemplated in this
Agreement. Each Iron Age Company and each Seller will instruct its officers,
directors, agents and Affiliates, to refrain from doing any of the above. The
Company or the Sellers will notify the Buyer immediately if any such inquiries
or proposals are received by, any such information is received from, or any such
negotiations or discussions are sought to be initiated with it or any of the
other persons or entities referred to above.
8. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE BUYER. The obligations of the
Buyer to consummate the Closing under this Agreement are subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
compliance with which, or the occurrence of which, may be waived prior to the
Closing in writing by the Buyer in its sole discretion:
8.1 Representations, Warranties and Covenants.
-----------------------------------------
8.1.1. Continued Accuracy of Representations and Warranties. All
----------------------------------------------------
representations and warranties of the Sellers and the Company contained in
this Agreement shall be true and accurate in all material respects as of
the Closing Date as if made on the Closing Date, except for changes
expressly permitted or contemplated by this Agreement.
8.1.2. Performance of Agreements. The Sellers and the Company shall
-------------------------
have performed and satisfied, in all material respects, all covenants and
agreements required by this Agreement to be performed or satisfied by them
at or prior to the Closing.
8.1.3. Sellers' Closing Certificate. At the Closing, the Sellers shall
----------------------------
furnish a certificate, signed by each of the Sellers, dated the Closing
Date, to the effect that the conditions specified in Sections 8.1.1 and
8.1.2 hereof, to the extent relating to representations, warranties,
covenants and agreements of such Seller, have been satisfied.
8.1.4. Company's Closing Certificate. At the Closing, the Company
-----------------------------
shall furnish a certificate, signed by the President or the Vice President
the Company, dated
-34-
<PAGE>
the Closing Date, to the effect that the conditions specified in Sections
8.1.1 and 8.1.2 hereof, to the extent relating to representations,
warranties, covenants and agreements of the Company, have been satisfied.
8.1.5 Outstanding Capital. The Shares shall constitute all the
-------------------
outstanding stock of the Company and the Options and Warrants shall
constitute all the Contractual Obligations pursuant to which the Company
has granted any option, warrant or other right to any Person to acquire the
shares of common stock or any other securities of, or equity interest in,
the Company. All Shares and all Options and Warrants shall have been
tendered to the Buyer for sale or for investment in Buyer at the Closing.
8.2 Legality; Governmental Authorization; Litigation. The acquisition of
------------------------------------------------
the Shares, Options and Warrants and the consummation of the other transactions
contemplated hereby, shall not be prohibited by any Legal Requirement, and all
necessary filings, if any, pursuant to the HSR Act shall have been made and all
applicable waiting periods thereunder shall have expired or been terminated. No
Action shall have been instituted at or prior to the Closing by any Person other
than a party hereto, or instituted by any Governmental Authority, relating to
this Agreement or any of the transactions contemplated hereby, the result of
which would prevent or make illegal the consummation of any such transaction or
would otherwise have a material adverse effect on the ability of the Buyer to
consummate the transactions contemplated hereby.
8.3 Third Party Consents. There shall have been obtained by the Company
--------------------
the consents listed on Schedule 8.3 hereto.
8.4 Opinion of Counsel. The Sellers and the Company shall have furnished
------------------
the Buyer with favorable opinions of Kirkpatrick & Lockhart LLP, Ropes & Gray
and Smith, Katzenstein & Furlow (or in each case other counsel reasonably
satisfactory to Buyer), each dated as of the Closing Date, with respect to the
matters set forth on Exhibit 8.4.
8.5 Financing. The Buyer shall have obtained the senior secured debt
---------
financing (the "Financing") to be provided pursuant to the commitment letter
---------
between Fenway Partners, Inc. and Banque Nationale de Paris (the "Financing
---------
Source") dated December 12, 1996, on the terms and conditions specified in such
- - ------
commitment letter (the "Commitment Letter") and such additional commercially
-----------------
reasonable terms that are contemplated by the Commitment Letter to
-35-
<PAGE>
be agreed upon by the parties thereto, and the portion of the Financing
necessary to consummate the transactions contemplated at the Closing and to fund
the working capital requirements of the Iron Age Companies after the Closing
shall have been funded or otherwise made available to the Buyer as of the
Closing Date.
8.6 General. All corporate proceedings required to be taken on the part
-------
of the Company and Sellers in connection with the transactions contemplated by
this Agreement shall have been taken. The Buyer shall have received copies of
such officers' certificates, good standing certificates, incumbency certificates
and other customary closing documents as the Buyer may reasonably request in
connection with the transactions contemplated hereby.
9. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE SELLERS. The obligations of
the Sellers to consummate the Closing under this Agreement are subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
compliance with which, or the occurrence of which, may be waived prior to the
Closing in writing by the Sellers in their sole discretion:
9.1 Representations, Warranties and Covenants.
-----------------------------------------
9.1.1 Continued Accuracy of Representations and Warranties. All
----------------------------------------------------
representations and warranties of the Buyer contained in this Agreement
shall be true and accurate in all material respects as of the Closing Date
as if made on the Closing Date.
9.1.2 Performance of Agreements. The Buyer shall have performed and
-------------------------
satisfied, in all material respects, all covenants and agreements required
by this Agreement to be performed or satisfied by the Buyer at or prior to
the Closing.
9.1.3 Officer's Certificate. At the Closing, the Buyer shall furnish
---------------------
to the Sellers a certificate signed by the President or any Vice President
of the Buyer, dated the Closing Date, to the effect that the conditions
specified in Sections 9.1.1 and 9.1.2 hereof have been satisfied.
9.2 Payment of BCC Debt, etc. The Buyer shall have paid or made
------------------------
arrangements satisfactory to Sellers to pay in full on the Closing Date all BCC
Debt and PNC Debt then
-36-
<PAGE>
outstanding and all accrued but unpaid obligations of any Iron Age Company
owed to BCC ISI as of the Closing Date relating to the services described in
Section 7.6 hereof.
9.3 Legality; Government Authorization; Litigation. The Sellers'
----------------------------------------------
consummation of the transactions contemplated hereby shall not be prohibited by
any Legal Requirement, and all necessary filings, if any, pursuant to the HSR
Act shall have been made and all applicable waiting periods thereunder shall
have expired or been terminated. No Action shall have been instituted at or
prior to the Closing by any Person other than a party hereto, or instituted by
any Governmental Authority, relating to this Agreement or any of the
transactions contemplated hereby, the result of which would prevent or make
illegal the consummation any such transaction or could otherwise have a material
adverse effect on the ability of the Sellers to consummate the transactions
contemplated hereby.
9.4 Opinion of Counsel. The Buyer shall have furnished the Sellers with
------------------
the favorable opinion of Ropes & Gray dated the Closing Date with respect to the
matters set forth in Exhibit 9.4.
9.5 General. All corporate proceedings required to be taken by the Buyer
-------
in connection with the transactions contemplated by this Agreement shall have
been taken. The Sellers shall have received copies of such officers'
certificates, good standing certificates, incumbency certificates and other
customary closing documents as the Sellers may reasonably request in connection
with the transactions contemplated hereby.
10. EMPLOYMENT AND EMPLOYEE BENEFITS ARRANGEMENTS.
10.1. Employment of Affected Employees. Buyer shall cause the Iron Age
--------------------------------
Companies to employ on the Closing Date, at the same rate of pay as in effect
immediately preceding the Closing Date, all Affected Employees. The Sellers
shall not retain any obligations or liabilities with respect to any benefits or
wages, regardless of whether such benefits or wages were accrued (or relate to
claims incurred) prior to, on or after the Closing Date, with respect to
Affected Employees. Except as set forth on Schedule 10.1, no Iron Age Company
-------------
or Seller (or any of their Affiliates) has agreed or is committed to make to any
Affected Employee any payment contingent upon or otherwise in connection with
this Agreement or any of the transactions contemplated hereby. Except as set
forth on Schedule 10.1, no obligation or liability to any Affected Employee will
-------------
be triggered or otherwise made
-37-
<PAGE>
effective solely by the execution and delivery of this Agreement and the
consummation of sale of the Shares, Warrants and Options hereunder.
10.2. Substantially Equivalent Benefits. With respect to the Company Plans
---------------------------------
in effect immediately prior to the Closing Date, Buyer shall for a period of no
less than one year following the Closing Date continue to provide or cause to be
provided such plans, programs, agreements or arrangements on behalf of the
Affected Employees so as to provide, in the aggregate, employee benefits which
are substantially equivalent to the benefits provided to such individuals under
the Company Plans immediately prior to the Closing Date; provided, however, that
-------- -------
in no event shall such benefits in the aggregate be less than the benefits
provided to other similarly situated employees of Buyer and, provided, further
-------- -------
that the foregoing shall not limit the obligation of any Iron Age Company to
maintain a plan which, pursuant to an existing contract, must be maintained for
a period longer than one year. Notwithstanding the foregoing, Buyer shall
maintain or cause to be maintained for a period of not less than one year
following the Closing Date severance and benefit continuation arrangements for
the Affected Employees no less favorable to the Affected Employees than those in
effect immediately prior to the Closing Date and shall assume sole
responsibility for the payment of severance and benefit continuation benefits to
any Affected Employee whose employment with Buyer or with the Company or any of
its Subsidiaries is terminated on or after the Closing Date.
10.3. WARN. The Buyer shall indemnify the Sellers and their Affiliates and
----
defend and hold each of them harmless from and against any Losses which may be
incurred by any of them under WARN, or any state plant closing or notification
law, or otherwise, arising out of, or relating to, any actions taken by the
Buyer or the Company on or after the Closing Date.
10.4. Third-Party Rights. No provision of this Section 10 shall create any
------------------
third-party beneficiary rights in any employee or former employee (including any
beneficiary or dependent thereof), of the Company or any Subsidiaries of the
Company in respect of continued employment (or resumed employment) for any
specified period of any nature or kind whatsoever.
10.5. Indemnity. Buyer agrees to indemnify the Sellers and their
---------
Affiliates and defend and hold the Sellers and their Affiliates harmless from
and against any and all claims, losses, damages, expenses, obligations and
liabilities (including without limitation costs of collection,
-38-
<PAGE>
attorney's fees and other costs of defense) arising out of any claims by or in
respect of any Affected Employee (or such Affected Employee's successors or
assigns) with respect to any of the obligations or liabilities assumed by Buyer
or retained by the Company hereunder or any other events arising out of matters
that occur on or after the Closing Date.
11. INDEMNIFICATION.
11.1. Indemnification. Subject to the terms of this Section 11, each of
---------------
the Sellers (each in its capacity as an indemnifying party, an "Indemnifying
------------
Party"), for itself only and not jointly in the case of the indemnification
- - -----
provided in Section 11.1.1(i) and 11.1.1(iii) below, and jointly and severally
in the case of the indemnification provided in Section 11.1.1(ii) below, agrees
to indemnify Buyer, its officers, directors, employees, agents and Affiliates,
other than any officer, director, employee, agent or Affiliate who is also a
Seller (each in its capacity as indemnified party, a "Buyer Indemnitee" or an
----------------
"Indemnitee") and hold each of such Buyer Indemnitees harmless, and the Buyer
----------
(in its capacity as indemnifying party, an "Indemnifying Party") agrees to
------------------
indemnify each of the Sellers, its officers, directors, employees, agents and
Affiliates (each in its capacity as indemnified party, a "Seller Indemnitee" or
an "Indemnitee") and hold each of such Seller Indemnitees harmless, from,
----------
against and in respect of any and all Losses arising from or related to any of
the following:
11.1.1. The Sellers. In the case of each Seller as an Indemnifying
-----------
Party (i) any breach of any representation or warranty made by such Seller
in this Agreement; (ii) any breach of any representation or warranty made
by the Company in this Agreement or any breach occurring on or before the
Closing of any covenant or agreement contained in this Agreement which is
to be performed by the Company; or (iii) any breach or violation of any
covenant or agreement contained in this Agreement which is to be performed
by such Seller.
11.1.2 The Buyer. In the case of the Buyer as Indemnifying Party (i)
---------
any breach of any representation or warranty made by or on behalf of the
Buyer in this Agreement; or (ii) any breach or violation of any covenant or
agreement contained in this Agreement which is to be performed by or on
behalf of the Buyer.
For purposes of indemnification under Section 11.1.1, other than with
respect to the breach of the representations and warranties contained in
Sections 5.2.2 (with respect to the
-39-
<PAGE>
first sentence thereof), 5.3.2(c) and 5.7(b) and 5.7(j), any breach of any
representation or warranty by the Sellers or the Company contained in this
Agreement shall be deemed to constitute a breach of such representation or
warranty notwithstanding any limitation or qualification as to materiality set
forth in such representation or warranty, it being the intention of the parties
hereto that the limitation contained in the first sentence of Section 11.3
substitute for any such limitation or qualification as to materiality and that
the Buyer Indemnitees shall be indemnified and held harmless from and against
any and all Losses arising out of or based upon or with respect to the failure
of any such representation or warranty to be true, correct and complete in any
respect subject to the limitations imposed in Section 11.3 or elsewhere in this
Section 11.
11.3. Time Limitation on Indemnification. No claim may be made or suit
----------------------------------
instituted by any Buyer Indemnitee under any provision of this Section 11 after
May 15, 1998 except for Reserved Claims. No claim may be made or suit
instituted by any Seller Indemnitee against the Buyer under any provision of
this Section 11 after May 15, 1998 except for: (i) claims by any Seller
Indemnitee pursuant to Section 10 hereto and (ii) Reserved Claims. The term
"Reserved Claims" shall mean (i) all claims as to which any Indemnitee has given
- - ----------------
any Indemnifying Party written notice (describing with reasonable specificity
the amount and basis of such claims) on or prior to May 15, 1998 and (ii) all
claims for Losses as a result of the breach of any representation or warranty
contained in Section 4.4, Section 5.11 or Section 5.12; provided, however, that
-------- -------
no claim may be made or suit instituted in respect of any breach of any
representation or warranty contained in Section 5.11 or Section 5.12 after the
statute of limitations (determined without regard to any extensions thereof)
applicable to the underlying Tax or ERISA matter in question shall have expired.
11.3. Monetary Limitations on Indemnification. Indemnifying Parties shall
---------------------------------------
not have any obligation to indemnify any Buyer Indemnitee under Section 11.1.1
(other than the representations and warranties contained in Sections 4.4, 5.11,
5.12(e) and 5.13) unless the aggregate cumulative total of all Losses incurred
by any Buyer Indemnitee with respect thereto exceeds three million dollars
($3,000,000) whereupon the Buyer Indemnitees shall be entitled to
indemnification for such Losses but only to the extent that the aggregate
cumulative total of such Losses exceeds three million dollars ($3,000,000).
Notwithstanding any other provision of this Agreement the total maximum
aggregate indemnification for all claims pursuant to Section 11.1.1 (other than
with respect to the breach of the representations and warranties contained in
Sections 4.4, 5.11, 5.12(e) and 5.13) shall not exceed ten million dollars
-40-
<PAGE>
($10,000,000) for all Sellers as a group; provided, however, that, in addition
-------- -------
to the foregoing aggregate limit, (a) with respect to claims pursuant to Section
11.1.1(ii) each Seller shall only be liable in respect of a portion of the
aggregate joint and several indemnification obligation with respect thereto
equal to the Seller's Percentage thereof set forth opposite such Seller's name
on Schedule 1 hereto, and (b) each Seller's aggregate obligation under this
----------
Section 11 shall in no event exceed such Seller's Percentage of the Cash
Consideration; provided, further, however that in the event that a claim for
-------- ------- -------
indemnification is made by any Buyer Indemnitee with respect to Losses incurred
as a result of the breach of any representation or warranty contained in Section
4.4, Section 5.11, Section 5.12(e) or Section 5.13 which claim would cause the
aggregate obligation of a Seller which is a holder of BCC Debt under this
Section 11 to be in excess of such Seller's Percentage of the Cash
Consideration, each such Seller that is a holder of BCC Debt shall be liable in
respect of a portion of such excess (the "Excess Amount") in an amount equal to
-------------
the product obtained by multiplying (x) the percentage of total BCC Debt held by
such Seller, by (y) the Excess Amount, but in no event shall the total
--
obligation of any holder of BCC Debt under this provision exceed the sum of (x)
the Seller's Percentage of such holder of the Cash Consideration, plus (y) the
----
amount of BCC Debt held by such Seller.
11.4. Third Party Claims, etc. Promptly after (a) becoming aware of any
-----------------------
fact, occurrence or event which may give rise to a claim for indemnification
under this Section 11 or (b) the receipt by any Indemnitee of notice of the
commencement of any action or other claim against such Indemnitee by a third
party, such Indemnitee shall, if a claim with respect thereto is or may be made
against any Indemnifying Party pursuant to this Section 11, give such
Indemnifying Party written notice of the nature and basis of such claim;
provided that the failure of an Indemnitee to give prompt notice in the manner
provided herein shall not relieve any Indemnifying Party of its obligations
under this Section 11, (i) unless such Indemnifying Party is actually prejudiced
by such failure to give prompt notice or (ii) except as provided in Section 11.2
hereof. Prior to the thirtieth day after receipt by the Indemnifying Party of a
notice from the Indemnitee with respect to the commencement of an action or
other claim by a third party, the Indemnitee will defend against such claim
(provided that the Indemnitee shall not settle such claim). The Indemnifying
Parties shall have the right to defend such claim, at the Indemnifying Parties'
expense and with counsel of their choice reasonably satisfactory to the
Indemnitee, provided that the Indemnifying Parties so notify the Indemnitee
within 30 days after receipt of such notice. So long as the Indemnifying Parties
are conducting the defense of such claim as provided in the previous sentence,
the Indemnitee may retain separate co-counsel
-41-
<PAGE>
at its sole cost and expense and may participate in defense of such claim, and
the Indemnifying Parties will not consent to the entry of any judgment or enter
into any settlement with respect to such claim without the prior written consent
of each Indemnitee, which consent shall not be unreasonably withheld. In the
event the Indemnifying Parties do not assume defense of such claim as so
provided, (x) the Indemnitee shall defend against such claim provided that the
Indemnitee shall not settle such claim without the prior written consent of the
Indemnifying Party which consent shall not be unreasonably withheld and (y) the
Indemnifying Parties will remain responsible for any Losses the Indemnitee may
suffer as a result of such claim to the full extent provided in this Section 11.
Regardless of which party shall assume the defense of such claim, each party
shall provide to the other parties on request all information and documentation
reasonably necessary to support and verify any Losses which give rise to such
claim for indemnification and shall provide reasonable access to all books,
records and personnel in their possession or under their control which would
have a bearing on such claim.
11.5. Certain Other Indemnity Matters. (a) The sole and exclusive remedies
-------------------------------
of each Buyer Indemnitee (i) from and after the Closing, with respect to any and
all claims relating to the subject matter of this Agreement, and (ii) prior to
the Closing, with respect to breaches of the representations and warranties
contained in Sections 4 or 5 hereof, shall be pursuant to the indemnification
provisions set forth in this Section 11 and, with respect to the matters
referred to in (ii), termination of this Agreement in accordance with Section 13
hereof; provided, however, that injunctive relief shall be available to the
-------- -------
parties with respect to breaches of the covenant contained in Section 7.2. In
furtherance of the foregoing, the Buyer hereby waives, to the fullest extent
permitted under applicable law, and agrees not to assert and to cause each of
the other Buyer Indemnitees not to assert in any action or proceeding of any
kind, any and all rights, claims and causes of action it may now or hereafter
have against the Sellers other than claims for indemnification asserted as
permitted by and in accordance with the provisions set forth in this Section 11
(including, without limitation, any such rights, claims or causes of action
arising under or based upon common law or other Legal Requirements).
(b) No party shall in any event be liable under this Section 11, and no
claim for indemnification may in any event be asserted under this Section 11,
for any consequential damages by reason of a breach of any representation or
warranty.
(c) Notwithstanding anything to the contrary contained in this Agreement,
if the Closing occurs, (i) no claim for indemnification may be asserted by any
Buyer Indemnitee against any Seller under this Section 11 if any fact, event or
circumstance giving rise to such claim was discovered by or known to any Buyer
Indemnitee on or before the Closing Date and
-42-
<PAGE>
(ii) no claim for indemnification may be asserted by any Seller Indemnitee
against the Buyer under this Section 11 with respect to any matter discovered or
known to any Seller Indemnitee on or before the Closing Date.
(d) Upon making any payment to an Indemnitee for any indemnification claim
pursuant to this Section 11, the Indemnifying Party shall be subrogated, to the
extent of such payment, to any rights which the Indemnitee may have against
other Persons with respect to the subject matter underlying such indemnification
claim.
12. CONSENT TO JURISDICTION; JURY TRIAL WAIVER.
12.1. Consent to Jurisdiction. Each party to this Agreement, by its
-----------------------
execution hereof, (i) hereby irrevocably submits, and agrees to cause each of
its Subsidiaries to submit, to the exclusive jurisdiction of the state courts of
the State of Delaware or the United States District Court located in the State
of Delaware for the purpose of any action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation arising out
of or based upon this Agreement or relating to the subject matter hereof (ii)
hereby waives, and agrees to cause each of its Subsidiaries to waive, to the
extent not prohibited by applicable law, and agrees not to assert, and agrees
not to allow any of its Subsidiaries to assert, by way of motion, as a defense
or otherwise, in any such action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that any such proceeding brought in one of
the above-named courts is improper, or that this Agreement or the subject matter
hereof may not be enforced in or by such court and (iii) hereby agrees not to
commence or to permit any of its Subsidiaries to commence any action, claim,
cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or
investigation arising out of or based upon this Agreement or relating to the
subject matter hereof other than before one of the above-named courts nor to
make any motion or take any other action seeking or intending to cause the
transfer or removal of any such action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation to any court
other than one of the above-named courts whether on the grounds of inconvenient
forum or otherwise. Each party hereby consents to service of process in any such
proceeding in any manner permitted by Delaware law, and agrees that service of
process by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 14.7 hereof is reasonably calculated to
give actual notice.
12.2. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
--------------------
WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND AGREES TO
CAUSE EACH OF ITS SUBSIDIARIES TO
-43-
<PAGE>
WAIVE, AND COVENANTS THAT NEITHER IT NOR ANY OF ITS SUBSIDIARIES WILL ASSERT
(WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY
FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN
CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT
OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. THE BUYER ACKNOWLEDGES
THAT IT HAS BEEN INFORMED BY THE SELLERS THAT THIS SECTION 12.2 CONSTITUTES A
MATERIAL INDUCEMENT UPON WHICH THE SELLERS ARE RELYING AND WILL RELY IN ENTERING
INTO THIS AGREEMENT AND ANY OTHER AGREEMENTS RELATING HERETO OR CONTEMPLATED
HEREBY. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION 12.2 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH
PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
13. TERMINATION.
13.1. Termination of Agreement. This Agreement may be terminated by the
------------------------
parties only as provided below:
(a) The Buyer and the Sellers may terminate this Agreement by mutual
written consent at any time prior to the Closing.
(b) The Buyer may terminate this Agreement by giving written notice
to the Sellers at any time prior to the Closing in the event any Seller or
the Company is in material breach of any representation, warranty, covenant
or agreement contained in this Agreement, the Buyer has notified the
breaching party of the breach and such breach has continued without cure
for a period of 30 days after the notice of breach and there is a
reasonable likelihood that such breach will result in an inability of the
breaching party to satisfy the conditions set forth in Section 8.1.
(c) The Sellers may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing in the event the Buyer
is in material breach of any representation, warranty, covenant or
agreement contained in this Agreement, the Sellers have notified the Buyer
of the breach and such breach has continued without
-44-
<PAGE>
cure for a period of 30 days after the notice of breach and there is a
reasonable likelihood that such breach will result in an inability of the
Buyer to satisfy the conditions set forth in Section 9.1.
(d) By the Sellers or the Buyer on or after February 15, 1997 (the
"Final Termination Date") if the Closing of the transactions contemplated
by this Agreement shall not have occurred by such date.
13.2. Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Section 13.1, all obligations of the parties hereunder
(other than obligations under Sections 7.2, 12, 14 and this Section 13, which
shall survive termination) shall terminate without any liability of any party to
any other party; provided, however, that no termination pursuant to clause (b),
-------- -------
(c) or (d) of Section 13.1 shall relieve any party from any liability arising
from or relating to any breach by such party prior to termination.
13.3. Time of Essence. Time is and shall be of the essence in this
---------------
Agreement.
14. MISCELLANEOUS.
14.1. Entire Agreement; Waivers. This Agreement constitutes the entire
-------------------------
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties with
respect to such subject matter, other than (i) the Confidentiality Agreement
(which shall survive execution and delivery of this Agreement and shall survive
any termination of this Agreement but shall terminate upon consummation of the
Closing) and (ii) any agreements among the Sellers' Representative and/or any of
the Sellers, which agreements shall neither amend nor modify the terms of this
Agreement. No waiver of any provision of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar),
shall constitute a continuing waiver unless otherwise expressly provided nor
shall be effective unless in writing and executed (i) in the case of a waiver by
the Buyer, and (ii) in the case of a waiver by the Sellers, by each of the
Sellers bound thereby.
14.2. Amendment or Modification. Except as set forth in Section 7.4.4 the
-------------------------
parties hereto may not amend or modify this Agreement except in such manner as
may be agreed upon by a written instrument executed by the Buyer and the
Sellers' Representative.
-45-
<PAGE>
14.3. Investigation; No Additional Representations. The Sellers and the
--------------------------------------------
Company have not made and are not making any representation, warranty, covenant
or agreement, express or implied, with respect to the matters contained in this
Agreement other than the explicit representations, warranties, covenants and
agreements set forth herein. The Buyer acknowledges and agrees that it (i) has
made its own inquiry and investigation into, and based thereon has formed an
independent judgment concerning, the Business and the Iron Age Companies, (ii)
has been furnished with or given adequate access to such information about the
Business and the Iron Age Companies as it has requested, and (iii) will not
assert and will cause the other Buyer Indemnitees not to assert, except pursuant
to Section 11, any claim against the Sellers or any of their respective
partners, directors, officers, employees, agents, stockholders, consultants,
investment bankers, representatives, controlling persons or an Affiliate of any
of the foregoing (or hold the Sellers or any such persons liable) for any
inaccuracies, misstatements or omissions with respect to information furnished
by the Company, the Sellers or such persons concerning the Business or the Iron
Age Companies.
14.4. Severability. In the event that any provision hereof would, under
------------
applicable law, be invalid or unenforceable in any respect, such provision shall
(to the extent permitted under applicable law) be construed by modifying or
limiting it so as to be valid and enforceable to the maximum extent compatible
with, and possible under, applicable law. The provisions hereof are severable,
and in the event any provision hereof should be held invalid or unenforceable in
any respect, it shall not invalidate, render unenforceable or otherwise affect
any other provision hereof.
14.5. Successors and Assigns. All of the terms and provisions of this
----------------------
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees and assigns (each of which permitted
transferees and assigns shall be deemed to be a party hereto for all purposes
hereof); provided, however, that (i) no transfer or assignment by any party
-------- -------
hereto shall be permitted (other than to such party's Affiliates) without the
prior written consent of the other parties hereto and any such attempted
transfer or assignment without consent shall be null and void and (ii) no
transfer or assignment by any party shall relieve such party of any of its
obligations hereunder.
14.6. Seller's Representative. (a) Each of the Sellers hereby appoints
-----------------------
Butler Capital Corporation ("Sellers' Representative") or its designee (as
-----------------------
appointed in writing), as the agent,
-46-
<PAGE>
proxy, and attorney-in-fact for the Sellers for all purposes under this
Agreement (including without limitation full power and authority to act on the
Sellers' behalf) to take any action, should it elect to do so in its sole
discretion, (i) to consummate the transactions contemplated under this
Agreement, (ii) in the event of such consummation, to receive on behalf of the
Sellers each of such Seller's Cash Consideration, (iii) to pay out of each
Seller's Cash Consideration his or its Seller's Percentage of all costs,
expenses and fees incurred by or on behalf of the Sellers in connection with the
transactions contemplated by this Agreement and to pay to the Sellers his or its
Seller's Percentage of the Cash Consideration, (iv) to conduct or cease to
conduct, should it elect to do so in its sole discretion, the defense of all
claims against any of the Sellers in connection with this Agreement other than
claims under 11.1.1(i) or 11.1.1(iii) of this Agreement, and settle all such
claims in its sole discretion on behalf of all the Sellers and exercise any and
all rights which the Sellers are permitted or required to do or exercise under
this Agreement, and (v) to execute and deliver, should it elect to do so in its
sole discretion, on behalf of the Sellers any amendment to this Agreement so
long as such amendments shall apply to all parties to this Agreement, and to
take all other actions to be taken by or on behalf of the Sellers and exercise
any and all rights which the Sellers are permitted or required to do or exercise
under this Agreement; provided, however, that (a) the Sellers' Representative
-------- -------
shall have no authority to enter into any settlement of any claim under clause
(iv) above or to execute and deliver any amendment to this Agreement under
clause (v) above on behalf of above Sellers (the "Individual Sellers") other
------------------
than MLA I, MLA II, MLA III, SLA I, SLA II and BCC ISI (collectively, the "BCC
---
Sellers"), without the consent of Donald R. Jensen, (b) the Sellers'
- - -------
Representative shall have no obligation to conduct any defense or settle any
claim or enter into any amendment or take any other action whatsoever on behalf
of any Seller under this Section 14.6 or otherwise in its capacity as Sellers'
Representative and (c) any settlement entered into or other action taken by any
Individual Seller shall be valid only to the extent expressly permitted by this
Section 14.6, and no such settlement or action (whether permitted or not by this
Section 14.6) shall bind or otherwise affect the rights or obligations of the
Seller's Representative or any BCC Seller. Each of the Sellers hereby agrees not
to assert any claim against, and to indemnify and hold harmless Sellers'
Representative from and against any and all Losses incurred by, the Sellers'
Representative or any of its partners, directors, officers, employees, agents,
stockholders, consultants, investment bankers, representatives or controlling
persons, or any Affiliate of any of the foregoing, relating to Sellers'
Representative's capacity as Sellers' Representative other than such claims or
Losses resulting from the Sellers' Representative's gross negligence or wilful
misconduct.
-47-
<PAGE>
(b) Each Seller hereby unconditionally and irrevocably agrees to pay to
the Sellers' Representative, promptly upon request and in any event within 10
days of such request, such Seller's Percentage of any amounts paid by the
Sellers' Representative on behalf of the Sellers and agrees to pay its Seller's
Percentage of any and all costs and expenses (including counsel and legal fees
and expenses) incurred by the Sellers' Representative in connection with the
protection, defense, expense or enforcement of any rights under this Agreement.
Any and all payments made by any Sellers under this Section 14.6 shall be made
free and clear of any present or future taxes, deductions, charges or
withholdings and all liabilities with respect thereto.
14.7. Notices. Any notices or other communications required or permitted
-------
hereunder shall be sufficiently given if in writing and delivered personally or
sent by telecopier, Federal Express, or registered or certified mail, postage
prepaid, addressed as follows:
If to any of the Sellers, to c/o Butler Capital Corporation
him or it: 767 Fifth Avenue, 6th Floor
New York, New York 10153
Telecopier: (212) 759-0876
Attention: Costa Littas
with a copy to: Ropes & Gray
One International Place
Boston, Massachusetts 02110
Telecopier: 617-951-7050
Attention: R. Newcomb Stillwell
and
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Telecopier: 412-355-6501
Attention: J. Richard Lauver
If to Buyer, to: IAH Acquisition Corp.
c/o Fenway Partners, Inc.
-48-
<PAGE>
152 West 57th Street
59th floor
New York, NY 10019
Telecopier: (212)
Attention: Andrea Geisser
with a copy to: Ropes & Gray
One International Place
Boston, Massachusetts 02110
Telecopier: 617-951-7050
Attention: John Ayer, Esq.
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally, (b) two
Business Days after being sent by Federal Express, if sent by Federal Express,
(c) one Business Day after being delivered, if delivered by telecopier and (d)
three Business Days after being sent, if sent by registered or certified mail.
Each of the parties hereto shall be entitled to specify a different address by
giving notice as aforesaid to each of the other parties hereto.
14.8. Public Announcements. At all times, no party hereto will issue or
--------------------
make any reports, statements or releases to the public with respect to this
Agreement or the transactions contemplated hereby without the consent of the
other parties hereto, which consent shall not be unreasonably withheld. If any
party hereto is unable to obtain, after reasonable effort, the approval of its
public report, statement or release from the other parties hereto and such
report, statement or release is, in the written opinion of legal counsel to such
party, required by law in order to discharge such party's disclosure
obligations, then such party may make or issue the legally required report,
statement or release and promptly furnish the other parties with a copy thereof.
Each party hereto will also obtain the prior approval by the other parties
hereto of any press release to be issued immediately following the Closing
announcing the consummation of the transactions contemplated by this Agreement.
14.9. Headings, etc. Section and subsection headings are not to be
-------------
considered part of this Agreement, are included solely for convenience, are not
intended to be full or accurate descriptions of the content thereof and shall
not affect the construction hereof.
14.10 Disclosure. Any item listed or described in any Schedule pursuant to
----------
any Section of this Agreement shall be deemed to have been listed in or
incorporated by reference into each other Schedule where such listing or
description would be appropriate.
-49-
<PAGE>
14.11. Knowledge. As used herein, knowledge of the Company shall mean the
---------
actual knowledge of the Sellers.
14.12. Third Party Beneficiaries. Except as expressly provided in Section
-------------------------
11 hereof, nothing in this Agreement is intended or shall be construed to
entitle any Person other than Sellers' Representative and other than the parties
or their respective transferees and assigns permitted hereby to any claim, cause
of action, remedy or right of any kind.
14.13. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
14.14. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic substantive laws of the State of Delaware, without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the laws of any other jurisdiction.
14.15. Strict Construction. No rule of strict construction shall apply to
-------------------
or be used against any party thereto.
14.16. Expenses. All costs and expenses (including legal fees and expenses
---------
but excluding any payments to Goldman Sachs) incurred by the Sellers or the
Company in connection with this Agreement and the transactions contemplated
hereby shall be paid by the Company up to an aggregate amount of $300,000 and by
the Sellers in respect of any amounts in excess of $300,000; provided, however,
-------- -------
that in addition to the foregoing the Company shall pay the amounts due to
Affected Employees under the letter agreements and plans listed on Schedule 10.1
up to an aggregate of $800,000. All such costs and expenses incurred by the
Buyer shall be paid by the Buyer whether or not the transactions contemplated
hereby are consummated.
[The rest of this page has been intentionally left blank]
-50-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed, as of the date first above
written by their respective officers thereunto duly authorized.
THE COMPANY: IRON AGE HOLDINGS CORPORATION
By: /s/ Keith A. McDonough
_______________________________
Name: Keith A. McDonough
Title: Vice President of Finance
and Chief Financial Officer
<PAGE>
THE SELLERS: Mezzanine Lending Associates I, L.P.
By: Mezzanine Lending Management I, L.P.,
its general partner
By: /s/ Costa Littas
___________________________________ ,
its authorized signatory
Mezzanine Lending Associates II, L.P.
By: Mezzanine Lending Management II, L.P.,
its general partner
By: /s/ Costa Littas
___________________________________ ,
its authorized signatory
Mezzanine Lending Associates III, L.P.
By: Mezzanine Lending Management III, L.P.,
its general partner
By: /s/ Costa Littas
___________________________________ ,
its authorized signatory
Senior Lending Associates I, L.P.
By: Senior Lending Management I, L.P.,
its general partner
By: /s/ Costa Littas
___________________________________ ,
its authorized signatory
Senior Lending Associates II, L.P.
By: Senior Lending Management II, L.P.
its general partner
By: /s/ Costa Littas
___________________________________ ,
its authorized signatory
<PAGE>
/s/ Donald R. Jensen
____________________________
Donald R. Jensen
/s/ William J. Mills
____________________________
William J. Mills
/s/ Keith A. McDonough
___________________________
Keith A. McDonough
/s/ Willie J. Taaffe
____________________________
Willie J. Taaffe
/s/ Theodore C. Johanson
____________________________
Theodore C. Johanson
/s/ Kenneth R. Herbaugh
____________________________
Kenneth R. Herbaugh
/s/ Gary Tousignant
____________________________
Gary Tousignant
/s/ Richard J. Jones
____________________________
Richard J. Jones
/s/ Joseph J. Sebes
____________________________
Joseph J. Sebes
/s/ John C. Engel
____________________________
John C. Engel
/s/ John F. Mason
____________________________
John F. Mason
/s/ Max W. Rush
____________________________
Max W. Rush
/s/ Don H. Stella
____________________________
Don H. Stella
/s/ James M. Randesi
____________________________
James M. Randesi
<PAGE>
/s/ Raymond M. Lickert
____________________________
Raymond M. Lickert
/s/ Frank J. Jindra
____________________________
Frank J. Jindra
BCC Industrial Services, Inc.
By: /s/ Donald E. Cihak
_________________________
a duly authorized officer
<PAGE>
THE BUYER: IAH ACQUISITION CORP.
By: /s/ Andrea Geisser
___________________________
Name: Andrea Geisser
Title: Vice President
<PAGE>
NOTES TO DISCLOSURE SCHEDULES
These Schedules are being furnished to you in connection with the Iron Age
Holdings Stock Purchase Agreement dated December 26, 1996 and among Iron Age
Holdings Corporation, the Sellers referred to therein and the Buyer (the
"Agreement"). Capitalized terms used and not otherwise defined herein have the
meanings assigned to such terms in the Agreement. The inclusion of any
information in the Schedules shall be deemed not to be an admission or
acknowledgment or evidence that such information is required to be listed in the
Schedules or is material to the Company or outside the Ordinary Course of
Business.
<PAGE>
SCHEDULE 1
Selling Shareholders, Shares, Options and Warrants
<TABLE>
<CAPTION>
Seller's Percentage
("Seller's Percentage")
of Fully Diluted
Selling Shareholder Shares Options/1/ Warrants/1/ Common Shares/2/
- - ------------------- ------ --------- ----------- ----------------
<S> <C> <C> <C> <C>
Senior Lending Associates I, L.P. 10,352/3/ 8.87
Senior Lending Associates II, L.P. 5,481/3/ 4.69
Mezzanine Lending Associates I, L.P. 9,652/5/ 8.27
Mezzanine Lending Associates II, L.P. 43,447/4/ 37.22
Mezzanine Lending Associates III, L.P. 26,068/5/ 22.33
BCC Industrial Services, Inc. 3,502 3.00
Theodore C. Johanson 850/1/ 0.73
Donald R. Jensen 2,760/1/ 6,700 8.10
William J. Mills 560/1/ 1,097 1.42
Keith A. McDonough 560/1/ 1,097 1.42
Willie J. Taaffe 259 0.22
Kenneth R. Herbaugh 124 0.11
Gary Tousignant 311 0.27
Richard J. Jones 281 0.24
Joseph J. Sebes 390 0.33
John C. Engel 323 0.28
John F. Mason 124 0.11
Max W. Rush 730/1/ 305 0.89
Don H. Stella 560/1/ 625 1.01
James M. Randesi 207 0.18
Raymond M. Lickert 207 0.18
Frank J. Jindra 162 0.14
</TABLE>
As of the Closing Date the Seller's Percentage will be recalculated in
accordance with the following formula: Seller's Percentage (Equity Proceeds +
Aggregate Exercise Price + Note Proceeds) -Exercise Price - Note Proceeds./6/
For all purposes of the Stock Purchase Agreement the recalculated Seller's
Percentage will be the Seller's Percentage.
__________________________
/1/ Shares of Class A Common Stock.
/2/ Assumes the issuance of all Shares and Options and BCC ISI Warrants to
purchase 3,502 shares of Class A Common Stock.
/3/ Shares of Class B-1 Common Stock.
/4/ Shares of Class B-2 Common Stock.
/5/ Shares of Class B-3 Common Stock.
-2-
<PAGE>
/6/ Exercise Price means, as to Sellers who are holders of Options or Warrants,
the applicable Exercise Price of Options or Warrants held by such Sellers.
The subtraction of the Exercise Price applies only to Sellers who are
selling Options or Warrants. The subtraction of Note Proceeds applies only
to Sellers who have borrowed money from Iron Age companies.
-3-
<PAGE>
SCHEDULE 4.3
Sellers' Exceptions to Non-Contravention
1. Authorization under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
-4-
<PAGE>
SCHEDULE 5.1.2
Company Exceptions to Non-Contravention
1. All consents required under any Personalty Lease listed on Schedule 5.5.1.
2. All consents required under any real property Lease listed on Schedule
5.5.2.
3. All consents required under any License listed on Schedule 5.6.
4. All consents required under any Contractual Obligation listed on Schedule
5.7.
5. All consents required under any insurance policy listed on Schedule 5.8.
6. All consents required under any Permit listed on Schedule 5.10.
7. All consents required under any Company Plan listed on Schedule 5.12.
8. Authorization under the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended.
9. Possibly a letter from the Maine Department of Professional and Financial
Regulation Bureau of Insurance acknowledging that the acquisition of the
Company by Buyer will not result in a new employer as defined in Title 39-
A.M.R.S.A.
-5-
<PAGE>
SCHEDULE 5.1.3
Capital Stock
According to the terms of the charter documents, any transfer of the stock
of Iron Age de Mexico de C.V. ("Iron Age Mexico") is subject to a right of first
refusal of the non-selling stockholders of Iron Age Mexico. Iron Age Mexico is
an indirect, wholly owned subsidiary of the Company.
Iron Age Corporation Sale Incentive Plan
Falcon Shoe Mfg. Co. Sale Incentive Plan
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Donald R. Jensen
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and William J. Mills
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Keith A. McDonough
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Willie Taaffe
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Theodore Johanson
-6-
<PAGE>
SCHEDULE 5.1.4
Subsidiaries
<TABLE>
<CAPTION>
Jurisdiction of Foreign Stock
Incorporation Qualification Ownership
------------- ------------- ---------
<S> <C> <C> <C>
Iron Age Holdings Corporation Delaware none See Schedule 1
Iron Age Corporation Delaware See Annex A Iron Age Holdings
attached hereto Corporation
Iron Age Canada Ltd. Ontario, Canada none Iron Age Corporation
Iron Age Investment Company Delaware none Iron Age Corporation
Falcon Shoe Mfg. Co. Maine none Iron Age Corporation
Iron Age de Mexico S.A. de C.V. Mexico none Iron Age Corporation (1%)
Iron Age Investment
Company (99%)
</TABLE>
Liens
- - -----
Amended and Restated Holdings Stock Pledge Agreement dated as of January 27,
1995 between Iron Age Holdings Corporation and PNC Bank as agent for the banks
(the "Banks") named therein.
Stock Pledge Agreement dated as of January 27, 1995 between Iron Age Corporation
and PNC Bank as agent for the Banks.
Stock Pledge Agreement dated as of January 27, 1995 between Iron Age Investment
Company and PNC Bank as agent for the Banks.
Jensen Stock Pledge Agreement dated as of November 20, 1995 between Donald R.
Jensen and Iron Age Corporation.
Rush Stock Pledge Agreement dated as of November 20, 1995 between Max W. Rush
and Iron Age Corporation.
Mills Stock Pledge Agreement dated as of November 20, 1995 between William J.
Mills and Iron Age Corporation.
McDonough Stock Pledge Agreement dated as of November 20, 1995 between Keith A.
McDonough and Iron Age Corporation.
Stella Stock Pledge Agreement dated as of November 20, 1995 between Don H.
Stella and Iron Age Corporation.
-7-
<PAGE>
SCHEDULE 5.1.4
Annex A
-------
Iron Age Corporation
- - --------------------
Alabama
Arizona
California
Colorado
Connecticut
District of Columbia
Florida
Georgia
Illinois
Indiana
Iowa
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Nevada
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
-8-
<PAGE>
SCHEDULE 5.2.2
Character of Financials
-----------------------
A decrease in rate of depreciation (decrease first effective for fiscal year
ended January 31, 1997) relating to molds and dyes and/or similar property,
reducing the aggregate annual charge relating to such items by not more than
$100,000.
All year-end and audit adjustments relating to the Stock Purchase Agreement and
the transactions contemplated thereby.
-9-
<PAGE>
SCHEDULE 5.2.3
Liabilities
See attached.
-10-
<PAGE>
SCHEDULE 5.3.1
Accounting Changes Since the Balance Sheet Date
None
-11-
<PAGE>
SCHEDULE 5.3.2
Changes in Condition Since the Balance Sheet Date
As discussed in the management presentations to the Buyer, since
October 31, 1996, future sales volume with L.L. Bean as it relates to products
other than hunting products is uncertain at this point. In 1996 sales to L.L.
Bean were $750,000, projected sales, for L.L. Bean for 1997 are now $200,000.
-12-
<PAGE>
SCHEDULE 5.4
Environmental Matters
Matters referred to in the Environmental Audit of Pennsylvania House Property,
240 North Avenue, Penn Yan, New York, 14527 prepared for Donald Jensen, Iron Age
Corporation, 2406 Woodmere Drive, Pittsburgh, Pennsylvania, 15205 prepared by
Lozier Architects-Engineers, 1050 Pittsford-Victor Road, Pittsford, New York,
14534, dated September 1991.
Matters referred to in the Environmental Assessment of Falcon Shoe Mfg. Co., 2
Cedar Street, Lewiston, Maine, prepared for Ropes & Gray on behalf of Iron Age
Holdings Corporation by ICF Kaiser.
-13-
<PAGE>
SCHEDULE 5.5.1
Personal Property
-----------------
Liens
- - -----
Amended and Restated Security Agreement dated as of January 27, 1995 between
Falcon Shoe Mfg. Co. and PNC Bank as agent for the Banks.
Security Agreement (Revolving Credit Note) dated as of January 27, 1995 between
Falcon Shoe Mfg. Co. and PNC Bank as agent for the Banks.
Amended and Restated Security Agreement dated as of January 27, 1995 between
Iron Age Corporation and PNC Bank as agent for the Banks.
Stock Pledge Agreement dated as of January 27, 1995 between Iron Age Corporation
and PNC Bank as agent for the Banks.
Amended and Restated Holdings Pledge Agreement dated as of January 27, 1995
between Iron Age Holdings Corporation and PNC Bank, as agent.
Stock Pledge Agreement dated as of January 27, 1995 between Iron Age Investment
Company and PNC Bank as agent for the Banks.
Amcom Security Agreement covering two leased copiers.
CIT Group/Amplicon Leasing Security Agreement covering leased equipment relating
to the Mobile Point-of-Sale (POS) System.
Iron Age Corporation
- - --------------------
Summary of Shoemobile Leases (Exhibit A attached hereto).
Master Lease Agreement dated May 6, 1996 between GE Capital Fleet Services and
Iron Age Corporation.
Summary of Automobile Leases (Exhibit B attached hereto).
Master Lease Agreement dated November 1, 1993 between Amplicon, Inc. and Iron
Age Corporation.
Falcon Shoe Mfg. Co.
- - --------------------
W.L. Gore Associates, Inc. Lease dated February 23, 1996.
W.L. Gore Associates, Inc. Lease.
-14-
<PAGE>
W.L. Gore Associates, Inc. Lease dated October 24, 1996.
W.L. Gore Associates, Inc. Lease dated June 24, 1993.
Iron Age Canada, Ltd.
- - ---------------------
Summary of Automobile Leases (Exhibit C attached hereto).
-15-
<PAGE>
EXHIBIT A Summary of Shoemobile Leases
----------------------------
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------
Total Principal
Payments REM. @
Truck # Truck Make/Type Lease Date Cap Cost 11/01/96
- - ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
920282093 92 Ford F800 Series 14-Jan-92 30,904.58 1,062.91
- - ----------------------------------------------------------------------------
920282173 92 Ford F800 Series 14-Jan-92 30,904.58 1,062.91
- - ----------------------------------------------------------------------------
920287213 92 Ford F800 Series 19-Mar-92 30,833.33 2,703.87
- - ----------------------------------------------------------------------------
920287303 92 Ford F800 Series 19-Mar-92 30,833.33 2,703.87
- - ----------------------------------------------------------------------------
920300763 92 Ford F800 Series 16-Jul-92 30,833.33 4,936.19
- - ----------------------------------------------------------------------------
920300843 92 Ford F800 Series 28-Jul-92 30,833.33 4,936.19
- - ----------------------------------------------------------------------------
920331303 92 Ford F800 Series 29-Jul-92 31,327.26 5,015.27
- - ----------------------------------------------------------------------------
920304593 92 Ford F800 Series 02-Oct-92 30,833.33 6,052.45
- - ----------------------------------------------------------------------------
920304673 92 Ford F800 Series 02-Oct-92 30,833.33 6,052.45
- - ----------------------------------------------------------------------------
930281993 92 Ford F800 Series 03-Dec-92 29,762.32 6,949.57
- - ----------------------------------------------------------------------------
930278343 93 Ford F800 Series 10-Feb-93 29,399.82 8,011.32
- - ----------------------------------------------------------------------------
930293143 93 Ford F800 Series 26-Jan-93 29,847.32 8,133.47
- - ----------------------------------------------------------------------------
930293223 93 Ford F800 Series 11-Feb-93 29,847.32 8,133.47
- - ----------------------------------------------------------------------------
930295783 93 Ford F800 Series 01-Mar-93 29,847.32 8,703.56
- - ----------------------------------------------------------------------------
930295863 93 Ford F800 Series 24-Feb-93 29,847.32 8,703.56
- - ----------------------------------------------------------------------------
930307973 93 Ford F800 Series 17-Mar-93 29,847.32 9,273.65
- - ----------------------------------------------------------------------------
930314913 93 Ford F800 Series 15-Apr-93 29,847.32 9,273.65
- - ----------------------------------------------------------------------------
930315053 93 Ford F800 Series 14-Apr-93 29,847.32 9,273.65
- - ----------------------------------------------------------------------------
930322853 93 Isuzu Truck 04-May-93 32,640.00 10,764.48
- - ----------------------------------------------------------------------------
930938113 94 Ford F800 Series 24-Jun-93 29,847.32 10,983.92
- - ----------------------------------------------------------------------------
930938373 94 Ford F800 Series 24-Jun-93 29,847.32 10,983.92
- - ----------------------------------------------------------------------------
930308013 94 Ford F800 Series 08-Jul-93 29,847.32 10,983.92
- - ----------------------------------------------------------------------------
940E1073 94 Ford F800 Series 07-Oct-93 30,130.70 12,814.61
- - ----------------------------------------------------------------------------
940E1091 94 Ford F800 Series 27-Oct-93 30,130.70 13,390.10
- - ----------------------------------------------------------------------------
940E1183 94 Ford F800 Series 18-Mar-94 30,663.70 16,708.76
- - ----------------------------------------------------------------------------
940E1184 94 Ford F800 Series 18-Mar-94 30,663.70 16,708.76
- - ----------------------------------------------------------------------------
940E1195 94 Ford F800 Series 18-Mar-94 30,663.70 16,708.76
- - ----------------------------------------------------------------------------
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------
Total Principal
Payments REM.
Truck # Truck Make/Type Less Date Cap Cost @ 11/01/96
- - ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------
940E1196 94 Ford F800 Series 18-Mar-94 30,663.70 16,708.76
- - ----------------------------------------------------------------------------
940E1139 94 Ford F800 Series 23-Mar-94 30,408.33 16,569.46
- - ----------------------------------------------------------------------------
940E1230 94 Ford F800 Series 17-May-94 26,164.11 16,919.42
- - ----------------------------------------------------------------------------
950E1378 95 Ford F800 04-Oct-94 34,417.55 23,414.23
- - ----------------------------------------------------------------------------
950E1286 95 Ford F800 16-Dec-94 31,315.00 23,047.88
- - ----------------------------------------------------------------------------
950E1341 95 Ford F800 16-Dec-94 29,575.00 22,051.20
- - ----------------------------------------------------------------------------
950E1285 95 Ford F800 01-Nov-94 31,315.00 21,695.08
- - ----------------------------------------------------------------------------
950E1434 95 INTH 4700 4X2 29-Dec-94 34,285.26 35,567.62
- - ----------------------------------------------------------------------------
990E1340 95 Ford F800 28-Feb-95 27,883.04 26,322.00
- - ----------------------------------------------------------------------------
95331497 95 INTH 4700 4X2 01-Mar-95 33,503.94 32,968.00
- - ----------------------------------------------------------------------------
00358 95 INTH 4700 4X2 27-Apr-95 33,503.94 34,616.40
- - ----------------------------------------------------------------------------
00359 95 INTH 4700 4X2 16-May-95 33,503.94 35,453.50
- - ----------------------------------------------------------------------------
00360 95 INTH 4700 4X2 19-Jul-95 33,503.94 38,440.36
- - ----------------------------------------------------------------------------
95331449 95 GMCX C7HO42 07-Jun-95 31,481.28 32,624.53
- - ----------------------------------------------------------------------------
95331450 95 GMCX C7HO42 07-Jun-95 31,481.28 32,624.53
- - ----------------------------------------------------------------------------
00361 95 INTH 4700 4X2 12-Sep-95 33,912.77 38,063.62
- - ----------------------------------------------------------------------------
00362 95 INTH 4700 4X2 12-Sep-95 33,503.94 38,063.62
- - ----------------------------------------------------------------------------
00365 96 INTH 4700 4X2 04-Feb-96 34,567.25 47,703.00
- - ----------------------------------------------------------------------------
00366 96 INTH 4700 4X2 04-Feb-96 34,567.25 47,703.00
- - ----------------------------------------------------------------------------
00367 96 INTH 4700 4X2 19-Jun-96 34,361.08 41,176.00
- - ----------------------------------------------------------------------------
00368 96 INTH 4700 4X2 12-Aug-96 34,361.08 41,176.00
- - ----------------------------------------------------------------------------
00369 on order * 34,851.40 n/a
- - ----------------------------------------------------------------------------
00370 on order * 34,851.40 n/a
- - ----------------------------------------------------------------------------
00371 on order * 35,249.20 n/a
- - ----------------------------------------------------------------------------
00372 on order * 35,249.20 n/a
- - ----------------------------------------------------------------------------
2,760,549.63 893,937.45
- - ----------------------------------------------------------------------------
</TABLE>
-17-
<PAGE>
EXHIBIT B Summary of Automobile Leases
----------------------------
<TABLE>
<CAPTION>
- - -------------------------------------------------------------
TOTAL OF PYMTS
UNIT NUMBER COST DATE IN SERVICE REM. @
1/27/97
- - -------------------------------------------------------------
<S> <C> <C> <C> <C>
1 91-035082-3 13,304.88 09/30/91 0.00
- - -------------------------------------------------------------
2 91-035091-3 13,498.68 09/30/91 0.00
- - -------------------------------------------------------------
3 91-645 14,172.89 04/17/91 0.00
- - -------------------------------------------------------------
4 91-037816-3 13,987.41 10/18/91 0.00
- - -------------------------------------------------------------
5 91-037841 16,080.78 10/15/91 0.00
- - -------------------------------------------------------------
6 92-031471-3 14,220.59 10/18/91 0.00
- - -------------------------------------------------------------
7 92-031501-3 15,356.10 10/22/91 0.00
- - -------------------------------------------------------------
8 92-032273-3 14,180.55 04/23/92 0.00
- - -------------------------------------------------------------
9 92-032737-3 15,112.09 06/16/92 515.41
- - -------------------------------------------------------------
10 92-032818-3 14,585.02 07/14/92 497.48
- - -------------------------------------------------------------
11 92-032826-3 13,953.40 07/29/92 800.98
- - -------------------------------------------------------------
12 92-033121-3 14,099.46 08/04/92 809.22
- - -------------------------------------------------------------
13 92-099611-3 14,410.56 09/30/92 1,498.61
- - -------------------------------------------------------------
14 93-028377-3 15,545.78 11/12/92 1,979.00
- - -------------------------------------------------------------
15 93-028385-3 15,858.94 11/22/92 2,388.23
- - -------------------------------------------------------------
16 93-028393-3 14,650.29 11/04/92 1,865.04
- - -------------------------------------------------------------
17 93-028407-3 14,650.29 11/13/92 1,865.04
- - -------------------------------------------------------------
18 93-029471-3 15,845.96 12/03/92 2,386.58
- - -------------------------------------------------------------
19 93-031394 13,470.60 02/15/93 2,656.38
- - -------------------------------------------------------------
20 93-031424 13,897.64 02/11/93 2,740.52
- - -------------------------------------------------------------
21 93-032005 14,970.81 04/09/93 3,700.93
- - -------------------------------------------------------------
22 93-032218 14,013.35 04/21/93 3,781.39
- - -------------------------------------------------------------
23 93-032277 14,542.14 04/26/93 3,958.29
- - -------------------------------------------------------------
24 93-093497 14,517.97 05/13/93 2,186.54
- - -------------------------------------------------------------
25 93-OE1004 18,086.96 06/08/93 5,375.35
- - -------------------------------------------------------------
26 93-OE1012 27,511.58 06/04/93 8,176.47
- - -------------------------------------------------------------
27 93-OE1016 14,528.37 06/24/93 4,680.96
- - -------------------------------------------------------------
28 93-OE1031 15,483.00 07/30/93 5,375.67
- - -------------------------------------------------------------
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------
TOTAL OF PYMTS
UNIT NUMBER COST DATE IN SERVICE REM.@
1/27/97
- - ----------------------------------------------------------------
- - ----------------------------------------------------------------
<S> <C> <C> <C> <C>
29 93-OE1074 16,644.27 08/19/93 6,194.92
- - ----------------------------------------------------------------
30 94-OE1169 18,075.98 11/04/93 7,631.66
- - ----------------------------------------------------------------
31 94-OE1177 17,235.65 11/17/93 7,707.86
- - ----------------------------------------------------------------
32 94-OE1179 15,651.90 12/01/93 6,999.46
- - ----------------------------------------------------------------
33 94-OE1185 15,940.56 11/22/93 7,128.65
- - ----------------------------------------------------------------
34 94-OE1231 15,559.23 05/20/94 9,501.92
- - ----------------------------------------------------------------
35 94-OE1232 17,280.33 05/27/94 10,554.67
- - ----------------------------------------------------------------
36 94-OE1254 27,484.90 03/22/94 15,315.03
- - ----------------------------------------------------------------
37 94-OE1271 16,689.04 04/14/94 9,222.55
- - ----------------------------------------------------------------
38 94-OE1309 23,576.94 06/27/94 15,122.24
- - ----------------------------------------------------------------
39 94-OE1315 14,904.90 07/07/94 9,559.94
- - ----------------------------------------------------------------
40 94-OE1335 16,444.74 08/26/94 11,586.79
- - ----------------------------------------------------------------
41 95-OE1338 16,034.04 09/09/94 11,364.71
- - ----------------------------------------------------------------
42 95-OE1397 19,214.16 10/24/94 13,753.33
- - ----------------------------------------------------------------
43 95-OE1431 16,884.06 12/22/95 13,476.79
- - ----------------------------------------------------------------
44 95-695 11,997.84 02/01/95 5,998.92
- - ----------------------------------------------------------------
45 95-696 15,343.96 02/02/95 13,198.78
- - ----------------------------------------------------------------
46 95-697 17,567.81 02/08/95 15,132.65
- - ----------------------------------------------------------------
47 95-698 17,123.72 03/02/95 15,271.01
- - ----------------------------------------------------------------
48 95-699 16,509.72 03/15/95 14,725.02
- - ----------------------------------------------------------------
49 95-700 18,094.82 04/13/95 14,800.97
- - ----------------------------------------------------------------
50 95-701 26,249.76 06/12/95 19,687.32
- - ----------------------------------------------------------------
51 95-702 17,005.41 06/09/95 16,723.26
- - ----------------------------------------------------------------
52 95-703 9,864.30 08/16/95 7,891.44
- - ----------------------------------------------------------------
53 95-704 12,407.75 10/31/95 13,323.47
- - ----------------------------------------------------------------
54 95-705 16,251.65 10/31/95 18,372.32
- - ----------------------------------------------------------------
55 96-706 25,688.70 12/27/95 30,443.72
- - ----------------------------------------------------------------
56 96-707 17,075.31 05/01/96 20,504.40
- - ----------------------------------------------------------------
57 96-708 17,024.25 04/29/96 20,442.09
- - ----------------------------------------------------------------
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------
TOTAL OF
UNIT NUMBER COST DATE OF SERVICE PYMTS REM. @
1/27/97
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
<S> <C> <C> <C> <C>
58 96-709 16,596.14 05/10/96 19,928.75
- - -----------------------------------------------------------------
59 96-710 16,885.37 04/29/96 20,276.03
- - -----------------------------------------------------------------
60 96-711 17,277.20 05/16/96 20,748.84
- - -----------------------------------------------------------------
61 96-712 18,607.32 05/01/96 18,607.32
- - -----------------------------------------------------------------
62 96-713 17,026.20 05/06/96 17,026.20
- - -----------------------------------------------------------------
63 96-714 17,088.93 05/13/96 18,777.12
- - -----------------------------------------------------------------
64 96-715 17,796.31 07/26/96 20,698.60
- - -----------------------------------------------------------------
65 96-716 12,530.16 08/01/96 12,530.16
- - -----------------------------------------------------------------
66 96-717 25,946.76 09/05/96 30,024.42
- - -----------------------------------------------------------------
67 96-718 On Order 0.00
- - -----------------------------------------------------------------
68 96-719 On Order 0.00
- - -----------------------------------------------------------------
69 96-720 On Order 0.00
- - -----------------------------------------------------------------
70 96-721 29,255.74 34,014.85
- - -----------------------------------------------------------------
TOTAL 651,506.27
- - -----------------------------------------------------------------
</TABLE>
-20-
<PAGE>
EXHIBIT C Summary of Shoemobile and Automobile Leases
-------------------------------------------
Iron Age Canada Ltd. is currently leasing 7 Trucks from Sherway Ford in Canada,
and one automobile from GMAC.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------
REMAINING MONTHLY
TRUCK LIABILITY PAYMENT EXPIRATION
- - -------------------------------------------------------------
<S> <C> <C> <C>
1994 Ford $23,834 $852.15 October 1998
- - -------------------------------------------------------------
1995 Ford $31,097 $876.30 July 1999
- - -------------------------------------------------------------
1995 Ford $30,419 $876.30 June 1999
- - -------------------------------------------------------------
1995 Ford $36,329 $924.90 February 2000
- - -------------------------------------------------------------
1995 Ford $36,329 $924.90 March 2000
- - -------------------------------------------------------------
1996 Ford $43,740 $975.20 November 2000
- - -------------------------------------------------------------
1996 Ford $40,331 $907.36 November 2000
- - -------------------------------------------------------------
</TABLE>
AUTOMOBILE
- - ----------
1995 Buick $644.12 May 1998
**Remaining Liability is at 9/28/96
**Monthly Payments total $6337.11 for Trucks
-21-
<PAGE>
SCHEDULE 5.5.2
Real Property
IRON AGE CORPORATION
Purchase and Sale Contract dated September 16, 1991 between Iron Age
Corporation and Pennsylvania House, Inc. for Real Property in the village
of Pen Yan, Yates County, New York. Title to the Real Property located in
the Village of Pen Yan, Yates County, New York is subject to the exceptions
listed on Schedule B of the attached Title Policy.
Lease Agreement from Yates County Industrial Development Agency to Iron Age
Corporation for property in town of Jerusalem, Yates County, New York.
Lease from Joseph A. Massaro, Jr. and Carolyn C. Massaro for property known
as Robinson Plaza Three, Suite 400, Pittsburgh, PA 15205, as amended.
Retail store leases for the following locations:
ALABAMA Iron Age Safety Shoes
3328 S. Garfield Avenue
Iron Age Safety Shoes Commerce, CA 90040
3696-B Airport Blvd.
Mobile, AL 36608 Iron Age Safety Shoes
1626 Old Bayshore Hwy.
ARIZONA San Jose, CA 95112
Iron Age Safety Shoes COLORADO/EAST WYOMING
2837 W. McDowell Road
Phoenix, AZ 85009 Denver Mobile Unit
4952 Ward Road
Iron Age Safety Shoes Wheat Ridge, CO 80033
2628 E. 22nd Street
Tucson, AZ 85713 CONNECTICUT/RHODE ISLAND/
METRO NEW YORK
CALIFORNIA
Iron Age Safety Shoes
Iron Age Safety Shoes 321 Boston Post Road
6475 Knott Avenue, Unit 4 Milford, CT 06460
Buena Park, CA 90621
-22-
<PAGE>
Real Property
(continued)
DELAWARE ILLINOIS/METRO CHICAGO
Iron Age Safety Shoes Iron Age Safety Shoes
Airport Business Center 11125 Franklin Avenue
243 Quigley Blvd., Suite 7-J Franklin Park, IL 60131
New Castle, DE 19720
INDIANA
FLORIDA
Iron Age Safety Shoes
Iron Age Safety Shoes 5320 W. 79th Street
Cypress Creek Industrial Park Indianapolis, IN 46268
6600 N.W. 12th Avenue
Suite 215 KANSAS/EASTERN NEBRASKA
Fort Lauderdale, FL 33309
Iron Age Safety Shoes
Iron Age Safety Shoes 4380 S. Noland Road
5100 E. Broadway Independence, MO 64055
Tampa, FL 336119
KENTUCKY
Jacksonville Mobile Unit
Commerce Park Iron Age Safety Shoes
4541-7 St. Augustine Road 3101 Fern Valley Rd., Suite
Jacksonville, FL 32207 Louisville, KY 40213
GEORGIA LOUISIANA
Iron Age Safety Shoes Iron Age Safety Shoes
3240 Peach Orchard Road 11940 Industriplex Blvd.
Augusta, GA 30906 Suite 7
Baton Rouge, LA 70809
Iron Age Safety Shoes
7681 Southlake Parkway MAINE/VERMONT
Suite 750 NEW HAMPSHIRE
Jonesboro, GA 30236
Iron Age Safety Shoes
ILLINOIS/IOWA One Delta Drive
Westbrook, ME 04092
Iron Age Safety Shoes
202 43rd Street MARYLAND
Moline, IL 61265
Iron Age Safety Shoes
1667 Knecht Avenue
Suite D Front
-23-
<PAGE>
Real Property
(continued)
Baltimore, MD 212276 NEW JERSEY
MASSACHUSETTS Iron Age Safety Shoes
1617 Stelton Road
Iron Age Safety Shoes Piscataway, NJ 08854
Heritage Business Park
1200 Millbury St., Suite 7K Parsippany Mobile Unit
Worcester, MA 01607 325 Route 46 East
Parsippany, NJ 07054
Mansfield Mobile Unit
888 South Main St., Rt. 140 NEW MEXICO
Mansfield, MA 02048
Iron Age Safety Shoes
MICHIGAN 2029 Candelaria Road N.E.7
Albuquerque, NM 87107
Iron Age Safety Shoes
4445-D Breton Rd., S.E. NEW YORK
Kentwood, MI 49508-8411
Iron Age Safety Shoes
Iron Age Safety Shoes D & L Plaza
31036 John R. Street 5165 Broadway Avenue
Madison Heights, MI 48071 Depew, NY 14043
MINNESOTA/NORTH DAKOTA/ SOUTH DAKOTA Iron Age Safety Shoes
1 Keuka Business Park No. 1
Iron Age Safety Shoes Route 54A
5155 E. River Road, Suite 415 Penn Yan, NY 14527
Minneapolis, MN 55421
Iron Age Safety Shoes
MISSOURI/SOUTHERN ILLINOIS 130 Main Street
Penn Yan, NY 14527
Iron Age Safety Shoes
11984 Dorsett Road General Electric Plastics
Maryland Heights, MO 63043 1 Norye Avenue
Selkerk, NY 12158
Independent Mobile Unit
4380 South Nolan Road Iron Age Safety Shoes
South Nolan Shopping Center 241 Vestal Parkway East
Independence, MO 64055 Vestal, NY 13850
-24-
<PAGE>
Real Property
(continued)
NORTH CAROLINA OREGON
Iron Age Safety Shoes Iron Age Safety Shoes
Stock Port Business Park 711 S.E. Stark Street
2900 Westinghouse Blvd. Portland, OR 97214
Suite 112-A
Charlotte, NC 28273 PENNSYLVANIA
Iron Age Safety Shoes York Mobile Unit
701 Carnegie Place 2133 Industrial Hwy.
Greensboro, NC 27409 York, PA 17402
Iron Age Safety Shoes Iron Age Safety Shoes
Creekstone Crossing Eastway Plaza
Service Center 4245 Buffalo Road
5400 S. Miami Boulevard, Suite 104 Route 20
Morrisville, NC 27560 Erie, PA 16510
OHIO Iron Age Safety Shoes
4450 Steubenville Pike
Meadowbrook Market Square Pittsburgh, PA 15205
22137 Rockside Rd.
Bedford, OH 44146 PUERTO RICO
Iron Age Safety Shoes Iron Age Safety Shoes
2300 Wall Street Road #2, Kilometer 44.7
Suite P BO. Cantera #43, Suite 2
Cincinnati, OH 45212 Manati, PR 00701
Iron Age Safety Shoes Iron Age Safety Shoes
1085 Bethel Road Avenida Las Americas No. 10
Columbus, OH 43220 Ponce, PR 00731
OKLAHOMA Caguas Mobile Unit
State Road No. 189, Rm. 4
Oklahoma City Mobile Unit Caguas, PR 00726
2506 N. Meridian
Oklahoma City, OK 73107 SOUTH CAROLINA
Iron Age Safety Shoes Iron Age Safety Shoes
10915 E. 31st Street 795 N. Cashua Drive
Tulsa, OK 74146 Florence, SC 29501
-25-
<PAGE>
Real Property
(continued)
Iron Age Safety Shoes Iron Age Safety Shoes
Cleveland Village Shopping Ctr. 11005 Burnet Road
1564 Ashville Highway Suite 106 Suite 106
Spartanburg, SC 29303 Austin, TX 78758
General Electric Iron Age Safety Shoes
300 Barrington Road 1000 Lupo Drive
Greenville, SC 29602 Dallas, TX 75207
Iron Age Safety Shoes Iron Age Safety Shoes
1545 Burnett Drive 2914 E. Yandell, Suite 1
Columbia, SC 29210 El Paso, TX 79903
TENNESSEE Iron Age Safety Shoes
9000 Emmott Road
Goodyear Tire & Rubber Co. Houston, TX 77040
3260 Barbam Road
Union City, TN 38281 Iron Age Safety Shoes
3903 Fredericksburg Rd.
Iron Age Safety Shoes San Antonio, TX 78201
Wilcox Business Center
Unit 2, Building 3 Pasadena Mobile Unit
920 S. Wilcox Drive 4111 Fairmont Balcony
Kingsport, TN 37660 Suite 108
Pasadena, TX 77504
Iron Age Safety Shoes
3140 Tchulahoma Road UTAH/IDAHO/WYOMING/NEVADA
Suite 12
Memphis, TN 38118 Salt Lake City Mobile Unit
2284 South Redwood Road
Iron Age Safety Shoes West Valley City, UT 84119
331 Wilhagan Road
Nashville, TN 37217 VIRGINIA
Knoxville Mobile Unit Hoeschst Calabse Corporation
156 West End Avenue P.O. Box 440
Farragut, TN 37922 Pairsburg, VA 24134
TEXAS Goodyear
2435 Goodyear Blvd.
Longview Mobile Unit Danville, VA 24541
1517 Pine Tree Road
Longview, TX 75604
-26-
<PAGE>
Real Property
(continued)
Norfolk Mobile Unit
Northhampton Business Center
5760 North Hampton Blvd., Suite 112
Virginia Beach, VA 23455
Iron Age Safety Shoes
Popular Forest Center
P.O. Box 1170, Route 5
Forest, VA 24551
WASHINGTON
Seattle Mobile Unit
22030 68th Ave., South
Building A
Kent, WA 98032
WEST VIRGINIA
Iron Age Safety Shoes
202 Park Center Drive
Parkersburg, WV 26101
WISCONSIN
Green Bay Store
Iron Age Safety Shoes
2979 Allied Street
Green Bay, WI 54304
Iron Age Safety Shoes
Unit D
7030 Industrial Loop
Greendale, WI 53129
-27-
<PAGE>
Real Property
(continued)
2. IRON AGE CANADA LTD
Lease Agreement between Von-Land Corporation, Limited and Iron Age Canada,
Ltd. for property located at Calgary Bay #204, 255 28 Street, S.E.,
Calgary, Alberta.
Lease Renewal Agreement dated November 23, 1995 between Von-Land
Corporation, Limited and Iron Age Canada, Ltd.
3. IRON AGE INVESTMENT COMPANY
Lease Agreement dated April 1, 1992 between KAP, Inc. and Iron Age
Investment Company for the property located at 911 Washington Street,
Wilmington, Delaware.
4. IRON AGE MEXICO
Lease Agreement dated October, 1994 between Immobillaria Fercam, S.A. de
C.V. and Iron Age de Mexico S.A. de C.V. for the property located at Cuidad
Juarez, Chihuahua, Mexico.
5. FALCON
Lease Agreement dated January 14, 1994 between Robert A. Roy and Falcon
Shoe Mfg. Co. for the property located at 2 Cedar Street, Lewiston, ME.
-28-
<PAGE>
SCHEDULE 5.6
Intellectual Property Rights
IRON AGE CORPORATION
U.S. TRADEMARKS
---------------
<TABLE>
<CAPTION>
==============================================================================
TRADEMARK REGISTRATION NO. REGISTRATION DATE
- - --------- ---------------- -----------------
- - ------------------------------------------------------------------------------
<S> <C> <C>
IRON AGE MAXIMUM & Design 1,671,179 1/7/92
- - -----------------------------------------------------------------------------
IRON AGE SPORTWORK II 1,677,695 3/3/92
- - -----------------------------------------------------------------------------
GRABBER 928,349 2/1/72
- - -----------------------------------------------------------------------------
FREEDOM TOE 1,276,282 5/1/84
- - -----------------------------------------------------------------------------
BF AND DESIGN 1,077,024 11/8/77
- - -----------------------------------------------------------------------------
METAPRO 949,859 1/2/73
- - -----------------------------------------------------------------------------
SAF-GUARD 1,082,707 1/17/98
- - -----------------------------------------------------------------------------
IRON AGE & DESIGN 1,212,263 10/12/82
- - -----------------------------------------------------------------------------
IRON AGE 634,888 9/25/56
- - -----------------------------------------------------------------------------
MIGHTY TOUGH 1,919,851 9/19/95
- - ------------------------------------------------------------------------------
MIGHTY TOUGH & Design 1,919,852 9/19/95
==============================================================================
</TABLE>
U.S. SERVICE MARKS
------------------
<TABLE>
<CAPTION>
=============================================================================
SERVICEMARK REGISTRATION NO. REGISTRATION DATE
- - ------------- ---------------- -----------------
- - ------------------------------------------------------------------------------
<S> <C> <C>
IRON AGE 1,966,512 4/9/96
==============================================================================
</TABLE>
PENDING U.S. TRADEMARKS
-----------------------
<TABLE>
<CAPTION>
===============================================================
TRADEMARK COUNTRY REGISTRATION NO.
--------- ------- ----------------
- - ---------------------------------------------------------------
<S> <C> <C>
DUNHAM DOUBLE 74/388,256 5/4/93
COVERAGE TOES &
Design
- - ---------------------------------------------------------------
WIDE TRAK 74/480,274 1/14/94
- - ---------------------------------------------------------------
AMOR-TECH 74/702,930 7/18/95
- - ---------------------------------------------------------------
</TABLE>
-29-
<PAGE>
PENDING U.S. SERVICE MARKS
--------------------------
<TABLE>
<CAPTION>
- - ------------------------------------------------------------
SERVICE MARK SERIAL NO. FILING DATE
------------ --------- -----------
- - ------------------------------------------------------------
<S> <C> <C>
IRON AGE PLUS 75/077/5 3/25/96
- - ------------------------------------------------------------
</TABLE>
FOREIGN TRADEMARKS
------------------
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------
TRADEMARK COUNTRY REGISTRATION NO. REGISTRATION DATE
- - --------- ------- ---------------- -----------------
- - ----------------------------------------------------------------
<S> <C> <C> <C>
IRON AGE Benelux 488,506 12/7/90
- - ----------------------------------------------------------------
IRON AGE Canada 223,537 10/7/77
- - ----------------------------------------------------------------
IRON AGE Germany 1,022,860 11/27/80
- - ----------------------------------------------------------------
IRON AGE Denmark 2318-1981 9/4/81
- - ----------------------------------------------------------------
IRON AGE France 1,621,306 11/27/80
- - ----------------------------------------------------------------
IRON AGE United Kingdom 1,144,205 11/19/80
- - ----------------------------------------------------------------
IRON AGE Mexico 419,038 3/8/92
- - ----------------------------------------------------------------
IRON AGE Norway 110,047 12/3/81
- - ----------------------------------------------------------------
IRON AGE Taiwan 434,908 3/16/89
- - ----------------------------------------------------------------
IRON AGE China 642,723 5/21/93
- - ----------------------------------------------------------------
IRON AGE Sweden 176,255 4/16/81
- - ----------------------------------------------------------------
IRON AGE Hong Kong 04875 12/30/93
- - ----------------------------------------------------------------
IRON AGE United Kingdom 1,512,133 9/9/92
================================================================
</TABLE>
PENDING FOREIGN TRADEMARK APPLICATIONS
--------------------------------------
<TABLE>
<CAPTION>
- - ---------------------------------------------------------
TRADEMARK COUNTRY SERIAL NO. FILING DATE
- - --------- ------- ---------- ---------------
- - ---------------------------------------------------------
<S> <C> <C> <C>
IRON AGE Japan 07-080174 8/3/95
- - ---------------------------------------------------------
IRON AGE Korea 96-12449 3/29/96
- - ---------------------------------------------------------
IRON AGE Korea 96-12448 3/29/96
- - ---------------------------------------------------------
IRON AGE Philippines 102856 9/20/95
=========================================================
</TABLE>
-30-
<PAGE>
PENDING FOREIGN SERVICE MARKS
-----------------------------
<TABLE>
<CAPTION>
- - ------------------------------------------------------
SERVICE MARK COUNTRY SERIAL NO. FILING DATE
- - ------------ ------- ---------- ------------
- - ------------------------------------------------------
<S> <C> <C> <C>
IRON AGE Korea 96-3290 3/29/96
- - ------------------------------------------------------
IRON AGE Philippines 102,857 9/20/95
======================================================
</TABLE>
IRON AGE INVESTMENT COMPANY
---------------------------
FOREIGN SERVICE MARKS
---------------------
<TABLE>
<CAPTION>
- - ------------------------------------------------
SERVICE MARK COUNTRY SERIAL NO. FILING DATE
- - ------------ ------- ---------- -----------
- - ------------------------------------------------
<S> <C> <C> <C>
IRON AGE Mexico 509,304 10/31/95
================================================
</TABLE>
PENDING FOREIGN SERVICE MARKS
<TABLE>
<CAPTION>
- - ------------------------------------------------
SERVICE MARK COUNTRY SERIAL NO. FILING DATE
- - ------------ ------- ---------- -----------
- - ------------------------------------------------
<S> <C> <C> <C>
IRON AGE Canada 775,314 2/13/95
================================================
</TABLE>
FALCON SHOE MFG. CO.
U.S. TRADEMARKS
---------------
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------
TRADEMARK REGISTRATION NO. REGISTRATION DATE
- - --------- ---------------- -----------------
- - -------------------------------------------------------------------------
<S> <C> <C>
CHIEF QUODDY'S MAINE MADE & Design 656,488 12/31/57
- - -------------------------------------------------------------------------
DUNHAM 895,088 7/21/70
- - -------------------------------------------------------------------------
DUNHAM TYROLEANS 740,975 11/20/62
- - -------------------------------------------------------------------------
DUNHAM WAFFLE-STOMPERS 973,456 11/20/73
- - -------------------------------------------------------------------------
GREAT FOOTWEAR FOR THE GREAT 1,119,327 5/29/79
OUTDOORS
- - -------------------------------------------------------------------------
THE WAY OF NATURE. . .THRU THE 1,110,565 1/2/79
HANDS OF MAN
- - -------------------------------------------------------------------------
RUGGARDS (Stylized) 419,794 3/5/46
- - -------------------------------------------------------------------------
TRU-TRAK 1,437,386 4/21/87
- - -------------------------------------------------------------------------
TRUKKERS 993,107 9/10/74
- - -------------------------------------------------------------------------
DUNHAM DOUBLE COVERAGE TOES & 1,855,821 9/27/94
Design
=========================================================================
</TABLE>
-31-
<PAGE>
STATE TRADEMARK
---------------
<TABLE>
<CAPTION>
==============================================================
TRADEMARK STATE REGISTRATION NO. REGISTRATION DATE
- - --------------------------------------------------------------
<S> <C> <C> <C>
DUNHAM Vermont 4,553 3/29/73
(Stylized)
==============================================================
</TABLE>
FOREIGN TRADEMARKS
<TABLE>
<CAPTION>
=====================================================================
TRADEMARK COUNTRY REGISTRATION NO. REGISTRATION DATE
- - ---------------------------------------------------------------------
<S> <C> <C> <C>
DUNHAM Austria 142,074 5/21/92
- - ---------------------------------------------------------------------
DUNHAM Canada 225,957 2/10/78
TYROLEANS
- - ---------------------------------------------------------------------
DUNHAM'S Italy 259,229 5/30/70
- - ---------------------------------------------------------------------
DUNHAM Japan 1,620,432 9/29/83
- - ---------------------------------------------------------------------
DUNHAM Germany 2,027,548 1/5/93
- - ---------------------------------------------------------------------
DUNHAM Spain 1/683/507 4/3/95
- - ---------------------------------------------------------------------
DUNHAM Canada 460,625 8/2/96
- - ---------------------------------------------------------------------
QUODDY South Africa 815,685 6/6/81
MOCCASINS &
Design
=====================================================================
</TABLE>
PENDING FOREIGN TRADEMARK APPLICATIONS
--------------------------------------
<TABLE>
<CAPTION>
================================================
TRADEMARK COUNTRY SERIAL NO. FILING DATE
- - ------------------------------------------------
<S> <C> <C> <C>
DUNHAM Canada 699,353 2/20/92
- - ------------------------------------------------
AMOR-TECH Canada 801,437 1/10/96
================================================
</TABLE>
-32-
<PAGE>
PENDING U.S. PATENT APPLICATIONS
--------------------------------
<TABLE>
<CAPTION>
==========================================================
TITLE SERIAL NO. FILING DATE
- - ----------------------------------------------------------
<S> <C> <C>
METHODS AND APPARATUSES FOR 08/543,002 10/13/95
INSULATING AN ARTICLE OF
FOOTWEAR HAVING A PROTECTIVE
TOE CAP
==========================================================
</TABLE>
Service Mark License Agreement dated January 29, 1995 between Iron Age
Investment Company and Iron Age Canada, Ltd.
Service Mark License Agreement dated January 29, 1995 between Iron Age
Investment Company and Iron Age de Mexico S.A. de C.V.
Services Agreement dated January 29, 1995 between Iron Age Investment Company
and Iron Age Corporation.
Assignment of Service Mark dated February 14, 1995 between Iron Age Corporation
and Iron Age Investment Company.
Assignment of Service Mark dated January 29, 1995 between Iron Age Corporation
and Iron Age Investment Company.
License Agreement dated July 25, 1994 (the "Falcon/Gore License Agreement")
between Falcon Shoe Mfg. Co. and W.L. Gore & Associates, Inc. ("Gore").
Manufacturing Certification Agreement dated July 25, 1994 (the "Falcon/Gore
Manufacturing Agreement") between Falcon Shoe Mfg. Co. and Gore.
License Agreement dated August 15, 1994 between Iron Age Corporation and Gore
(the "Iron Age/Gore License Agreement").
-33-
<PAGE>
SCHEDULE 5.7
Contractual Obligations
(a)
Employment Agreement among the Company, Iron Age Corporation and Donald R.
Jensen dated May 4, 1994.
Employment Agreement among the Company, Iron Age Corporation and Keith A.
McDonough dated November 20, 1995.
Employment Agreement among the Company, Iron Age Corporation and William J.
Mills dated November 20, 1995.
Employment Agreement among the Company, Iron Age Corporation and Max W. Rush
dated November 20, 1995.
Employment Agreement among the Company, Iron Age Corporation and Don H. Stella
dated November 20, 1995.
Employment Agreement among Falcon Shoe Mfg. Co. and Theodore C. Johanson dated
August 1, 1994.
Johanson Non-Competition Agreement dated August 1, 1994.
Consulting Services Agreement between Iron Age Corporation and BCC Industrial
Services, Inc.
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Donald R. Jensen.
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and William J. Mills.
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Keith A. McDonough.
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Willie J. Taaffe.
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation,
Falcon Shoe Mfg. Co. and Theodore C. Johanson.
Oral agreement to pay Ted Tseng a commission based on per pair of footware sales
for footwear exported from China, Korea and Taiwan.
Oral agreement to pay H.H. Brown Company a commission based upon a percentage of
"first cost" for footwear exported from China, Korea and Taiwan.
The Hanley Deferred Compensation Agreement dated August 1, 1994 between Falcon
Shoe Mfg. Co. and Bruce Hanley.
Key Man Life Insurance Policy for Theodore Johanson.
-34-
<PAGE>
(b)
Distributor Agreement dated February 25, 1994 between Iron Age Corporation and
Deep South Mobile.
Letter Agreement dated May 23, 1995 between Steel Toes Enterprises and Iron Age
Corporation.
Letter Agreement dated March 26, 1996 between Blackwood Pacific International
and Iron Age Corporation, as amended on September 18, 1996.
(d)
See Schedule 5.14
(e)
Amended and Restated Credit Agreement dated as of January 27, 1995 among Iron
Age Corporation and PNC Bank as agent for the banks named therein and related
documentation.
Amended and Restated Revolving Credit Note in favor of PNC Bank in the principal
amount of up to $10,200,000.
Revolving Credit Note in favor of Society National Bank in the principal amount
of up to $6,800,000.
Amended and Restated Term Note in favor of PNC Bank in the principal amount of
$6,000,000.
Term Note in favor of Society National Bank in the principal amount of
$4,000,000.
Swing Note in favor of PNC Bank in the principal amount of up to $2,000,000.
Promissory Note in favor of Colonial Safety, executed by Iron Age Corporation,
in the amount of approximately $150,000.
Acquisition Financing Agreement dated January 29, 1990 between Iron Age Holdings
Corporation, Childs Acquisition Corporation, SLA I, MLA I, MLA II and MLA III,
as amended, and related documentation.
Promissory Note dated January 30, 1990 in the principal amount of $4,000,000 in
favor of Mezzanine Lending Associates I, L.P.
Promissory Note dated January 30, 1990 in the principal amount of $18,005,211 in
favor of Mezzanine Lending Associates II, L.P.
Promissory Note dated January 30, 1990 in the principal amount of $10,803,143 in
favor of Mezzanine Lending Associates III, L.P.
Senior Note dated October 2, 1990 in the principal amount of $18,881,646 in
favor of Senior Lending Associates I, L.P.
Senior Note dated October 2, 1990 in the principal amount of $10,000,000 in
favor of Senior Lending Associates II, L.P.
Term Loan in favor of Colonial Safety in the principal amount of $349,231.
-35-
<PAGE>
Amended and Restated Security Agreement dated as of January 27, 1995 between
Falcon Shoe Mfg. Co. and PNC Bank as agent for the Banks.
Security Agreement (Revolving Credit Note) dated as of January 27, 1995 between
Falcon Shoe Mfg. Co. and PNC Bank as agent for the Banks.
Amended and Restated Security Agreement dated as of January 27, 1995 between
Iron Age Corporation and PNC Bank as agent for the banks named therein.
Stock Pledge Agreement dated as of January 27, 1995 between Iron Age Corporation
and PNC Bank as agent for the Banks.
Amended and Restated Holdings Pledge Agreement dated as of January 27, 1995
between Iron Age Holdings Corporation and PNC Bank, as agent for the Banks.
Stock Pledge Agreement dated as of January 27, 1995 between Iron Age Investment
Company and PNC Bank as agent for the Banks.
Collateral assignment to the holders of the BCC Debt of Donald Jensen's Key Man
Life Insurance Policy.
Amended and Restated Guaranty dated January 27, 1995 by Iron Age Holdings
Corporation of the indebtedness of Iron Age Corporation under the PNC Credit
Agreement.
Guaranty by Iron Age Holdings Corporation of amounts owing by Iron Age
Corporation as lessee under a Lease with Amplicon, Inc.
Guaranty by Iron Age Corporation in favor of Von-Land Corporation pursuant to
the Iron Age Canada Lease.
Guaranty and Suretyship dated as of January 27, 1995 by Falcon Shoe Mfg. Co. of
the indebtedness of Iron Age Corporation under the PNC Credit Agreement.
Amended and Restated Subsidiary Guaranty and Suretyship Agreement dated as of
January 27, 1995 by Iron Age Investment Company of the indebtedness of Iron Age
Corporation under the PNC Credit Agreement.
Indemnity Agreement dated June 11, 1991 in favor of Von-Land Corporation,
Limited by Iron Age Canada, Ltd.
(f)
Acquisition Financing Agreement dated January 29,1990 between Iron Age Holdings
Corporation, Childs Acquisition Corporation, SLA I, MLA I, MLA II and MLA III,
as amended, and related documentation.
Stock Purchase Agreement dated December 22, 1989, as amended, among the Seller
referred to therein, the Boots Company PLC and Iron Age Holdings Corporation,
and related documentation.
Stock Purchase Agreement among Iron Age Holdings Corporation, Theodore C.
Johanson, Patricia G. Lundholm and Falcon Shoe Mfg. Co. Employee Stock Ownership
Plan Trust dated November 13, 1989, and related documentation.
Asset Purchase Agreement for Airweld and related documentation.
-36-
<PAGE>
Asset Purchase Agreement for Ohio Safety Shoe Corporation dated February 1, 1991
and related documentation.
Asset Purchase Agreement for Protective Footwear, Inc. dated May 6, 1991 and
related documentation.
Asset Purchase Agreement for MacDougal's Men at Work, Inc. dated June 22, 1995
and related documentation.
Asset Purchase Agreement for Working Comfort, Inc. dated September 25, 1995 and
related documentation.
Asset Purchase Agreement for Colonial Safety Supply, Inc. dated October 6, 1995
and related documentation.
Asset Purchase Agreement for Wayne Safety, Inc. dated June 12, 1991 and related
documentation.
Indemnification Agreement dated September 26, 1991 among Iron Age Corporation,
LADD Furniture, Inc. and Pennsylvania House, Inc. and related documentation.
(g)
General Services Administration Contract, effective July 26, 1996.
From time to time, Iron Age Corporation provides Central Tractor Farm and Family
Center, Inc. ("CT"), Walls Holdings Company, Inc. and its subsidiaries, and
possibly other Butler Capital Corporation portfolio companies with footwear and
other items pursuant to purchase orders received by Iron Age Corporation.
Agreement between W.W. Grainger and Iron Age Corporation dated July 1, 1996.
Distributor Agreement dated February 25, 1994 between Iron Age Corporation and
Deep South Mobile.
Authorized Wholesale Agreement dated September 27, 1996 between Iron Age
Corporation and Air Liquide.
(h)
Gore/Falcon License Agreement.
Gore/Falcon Manufacturing Certification Agreement.
Iron Age/Gore License Agreement.
-37-
<PAGE>
SCHEDULE 5.8
Insurance
Property Insurance Program with Lexington Insurance Company and Travelers
Insurance Company (Primary) and Fireman's Fund and Hartford Insurance
Company (Excess)
Boiler Insurance with Travelers
Casualty covering General, Liability, Workmen's Compensation and Auto with
National Union
Umbrella Policy with National Union
Crime Coverage Policy with National Union
Pension/Fiduciary Liability Insurance with National Union Insurance Company
Cargo Policy with Great American
Travel Accident Policy with Chubb
Maine Workmen's Compensation (separately insured) with Maine Employers
Mutual Insurance Company
New York Disability Policy with Standard Security
Non-Owned Aviation Policy with AIG Aviation
Business Insurance Policy with Economical Mutual Insurance Company for Iron
Age Canada, Ltd.
Alberta Automobile Insurance Policy with Economical Mutual Insurance
Company for Iron Age Canada Ltd.
Ontario Automobile Insurance Policy with Economical Mutual Insurance
Company for Iron Age Canada, Ltd.
Mexico Property and Liability Policy with Chubb
Falcon General Liability
Falcon Business Auto
Falcon Primary Worker's Compensation with Maine Employers Mutual Insurance
Company
Falcon Excess Worker's Compensation with General Reinsurance Company
Falcon Crime Policy
Falcon Profit Sharing Policy
Key Man Insurance; D. Jensen & T. Johanson
-38-
<PAGE>
SCHEDULE 5.9
Litigation Matters
Richard Kleer, United States District Court for Western District of
Pennsylvania, C.A. 96-2208. Kleer, a former employee at the Iron Age
Corporation's Pittsburgh, Pennsylvania, facility, on December 9, 1996, filed a
complaint alleging discrimination on the basis of sex, age and disability in his
May 30, 1995 discharge. The charge had previously been dismissed by the Equal
Employment Opportunity Commission for lack of cause. The Company intends to
vigorously defend itself.
See attached Schedule B.
See attached Schedule C.
-39-
<PAGE>
SCHEDULE 5.10
Compliance with Laws
None
-40-
<PAGE>
SCHEDULE 5.11
Tax Matters
Iron Age Corporation is currently under sales tax audits with the following
states:
Illinois
Arizona
Indiana
Iron Age Corporation is currently under an income tax audit with New York.
-41-
<PAGE>
SCHEDULE 5.12
Employee Benefit Plans
Iron Age Holdings Corporation Incentive Stock Option Plan.
Iron Age Corporation Profit Sharing Retirement Plan as amended through
January 1, 1994.
Iron Age Corporation Pension Plan for Employees of Iron Age Corporation
Represented by Teamsters Local Union 636 as amended through January 1, 1994.
Iron Age Corporation Supplemental Pension Plan.
Falcon 1994 Super Incentive Bonus Plan.
Iron Age Corporation Group Benefit Plans:
Long Term Disability Plan dated September 1, 1996
Travel Accident Insurance Plan dated January 30, 1990
Blue Cross/Blue Shield Medical Plan dated October 1, 1996
Group Life/ADD Plan dated September 1, 1996
Educational Assistance Plan dated January 1, 1992
Prevailing Fee 100 Group Medial Plan dated March 1, 1994
U.S. Health Care HMO Plan dated October 1, 1987
Blue Choice HMO Plan dated December 1, 1991
Hospital/Medical/Surgical Plan of Puerto Rico dated November 1, 1996
Cafeteria Plan dated August 1, 1993
Falcon Shoe Mfg. Co. Welfare Benefit Plans:
Falcon Fringe Benefits Plan
LTD Contract dated April 7, 1993
Group Life Contract dated August 10, 1993
Weekly Indemnity Contract dated August 10, 1993
Falcon Flex Plan dated July 1, 1994
Iron Age Canada, Ltd. Group Insurance Policy dated December 7, 1993.
Iron Age Corporation Sale Incentive Plan
Falcon Shoe Mfg. Co. Sale Incentive Plan
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Donald R. Jensen
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and William J. Mills
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Keith A. McDonough
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Willie J. Taaffe.
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Theodore C. Johanson
-42-
<PAGE>
Hanley Deferred Compensation Letter dated August 1, 1994
The following individuals have the right to the following annual payments until
death:
<TABLE>
<S> <C>
Mrs. Childs $48,000
Mr. Mitchell $18,000
Mr. Powers $ 2,400
-------
$68,400
=======
</TABLE>
Iron Age Corporation maintains the Pension Plan for Employees of Iron Age
Corporation (the "Plan") represented by Teamsters Local Union 636. The Plan was
amended effective December 31, 1991 to freeze all future benefit accruals. The
Plan is at full-funding limits.
See attached letter re: Forms 5500
-43-
<PAGE>
SCHEDULE 5.14
Affiliate Transactions
----------------------
Contribution Agreement dated as of December 26, 1996 among Butler Capital
Corporation, as the Seller's Representatives, and the Sellers named therein
("Sellers Contribution Agreement").
Acquisition Financing Agreement dated January 29, 1990 between Iron Age Holdings
Corporation, Childs Acquisition Corporation, SLAI, MLAI, MLAI, MLA II and MLA
III, as amended, and related documents
Lease for Premises at 130 Main Street, Penn Yan, New York
Jensen Demand Promissory Note in favor of Iron Age Corporation dated as of
November 20, 1995 as executed by Donald R. Jensen in the principal amount of
$1,000,000.
Rush Demand Promissory Note in favor of Iron Age Corporation dated as of
November 20, 1995 as executed by Max W. Rush in the principal amount of
$265,000.
Mills Demand Promissory Note in favor of Iron Age Corporation dated as of
November 20, 1995 as executed by William J. Mills in the principal amount of
$265,000.
McDonough Demand Promissory Note in favor of Iron Age Corporation dated as of
November 20, 1995 as executed by Keith A. McDonough in the principal amount of
$265,000.
Stella Demand Promissory Note in favor of Iron Age Corporation dated as of
November 20, 1995 as executed by Donald H. Stella in the principal amount of
$265,000.
Jensen Stock Pledge Agreement dated as of November 20, 1995 between Donald R.
Jensen and Iron Age Corporation.
Rush Stock Pledge Agreement dated as of November 20, 1995 between Max W. Rush
and Iron Age Corporation.
Mills Stock Pledge Agreement dated as of November 20, 1995 between William J.
Mills and Iron Age Corporation.
McDonough Stock Pledge Agreement dated as of November 20, 1995 between Keith A.
McDonough and Iron Age Corporation.
Stella Stock Pledge Agreement dated as of November 20, 1995 between Donald H.
Stella and Iron Age Corporation.
Amended and Restated Stockholders' Agreement dated as of May 21, 1990, as
amended May 4, 1994, among Iron Age Corporation and the Stockholders named
therein.
Collateral assignment to the holders of the BCC Debt of Donald Jensen's Key Man
Life Insurance Policy.
Employment Agreement among the Company, Iron Age Corporation and Donald R.
Jensen dated May 4, 1994.
Employment Agreement among the Company, Iron Age Corporation and Keith A.
McDonough dated November 20, 1995.
Employment Agreement among the Company, Iron Age Corporation and William J.
Mills dated November 20, 1995.
-44-
<PAGE>
Employment Agreement among the Company, Iron Age Corporation and Max W. Rush
dated November 20, 1995.
Employment Agreement among the Company, Iron Age Corporation and Don H. Stella
dated November 20, 1995.
Employment Agreement among Falcon Shoe Mfg. Co. and Theodore C. Johanson dated
August 1, 1994.
Johanson Non-Competition Agreement dated August 1, 1994.
Consulting Services Agreement between Iron Age Corporation and BCC Industrial
Services, Inc.
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Donald R. Jensen.
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and William J. Mills.
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Keith A. McDonough.
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Willie J. Taaffe.
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation,
Falcon Shoe Mfg. Co. and Theodore C. Johanson.
From time to time, Iron Age Corporation provides Central Tractor Farm and Family
Center, Inc. ("CT"), Walls Holdings Company, Inc. and its subsidiaries and
possibly other Butler Capital Corporation portfolio companies with footwear and
other items pursuant to purchase orders received by Iron Age Corporation.
-45-
<PAGE>
SCHEDULE 8.3
Third Party Consents
1. Consent of PNC Bank and Society National Bank pursuant to PNC Credit
Agreement and PNC Stock Pledge Agreement dated January 2, 1996.
2. Consent of Gore relating to the Falcon/Gore License Agreement referred to
on Schedule 5.6.
3. Consent of Gore relating to the Falcon/Gore Manufacturing Agreement
referred to on Schedule 5.6.
4. Consent of Gore relating to the Iron Age/Gore License Agreement referred to
on 5.6.
5. Consent of CTI Group/Amplicon Leasing relating to the CTI Group/Amplicon
Leasing Security Agreement covering equipment relating to the Mobile Point
of Sale Agreement.
6. Consent of Amplicom Financial relating to the Master Lease Agreement by and
between Amplicon, Inc. and Iron Age Corporation.
7. Consent of Von-Land Corporation Limited under a lease dated June 11, 1991
and a renewal lease dated November 23, 1995 between Von-Land Corporation
Limited and Iron Age Canada Ltd. for office space located at 475 N.
Rivermede Road, Unit 2, Concord, Ontario LYK3RZ.
-46-
<PAGE>
SCHEDULE 10.1
Employee Payments
Iron Age Corporation Sale Incentive Plan
Falcon Shoe Mfg. Co. Sale Incentive Plan
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Donald R. Jensen
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and William J. Mills
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Keith A. McDonough
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Willie J. Taaffe
Letter Agreement dated August 27, 1996 among Iron Age Holdings Corporation, Iron
Age Corporation and Theodore C. Johanson
Sellers Contribution Agreement
-47-
<PAGE>
EXHIBIT 10.20
Butler Capital Corporation
767 Fifth Avenue, 6th Floor
New York, New York 10153
February 26, 1997
IAH Acquisition Corp.
c/o Fenway Partners, Inc.
152 West 57th Street, 59th floor
New York, New York 10019
Re: Amendment No. 1 to Stock Purchase Agreement (the "Amendment")
-------------------------------------------------------------
Ladies and Gentlemen:
Butler Capital Corporation, in its capacity as Sellers' representative (the
"Sellers' Representative"), IAH Acquisition Corp. ("Buyer") and each of John C.
Engel, Keith A. McDonough, William J. Mills, Joseph J. Sebes, Willie J. Taaffe,
and Mezzanine Lending Associates I, L.P., Mezzanine Lending Associates II, L.P.,
Mezzanine Lending Associates III, L.P., Senior Lending Associates I, L.P.,
Senior Lending Associates II, L.P. and BCC Industrial Services, Inc.
individually, and Donald R. Jensen, individually and as the consenting party on
behalf of the Selling Parties pursuant to the provisions of Section 14.6 of the
Purchase Agreement (as defined below) hereby agree as follows:
1. REFERENCE TO PURCHASE AGREEMENT.
Reference is hereby made to the Stock Purchase Agreement among Iron Age
Holdings Corporation, the Selling Parties of Iron Age Holdings Corporation and
Buyer (the "Purchase Agreement") dated as of December 26, 1996. Terms defined
in the Purchase Agreement and not otherwise defined herein are used herein with
the meanings so defined.
2. AMENDMENTS TO PURCHASE AGREEMENT.
In accordance with Section 14.2 of the Purchase Agreement, Buyer and
Sellers' Representative, and each of the Sellers hereby agree that, effective as
of the date hereof, the Purchase Agreement is hereby amended as follows:
2.1. Amendment to Section 3.1. Section 3.1 of the Purchase Agreement is
------------------------
hereby amended and restated to read in its entirety as follows:
<PAGE>
"3.1. Purchase Price. At the Closing, the Buyer will pay by wire
--------------
transfer of immediately available funds and the issuance of the Rollover
Options (as defined below) an aggregate amount equal to $138,000,000 (the
"Purchase Price"). The Purchase Price shall be payable at the Closing (i)
--------------
by wire transfer of immediately available funds, to such accounts as the
holders of the BCC Debt and the PNC Debt may specify, of payment in full of
the outstanding BCC Debt and PNC Debt, respectively (the "Debt Payment"),
------------
(ii) cancellation of Options to purchase an aggregate of 6,146.82 shares of
Class A Common Stock held by certain specified members of the Company's
management as set forth on Schedule 1 hereto and the issuance promptly
following the Closing of options to purchase, for an exercise price of
$36.36 per share, an aggregate of 11,387.52 shares of common stock in the
parent corporation of Buyer (the "Rollover Options"), valued for purposes
----------------
of this Agreement at $3,726,821.33 (the "Option Value"), to such members of
------------
management (the "Rollover Managers") in the amounts set forth opposite
-----------------
their names under column 7 on Schedule 1 hereto and (iii) by wire transfer
of immediately available funds, to such account or accounts as the Sellers
may specify, of the balance of the Purchase Price, after deducting the Debt
Payment and the Option Value (the "Cash Consideration"). The Cash
------------------
Consideration shall be allocated among each of the Sellers in the
respective percentages (each a "Closing Payment Percentage") set forth
--------------------------
under column 8 on Schedule 1."
----------
2.2. Amendment to Section 3.3. Section 3.3 of the Purchase Agreement is
------------------------
hereby amended and restated to read in its entirety as follows:
"3.3. Delivery. On the Closing Date, each of the Sellers shall
--------
deliver to the Buyer the certificate or certificates evidencing all of the
Shares, Options and Warrants held by such Seller against delivery by the
Buyer to (a) the holders of the BCC Debt and PNC Debt, their respective
portions of the Debt Payment, (b) the Rollover Managers, the Rollover
Options, and (c) the Sellers, the Cash Consideration."
2.3 Amendment to Article 9. A new Section 9.6 shall be inserted
----------------------
immediately following Section 9.5, which Section 9.6 shall read in its entirety
as follows:
"9.6. Management Participation.
------------------------
9.6.1. Options to purchase an aggregate of 6,146.82 shares of
Class A Common Stock of the Company held by the Rollover Managers
shall be cancelled;
-2-
<PAGE>
9.6.2. Rollover Options to purchase, for an exercise price of
$36.36 per share, an aggregate of 11,387.52 shares of the common stock
of the parent corporation of Buyer ("Parent Stock"), all as set forth
------------
on Schedule 1 hereto, shall be issued to the Rollover Managers in
----------
consideration of their performance of future services to Buyer and its
Affiliates; and
9.6.3. Certain of the Rollover Managers shall purchase in
exchange for a cash payment of $45,905.67 Rollover Options to
purchase, for an exercise price of $36.36 per share, an aggregate of
140.26 shares of Parent Stock all as set forth on Schedule 1 hereto."
----------
2.4. Amendment to Section 11.3. Section 11.3 is hereby amended by
-------------------------
inserting the following sentence at the end thereof:
"For purposes of determining any Seller's Percentage of the Cash
Consideration under clause (b) of this Section 11.3, such amount
shall be calculated in accordance with column 6 of Schedule 1 as
----------
if Buyer had purchased in cash, for an amount equal to the
Purchase Price minus the Debt Payment, all of the Shares, Options
and Warrants at the Closing and no Rollover Options were issued."
2.5. Amendments to Section 14.6.
--------------------------
2.5.1. Section 14.6(a) is hereby and restated to read in its
entirety as follows:
"14.6. Sellers' Representative. (a) Each of the Sellers hereby
-----------------------
appoints Butler Capital Corporation ("Sellers' Representative") or its
-----------------------
designee (as appointed in writing), as the agent, proxy, and attorney-
in-fact for the Sellers for all purposes under this Agreement
(including without limitation full power and authority to act on the
Sellers' behalf) to take any action, should it elect to do so in its
sole discretion, (i) to consummate the transactions contemplated under
this Agreement, (ii) in the event of such consummation, to receive on
behalf of the Sellers the Cash Consideration, provided, that,
-------- ----
Kirkpatrick & Lockhart LLP may, pursuant to this Section 14.6, receive
on behalf of the Individual Sellers each of such Individual Seller's
Closing Payment Percentage, net of the attributable Seller's
Percentage of expenses, relating to the Shares to be sold by such
Individual Sellers hereunder and the Company may, pursuant to this
Section 14.6, receive on behalf of the Individual Sellers each of such
Seller's Closing Payment Percentage, net of the attributable Seller's
Percentage of expenses, relating to the Options to be sold by such
Individual Seller hereunder, (iii) to receive and pay out of the Cash
Consideration the Seller's Percentage attributable to each Seller of
all expenses incurred by or on behalf of the Sellers in connection
with the transactions contemplated by this Agreement
-3-
<PAGE>
and to pay to each of the Sellers his or its Closing Payment
Percentage, net of the attributable Seller's Percentage of expenses,
provided, that, each of Kirkpatrick & Lockhart LLP. and the Company
-------- ----
may, pursuant to this Section 14.6, pay to the Individual Sellers on
whose behalf they receive Cash Consideration under clause (ii) hereof
such Individual Sellers' Closing Payment Percentage, net of the
attributable Seller's Percentage of expenses, subject to any
withholding requirements under applicable law, (iv) to conduct or
cease to conduct, should it elect to do so in its sole discretion, the
defense of any or all claims against any of the Sellers in connection
with this Agreement other than claims under 11.1.1(i) or 11.1.1(iii)
of this Agreement, and settle any or all such claims in its sole
discretion on behalf of any or all the Sellers and exercise any or all
rights which any or all of the Sellers are permitted or required to
exercise under this Agreement, and (v) to execute and deliver, should
it elect to do so in its sole discretion, on behalf of any or all of
the Sellers any or all amendments to this Agreement and to take any or
all other actions to be taken by or on behalf of any or all of the
Sellers and exercise any or all rights which any or all of the Sellers
are permitted or required to exercise under this Agreement; provided,
--------
however, that (a) the Sellers' Representative shall have no authority
-------
to enter into any settlement of any claim under clause (iv) above or
to execute and deliver any amendment to this Agreement under clause
(v) above on behalf of Sellers (the "Individual Sellers") other than
------------------
MLA I, MLA II, MLA III, SLA I, SLA II and BCC ISI (collectively, the
"BCC Sellers"), without the consent of Donald R. Jensen, (b) the
-----------
Sellers' Representative shall have no obligation to conduct any
defense or settle any claim or enter into any amendment or take any
action whatsoever on behalf of any Seller under this Section 14.6 or
otherwise in its capacity as Sellers' Representative and (c) any
settlement entered into or other action taken by any Individual Seller
shall be valid only to the extent expressly permitted by this Section
14.6, and no such settlement or action (whether permitted or not by
this Section 14.6) shall bind or otherwise affect the rights or
obligations of the Sellers' Representative or any BCC Seller. Each of
the Sellers hereby agrees not to assert any claim against, and to
indemnify and hold harmless the Sellers' Representative from and
against any and all Losses incurred by, the Sellers' Representative or
any of its partners, directors, officers, employees, agents,
stockholders, consultants, investment bankers, representatives or
controlling persons, or any Affiliate of any of the foregoing,
relating to Sellers' Representative's capacity as Sellers'
Representative other than such claims or Losses resulting from the
Sellers' Representative's gross negligence or wilful misconduct."
2.5.2. Section 14.6 is hereby further amended by inserting the
following immediately after paragraph (b) thereof:
-4-
<PAGE>
"(c) For purposes of determining any Seller's Percentage
under this Section 14.6, such amount shall be calculated in
accordance with column 6 of Schedule 1 as if Buyer had purchased
----------
in cash, for an amount equal to the Purchase Price minus the Debt
Payment, all of the Shares, Options and Warrants at the Closing
and no Rollover Options were issued."
3. SCHEDULES.
Attached to this Amendment as Exhibit A is the amended and restated
Schedule 1 to the Purchase Agreement, and such Schedule is hereby amended and
restated so as to read in its entirety as set forth on Exhibit A hereto.
4. REPRESENTATIONS AND WARRANTIES.
Each of the parties hereto represents and warrants to each other party that
this Amendment has been duly authorized, executed and delivered by, and is
Enforceable against each such party.
5. MISCELLANEOUS.
Except to the extent specifically amended hereby the provisions of the
Purchase Agreement shall remain unmodified and the Purchase Agreement as amended
hereby is hereby confirmed, as being in full force and effect. This Amendment,
which shall apply to all parties to the Purchase Agreement, may be executed in
counterparts which together shall constitute one instrument and shall be deemed
by a contract made under the laws of the State of Delaware and shall be
construed under and governed by the laws of such State and, shall bind and inure
to the benefit of the parties hereto and their respective successors and
assigns.
[The rest of this page is intentionally left blank.]
-5-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Amendment as of the date first above written.
BUTLER CAPITAL CORPORATION,
in its capacity as Sellers'
Representative under the Purchase
Agreement
By: /s/ Costa Littas
_____________________________________
Title: Managing Director
IAH ACQUISITION CORP.
By: /s/ Andrea Geisser
_____________________________________
Title: Vice President
/s/ John C. Engel
________________________________________
John C. Engel, individually
/s/ Keith A. McDonough
________________________________________
Keith A. McDonough, individually
/s/ William J. Mills
________________________________________
William J. Mills, individually
/s/ Joseph J. Sebes
________________________________________
Joseph J. Sebes, individually
/s/ Willie J. Taaffe
________________________________________
Willie J. Taaffe, individually
/s/ Donald R. Jensen
________________________________________
Donald R. Jensen, individually and
as the consenting party on behalf of
the Selling Parties other than the BCC
Sellers pursuant to Section 14.6 of the
Purchase Agreement
<PAGE>
Mezzanine Lending Associates I, L.P.
By: Mezzanine Lending Management I, L.P.,
its general partner
By: /s/ Costa Littas
__________________________________________,
its authorized signatory
Mezzanine Lending Associates II, L.P.
By: Mezzanine Lending Management II, L.P.,
its general partner
By: /s/ Costa Littas
__________________________________________,
its authorized signatory
Mezzanine Lending Associates III, L.P.
By: Mezzanine Lending Management III, L.P.,
its general partner
By: /s/ Costa Littas
__________________________________________,
its authorized signatory
Senior Lending Associates I, L.P.
By: Senior Lending Management I, L.P.,
its general partner
By: /s/ Costa Littas
__________________________________________,
its authorized signatory
Senior Lending Associates II, L.P.
By: Senior Lending Management II, L.P.
its general partner
By: /s/ Costa Littas
__________________________________________,
its authorized signatory
BCC Industrial Services, Inc.
By: /s/ Donald E. Cihak
__________________________________________,
a duly authorized officer
<PAGE>
Exhibit A
AMENDED AND RESTATED SCHEDULE 1
<PAGE>
SCHEDULE 1
Selling Shareholders, Shares, Options and Warrants
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6)
Seller's Percentage
("Seller's Percentage")
Total Options Options of Fully Diluted
Selling Shareholder Shares Options/1/ Being Sold Rolling Over Warrants/1/ Common Shares/2/
- - ------------------- ------ ---------- ---------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Senior Lending Associates I, L.P. 10,352/3/ 8.87
Senior Lending Associates II, L.P. 5,481/3/ 4.69
Mezzanine Lending Associates I, L.P. 9,652/5/ 8.27
Mezzanine Lending Associates II, L.P. 43,447/4/ 37.22
Mezzanine Lending Associates III, L.P. 26,068/5/ 22.33
BCC Industrial Services, Inc. 3,502.00 3.00
Theodore C. Johanson 850/1/ .073
Donald R. Jensen 2,760/1/ 6,700 3,249.15 3,450.85 8.10
William J. Mills 560/1/ 1,097 52.89 1,044.11 1.42
Keith A. McDonough 560/1/ 1,097 52.89 1,044.11 1.42
Willie J. Taaffe 259 0 259.00 0.22
Kenneth R. Herbaugh 124 124 -- 0.11
Gary Tousignant 311 311 -- 0.27
Richard J. Jones 281 281 -- 0.24
Joseph J. Sebes 390 390 174.22 0.33
John C. Engel 323 148.47 174.53 0.28
John F. Mason 124 124 -- 0.11
Max W. Rush 730/1/ 305 305 -- 0.89
Don H. Stella 560/1/ 625 625 -- 1.01
James M. Randesi 207 207 -- 0.18
Raymond M. Lickert 207 207 -- 0.18
Frank J. Jindra 162 162 -- 0.14
<CAPTION>
(7) (8)
Seller's Portion
of Cash at Closing
("Closing
Rollover Payment
Selling Shareholder Options Percentage")/7/
- - ------------------- ------- ---------------
<S> <C> <C>
Senior Lending Associates I, L.P. -- 6,867,206.24/8/
Senior Lending Associates II, L.P. -- 3,635,930.97/8/
Mezzanine Lending Associates I, L.P. -- 6,402,847.24/8/
Mezzanine Lending Associates II, L.P. -- 28,821,436.39/8/
Mezzanine Lending Associates III, L.P. -- 17,292,729.16/8/
BCC Industrial Services, Inc. -- 2,131,352.22/8/
Theodore C. Johanson -- 563,863.69
Donald R. Jensen 6,404.83 2,784,834.71
William J. Mills 1,929.75 138,291.42
Keith A. McDonough 1,929.75 138,291.42
Willie J. Taaffe 617.89/6/ 0.00
Kenneth R. Herbaugh -- 7,440.04
Gary Tousignant -- 18,600.11
Richard J. Jones -- 16,802.10
Joseph J. Sebes 322.78 13,378.57
John C. Engel 322.78 9,205.40
John F. Mason -- 7,440.04
Max W. Rush -- 281,616.37
Don H. Stella -- 301,146.42
James M. Randesi -- 12,400.07
Raymond M. Lickert -- 12,400.07
Frank J. Jindra -- 9,672.06
</TABLE>
_______________________
/1/ Shares of Class A Common Stock.
/2/ Assumes the issuance of all Shares and Options and BCC ISI Warrants to
purchase 3,502 shares of Class A Common Stock.
/3/ Shares of Class B-2 Common Stock.
/4/ Shares of Class B-2 Common Stock.
/5/ Shares of Class B-3 Common Stock.
/6/ Includes purchase by Mr. Taaffe of options to purchase 140.26 shares
in Buyer's parent for a purchase price of $33.36 per option.
/7/ Calculated in accordance with the following formula: Seller's
Percentage (Equity Proceeds + Aggregate Exercise Price + Aggregate
Note Proceeds) -Individual Exercise Price - Individual Note Proceeds.
Individual Exercise Price means, as to Sellers who are holders of
Options or Warrants, the applicable Exercise Price of Options or
Warrants held by such Sellers. The subtraction of the Exercise Price
applies only to Sellers who are selling Options or Warrants. The
subtraction of Individual Note Proceeds applies only to Sellers who
have borrowed money from Iron Age companies.
/8/ Excludes deduction of pro rata portion of $21,095 in expenses.
<PAGE>
EXHIBIT 10.21
ROBINSON PLAZA
OFFICE BUILDING THREE
LEASE
BY AND BETWEEN
JOSEPH A. MASSARO, JR.
AND
CAROLYN C. MASSARO
LANDLORD
AND
IRON AGE CORPORATION
TENANT
March 1, 1993
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Title Page
- - ----- ----
<S> <C>
PARTIES..................................................................... 5
PREMISES.................................................................... 5
TERM........................................................................ 5
RENEWAL OPTION.............................................................. 5
HOLDING OVER................................................................ 6
RENT........................................................................ 6
RENTAL ADJUSTMENTS FOR EXPENSES............................................. 7
LANDLORD'S RECORDS.......................................................... 10
SECURITY DEPOSIT............................................................ 11
USE OF PREMISES............................................................. 11
CONSTRUCTION OF PREMISES.................................................... 11
ALTERATIONS................................................................. 11
BUILDING SERVICES........................................................... 13
ASSIGNMENT AND SUBLETTING................................................... 16
LANDLORD'S INDEMNIFICATION.................................................. 25
FIRE OR OTHER CASUALTY...................................................... 26
SUBORDINATION APPROVAL AND ATTORNMENT....................................... 27
EMINENT DOMAIN.............................................................. 28
ESTOPPEL CERTIFICATE........................................................ 29
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C>
BANKRUPTCY.................................................................. 29
DEFAULTS AND REMEDIES....................................................... 30
NON-WAIVER.................................................................. 34
RELOCATION OF TENANT........................................................ 35
QUIET ENJOYMENT............................................................. 35
AVOIDABLE DELAY............................................................. 35
SUCCESSORS.................................................................. 36
GOVERNING LAW............................................................... 36
SEVERABILITY................................................................ 36
CAPTIONS.................................................................... 36
GENDER...................................................................... 36
NOTICES..................................................................... 37
BROKERS..................................................................... 37
EXECUTION................................................................... 37
MODIFICATIONS............................................................... 37
SIGNAGE..................................................................... 38
REPRESENTATIONS BY LANDLORD................................................. 38
ENTIRE AGREEMENT............................................................ 39
</TABLE>
EXHIBITS
--------
<TABLE>
<CAPTION>
<S> <C>
FLOOR PLAN......................................................................
LANDLORD'S WORK........................................................... 1 - 4
CLEANING SPECIFICATIONS................................................... 1 - 2
RULES AND REGULATIONS..................................................... 1 - 4
</TABLE>
-3-
<PAGE>
LEASE
PARTIES 1. THIS LEASE is made as of the 1st, day of March, 1993,
between Joseph A. Massaro, Jr. and Carolyn C. Massaro,
having their principal office at 212 Ninth Street,
Pittsburgh, Pennsylvania 15222 (hereinafter collectively
called "Landlord") and Iron Age Corporation, having its
principal office at Robinson Plaza Three, Suite 400, Route
60 and Park Manor Drive, Pittsburgh, Pennsylvania 15205
(hereinafter called "Tenant").
PREMISES 2. Landlord hereby leases to Tenant and Tenant hereby hires
from Landlord that certain space ("Premises") containing
approximately seventeen thousand (17,0000 rentable square
feet, as shown on the Plan attached hereto as Exhibit A, in
the building ("Building") known as Robinson Plaza Office
Building Three, Robinson Township, Pennsylvania 15205,
sometimes referred to as "Land and Building".
Landlord and Tenant agree to execute an addendum to the
Lease specifying the exact rentable area contained in the
Premises, as certified by Landlord's Architect, prior to
Tenant's occupancy. This addendum shall also specify the
exact Rent payable (both initial term and option period
Rent), and Tenant's exact proportionate share.
TERM 3. The term of this Lease and Tenant's obligation to pay rent
hereunder shall commence on May 1, 1993 (the "Commencement
Date"). Possession of the Premises will be tendered upon
substantial completion of the construction work and other
items of work which Landlord is obligated to perform under
Section 11 hereof. The term "substantial completion" as used
in this Lease, shall be construed to mean such completion as
shall enable Tenant to reasonably and conveniently use and
occupy the Premises for the conduct of its ordinary
business, even though minor details, decorations, and/or
mechanical adjustments may remain to be completed by
Landlord. The term of this Lease shall end at midnight on
April 30, 1999, unless sooner terminated, as hereinafter
provided.
RENEWAL
OPTION 4. Provided Tenant is not in default under this Lease, upon one
hundred eighty (180) days' prior written notice, Tenant
shall have the option to extent the term of the Lease for
two (2) five (5) year
-1-
<PAGE>
periods. The Rent shall be Two Hundred Ninety-Seven Thousand
Five Hundred and 00/100 (297,500.00) Dollars annually during
the first five (5) year extension and Three Hundred Thirty-
Five Thousand Seven Hundred Fifty and 00/100 ($335,750.00)
Dollars annually during the second five (5) year extension.
The Base Year shall be adjusted to 1999 for the first five
(5) year extension and 2004 for the second five (5) year
extension. All other terms and conditions of the Lease shall
remain in full force and effect.
HOLDING OVER 5. If Tenant retains possession of the Premises or any part
thereof after the termination of the term of this Lease by
lapse of time or otherwise, Tenant shall pay to Landlord
Rent at double the Basic Monthly Rent specified in Section 6
hereof, adjusted according to the provisions of Section 7
hereof, for each month or portion thereof Tenant thus
remains in possession, and, in addition thereto, shall pay
Landlord all reasonable damages sustained by reason of
Tenant's retention of possession. Such holding over shall
not constitute a renewal or extension of this Lease and such
tenancy shall continue until canceled by Landlord on ten
(10) week days' prior written notice.
RENT 6. Tenant shall pay to Landlord at its aforesaid principal
office or at such other place as Landlord may designate from
time to time, as Rent, the sum of Two Hundred Sixty Three
Thousand Five Hundred and 00/100 ($263,500.00) Dollars,
("Rent"), payable on or before the first week day of each
calendar month in equal monthly installments of Twenty One
Thousand Nine Hundred Fifty Eight and 33/100 ($21,958.33)
Dollars in United States currency ("Basic Monthly Rent"), in
advance and without demand, beginning at May 1, 1993 and
continuing until the expiration of said term, without any
deduction or set-off whatsoever. Tenant hereby covenants and
agrees to pay the Rent hereby reserved as and when due, and
also all other sums of money, rental adjustments, charges or
other amounts required to be paid by Tenant to Landlord or
to another person under this Lease, which shall be deemed to
be additional rent to be paid in addition to the Rent
provided for herein ("Additional Rent"). Nonpayment of such
Additional Rent when due shall constitute a default under
this Lease to the same extent, and shall entitle the
Landlord to the same remedies, as nonpayment of Rent.
Notwithstanding the foregoing, Tenant shall receive an
abatement of Basic Monthly Rent for May 1993, May 1994, and
May 1995.
-2-
<PAGE>
RENTAL
ADJUSTMENTS
FOR EXPENSES 7. In addition to the Rent, provided in Section 6, Tenant shall
pay to Landlord, as Additional Rent, Tenant's proportionate
share of the increased cost to Landlord, for each of the
categories enumerated below, in excess of the "Base Year"
costs (as hereinafter defined) for said categories. Base
Year shall be defined as the calendar year 1993, and
Tenant's proportionate share shall be defined as the ratio
that the rentable area of the Premises bears to the rentable
area of the Building, which Tenant and Landlord hereby agree
to be 33.1 percent.
(a) Operating and Maintenance Costs - If the Operating and
-------------------------------
Maintenance costs incurred for the Building in which
Premises are located (including landscaped areas, parking
and access areas) for any calendar year, or proportionate
part thereof, during the Lease term shall be greater than
the Base Year operating and maintenance costs, then Tenant
shall pay to Landlord, as Additional Rent, its proportionate
share of all such excess operating and maintenance costs.
Operating and Maintenance costs shall be defined as (i) all
those costs and expenses of every kind and character
incurred during each calendar year in respect to the
operation, management and maintenance of the Building in
accordance with accepted principals of sound management and
accounting practices as applied to the operation, management
and maintenance of first class office buildings, including
without limitation, (i) premiums for all property, business
income and liability insurance carried by Landlord plus (ii)
those additional expenses which Landlord reasonably
determines it would have so incurred during each year had
the Building been one hundred percent (100%) occupied. Such
Operating and Maintenance costs shall not include (i)
expenses for any capital improvements made to Land or
Building (except that capital expenses for improvements
which result in savings of labor or other operating costs
shall be included at the cost of such improvements amortized
over the useful life of the improvement); (ii) expenses for
repairs or other work occasioned by fire, windstorm or other
insured casualty; (iii) expenses incurred in leasing or
procuring new tenants (i.e., lease commissions, advertising
expenses of renovating space for new tenants); (iv) legal
expenses in enforcing the terms of any lease;
-3-
<PAGE>
and (v) interest or amortization payments on any mortgage or
mortgages.
Landlord shall determine and provide Tenant a written
statement, within a reasonable amount of time after the end
of the calendar year identified herein as the Base Year, of
the actual operating expenses incurred for the Building for
the Base Year. Each calendar year thereafter, Landlord will
again provide Tenant a written statement of the actual
operating expenses incurred during the preceding calendar
year and a reconciliation of those expenses versus the Base
Year expenses. This statement will indicate the total amount
of (a) Additional Rent due and payable by Tenant for the
excess operating expenses incurred for the Building for the
preceding calendar year, if any, and (b) the projected
increase in operating expenses for the ten current calendar
year. Tenant shall thereafter pay to Landlord, on the first
day of each succeeding month on the then current calendar
year, one-twelfth (1/12) of said projected increase in
operating expenses as Additional Rent. In each of the
following calendar years, upon notification by Landlord to
Tenant of the projected Additional Rent to be payable by
Tenant for the then current calendar year, such Additional
Rent shall be payable in like manner. All amounts due by
Tenant for the preceding calendar year are payable within
thirty (30) days from the date of the sending such statement
by Landlord to Tenant. If the last year of the Term of this
Lease shall not be a full calendar year, then Tenant's
obligation for Operating Expenses attributable to such year
shall be prorated on the basis of the ratio between the
number of days of such calendar year falling within the
Lease Term and 365.
(b) Taxes - If the real estate taxes for the Building in
-----
which the Premises are located for any calendar year, or
proportionate part thereof, during the Lease term shall be
greater than the Base Year real estate taxes, then Tenant
shall pay Landlord, as Additional Rent, its proportionate
share of all such excess real estate taxes.
"Taxes" are defined for purposes of this Lease as including,
but not limited to (i) Real Property Taxes in an amount
obtained by multiplying the assessed values of the Robinson
Plaza Three Office Building for such year by the then
applicable respective tax rates (millage) for land and for
buildings, and Personal Property Taxes, ad valorem or
specific or otherwise, levied upon, or with respect to land
and Landlord and/or Tenant improvements
-4-
<PAGE>
comprising of any furniture, fixtures, machinery, and
equipment used in the operation of Building; (ii)
assessments (on the same schedule of payments incurred by
Landlord), general or special (whether or not for work
commenced or completed during the term of this Lease), ad
valorem or specific or otherwise, levied, upon, or with
respect to land and Landlord and/or Tenant improvements
comprising of any furniture, fixtures, machinery and
equipment used in operation of Building; (iii) any tax or
excise in addition thereto or substitution thereof levied by
any governmental authority upon or in respect or by reasons
of ownership, leasing, operation or occupancy of Building,
and incurred by Landlord, and any tax against Landlord on
rents and/or additional rents from Building, including,
without limitation, the Pittsburgh Business Privilege Tax
(but excluding income and excess profits taxes, franchise,
capital stock, and inheritance taxes, and licenses,
inspection, and permit fees); (iv) any water charges and/or
sewer rents which may be assessed, levied, confirmed, or
imposed or in respect of or be a lien upon Building; and (v)
any and all fees, costs, and reasonable expenses incurred by
Landlord in negotiating, appealing, or contesting any of the
foregoing items specified above in (i) through (iv).
Landlord shall determine and provide Tenant a written
statement, within a reasonable amount of time after the end
of the calendar year identified herein as the Base Year, of
the actual tax expense incurred for the Building for the
Base Year. Each calendar year thereafter, Landlord will
again provide Tenant a written statement of the actual tax
expense incurred for the Building during the preceding
calendar year and a reconciliation of those tax expenses
versus the Base Year expenses. This statement will indicate
the total amount of (a) Additional Rent due and payable by
Tenant for the excess tax expense incurred for the Building
for the preceding calendar year, if any, and (b) the
projected increase in tax expense for the then current
calendar year. Tenant shall thereafter pay to Landlord, on
the first day of each succeeding month the then current
calendar year, one twelfth (1/12) of the projected
Additional Rent. In each of the following calendar years,
upon notification by Landlord to Tenant to the projected
Additional Rent to be payable by Tenant for the then current
calendar year, such Additional Rent shall be payable in a
like manner. All amounts due from Tenant for the preceding
calendar year are payable within thirty (30) days from the
date of the sending of such statement by Landlord to Tenant.
If the last year
-5-
<PAGE>
of the Term of this Lease shall not be a full calendar year,
then Tenant's obligation for Taxes attributable to such year
shall be prorated on the basis of the ratio between the
number of days of such calendar year falling within the
Lease Term and 365.
LANDLORD'S
RECORDS 8. Landlord shall maintain records respecting Taxes and
Operating expenses and determine the same in accordance with
sound accounting and management practices, consistently
applied. Although this Lease contemplates the computation of
Taxes and Operating Expenses on a cash basis, Landlord shall
make reasonable and appropriate accrual adjustments to
ensure that each calendar year, including the Base Year,
includes substantially the same recurring items. Landlord
reserves the right to change to a full accrual system of
accounting so long as the same is consistently applied and
Tenant's obligations are not materially adversely affected.
Tenant or its representative shall have the right to examine
such records upon reasonable prior notice specifying such
records Tenant desires to examine, during normal business
hours at the place or places where such records are normally
kept by sending such notice no later than fifteen (15) days
following the furnishing of the Statement. Tenant may take
exception to matters included in Taxes or Operating
Expenses, or Landlord's computation of Tenant's
Proportionate Share of either, by sending notice specifying
such exception and the reasons therefor to Landlord not
later than thirty (30) days after Landlord makes such
records available for examination. Such Statement shall be
considered final, except as to matters to which exception is
taken after examination of Landlord's records in the
foregoing manner and within the foregoing times. Tenant
acknowledges that Landlord's ability to budget and incur
expenses depends on the finality of such Statement, and
accordingly agrees that time is of the essence of this
Paragraph. If Tenant takes exception to any matter contained
in the Statement as provided herein, Landlord shall refer
the matter to an independent certified public accountant,
whose certification as to the proper amount shall be final
and conclusive as between Landlord and Tenant. Tenant shall
promptly pay the cost of such certification unless such
certification determines that Tenant was overbilled by more
than two percent (2%). Pending resolution of any such
exceptions in the foregoing manner, Tenant shall continue
paying Tenant's Proportionate Share of Taxes and
-6-
<PAGE>
Operating Expenses in the amounts determined by Landlord,
subject to adjustment after any such exceptions are so
resolved.
SECURITY
DEPOSIT 9. INTENTIONALLY OMITTED.
USE OF
PREMISES 10. Tenant shall use and occupy the Premises, subject to the
certificate of occupancy for the building, for general
office use. Tenant shall not use or occupy the premises for
any other purposes or business without the prior written
consent of Landlord. Tenant shall observe and comply with
all applicable governing laws, statutes, ordinances, rules,
regulations and the Rules and Regulations attached hereto as
Exhibit "D" and made part hereof. All such Rules and
Regulations shall apply equally to Tenant and its employees,
agents, licensees, invitees, subtenants, contractors,
subcontractors and assignees, as well as all other tenants
of the Building, and their employees, agents, licensees,
invitees, subtenants, contractors, subcontractors and
assignees.
CONSTRUCTION
OF PREMISES 11. Landlord shall, without cost to Tenant, do that portion of
the construction and other items of work in Premises and
furnish those qualities and quantities of materials
designated as "Landlord's Work" in Exhibit "B" attached
hereto and made a part hereof.
Additionally, Landlord shall perform, or cause to be
performed all of those additional items of work and shall
furnish or cause to be furnished all of those additional
items of materials specified by Tenant which are over and
above those items of work and qualities and quantities of
materials which Landlord is required to perform or furnish,
under exhibit "B". Tenant shall pay Landlord for the cost of
such additional work and materials, plus normal building and
construction fees within thirty (30) days of the date of
Landlord's invoice for such additional work.
ALTERATIONS 12. Tenant shall make no alterations, installations, additions,
improvements or changes in or to the Premises without the
prior written consent of Landlord, which consent will not be
unreasonably withheld or delayed. Subject to obtaining the
prior written consent of Landlord and subject to the
provisions of this
-7-
<PAGE>
Section 12, Tenant at Tenant's own expense, may make
alterations, installation, additions, improvements, changes
in or to the Premises which are nonstructural and which do
not affect utility services or distribution systems,
mechanical systems, or plumbing, electrical or sprinkler
lines.
Failure to obtain such consent or violation by Tenant of any
of the terms or conditions of such consent or of this
Section 12 shall constitute a default and breach of this
Lease by Tenant, and Landlord may pursue any or all of the
remedies provided for in this Lease. If Landlord grants such
consent, Tenant, at least fifteen (15) days before
commencement of any work or delivery of materials to the
Premises or Building, shall furnish to Landlord plans and
specifications, necessary approvals and permits, names and
addresses of all contractors and subcontractors, and
indemnification in form and amount satisfaction to Landlord.
Tenant shall perform or cause to be performed such work in
such a manner so as not to interfere with or impair the use
and enjoyment of any other portion of the Building by
Landlord and/or other tenants and, if required by Landlord,
in its sole discretion, Tenant shall do or cause such work
to be done after normal business hours and on weekends and
holidays. All such alterations, installations, additions,
improvements, or changes, along with the construction and
other items of work done pursuant to Section 11 hereof,
shall become a part of the Premises when made and shall
remain upon and be surrendered with the Premises at the end
of the term, provided, however, that if prior to the
termination of this Lease by lapse of time or otherwise, or
within fifteen (15) days thereafter, Landlord so directs by
written notice to Tenant, Tenant shall promptly remove the
alterations, installations, additions, improvements or
changes which were placed in the Premises by Tenant and
which are designated in said notice. Tenant shall repair any
damage occasioned by such removal and repairs at Tenant's
expenses. Tenant agrees to hold Landlord forever harmless
from and to indemnify Landlord for and defend Landlord
against any and all claims and liabilities of every kind and
description which may arise out of or be connected in any
way with said improvements, installations, alterations,
additions or changes. Tenant shall pay the cost of such
improvements, installations, alterations, additions or
changes, and also the cost of decorating or redecorating the
Premises and the Building occasioned by such improvements,
installations, alterations, additions, or changes. Tenant
hereby
-8-
<PAGE>
covenants and agrees not to place or permit to be placed any
lien or liens on or against the Premises, the Land and/or
the Building. Further, Tenant does hereby waive, relinquish
and disclaim any right or power to cause any lien to attach
to the Landlord's interest in the Premises, the Land and/or
the Building, and Tenant does hereby agree to hold harmless,
indemnify and defend Landlord from and against any such lien
or liens. Tenant agrees to pay all sums of money in respect
of any labor, services, materials, supplies or equipment
furnished or alleged to have been furnished to Tenant in or
about the Premises, Land and/or Building which may be
secured by any mechanic's, materialmen's or other premises
liens against the Land and/or Building or the Landlord's
interest therein and will cause each such lien to be
discharged at the time performance of any obligation secured
thereby matures, provided that Tenant may contest such lien,
but if such lien is reduced to final judgment or process
thereon is not stayed, or if stayed and said stay expires,
then and in each such event Tenant shall forthwith pay and
discharge said judgment. Landlord shall have the right to
post and maintain on the Premises, notices of non-
responsibility under the laws of the Commonwealth of
Pennsylvania. Upon completing such improvements,
installations alterations, additions or changes, Tenant
shall furnish Landlord with contractors' affidavits and full
and final waivers of lien and receipted bills covering all
labor and materials expended and used. All such
improvements, installations, alterations, additions or
changes shall comply with all insurance requirements and
with all laws, ordinances, rules and regulations of all
governmental authorities, and shall be constructed in good
and workmanlike manner, and only good grades of materials
shall be used. Tenant shall permit Landlord to inspect
construction operations in connection with such work. If
Tenant desires signal, communications, alarm or other
utility service connections installed or changed, the same
may, at Landlord's option, be provided by Landlord at the
expense of Tenant.
BUILDING
SERVICES 13. Landlord shall provide the following services and facilities
for a one shift operation only:
(a) Air conditioning, ventilation and heating during the
hours from 8:00 a.m. to 6:00 p.m. on week days ("normal
business hours"), and at other hours as Tenant may request,
provided that
-9-
<PAGE>
such request shall be made prior to 12:00 o'clock noon in
the case of after-hours service on Monday through Friday and
prior to 12:00 o'clock noon on Friday for after-hours
service on weekends. Requests shall be made in writing and
delivered to the Building Maintenance Office in Robinson
Plaza Office Building Two. Tenant shall pay to Landlord,
Landlord's cost for providing any after-hours service.
Landlord will establish the hourly cost of such service
including reasonable physical depreciation based upon the
anticipated operating life of the equipment at or prior to
the first Commencement Date, which cost is presently
estimated to be $25.00 per hour per floor, and shall from
time to time notify Tenant in writing of changes in such
cost. Landlord will render to Tenant and Tenant shall
promptly pay monthly bills for such service.
The air conditioning system will provide interior conditions
of 75 degrees Fahrenheit dry bulb and 50 percent relative
humidity when outside conditions are 90 degrees Fahrenheit
dry bulb and 75 degrees Fahrenheit wet bulb, except to the
extent such services shall be limited by any governmental
authority. The heating system for the Building shall be
capable of maintaining 70 degrees Fahrenheit based on
outdoor conditions of 7 degrees Fahrenheit, except to the
extent such services shall be limited by governmental
authority. Notwithstanding any limitation imposed by
governmental authority on the actual operation of the air
conditioning and heating system such systems, except during
periods to accommodate required maintenance and repairs,
shall at all times have the operating capabilities set forth
above.
Landlord will maintain the air conditioning systems, and
will use all reasonable care to keep the same in proper and
efficient operating condition; but Landlord will not be
responsible for the failure of the air conditioning system
to meet the requirements hereinbefore specified if such
failure results from the occupancy of the Premises by more
than an average of one person for each one hundred (10)
square feet of useable area or if Tenant installs and
operates machines, appliances and lighting fixtures,
including Building Standard lighting fixtures in the
ceiling, which exceed a total of three (3) watts of
connected load per square foot of useable area.
Tenant agrees to cooperate fully with Landlord and to abide
by all the regulations and requirements which Landlord may
-10-
<PAGE>
reasonably prescribe for the proper functioning and
protection of the heating, ventilating and air conditioning
systems. Tenant also agrees to abide by all governmental
regulations regarding heating and cooling and agrees to
indemnify Landlord for any liabilities imposed upon landlord
for Tenant's failure to do so;
(b) Continuous passenger elevator service during week days
and hours, and service via at least one (1) car per elevator
bank at all other times;
(c) Janitor service, five (5) nights per week in accordance
with the Cleaning Specifications attached hereto as Exhibit
"C".
(d) Hot and cold water for Building Standard lavatory
facilities and cold water for drinking fountains. If Tenant
requires water for any additional purposes, Tenant shall pay
the cost thereof as shown on a meter to be installed and
maintained at Tenant's expense to measure such consumption.
(e) Relamping and reballasting in the common areas of the
Building. However, relamping and reballasting in Tenant's
Lease Premises shall be performed by Landlord at Tenant's
direction and at Tenant's sole cost and expense.
Rent includes consumption of electricity for Building
Standard level of illumination using fixtures installed in
the Premises and for normal small business machines
connected to Building Standard 120-volt, single phase
outlets week days during normal business hours, with a total
connected load of 5-1/2 watts per square foot of useable
area or less. Tenant sh all pay Landlord as Additional Rent,
monthly in arrears for their consumption of electricity in
excess of 5-1/2 watts per square foot of useable area at a
rate equal to Landlord's average cost per kilowatt hour for
the Building for each month. The amount of electrical
consumption in the Premises in excess of 5-1/2 watts per
square foot of useable area shall be determined by
Landlord's reasonable estimate, or, if requested by Tenant,
by an engineering analysis and/or study, such analysis
and/or study to be at Tenant's cost. Landlord shall not e
liable for failure of and/or lack of supply in the electric
current not arising form Landlord's negligence.
Landlord shall not be liable to Tenant and there shall be no
abatement or diminution in Rent or additional Rent in the
event of
-11-
<PAGE>
the suspension, delay or stoppage for a period of thirty
(30) days or less of any of the services to be furnished and
provided by Landlord under this Lease, whenever occasioned
by reason of fire, storm, explosion, strike, lockout, labor
dispute, casualty or accident, lack or failure of sources of
supply or labor, energy or fuel (or inability in the
exercise of reasonable diligence to obtain any required
energy or fuel), acts of God or the public enemy, riots,
interferences by civil or military authorities in compliance
with the laws of the United States of America or with the
laws, orders or regulations of any governmental authority,
or by reason of any other cause beyond Landlord's control.
Furthermore, Landlord shall not be liable to Tenant, and
there shall be no abatement or diminution of Rent or
Additional Rent whatsoever in the event of the suspension,
delay or stoppage of any of the services to be furnished or
provided by Landlord under this Lease whenever occasioned by
emergency inspection, cleaning, repairs, replacements,
alterations, or improvements which, in Landlord's reasonable
judgment, are desirable or necessary to be made and Landlord
may suspend any such service until completion of any such
work, which Landlord covenants and agrees to use its best
efforts to complete in a timely manner.
ASSIGNMENT AND
SUBLETTING 14. Tenant shall not assign, transfer, mortgage or otherwise
encumber this Lease or sublet or permit to be occupied or
used by anyone other than Tenant or its employees all or any
part of the Premises without Landlord's prior written
consent, which Landlord agrees to not unreasonably withhold.
It will not be unreasonable for Landlord to withhold consent
if the reputation, financial responsibility, or business of
the proposed assignee or subtenant is unsatisfactory to
Landlord, or if Landlord deems such business not consonant
with that of other tenants in the Building, or if the
proposed assignee or subtenant is a present or former tenant
of the Building.
Such written request for Landlord's approval shall contain
(a) the name, address, and description of the business of
the proposed assignee or subtenant, (b) the proposed
assignee's or subtenant's most recent financial statement
and any other evidence of financial responsibility, (c) a
statement of the intended use of the Premises, and (d) the
terms and conditions of the proposed assignment or
subletting. Within thirty (30) days from receipt of such
request, Landlord shall grant or refuse consent.
-12-
<PAGE>
In responding to Tenant's request for consent to a proposed
subletting of all or part of the Premises, Landlord, in
addition to any other rights it may have hereunder, may
elect to require Tenant to execute, upon the same terms and
conditions as are contained in the proposed subletting, a
sublease (of that part of the Premises that Tenant proposes
to sublet to another) to a tenant then occupying space in
the Building for use by such tenant or by a subsidiary of or
affiliate of such tenant; or if the request is for consent
to a proposed assignment of lease, to terminate this Lease
and the term hereof, effective at the end of the third month
from the date when the request was received.
In the event that any subletting or assignment, even with
the consent of Landlord, results in rental income or other
charges in an amount greater than provided in this Lease,
attributable to the sublet or assigned space, then fifty
percent (50%) of such excess shall belong to Landlord and
shall be payable to Landlord as Additional Rent. Similarly,
in the event that Tenant hereunder should receive from its
subtenant or assignee any consideration for the making of
such subletting or assignment, even if such subletting or
assignment is consented to by Landlord, then fifty percent
(50%) of such consideration shall belong to Landlord and
shall be payable to Landlord as Additional Rent.
Each assignee shall assume, and be deemed to have assumed
this Lease and be and remain liable jointly and severally
with Tenant for all payments and for the due performance of
all terms, covenants and conditions herein contained on
Tenant's part to be paid and performed. No assignment shall
be binding upon Landlord unless the assignee shall deliver
to Landlord an instrument in recordable form containing a
covenant of assumption by the assignee, but the failure or
refusal of an assignee to execute the same shall not release
such assignee from its liability as set forth herein.
Any consent by Landlord shall not constitute a waiver of
strict future compliance by Tenant of the provisions of this
Section 14 or a release of Tenant from the full performance
by it of the covenants on its part herein contained.
Notwithstanding anything to the contrary contained above in
this Section, Landlord shall, at all times, retain the
absolute and unqualified right, to respond to Tenant's
request for consent to a
-13-
<PAGE>
proposed subletting or assignment by electing to take back
the space proposed to be sublet or assigned, terminating the
Lease as to such space, and releasing Tenant from any
further liability under this Lease with respect to such
space.
Notwithstanding the foregoing, Landlord's consent is not
required for any assignment or subletting of the Lease by
Tenant to a member of Tenant's controlled group of
corporations as defined in Section 1563 of the Internal
Revenue Code 1986, as amended, or its successor statutory
provision. Likewise, Landlord's consent is not required for
an assignment or transfer by Tenant of the Lease to a third
party by virtue of a merger or consolidation as a matter of
law, nor to any assignment to a third party which purchases
substantially all the business assets of Tenant and which
continues to operate the same business as Tenant. Section 31
and 39 shall not apply to any assignment or subletting under
this clause. Notwithstanding the foregoing, Tenant shall at
all times remain jointly and severally liable to the
landlord for all rent payments for the remaining current
term of this Lease prior to any renewal or extension
thereof. Additionally, this clause is not intended to
relieve Tenant of its obligation to notify Landlord of any
such assignment or subletting regardless of the necessity of
Landlord's consent.
ACCESS TO
PREMISES 15. Landlord, its employees and agents shall have the right to
enter the Premises at all reasonable times for the purposes
of examining or inspecting the same, showing the same to
prospective purchasers, mortgagees, or tenants of the
Building, performing cleaning and maintenance, and making
such alterations, repairs, improvements or additions to the
Premises or the Building as Landlord may deem necessary or
desirable. If representatives of Tenant shall not be present
to open and permit entry into the Premises at any time when
such entry by Landlord is necessary or permitted hereunder,
Landlord, its employees and agents may enter by means of a
master key (or forcibly in the event of an emergency),
without liability of Landlord to Tenant and without such
entry constituting any eviction of tenant or termination of
this Lease.
REPAIRS 16. Landlord shall make all repairs necessary to maintain the
plumbing, air conditioning and electric systems, windows,
floors (excluding floor coverings), and all other items
which do not
-14-
<PAGE>
constitute a part of the Premises and are installed or
furnished by Landlord, except repairs of Tenant's trade
fixtures and property and installations which tenant was
obligated to make or which was performed by Landlord or
others at Tenant's request. The cost of such repairs made by
landlord shall be included in "Operating and Maintenance
Expenses". It is provided however, that Landlord shall not
be obligated for any of such repairs until the expiration of
a reasonable period of time after receipt of written notice
from Tenant that such repairs are needed. In no event shall
Landlord be obligated under this Section to repair any
damage caused by any act, omission or negligence of the
Tenant or its employees, agents, invitees, licensees,
subtenants, contractors, subcontractors or assignees.
Tenant shall take good care of the Premises and the fixtures
and appurtenances therein. Tenant shall, at its sole cost
and expense, repair and replace all damage or injury to the
Premises and Building and to fixtures and equipment caused
by Tenant or its employees, agents, invitee, licensees,
subtenants, contractors, or subcontractors, or assignees as
the result of all or any of them moving in or out of
Building or by installation or removal of furniture,
fixtures or other property, which repairs and replacements
shall be in quality and class equal to the original,
undamaged condition. If Tenant fails to make such repairs or
replacements, the same may be made by Landlord and such
expense shall be collectible as Additional Rent and paid by
Tenant within thirty (30) days after rendition of a bill
therefor.
Landlord shall not be liable by reason of any inconvenience,
injury to, or interference with Tenant's business arising
from the making of any repairs, alterations, additions or
improvement in or to the Premises or the Land and Building
or to any appurtenances or equipment therein unless such
inconvenience, or injury or interference shall be occasioned
by the sole negligence of the Landlord, its agents,
servants, and/or employees. There shall be no abatement of
rent because of such repairs, alterations, additions or
improvements, except as may be specifically provided in
Section 21 hereof. Landlord covenants to use its best
efforts to implement such repairs, alterations, additions or
improvements in a timely manner.
-15-
<PAGE>
SURRENDER
OF PREMISES 17. At termination of this Lease by lapse of time or otherwise,
Tenant shall surrender the Premises together with all
alterations, additions, and improvements thereto, in broom-
clean condition and in good order and repair, except for
ordinary wear and tear and damage for which Tenant is not
obligated to make repairs under this Lease, failing which
landlord may restore the Premises to such condition and
Tenant shall pay the cost thereof. Upon such termination all
installations, alterations, additions, hardware and
improvements, including partitions which may have been
installed by either Landlord or Tenant upon the Premises,
shall remain upon the Premises and shall be Landlord's
property, all without compensation, allowance, or credit,
except that Tenant's trade fixtures and furniture shall
remain tenant's property, and, if Tenant shall not then be
in default, Tenant shall have the right prior to such
termination to remove the same. It is further provided,
however, that (i) if prior to such termination or within
fifteen (15) days thereafter Landlord so directs by notice
to Tenant, Tenant shall also promptly remove such
installations, alterations, additions, hardware and
improvements placed in the Premises by Tenant and designated
in the notice, failing which Landlord may remove same and
Tenant shall pay the cost of such removal and of any
necessary restoration of the Premises; and (ii) Tenant shall
promptly repair any damage to the Premises caused by any
such removal by Tenant and shall restore the Premises to the
condition in which they were prior to the installation of
the items so removed. It is specifically agreed that
Tenant's covenants set forth in sub-sections (i) and (iii)
above shall survive the termination of this Lease.
TENANT EXPRESSLY WAIVES TO LANDLORD THE BENEFIT TO TENANT OF
68 P.S. SECTION 250.501, APPROVED APRIL 6, 1951, ENTITLED
"LANDLORD AND TENANT ACT OF 1951", AS MAY BE AMENDED FROM
TIME TO TIME, REQUIRING NOTICE TO QUIT UPON THE EXPIRATION
OF THE TERM OF THIS LEASE OR AT THE EXPIRATION OF ANY
EXTENSION OR RENEWAL THEREOF, OR UPON ANY EARLIER
TERMINATION OF THIS LEASE, AS HEREIN PROVIDED. TENANT
COVENANTS AND AGREES TO VACATE, PROVIDED. TENANT COVENANTS
AND AGREES TO VACATE, REMOVE FROM AND DELIVER UP AND
SURRENDER THE POSSESSION OF THE PREMISES TO LANDLORD
-16-
<PAGE>
UPON THE EXPIRATION OF THE TERM OR UPON THE EXPIRATION OF
ANY EXTENSION OR RENEWAL THEREOF, OR UPON ANY EARLIER
TERMINATION OF THIS LEASE, AS HEREIN PROVIDED, WITHOUT SUCH
NOTICE, IN THE CONDITION AS REQUIRED ABOVE.
WAIVER OF
CLAIMS 18. Tenant agrees, to the extent not expressly prohibited by
law, that Landlord, its agents, employees and servants shall
not be liable for, and Tenant waives all claims against
Landlord, its agents, employees and servants for injury to
person or damage to property sustained by Tenant or any
other person occurring in or about the Land and Building or
the Premises, resulting directly or indirectly from any
existing or future condition, defect, matter or thing in the
Premises, the Land and Building or any part thereof ro from
equipment or appurtenances becoming out of repair or from
accident, or from any occurrence or act, or omission of any
tenant or occupant of the Building, or of any other person,
other than occasioned solely by the negligence of the
Landlord, its agents, servants and/or employees. This
Section 18 shall apply especially, but not exclusively, to
injury or damage caused as aforesaid or by the flooding of
basements or other subsurface areas or by refrigerators,
sprinkling devices, air-conditioning apparatus, water, snow,
frost, steam, excessive heat or cold, falling plaster,
broken glass, sewage, gas, odors, or noise, or the bursting
or leaking of pipes or plumbing fixtures, and shall apply
equally whether any such damage results from the act or
omission of other tenants or occupants in the Building or
any other persons, and whether such damage be caused by or
result from any thing or circumstance whether of a like or
wholly different nature.
TENANT LIABILITY
INDEMNIFICATION
INSURANCE 19. Tenant covenants and agrees to provide on or before the
commencement of the term and to keep in force during the
entire term of this Lease:
(a) comprehensive general liability insurance for the mutual
benefit of Landlord and Tenant naming Landlord as additional
insured relating to the Premises and its appurtenances in an
amount of not less than $1,000,000.00 in respect of personal
injury or death and of not less than $500,000.00 in respect
of
-17-
<PAGE>
property damage, which insurance shall name Landlord as an
additional insured; (2) fire and extended coverage,
vandalism, malicious mischief and special extended coverage
insurance, if required, in an amount adequate to cover the
cost of replacement of all leasehold or building
improvements in the Premises which were originally
constructed or provided by or on behalf of Tenant, at
Tenant's cost, as well as the cost of replacement of all
fixtures, equipment, decoration, contents and personal
property therein; and (3) plate glass insurance with respect
to all plate and other glass in the Premises, if any. Tenant
agrees to deliver to Landlord at least fifteen (15) days
prior to the time such insurance is first required to be
carried by Tenant, and thereafter at least fifteen (15)
prior to the expiration of any such policy, either a
duplicate original or a certificate and true copy of all
policies procured by Tenant in compliance with its
obligations hereunder, together with evidence of payment
therefor. Tenant shall, within thirty (30) days after the
Commencement Date of the term, provide Landlord with a list
of all leasehold and building improvements in the Premises
and their value, and shall update the same throughout the
term of this Lease.
(b) All of the aforesaid insurance shall be written by one
(1) or more responsible insurance companies rated "A" or
better by A.M. Best Co.; all such insurance may be carried
under a blanket policy covering the Premises and any other
of Tenant's offices or properties and shall contain
endorsements that: (1) such insurance may not be canceled;
or failed to be renewed; or amended with respect to Landlord
and/or its designed(s), except upon ten (10) days prior
written notice to Landlord from the insurance company; and
(2) Tenant shall be solely responsible for payment of
premiums for such insurance. In the event Tenant fails to
furnish such insurance, the Landlord may obtain such
insurance and the premiums shall be deemed Additional Rent
to be paid by Tenant to the Landlord upon demand.
(c) The minimum limits of the comprehensive general
liability policy of insurance shall in no way limit or
diminish Tenant's liability under subsection (d) hereof and
shall be subject to increase at any time, and from time to
time, after the commencement of the third (3rd) year of term
hereof, if Landlord, in the exercise of its reasonable
judgment, shall deem the same necessary for adequate
protection. Within thirty (30) days after demand therefor by
Landlord, Tenant shall furnish
-18-
<PAGE>
Landlord with evidence that such demand has been complied
with.
(d) Tenant will indemnify, save harmless, and defend
Landlord from and against any and all claims and demands in
connection with any accident, injury or damage whatsoever
caused to any person or property arising directly or
indirectly out of the business conducted in the Premises or
occurring in, on or about the Premises or any part thereof,
or arising directly or indirectly from any act or omission
of Tenant or any concessionaire or subtenant or their
respective licensees, servants, agents, employees, or
contractors, and from and against any and all costs,
expenses and liability incurred in connection with any such
claim or proceeding brought thereon. The comprehensive
general liability coverage maintained by Tenant pursuant to
subsection (a) above shall specifically insure the
contractual obligations of Tenant as set forth herein.
Landlord will indemnify, save harmless, and defend Tenant
from and against any and all claims and demands in
connection with any accident, injury or damage whatsoever
caused to any person or property arising directly or
indirectly out of the business conducted in the Premises or
occurring in, on or about the Premises or any part thereof,
or arising directly or indirectly from any act or omission
of Landlord or any concessionaire or subtenant or their
respective licensees, servants, agents, employees, or
contractors, and from and against any and all costs,
expenses and liability incurred in connection with any such
claim or proceeding brought thereon. The comprehensive
general liability coverage maintained by Landlord pursuant
to subsection (g) below shall specifically insure the
contractual obligations of Landlord as set forth herein.
(e) Tenant agrees, at its own cost and expense to comply
with all of the rules and regulations and recommendations of
the Fire Insurance Rating organization having jurisdiction
and any similar body. If, at any time and from time to time,
as a result of or in connection with any failure by Tenant
to comply with the foregoing sentence or any act of omission
or commission by Tenant, its employees, contractors or
licensees, or as a result of or in connection with the use
to which the Premises are put (notwithstanding that such use
may be for the purposes hereinbefore permitted or that such
use may have been consented
-19-
<PAGE>
to by Landlord), the fire insurance rate(s) and/or rent
insurance rates applicable to the Premises, or the Building
in which same are located, or to any other premises in said
Building, or to any adjacent property owned or controlled by
Landlord or an affiliate of Landlord, and/or to the contents
in any or all of the aforesaid properties shall be higher
than which would be applicable for the least hazardous type
of occupancy legally permitted therein, Tenant agrees that
it will pay to Landlord, on demand, as Additional Rent, such
portion of the premiums for all fire insurance policies
and/or rent insurance in force with respect to the aforesaid
property and the contents or any occupancy thereof as shall
be attributable to such higher rate(s). If Tenant installs
any electrical equipment that overloads the lines in the
Premises or the Building in which the Premises are located,
Tenant shall, at its own cost and expense, promptly make
whatever changes are necessary to remedy such condition and
to comply with all requirements of the Landlord and the Fire
Insurance Rating organization and any similar body and any
governmental authority having jurisdiction thereof. For the
purpose of this paragraph, any finding or schedule of the
Fire Insurance Rating organization having jurisdiction
thereof shall be deemed to be conclusive. In the event that
this Lease so permits and Tenant engages in the preparation
of food or packaged foods or engages in the use, sale or
storage of flammable or combustible material, Tenant shall
install chemical extinguishing devices (such as ansul)
approved by the Fire Insurance Rating organization having
jurisdiction and shall keep such devices under service as
required by such organization. If gas is used in the
Premises, Tenant shall install gas cutoff devices (manual
and automatic).
(f) Each insurance policy carried by Landlord and/or Tenant
and insuring all or any part of the Building, the Premises,
including improvements, alterations and changes in and to
the Premises made by either of them and Tenant's trade
fixtures or contents therein, shall be written in a manner
to provide that the insurance company waives all right of
recovery by way of subrogation against Landlord and/or
Tenant, as the case may be, in connection with any loss or
damage to the Premises or the Building in which the Premises
are located, or to property or business caused by any of the
perils covered by fire and extended coverage, building and
contents, and business interruption insurance, for which
either party may be reimbursed as a result of insurance
coverage affecting any loss suffered by it; provided,
-20-
<PAGE>
however, the foregoing waivers shall apply only to the
extent of any recovery made by the parties hereto under any
policy of insurance now or hereinafter issued. So long as
the policy or policies involved can be so written and
maintained in effect, neither Landlord nor Tenant shall be
liable to the other for any such loss or damage. In the
event of inability on the part of either party to obtain
such provision in its policy or policies with the carrier
with whom such insurance is then carried, or such carrier's
requiring payment of additional premium for such provision,
the party so affected shall give the other party written
notice of such inability or the increase in premium as the
case may be. The party to whom such notice is given shall
have fifteen (15) days from the receipt thereof within
which: (1) in the case of such inability on the part of the
other carrier, to procure from the aforesaid party's
insurance carrier in writing, at no increase in premium
over that paid theretofore by the party so affected, such
waiver of subrogation; (2) in the case of increased
premium, to pay the party so affected the amount of such
increase; (3) to waive, in writing, within the time limit
set forth herein, such requirement to obtain the aforesaid
waiver of subrogation. Should the party to whom such notice
is given fail to comply as aforesaid with the said fifteen
(15) day period, each and every provision in this
subsection (f) in favor of such defaulting party shall be
cancelled and of no further force and effect.
(g) Landlord agrees to maintain: (1) comprehensive general
liability insurance relating to the Building and its common
areas on an occurrence basis in the minimum amount of One
Million Dollars ($1,000,000.00); (2) fire and extended
overage insurance to the extent of the replacement value of
the Building and improvements originally constructed by
Landlord; (3) business income insurance ("rent insurance")
to the limit of the existing gross aggregate rent received
by Landlord for the Building. The cost of such insurance
shall be considered an operating expense of the Building.
LANDLORD'S
INDEMNIFICATION 20. In the event Tenant is legally obligated by order of the
courts under the Americans with Disabilities Act of 1991 to
make capital improvements or alterations to either the
Premises or the Building in order to remain in possession
of the Premises during the term of the Lease or any
extension thereof, Landlord will make said
-21-
<PAGE>
capital improvements or alterations on account of Tenant at
Landlord's sole cost and expense. Notwithstanding the
foregoing, Landlord shall have the right to terminate this
Lease in lieu of completing said capital improvements or
alterations, in the event that less than one (1) year
remains in the term of the Lease at the date upon which the
court order becomes effective.
FIRE OR OTHER
CASUALTY 21. (a) Should the Premises (or any part thereof) be damaged or
destroyed by fire or other casualty insured under the
standard fire and casualty insurance policy with approved
standard extended coverage endorsement applicable to the
premises, Landlord shall, except as otherwise provided
herein, and to the extent it recovers proceeds from such
insurance, repair and/or rebuild the same with reasonable
diligence. Landlord's obligation hereunder shall be limited
to the Building and improvements originally provided by
Landlord at the Commencement Date of the term of this
Lease. Landlord shall not be obligated to repair, rebuild
or replace any property belonging to Tenant or any
leasehold or building improvements in the Premises which
were originally constructed or provided by or on behalf of
Tenant at Tenant's cost. If there should be a substantial
interference with the operation of Tenant's business in the
Premises as a result of such damage or destruction which
requires Tenant to temporarily close its business to the
public, the Rent shall abate, but only to the extent of the
proceeds actually received by Landlord under its rent
insurance policy. Unless this Lease is terminated by
Landlord as hereinafter provided, Tenant shall, at its cost
and expense, repair, restore, redecorate and refixture the
Premises and restock the contents thereof in a manner and
to at least a condition equal to that existing prior to
such damage or destruction, except for the Building and
improvements to be reconstructed by Landlord as above set
forth, and the proceeds of all insurance carried by Tenant
on the property, decorations and improvements, as well as
fixtures and contents in the Premises, shall be held in
trust by Tenant for such purposes. Tenant agrees to
commence such work within ten (10) days after the date of
such damages or destruction or the date Landlord completes
any reconstruction required to be completed by it pursuant
to the above, whichever date is later, and Tenant shall
diligently pursue such work to its completion.
-22-
<PAGE>
(b) Notwithstanding anything to the contrary contained in
the preceding subsection (a) or elsewhere in this Lease,
Landlord, at its option, may terminate this Lease on thirty
(30) days' notice to Tenant, given within ninety (90) days
after the occurrence of any damage or destruction if (1)
the Premises be damaged or destroyed as a result of a risk
which is not covered by Landlord's insurance, or (2) the
Premises be damaged and the cost to repair the same shall
be more than twenty-five percent (25%) of the cost of
replacement thereof, or (3) the Premises be damaged during
the last three (3) years of the term of this Lease, or (4)
the Building in which the Premises are located shall be
damaged to the extent of twenty-five percent (25%) or more
of the then monetary value thereof (whether the Premises be
damaged or not), or (5) if the Building in which the
Premises are located is damaged (whether or not the
Premises are damaged) to such an extent that, in the sole
judgment of Landlord the Building cannot be operated as an
integral unit.
(c) Except to the extent specifically provided for in this
Lease, none of the rentals payable by Tenant, nor any of
Tenant's other obligations under any provisions of this
Lease shall be affected by any damage to or destruction of
the Premises or Building by any cause whatsoever, and
Tenant hereby specifically waives any and all additional
rights it might otherwise have under any law or status.
SUBORDINATION
APPROVAL AND
ATTORNMENT 22. The Landlord reserves the right and privilege to subject
and subordinate this Lease at all times to the lien of any
mortgage or mortgagees now or hereafter placed upon
Landlord's interest in the said Premises and on the Land
and Building of which said Premises are a part, or upon any
buildings hereafter placed upon the Land on which the
Premises are located (the holder of any such mortgage
hereinafter referred to as mortgagee), and to any all
advances to be made under such mortgages, and all renewals,
modifications, extensions, consolidations and replacements
thereof.
Tenant covenants and agrees to execute and deliver, upon
demand, such further instrument or instruments
subordinating this Lease on the foregoing basis to the lien
of any such mortgage or mortgages as shall be desired by
the Landlord and any
-23-
<PAGE>
mortgagees or proposed mortgages, and hereby irrevocably
appoints Landlord the attorney-in-fact of Tenant to execute
and deliver such instrument or instruments for and in the
name of Tenant in the event Tenant shall fail to execute
such instrument or instruments within ten (10) week days
after written notice to so do.
Tenant shall, in the event of the sale or assignment of
Landlord's interest in the Land and/or Building, or in the
event of any proceedings bought for the foreclosure of, or
in the event of the exercise of the power of sale under any
mortgage covering the Land and Building, attorn to and
recognize such purchaser or mortgagee as Landlord under
this Lease, and in any such events, Landlord named herein
shall not thereafter be liable on this Lease.
Notwithstanding the foregoing, any such subordination or
attornment document shall expressly provide that Tenant's
right to quiet possession of the Premises shall not be
disturbed or affected by any such mortgagee or purchaser so
long as Tenant is not in default under the Lease, and that
such mortgagee or purchaser shall be liable to Tenant for
all of Landlord's duties and obligations to Tenant under
the Lease.
EMINENT
DOMAIN 23. If the Land and/or Building, or any portion thereof which
includes a substantial part of the Premises or which
prevents the operation of the Building, shall be taken or
condemned by any competent authority for any public use or
purpose, the term of this Lease shall end upon, and not
before, the date when the possession of the part so taken
shall be required by the condemning authority for such use
or purpose, and without apportionment of the condemnation
award. Rent shall be apportionment as of the date of such
termination. If any condemnation proceeding shall be
instituted in which it is sought to take or damage any part
of the Land and/or Building, or if the grade of any street
or alley adjacent to the Building is changed by any
competent authority and such change or grade makes it
necessary or desirable to remodel the Building to conform
to the changed grade, Landlord shall have the right to
cancel this lease upon not less than ninety (90) days
notice prior to the date of cancellation designated in the
notice. No money or other consideration shall be payable by
Landlord to Tenant for the right
-24-
<PAGE>
of cancellation, and Tenant shall have no right to share in
the condemnation award or in any judgment for damages
caused by such taking or change of grade.
However, provided that the amount can be definitely
ascertained in such proceedings, and be awarded separate
and apart, and not in diminution of any award to Landlord,
nothing hereinabove provided shall preclude Tenant from
appearing, claiming, providing and receiving in the
condemnation proceedings, Tenant's separate claim for
Tenant's moving expenses, the value of Tenant's fixtures,
or Tenant's alterations, installations and improvements
which do not become part of the Building, or property of
Landlord.
ESTOPPEL
CERTIFICATE 24. At any time, and from time to time, upon the written
request of Landlord or any mortgagee, Tenant, within ten
(10) week days of the date of such written request, agrees
to execute and deliver to Landlord and/or such mortgagee,
without charge and in a form satisfactory to Landlord
and/or such mortgagee, a written statement; (a) ratifying
this Lease, (b) confirming the commencement and expiration
dates of the term of this Lease; (c) certifying that Tenant
is in occupancy of the Premises, and that this lease is in
full force and effect and has not been modified, assigned,
supplemented, or amended, except by such writings as shall
be stated; (d) certifying that all conditions and
agreements under this Lease to be satisfied and performed
have been satisfied and performed, except as shall be
stated; (e) certifying that Landlord is not in default
under the Lease and there are not defenses or offsets
against the enforcement of this Lease by Landlord, or
stating the defaults and/or defenses claimed by Tenant; (f)
reciting the amount of advance Rent, if any, paid by Tenant
and the date to which Rent has been paid; (g) reciting the
amount of security deposited with Landlord, if any; and (h)
any other information which Landlord or the mortgagee shall
require.
BANKRUPTCY 25. If there shall be filed against Tenant, in any court,
pursuant to any statute, either of the United States or of
any state, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or
trustee of all or any portion of Tenant's property and
Tenant fails to secure a discharge thereof within thirty
(30) days from the date of such filing, or if Tenant shall
voluntarily file any such petition or make an assignment
for
-25-
<PAGE>
the benefit of creditors or petition for or enter into an
arrangement, then, in any of such events, this Lease, at
the option of Landlord, may be cancelled and terminated.
Furthermore, if there shall be filed against Tenant's
guarantor or surety of this Lease, if any, a petition in
bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or any portion
of the property of any such guarantor or surety, and such
guarantor or surety fails to secure a discharge thereof
within thirty (30) days from the date of such filing, or if
such guarantor or surety shall voluntarily file any such
petition or make an assignment for the benefit of creditors
or petition for or enter into an arrangement, this Lease,
at the option of Landlord, may be cancelled and terminated.
In the event of a termination of this Lease pursuant to
this Section, neither Tenant nor any person claiming
through or under Tenant (whether by virtue of any statute
or any order of any court or otherwise) shall be entitled
to acquire or remain in possession of the Premises, as the
case may be, and Landlord shall have not further liability
hereunder to Tenant or any other person and Tenant or any
other such person shall forthwith quit and surrender the
Premises. If this Lease shall be so cancelled or
terminated, Landlord, in addition to the other rights and
remedies of Landlord contained elsewhere in this Lease, or
under any statute or rule of law, may retain as liquidated
damages any Rent, or any other money received by Landlord
from Tenant or others on behalf of Tenant.
DEFAULTS
AND
REMEDIES 26. All rights and remedies of Landlord herein enumerated shall
be cumulative, and none shall exclude any other rights or
remedies allowed by law or in equity. The occurrence of any
of the following shall constitute a default and breach of
this Lease by Tenant:
(a) Tenant shall fail, neglect or refuse to pay any
installment of Rent or Additional Rent at the time and in
the amount as herein provided, or to pay any other monies
agreed by it to be paid promptly when and as the same shall
become due and payable under the terms hereof, and if any
such default should continue for a period of more than ten
(10) days; or if
(b) Tenant shall abandon or vacate the Premises, or shall
remove or attempt to remove or express or declare any
intention to
-26-
<PAGE>
remove any of the goods and chattels from the Premises
(other than in the normal course of business), or shall
fail, neglect or refuse to keep and perform any of the
other covenants, conditions, stipulations or agreements
herein contained, and in the event any such default shall
continue for a period of more than ten (10) days after
notice thereof is given in writing to Tenant by Landlord
(provided, however, that if the cause for giving such
notice involves the making of repairs or other matters
reasonably requiring a longer period of time than said ten
(10) day period, Tenant shall be deemed to have complied
with such notice so long as it has commenced to comply with
said notice within said ten (10) day period and is
diligently prosecuting compliance of said notice); or if
(c) Tenant shall repeatedly be delinquent in the payment of
Rent or Additional Rent or other sums or charges due
Landlord under this Lease or shall repeatedly default in
the keeping, observing, or performing of any other
covenants or agreements herein contained to be kept,
observed or performed by Tenant (provided notice of such
payment or other defaults shall have been given to Tenant,
but irrespective of whether or not Tenant shall have timely
cured any such payment or other defaults of which notice
was given);
In the event of any such default or breach of this Lease by
Tenant, Landlord shall have the right and option to declare
the entire Rent and Additional Rent due for the balance of
the term hereof immediately due and payable by Tenant, and
shall have any or all of the remedies set forth, and
further, in the event of such default or breach of this
Lease by Tenant, Tenant does hereby:
1) authorize and fully empower Landlord or Landlord's agent
to cancel or annul this Lease at once and re-enter the
Premises and remove all persons and their property therein
and such property may be stored in a public warehouse or
elsewhere at the cost of the Tenant, all without service of
notice or resort to legal process and without being deemed
guilty of any manner of trespass and without prejudice to
any remedies which might otherwise be used by Landlord; 2)
empower any attorney of any court of record within the
United States or elsewhere to appear for Tenant and, with
or without declaration filed, confess judgment against the
Tenant, and in favor of Landlord, its heirs, devices,
executors,
-27-
<PAGE>
administrators, successors or assigns, as of any term for
the sum due by reason of said default in the payment of
Rent, Additional Rent, or other sum of charges due Landlord
under this Lease, including unpaid Rent for the balance of
the term if the same shall have become due and payable
under the provisions of this Lease, and/or for the sums due
by reasons of any breach of covenant or agreement by Tenant
herein, with costs of suit and attorney's commission of
fifteen percent (15%) for collection, and forthwith issue
writ or writs of execution thereon, with release of all
errors, and without stay of execution, and inquisition and
extension upon any levy on real estate is hereby expressly
waived, and condemnation agreed to, and exemption of any
and all property from levy and sale by virtue of any
exemption law now in force or which may be hereafter passed
is also expressly waived by Tenant; further, at the option
of the Landlord, Tenant authorizes and employers any such
attorney, either in addition to or without such judgment
for the amount due according to the terms of this Lease, to
appear for said Tenant and confess judgment forthwith
against Tenant, and in favor of Landlord, in an amicable
action of ejectment for the Premises above described, with
all the same conditions, fees, releases, waivers of stay of
execution and waiver of exemption as accompany said
confession of judgment for money sums due; and authorizes
the entry of such action, confession of judgment therein,
and the Landlord may, without notice, reenter and expel the
Tenant from the Premises, and also any person holding under
him or them, and in each case, this Lease or a true copy
thereof shall be a sufficient warrant of any person.
Said authority to confess judgments hereunder shall not be
exhausted by any one exercise thereof, but judgment may be
confessed as aforesaid from time to time and as often as
any of said rent, additional rent or other charges reserved
as rent shall fall due or be in arrears and such powers may
be exercised as well after the expiration of the original
term or during any extension or renewal of this Lease. It
shall not be necessary for Landlord to file the original of
this Lease, but Landlord may file a true copy thereof at
the time of the entry of such judgment or judgments.
The Landlord may, however, at its options, at any time
after Tenant's default or violation of condition or
covenant, re-enter and take possession of said Premises and
remove any property
-28-
<PAGE>
contained therein without such re-entry working as a
forfeiture of the Rents to be paid and the covenants,
agreements and conditions to be kept and performed by
Tenant for the full term of this lease. In such event,
Landlord shall have the right, but not the obligation, to
divide or subdivide the Premises in any manner Landlord may
determine and to lease or let the same or portions thereof
for such periods of time and at such rentals and for such
use and upon such covenants and conditions as Landlord may
elect, and its sole discretion, applying the net rentals
from such letting first to the payment of Landlord's
expenses incurred in dispossessing Tenant and the cost and
expense of making such improvements, alterations and
repairs in the Premises as may be necessary in order to
enable Landlord to re-let the same, and to the payment of
any brokerage commissions or other necessary expenses of
Landlord in connection with such re-letting. The balance,
if any, shall be applied by Landlord, from time to time, on
account of the payments due or payable by Tenant hereunder
with the right reserved to landlord to bring such action or
proceedings for the recovery of any deficits remaining
unpaid as Landlord may deem favorable from time to time
without obligation to await the end of the term hereof for
the final determination of Tenant's account. The failure or
refusal of Landlord to re-let the Premises or any part or
parts thereof shall not release or affect Tenant's
liability for damages. Landlord may make such alterations,
repairs, replacements and/or decorations in the Premises as
Landlord, in the Landlord's sole judgment, considers
advisable and necessary for the purpose of re-letting the
Premises; and the making of such alterations, repairs,
replacements, and/or decorations shall not operate or be
construed to release Tenant from liability hereunder as
aforesaid. Landlord shall, in no event, be liable in any
way whatsoever for failure to re-let the Premises, or, in
the event the Premises are re-let, for failure to collect
the rent hereof under such re-letting.
In the event any installment of Rent or Additional Rent
shall become overdue for a period in excess of ten (10)
days, a "Late Charge" in the amount of five percent (5%)
per month of such overdue installment may be charged to
Tenant by Landlord, which Late Charge shall be payable
monthly on the same day of the month as installments of
Rent and Additional Rent, until such overdue installment is
paid. This charge shall be in addition to, and not in lieu
of, any other remedy Landlord may have and is in addition
to any reasonable fees and charges of any agent or
-29-
<PAGE>
attorneys which Landlord is entitled to employ on any
default hereunder, whether authorized herein, or by law.
In addition to the above described Late Charge, at
Landlord's option, any payment required to be made by
Tenant under the Provisions of this Lease not made by
Tenant when and as due shall thereupon be deemed to be due
and payable by Tenant to Landlord with interest thereon
from the date when the particular amount became due to the
date of payment thereof to Landlord. The aforesaid interest
shall be at the then applicable prime interest rate plus
two percent (2%) per annum, announced from time to time by
Mellon Bank, N.A. at its principal office in Pittsburgh,
Pennsylvania.
In the event of a breach or threatened breach by Tenant of
any of the covenants or provisions of this Lease, Landlord
shall have the right of injunction and the right to invoke
any remedy allowed at law or in equity as if re-entry,
summary proceedings and other remedies were not herein
provided for. Mention in this Lease of any particular
remedy shall not preclude Landlord from any other remedy,
in law or in equity. Tenant hereby expressly waives any and
all rights or redemption granted by or under any present or
future laws in the event of Landlord's obtaining possession
of the Premises, by reason of the violation by Tenant of
any of the covenants and conditions of this Lease or
otherwise; and further expressly waives service of any
notice of Landlord's intention to re-enter.
NON-WAIVER 27. The failure or delay on the part of either party to enforce
or exercise at any time any of the provisions, rights or
remedies in this Lease shall in no way be construed to be a
waiver thereof, nor in any way to affect the validity of
this Lease or any part thereof, or the right of the party
to thereafter enforce each and every such provision, right
or remedy. No waiver of any breach of this Lease shall be
held to be a waiver of any other or subsequent breach. The
receipt and acceptance by Landlord of Rent or Additional
Rent at a time when the payment of such Rent or Additional
Rent is in default under this lease shall not be construed
as a waiver of such default. The receipt and acceptance by
Landlord of a lesser amount than the Rent or Additional
Rent due shall not be construed to be other than a payment
on account of the Rent or Additional Rent then due, nor
shall any statement on Tenant's check or any letter
accompanying
-30-
<PAGE>
Tenant's check be deemed an accord and satisfaction, and
Landlord may accept such payment without prejudice to
Landlord's right to recover the balance of the Rent or
Additional Rent due or to pursue any other remedies
available under law or provided in this Lease. No act or
thing done by Landlord or Landlord's agents or employees
during the term of this Lease shall be deemed an acceptance
of a surrender of the Premises, and no agreement to accept
such a surrender shall be valid unless in writing and signed
by Landlord.
If there be any agreement between Landlord and Tenant
providing for the cancellation of this Lease upon certain
provisions or contingencies, and/or an agreement for the
renewal hereof at the expiration of the term first above
mentioned, the right to such renewal or the execution of a
renewal agreement between Landlord and Tenant prior to the
expiration of such first mentioned term shall not be
considered an extension thereof or a vested right in tenant
to such further term, so as to prevent Landlord from
cancelling this Lease and any such extension thereof
pursuant to Landlord's exercising any remedies provided
herein or at law in the event of a default by Tenant during
the remainder of the original term. Such privilege, if and
when so exercised by Landlord, shall cancel and terminate
this Lease and any such renewal or extension previously
entered into between Landlord and Tenant or the right of
Tenant to any such renewal or extension; any right herein
contained on the part of Landlord to cancel this Lease shall
continue during any extension or renewal hereof; and any
option on the part of Tenant herein contained for an
extension or renewal hereof shall not be deemed to give
Tenant any option for a further extension beyond the first
renewal or extended term.
RELOCATION OF
TENANT 28. INTENTIONALLY OMITTED.
QUIET
ENJOYMENT 29. If and so long as Tenant pays the Rent and Additional Rent
reserved hereunder and observes and performs all of the
covenants, conditions and provisions on Tenant's part to be
observed and performed hereunder, Tenant shall and may
peaceably and quietly have, hold and enjoy the Premises for
the entire term hereof, subject to all provisions of this
Lease.
-31-
<PAGE>
UNAVOIDABLE
DELAY 30. In the event that either party shall be delayed or hindered
in, or prevented from the performance of any work, service
or other acts required under this Lease to be performed by
such party, and such delay or hinderance is due to strikes,
lockouts, acts of God, governmental restrictions, enemy act,
civil commotion unavoidable fire or other casualty, or other
causes of a like nature beyond the control of the party so
delayed or hindered, then performance of such work, service
or other act shall be extended for a period equivalent to
the period of such delay. In no event shall such delay
constitute a termination of this Lease, or any extension
thereof. The provisions of this Section shall not operate to
excuse Tenant from the prompt payment of Rent and/or
Additional Rent, including such pro rata payments of Rent
and/or Additional Rent as may be due under any Section
hereby after the commencement of the term.
SUCCESSORS 31. The respective rights and obligations provided in this Lease
shall bind and shall inure to the benefit of the parties
hereto, their legal representatives, heirs, successors and
assigns; provided however, that no rights shall inure to the
benefit of any successor or assign of Tenant unless
Landlord's written consent for the transfer to such
successor or assign has first been obtained as provided in
Section 14.
GOVERNING
LAW 32. This Lease shall be construed, governed and enforced in
accordance with the laws of the Commonwealth of
Pennsylvania.
SEVERABILITY 33. If any provisions of this Lease shall be held to be invalid,
void or unenforceable, the remaining provisions hereof shall
in no way be affected or impairs and such remaining
provisions shall remain in full force and effect.
CAPTIONS 34. Marginal captions and titles and the table of contents to
this Lease are for convenience and reference only, and are
in no way to be construed as defining, limiting or modifying
the scope or intent of the various provisions of this Lease.
GENDER 35. As used in this Lease, the word "person" shall mean and
include, where appropriate, an individual, corporation,
partnership or other entity; the plural shall be substituted
for the singular, and
-32-
<PAGE>
the singular for the plural, where appropriate, and words of
any gender shall mean and include any other gender.
NOTICES 36. All notices required or permitted hereunder shall be deemed
delivered and sufficiently given if sent by registered or
certified mail, return receipt requested addressed to the
Landlord or Tenant, as the case may be, as follows:
TO LANDLORD: Joseph A. Massaro, Jr. and
Carolyn C. Massaro
212 Ninth Street
Pittsburgh, Pennsylvania 15222
TO TENANT: Iron Age Corporation
Robinson Plaza Three, Suite 400
Route 60 & Park Manor Drive
Pittsburgh, Pennsylvania 15205
Either party may change its address by written notice so
given to the other.
BROKERS 37. Tenant represents to Landlord that Tenant has not entered
into any agreement with a broker (relative to the making of
this Lease) committing the Landlord to pay the commission of
such broker. Tenant agrees that should any claim be made
against Landlord for any broker's commission by reason of
the acts of Tenant, Tenant shall indemnify and hold Landlord
free and harmless from and against any and all liability and
expenses in connection therewith. Landlord represents to
Tenant that Grubb & Ellis Company will be paid a commission
relative to the making of this Lease.
EXECUTION 38. This Lease shall become effective only when it has been
signed by a duly authorized officer or representative of
each of the parties and delivered to the other party. This
Lease is being executed simultaneously in three (3)
counterparts, of which one (1) shall be delivered to Tenant.
Each of such fully executed counterparts shall be deemed
original and it shall not be necessary in making proof of
this Lease to produce or account for more than one (1) such
counterpart.
MODIFICATIONS 39. If, in connection with obtaining financing or refinancing
for the Building of which the Premises form a part, a
banking, insurance
-33-
<PAGE>
or other institutional lender shall request reasonable
modifications that do not increase the obligations of Tenant
hereunder (except, perhaps, to the extent that Tenant may be
required to give notices of any defaults by landlord to such
lender and/or permit the curing of such defaults by such
lender together with the granting of such additional time
for such curing as may be required for such lender to get
possession of the said Building), and do not materially
adversely affect the leasehold interest hereby created, then
in such event, Tenant agrees to execute and deliver such
modification. In no event shall a requirement that the
consent of any such lender be given for any modification of
this Lease or for any assignment or sublease, be deemed to
materially adversely affect this Lease or leasehold interest
created by this Lease.
RULES AND
REGULATIONS 40. Tenant and Tenant's servants, employees, agents, visitors
and licensees shall observe faithfully, and comply strictly
with, the Rules and Regulations, attached hereto and market
as Exhibit "D", and such other and further reasonable Rules
and Regulations as Landlord or Landlord's agents may, after
notice to Tenant, from time to time adopt. Nothing contained
in this Lease shall be construed to impose upon Landlord any
duty or obligation to enforce the Rules and Regulations or
terms, covenants or conditions in any other Lease, as
against any other tenant and Landlord shall not be liable to
Tenant for violation of the same by any other tenant, its
servants, employees, agents, visitors or licensees.
SIGN AGE 41. Landlord hereby covenants that in the event Landlord grants
permission for the installation of exterior signage to any
other non-retail tenant of the Robinson Plaza Buildings,
Tenant will be granted the signage rights for Robinson Plaza
Three.
MISREPRESENTA-
TIONS BY
LANDLORD 42. Tenant acknowledges and agrees that, except as expressly set
forth in this Lease, there have been no representations,
promises made by or on behalf of Landlord with respect to
the Premises or the Land and Building or with respect to the
suitability of either for the conduct of Tenant's business.
The taking of possession of the Premises by Tenant shall
conclusively establish that the Premises and the Land and
Building were at such time in satisfactory condition, order
and repair.
-34-
<PAGE>
ENTIRE
AGREEMENT 43. This Lease, including the Exhibits and any Riders hereto,
(which shall all be deemed to be a part of this Lease)
contains all the agreements, conditions, understandings,
representations and warranties made between the parties
hereto with respect to the subject matter hereof, and may
not be modified orally or in any manner other than by an
agreement in writing signed by both parties hereto or their
respective successors in interest.
-35-
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, Landlord
and Tenant have hereunto respectively signed and sealed triplicate originals of
this Lease as of the day and year first above written.
LANDLORD:
JOSEPH A. MASSARO, JR.
WITNESS:
/s/ Gwenn A. Grayson /s/ Joseph A. Massaro, Jr.
- - -------------------------- -------------------------------------
WITNESS: CAROLYN C. MASSARO
/s/ Gwenn A. Grayson /s/ Carolyn C. Massaro
- - -------------------------- -------------------------------------
ATTEST: TENANT: IRON AGE CORPORATION
/s/ Keith A. McDonough, VP Finance /s/ Donald R. Jensen
- - -------------------------------------- -------------------------------------
[Name/Title]
(CORPORATE SEAL)
-36-
<PAGE>
EXHIBIT "B"
LANDLORD'S WORK
Landlord will perform the following scope of work in the Premises at its sole
cost and expense, using good grade materials and in a good and workmanlike
manner.
. Remove all partitions and doors as shown on drawing B-1, attached
hereto.
. Install all partitions and doors as shown on drawing B-2.
. Patch existing carpet as necessary in "open office area".
. Clean all existing carpet in "open office area".
. Replace all existing carpet in "executive area" with Tenant's
selection (Stratton "Synergy" or equal; cost of goods not to exceed
$10.00 per square yard).
. Replace all existing vinyl wall covering with Tenant's selection
("Genon Express Type I" or equal; cost of goods not to exceed $5.00
per square yard).
. Paint all walls and door frames with two coats of Sherwin Williams
latex paint of Tenant's selection;
. Replace all ceiling with Armstrong Tegular Cortega "Second Look".
. Paint all existing ceiling grid white.
. Furnish and install 1-3/4" crown molding at all ceiling/wall joints;
paint to match wall color or ceiling grid as appropriate.
. Clean and relamp all existing light fixtures.
. Furnish and install conference room fluorescent light fixture capable
of providing 100 FC at 30 inches above finished floor.
. Furnish and install water hookup for coffee machine in kitchen area.
. Furnish and install full-size refrigerator and microwave.
. Furnish and install card access capabilities on two main entrance
doors to the fourth floor Premises.
<PAGE>
. Provide a Ten Thousand Dollar ($10,000.00) furniture refinishing
allowance.
. Clean and repair or replace blinds as necessary at all perimeter
windows.
<PAGE>
DRAWING B-1
[PLAN]
<PAGE>
DRAWING B-2
[PLAN]
<PAGE>
EXHIBIT A.2 THIRD FLOOR
[PLAN]
<PAGE>
EXHIBIT "C"
CLEANING SPECIFICATIONS
DAILY (Five (5) Days per Week)
- - -----
1. Empty and remove all trash, replace liners.
2. Dust all furniture, sills, files, tables, horizontal surfaces that are
accessible. Wash and/or polish as needed.
3. Thoroughly sweep and wet mop all hard surface floors.
4. Vacuum all traffic areas nightly removing any visible litter.
5. Clean and spot any partition glass in office area along with cleaning
any glass top furniture, etc.
6. Clean and disinfect all water fountains.
7. Spot clean any wall space in public areas to remove soil and prints.
8. Clean all extinguishers in and out as needed.
9. Wipe down elevators interior and exterior with polish or cleaner.
10. Clean all reachable entrance glass, inside and outside, wiping all
frames as needed but at least once a week.
11. Vacuum all entrance mats and runners.
12. Vacuum all elevator carpets and edges; vacuum and wipe tracks.
13. Clean and sanitize all restroom facilities, to include all toilets in
and out, all sinks, partitions, cabinet, mirrors, dispensers,
furniture; spot all wall space around sinks, dispensers, toilets to
remove soil, splashing. Wet mop floors with disinfectant.
14. Restock all dispensable restroom supplies from customer's stock.
15. Wipe entrance doors to remove prints.
16. Clean and polish all brightwork in restrooms.
<PAGE>
17. Maintenance company will perform any reasonable service to maintain
the buildings in a clean and attractive manner.
WEEKLY
- - ------
1. Police stairways nightly and wet mop weekly.
2. Thoroughly wet mop and speed buff white tile in building.
3. Clean all high glass in lobbys.
4. Clean and wet mop all trash rooms twice weekly.
5. Vacuum all carpet area thoroughly.
MONTHLY
- - -------
1. Machine scrub all restroom floors.
2. Machine scrub all lobby floors and refinish.
3. Remove and clean under all foyer mats monthly.
4. Shampoo and extract all elevator carpets monthly.
5. Shampoo all entrance carpets.
6. Dust all venetian blinds.
7. Spot clean carpet in tenant space as requested.
ADDITIONAL SERVICES
- - -------------------
1. Wash all restroom walls and partitions quarterly.
2. Shampoo all public area carpet quarterly.
3. Open and clean light lens as requested.
<PAGE>
EXHIBIT "D"
RULES AND REGULATIONS
DEFINITIONS 1. Whenever in these Rules and Regulations the word
"Tenant" is used, it shall be taken to apply to and
include the Tenant and his agents, employees, invitees,
licensees, subtenants and contractors, and is to be
deemed of such number and gender as the circumstances
require. The words "Room" and "Premises" are to be taken
to mean and include the space covered by this Lease. The
word "Landlord" shall be taken to include the employees
and agents of Landlord.
OPERATIONS 2. The streets, sidewalks, entrances, halls, passages,
elevators, stairways and other common area provided by
Landlord shall not be obstructed by Tenant, or used by
him for any other purpose than for ingress and egress.
WASHROOMS 3. Toilet rooms, water closets and other water apparatus
shall not be used for any purposes other than those for
which they were constructed.
INSURANCE
REGULATIONS 4. Tenant shall not do anything in the Premises, or bring
or keep anything therein, which will in any way increase
or tend to increase the risk of fire or the rate of fire
insurance, or which will conflict with the regulations
of the Fire Department of the Fire Laws, or with the
rules and regulations of the Fire Insurance Rating
Organization, or equivalent bodies, or with any
insurance policy on the Building or any part thereof, or
with any law, ordinance, rule or regulation affecting
the occupancy and use of the Premises, now existing or
hereafter enacted or promulgated by any public authority
or by the Fire Insurance Rating Organization, or any
equivalent body.
GENERAL
PROHIBITIONS 5. In order to insure proper use and care of the Premises,
Tenant shall not:
(a) Keep animals or birds in the Premises.
<PAGE>
(b) Use the Premises or any rooms therein as sleeping
apartments.
(c) Allow any sign, advertisement, or notice to be
fixed to the Building.
(d) Make improper noises or disturbances of any kind;
sing, play or operate any musical instrument,
radio or televisions without consent of Landlord,
or otherwise do anything to disturb other tenants
or tend to injure the reputation of the Building.
(e) Mark or defile elevators, water-closets, toilet
rooms, walls, windows, doors or any other part of
the Building.
(f) Place anything on the outside of the Building,
including roof setbacks, window ledges and other
projections or drop anything from the windows,
stairways or parapets; or place trash or other
matter in the halls, stairways, elevators or light
wells of the Building.
(g) Cover or obstruct any window, skylight, door or
transom that admits light, except with building
standard narrow slot, horizontal venetian blinds
without the prior written approval of Landlord.
(h) Fasten any article, drill holes, drive nails or
screws into the walls, floors, woodwork, window
mullions, or partitions of the Premises or
Building; nor shall the same be painted, papered
or otherwise covered or in any way marked or
broken without the prior consent of Landlord.
(i) Interfere with the heating or cooling apparatus.
(j) Allow anyone but Landlord's employees to clean the
Premises.
(k) Leave the Premises without locking doors, stopping
all office machines, and extinguishing all lights.
<PAGE>
(l) Install any shades, blinds, or awnings, except
building standard window coverings, without
consent of Landlord.
(m) Use any electric heating device.
(n) Operate any machinery other than small office
equipment.
(o) Install call boxes, or any kind of wire in or on
the Premises or the Building without Landlord's
permission and direction.
(p) Manufacture any commodity, or prepare or dispense
any foods, beverages, whether by vending or
dispensing machines or otherwise or alcoholic
beverages, tobacco, drugs, flowers or other
commodities or articles without the written
consent of Landlord.
(q) Secure duplicate keys for rooms or toilets, except
from Landlord, or change the locks of any doors to
or in the Premises.
(r) Give his employees or other persons permission to
go upon the roof of the Building without the
written consent of Landlord.
(s) Place door mats in public corridors without the
written consent of Landlord.
(t) Use passenger elevators for freight during normal
business hours as defined in the Lease.
(u) Schedule, nor will Landlord receive, deliver or
accept freight for Tenant other than Monday
through Friday, excluding holidays, between the
hours of 9:30 A.M. to 11:30 A.M. and 1:30 P.M. to
4:15 P.M.
PUBLICITY 6. Tenant shall not use the name of the Building in any
way in connection with his business except as the
address thereof. Landlord shall also have the right to
prohibit any advertising by Tenant, which in its
opinion, tends to impair
<PAGE>
the reputation of the Building or its desirability as a
building for offices; and upon written notice from
Landlord, Tenant shall refrain from or discontinue such
advertising. Signs on interior glass doors will be
painted only by the person designated by Landlord, the
cost of the printing to be paid by Tenant.
BUSINESS
MACHINES 7. Business machines and mechanical equipment which cause
vibration, noise, cold or heat that may be transmitted
to Building structure, or any leased space outside
Premises shall be placed and maintained by Tenant, at
its sole cost and expense in settings of cork, rubber,
or spring type vibration eliminators sufficient to
absorb and prevent such vibration, noise, cold or heat.
No business machines or mechanical equipment which
require unusually high amounts of electricity shall be
used or installed in the Premises without Landlord's
prior written consent.
MOVEMENT OF
EQUIPMENT 8. Landlord reserves the right to designate the time and
the method whereby freight, small office equipment,
furniture, safes and other articles may be brought
into, moved, or removed from the Building Premises, and
to designate the location for temporary disposition of
such items. In no event shall any of the foregoing
items be taken from Tenant's Premises for the purpose
of removing same from the Building without the express
consent of both Landlord and Tenant.
PUBLIC
ENTRANCE 9. Landlord reserves the right to exclude the general
public from the Building upon such days and at such
hours as in Landlord's judgment will be for the best
interest of the Building and its tenants. At Landlord's
discretion, persons entering the office portion of the
Building after 6:00 P.M. Monday through Friday, after
1:00 P.M. on Saturday and at all times on Sunday and
holidays and before 8:00 A.M. Monday through Saturday
may be required to sign the register maintained for
that purpose.
<PAGE>
RIGHTS RESERVED
TO LANDLORD 10. Without abatement or diminution in Rent, Landlord
reserves and shall have the following additional
rights:
(a) To change the name or street address of Building
and the arrangement and/or location of entrances,
passageways, doors, doorways, corridors,
elevators, stairs, toilet or other public parts of
the Building, provided that such acts shall not
unreasonably interfere with Tenant's use and
occupancy of the Premises as a whole;
(b) To install and maintain a sign or signs on the
exterior of the Building;
(c) To have access for Landlord and other tenants of
Building to any mail chutes, if any, located on
the Premises according to the rules of the United
States Post Office;
(d) To designate all sources furnishing sign painting
and lettering, ice, drinking water, towels and
toilet supplies, and other like service used on
the premises;
(e) At any time or times Landlord, either voluntarily
or pursuant to governmental requirement, may, at
Landlord's own expense, make repairs, alterations,
or improvements in or to the Building or any part
thereof, and during such alterations, may close
entrance, doors, windows, corridors, elevators or
other facilities, provided that such acts shall
not unreasonably interfere with Tenant's use and
occupancy of the Premises as a whole;
(f) To erect, use and maintain pipes and conduits in
and through the Premises;
(g) During the last six (6) months of the term, if
during or prior to the time the Tenant vacates the
Premises, to decorate, remodel, repair, alter or
otherwise prepare the Premises for reoccupancy;
(h) To constantly have pass keys to the Premises;
<PAGE>
(i) To grant to anyone the exclusive right to conduct
any particular business or undertaking in the
Building;
(j) To exhibit the Premises to others and to display
"For Rent" signs on the Premises;
(k) To take any and all measures, including
inspections, repairs, alterations, additions and
improvements to the Premises or to the Building,
as may be necessary or desirable for the safety,
protection or preservation of the Premises or the
Building or Landlord's interests or as may be
necessary or desirable in the operation of the
Building. Landlord may enter upon the Premises
and may exercise any or all of the foregoing
rights hereby reserved without being deemed guilty
of an eviction or disturbance of Tenant's use or
possession and without being liable in any manner
to the Tenant.
REGULATION
CHANGE 11. Landlord shall have the right to make such other and
further reasonable rules and regulations as in the
judgment of Landlord, may from time to time be needed
for the safety, appearance, care and cleanliness of the
Building and for the preservation of good order
therein; Landlord shall not be responsible to Tenant
for any violation of rules and regulations by other
tenants.
<PAGE>
[Letterhead of The Massaro Company]
February 26, 1993
Mr. Keith McDonough
Iron Age Corporation
2406 Windmere Drive
Pittsburgh, PA 15205-1894
RE: Robinson Plaza Three Lease
Side letter agreement
Dear Keith:
Pursuant to our discussions and in conjunction with the execution of the Lease
by and between Iron Age Corporation (Tenant) and Joseph A. Massaro, Jr. and
Carolyn C. Massaro (collectively Landlord) for space on the third and fourth
floors of Robinson Plaza Three, the following items are expressly agreed to:
1. Reserved Parking: Landlord will provide two (2) reserved parking spaces to
be situated on the Robinson Plaza Three site at a mutually agreed upon
location. Although the spaces are provided for the exclusive use of Iron
Age Corporation, the Landlord is not responsible for the enforcement of the
exclusive parking arrangement.
2. Temporary Space: Landlord will provide the Tenant approximately 1,000
square feet of temporary office space within Robinson Plaza Three for a
period not to exceed one (1) year at no cost to the Tenant. The space
provided is subject to relocation upon demand and is subject to all other
applicable terms and conditions of the underlying Lease.
3. Use and Ownership of Furniture: As an incentive to the Lease, Landlord
will provide for Tenants use during the term of the Lease all that office
furniture presently located in Suite 215 and Suite 400 of Robinson Plaza
Three. The furniture is accepted in "as is" condition and will be
reconfigured and relocated at Tenant's expense. Title to the furniture
will vest in Tenant upon payment of the first month's rent, however, in the
event of a default under the Lease during the initial term thereof, title
will revert to Landlord.
If the foregoing accurately represents our agreement, please acknowledge your
acceptance by signing in the space provided below and returning one (1) copy of
this executed letter to us.
<PAGE>
Very truly yours,
THE MASSARO COMPANY
/s/ Conan R. McClain
Conan R. McClain
Property Manager
CRM/mh
Enclosure
Intending to be legally bound hereby, agreed to and accepted this 1st day of
March, 1993,
IRON AGE CORPORATION
By: /s/ Donald R. Jensen
--------------------------------
President
--------------------------------
[Name/Title]
<PAGE>
FIRST AMENDMENT TO LEASE
DATED MARCH 1, 1993
THIS AGREEMENT made and entered into this 2nd day of June 1994, by and between
Joseph A. Massaro, Jr. and Carolyn C. Massaro (hereinafter collectively called
"Landlord") and Iron Age Corporation (hereinafter called "Tenant").
WITNESSETH:
WHEREAS, on March 1, 1993, Landlord made and entered into a Lease (the "Lease")
with Tenant for certain premises consisting of 16,191 rentable square feet
located on the third and fourth floors (the "Premises") of a building known as
Robinson Plaza III, Robinson Township, Pennsylvania (the "Building"); and
WHEREAS, Tenant has requested that Landlord grant permission for it to contract
for the janitorial services performed within the Premises directly with a
reputable professional contractor of its choice; and
WHEREAS, Tenant has further requested that the Rent provided for under the Lease
be reduced by an amount equal to Landlord's cost of the janitorial services to
be performed under the Lease.
NOW, THEREFORE, in consideration of foregoing recitals and in further
consideration of the mutual covenants contained herein, and intending to be
legally bound hereby, the parties hereto mutually agree as follows:
1. This First Amendment to Lease Dated March 1, 1993 shall become effective
on May 1, 1994 (The "Effective Date").
2. Landlord hereby consents to Tenant's request to contract directly with a
reputable professional janitorial services contractor for the janitorial
services rendered within the Premises as of the Effective Date.
3. The parties hereto mutually agree that as of the Effective Date, the
first sentence of paragraph 6 of the Lease shall be deleted in its
entirety and in lieu thereof, the following provision shall be inserted:
"Tenant shall pay to Landlord at its aforesaid principal office
or at such other place as Landlord may designate from time to
time, as Rent, the sum of Two Hundred Forty-one Thousand Two
Hundred Forty-six and 02/100 ($241,246.02) Dollars, ("Rent"),
payable on or before the first week day of each calendar month in
equal monthly installments of Twenty Thousand One Hundred three
and 84/100 ($20,103.84) Dollars in United States
<PAGE>
currency ("Basic Monthly Rent"), in advance and without demand
beginning at the Effective Date and continuing until the
expiration of said term, without any deduction of set-off
whatsoever."
4. The parties hereto mutually agree that as of the Effective Date,
paragraph 13, section (c) of the Lease shall be deleted in its entirety
and in lieu thereof, the following provision shall be inserted:
"Any and all janitorial services for the Premises shall be
performed by Tenant at its sole cost and expense."
5. The parties hereto mutually agree that as of the Effective Date, Exhibit
"C" to the Lease shall be deleted in its entirety and Landlord shall
thereby be relieved of its obligation to perform the services specified
therein with respect to the Premises.
6. The parties hereto mutually agree that as of the Effective Date, the
first subparagraph of paragraph 19, section (d) of the Lease shall be
deleted in its entirety and in lieu thereof, the following provision
shall be inserted:
"Tenant will indemnify, save harmless and defend Landlord, its
agents, employees, or contractors from and against any and all
claims and demands in connection with any accident, injury or
damage whatsoever caused to any person or property arising
directly or indirectly out of the business conducted in the
Building or Premises or occurring in, on or about the Building or
Premises or any part thereof, or arising directly or indirectly
from any act or omission of Tenant or any concessionaire,
contractor or subtenant or their respective licensees, servants,
agents, employees, or contractors and from and against any and
all costs, expenses and liability incurred in connection with any
such claim or proceeding brought thereon. The comprehensive
general liability coverage maintained by Tenant pursuant to
subsection (a) above shall specifically insure the contractual
obligations of Tenant as set forth herein."
7. The parties hereto mutually agree and reaffirm Landlord's right to
periodically inspect the Premises as provided in paragraph 15 of the
Lease.
8. Except as otherwise provided in this First Amendment, the parties hereto
further agree that all terms and conditions contained in the Lease shall
remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties have
hereto set their hands this 2nd day of June 1994.
Witness: Landlord:
Joseph A. Massaro, Jr.
/s/ Conan R. McClain /s/ Joseph A. Massaro, Jr.
- - -------------------------- ----------------------------------
Witness: Carolyn C. Massaro
/s/ Conan R. McClain /s/ Carolyn S. Massaro
- - -------------------------- ----------------------------------
Attest: Tenant: Iron Age Corporation
/s/ Keith A. McDonough /s/ Donald R. Jensen
- - -------------------------- ----------------------------------
Keith A. McDonough Donald R. Jensen
Vice President - Finance President
[Corporate Seal]
<PAGE>
SECOND AMENDMENT TO LEASE DATED MARCH 1, 1993
By and Between
JOSEPH A. MASSARO, JR. (Landlord)
And
IRON AGE CORPORATION (Tenant)
THIS AGREEMENT made and entered into this 12th day of June, 1996, by and between
Joseph A. Massaro, Jr. and Carolyn C. Massaro (hereinafter collectively called
"Landlord") and Iron Age Corporation (hereinafter called "Tenant").
WITNESSETH:
WHEREAS, on March 1, 1993, Landlord made and entered into a Lease (the "Lease")
with Tenant for certain premises consisting of 16,191 rentable square feet
located on the third and fourth floors (the "Premises") of a building known as
Robinson Plaza III, Robinson Township, Pennsylvania (the "Building"); and
WHEREAS, Tenant has requested that Landlord grant permission for it to contract
for the janitorial services performed within the Premises directly with a
reputable professional contractor of its choice; and
WHEREAS, Tenant has further requested that the Rent provided for under the Lease
be reduced by an amount equal to Landlord's cost of the janitorial services to
be performed under the Lease; and
WHEREAS, on June 2, 1994 Tenant and Landlord executed a document entitled "First
Amendment to Lease," dated June 2, 1994 wherein Landlord agreed to Tenant's
request to contract directly with a reputable janitorial services contractor for
the janitorial services rendered within the premises as of the effective date.
NOW, THEREFORE, in consideration of foregoing recitals and in further
consideration of the mutual covenants contained herein, and intending to be
legally bound hereby, the parties hereto mutually agree as follows:
1. Landlord hereby agrees to lease to Tenant and Tenant hereby agrees to
hire from Landlord an additional 907 rentable square feet located on the
third floor of Robinson Plaza III.
2. Tenant agrees to pay the Landlord a rental rate of $15.19 per rentable
square feet for the additional 907 rentable square feet for an
additional annual rent of Thirteen Thousand Seven Hundred Seventy Seven
Dollars and 33/100 ($13,777.33) in
<PAGE>
equal monthly installments of One Thousand One Hundred Forty Eight
Dollars and 11/100 ($1,148.11).
3. Rent will commence July 1, 1996 or upon occupancy, whichever occurs
sooner.
4. Tenant's percentage of rental adjustment for expenses as set forth in
paragraph 7 of the lease shall increase from 33.1% to 33.5%.
5. Landlord will provide construction services to build space to Tenant's
specifications at Tenant's sole cost and expense.
6. In the event space becomes available adjoining Tenant's current space on
the third floor of Robinson Plaza III, Tenant will have right of first
refusal to that available space provided Tenant is not in default of the
Lease as amended. Landlord will provide construction services for
adjoining space at Tenant's sole cost and expense.
7. Except as otherwise provided in this second amendment, the parties
hereto further agree that all terms and conditions contained in the
Lease as amended shall remain in full force and effect.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties have
hereto set their hands this 13th day of June 1996.
WITNESS: LANDLORD:
Joseph A. Massaro, Jr.
/s/ David E. Massaro /s/ Joseph A. Massaro, Jr.
- - -------------------------- ----------------------------------
ATTEST: TENANT:
Iron Age Corporation
/s/ Keith A. McDonough /s/ Max Rush
- - -------------------------- ----------------------------------
Keith A. McDonough Max Rush
Vice President - Finance Senior Vice President
[Corporate Seal]
<PAGE>
THIRD AMENDMENT TO THE LEASE
DATED MARCH 1, 1993
THIS AGREEMENT made and entered into this 10th day of December, 1997 by and
between Joseph A. Massaro, Jr. and Carolyn C. Massaro (hereinafter collectively
called "Landlord") and Iron Age Corporation (hereinafter called "Tenant").
WITNESSETH:
WHEREAS, on March 1, 1993, Landlord made and entered into a Lease (the "Lease")
with Tenant for certain premises consisting of 16,191 rentable square feet
located on the third and fourth floors (the "Premises") of a building known as
Robinson Plaza III, Robinson Township, Pennsylvania (the "Building"); and
WHEREAS, Tenant has requested that Landlord grant permission for it to contract
for the janitorial services performed within the Premises directly with a
reputable professional contractor of its choice; and
WHEREAS, Tenant further requested that the Rent provided for under the Lease be
reduced by an amount equal to Landlord's cost of the janitorial services to be
performed under the Lease; and
WHEREAS, on June 2, 1994 Tenant and Landlord executed a document entitled "First
Amendment to Lease, Dated March 1, 1993," wherein Landlord agreed to Tenant's
request to contract directly with a reputable janitorial service contractor for
the janitorial services rendered within the premises as of the effective date.
WHEREAS, on June 12, 1996, Landlord and Tenant executed a document entitled
"Second Amendment to Lease, Dated March 1, 1993," wherein Landlord agreed to
lease to Tenant and Tenant agreed to hire from Landlord an additional 907
rentable square feet on the third floor of the Building.
NOW, THEREFORE, in consideration of foregoing recitals and in further
consideration of the mutual covenants contained herein, and intending to be
legally bound hereby, the parties hereto mutually agree as follows:
1. This Third Amendment to Lease Dated March 1, 1993 shall become effective
on August 1, 1998 (the "Effective Date").
2. Landlord hereby agrees to lease to Tenant and Tenant hereby agrees to
hire from Landlord an additional 3,269 rentable square feet located on
the third floor of the Building.
<PAGE>
3. Tenant agrees to pay Landlord, for the additional 3,269 rentable square
feet, an additional annual rental rate of Forty Eight Thousand Seven
Hundred Eight and 10/100 ($48,708.10) Dollars, ("Rent") payable on or
before the first week day of each calendar month in equal monthly
installments of Four Thousand Fifty Nine and 01/100 ($4,059.01) Dollars
in advance without demand beginning on the Effective Date and continuing
until April 30, 1999.
4. Landlord will provide Tenant an allowance of $32,690.00 (the
"Construction Allowance") for any Tenant improvements in the additional
3,269 rentable square feet, based on architectural drawings provided by
Tenant. Architectural drawing will be at Tenant's sole cost and
responsibility. Landlord shall provide Tenant with a construction
budget, based on Tenant's architectural drawings, with a 10% mark-up for
overhead and profit. Any costs in excess of the Construction Allowance
shall be the responsibility of Tenant, payable to Landlord on a net
thirty (30) day basis. All construction services shall be provided by
the Massaro Company during normal trade hours.
5. Tenant further agrees to extend the term of the Lease (the "Extension
Term") for a period of seven (7) years beginning May 1, 1999 (the
"Commencement Date") and ending at midnight on April 30, 2006.
6. Provided Tenant is not in default of the Lease, Tenant will have the
option to terminate the Lease agreement and all provisions contained
herein on April 30, 2004, by providing Landlord written notice 180 days
prior to April 30, 2004.
7. The parties hereto mutually agree that as of the Effective Date,
paragraph 2 of the Lease, "Premises," shall be deleted in its entirety
and in lieu thereof, the following paragraph shall be inserted:
"Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the certain space (the "Premises") containing 20,367
rentable square feet on third and fourth floors of the Building."
8. The parties hereto mutually agree that as the Effective Date, paragraph
4 of the Lease, "Renewal Option," shall be deleted in its entirety and
in lieu thereof, the following provision shall be inserted:
"Provided Tenant is not in default under this Lease, and upon one
hundred eighty (180) days prior written notice, Tenant shall have
the option to extend the term of the Lease for one (1) three (3)
year renewal option and one (1) five (5) year renewal option.
For the first three (3) year renewal option, the Rent shall be
Three Hundred Seventy Seven Thousand Six Hundred Four and 18/100
($377,604.18) Dollars annually paid in equal
<PAGE>
monthly installments of Thirty One Thousand Four Hundred Sixty
Seven and 20/100 ($31,467.02) Dollars. During the second five (5)
year renewal option, the Rent shall be Four Hundred Fifteen
Thousand Two Hundred Eighty Three and 13/100 ($415,283.13)
Dollars annually paid in equal monthly installments of Thirty
Four Thousand Six Hundred Six and 93/100 ($34,606.93) Dollars.
The Base Year shall be adjusted to 2004 for the three (3) year
renewal option and 2009 for the five (5) year renewal option."
9. The parties hereto mutually agree that as of the Commencement Date, May
1, 1999 paragraph 6 of the Lease, "Rent," shall be deleted in its
entirety and in lieu thereof, the following paragraph shall be inserted:
"Tenant shall pay to Landlord at its aforesaid principal office
or at such other place as Landlord may designate from time to
time, as Rent, the sum of Three Hundred Forty Three Thousand One
Hundred Eighty Three and 95/100 ($343,183.95) Dollars, ("Rent"),
payable on or before the first week day of each calendar month in
equal monthly installments of Twenty Eight Thousand Five Hundred
Ninety Eight and 66/100 ($28,598.66) Dollars in United States
currency ("Basic Monthly Rent"), in advance and without demand
beginning on the Commencement Date and continuing until April 30,
2004, without deduction or set-off whatsoever. Thereafter,
Tenant shall pay Landlord, as Rent, the sum of Three Hundred
Seventy Seven Thousand Six Hundred Four and 18/100 ($377,604.18)
Dollars, ("Rent"), payable on or before the first week day of
each calendar month in equal monthly installments of Thirty One
Thousand Four Hundred Sixty Seven and 02/100 ($31,467.02) Dollars
in United States currency ("Basic Monthly Rent"), in advance
without demand or deduction or set-off whatsoever. Furthermore,
the Tenant's Base Year shall be adjusted to the year 2004."
10. The parties hereto mutually agree that as of the Commencement Date, May
1, 1999 the second sentence of paragraph 7 of the Lease, "Rental
Adjustments for Expenses," shall be deleted in its entirety and in lieu
thereof, the following sentence shall be inserted:
"Base Year shall be defined as the calendar year 1999, and
Tenant's proportionate share shall be defined as the ratio of the
rentable area of the Premises bears to the rentable area of the
Building, which Tenant and Landlord hereby agree to be 40
percent."
11. Provided Tenant is not in default of the Lease and subject to the
rights previously afforded other tenants, Tenant shall have the right
to lease any space that becomes
<PAGE>
available in Robinson Plaza Three. Upon written notice by Landlord,
Tenant will ten (10) business days to either accept or reject
Landlord's lease proposal for additional space in Robinson Plaza Three
at the then fair market rental rate which at no time shall be less than
the basic rental rate plus any additional rents. If Tenant accepts said
lease proposal for additional space, the expiration date will be
coterminous with the existing Lease and amendments. Any improvements to
the space will be the responsibility of the Tenant, with Massaro
Company providing the construction services.
12. Notwithstanding any provisions of the lease to the contrary (including
but not limited to section 6), in the event that the Landlord fails to
comply with the terms Section 13 and Section 16 for a period of ninety
(90) days following written notice from the Tenant of such failure, the
Tenant shall have the right to pay one-third (1/3) of its Rent and
Additional Rent into an interest bearing Escrow Fund at PNC Bank,
jointly owned by Tenant and Landlord, until such time as the Landlord
cures such failure, at which time all the moneys in the Escrow Fund
shall be paid to the Landlord. Any dispute arising under this Section
shall be resolved by a disinterested arbitrator whose fees shall be
borne equally by the Landlord and Tenant.
13. Except as otherwise provided in this Third Amendment, the parties
hereto further agree that all terms and conditions contained in the
Lease shall remain in full force and effect.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties have
set their hands this 10th day of December 1997.
Witness: Landlord:
Joseph A. Massaro, Jr.
/s/ David E. Massaro /s/ Joseph A. Massaro, Jr.
- - -------------------------- ----------------------------------
Witness: Carolyn C. Massaro
__________________________ /s/ Carolyn C. Massaro
----------------------------------
<PAGE>
Attest: Tenant:
Iron Age Corporation
/s/ Max Rush /s/ Keith A. McDonough
- - -------------------------- ----------------------------------
Max Rush Keith McDonough
Senior Vice President Executive Vice-President
Chief Financial Officer
[Corporate Seal]
<PAGE>
EXHIBIT 10.22
LEASE AGREEMENT
THIS LEASE AGREEMENT is made this 9th day of December, 1992 by and between
Yates County Industrial Development Agency, hereinafter referred to as
"Landlord," and Iron Age Corporation, hereinafter referred to as "Tenant."
W I T N E S S E T H:
1. PREMISES & TITLE
1.1 For and in consideration of the payment of the rental and
performance of the covenants and agreements hereinafter set forth, Landlord
leases to Tenant, and Tenant accepts from Landlord, the premises located at 1
Keuka Business Park, in the Town of Jerusalem, State of New York, known as the
Seneca Building, more fully shown on Exhibit A, attached hereto and incorporated
herein by this reference ("the Leased Premises").
1.2 Landlord warrants that it has title to the Leased Premises, and
that it has the right to lease the same for the term of this Lease. Landlord
covenants that Tenant, upon the payment of the rent herein stipulated and the
performance of all the covenants and agreements hereunder, shall have the
peaceful and quiet possession, use and enjoyment of the Leased Premises, without
hindrance on the part of the Landlord or any party claiming by, through or under
it, for the term of this Lease, and Landlord further warrants that it shall
defend the Tenant in such peaceful and quiet use, and enjoyment and possession
of the Leased Premises against any such claims.
1.3 This Lease is and shall be subordinate at all times to any
mortgage or mortgages which may now be or at any time hereafter shall be placed
upon or made a lien upon the said leased premises or any part thereof and to any
extension, spreading, or modification thereof, The Tenant will, without expense
to the Landlord, promptly execute and deliver on demand such further and
additional instrument or instruments in proper form for recording subordinating
this lease to any such mortgage or mortgages as shall be requested by the
Landlord or by any mortgage or proposed mortgage. The Tenant hereby appoints
the Landlord the attorney-in-fact of the Tenant revocable to execute and deliver
any such instrument or instruments for and on behalf of and in the name of the
Tenant.
1.4 The TENANT represents that TENANT has inspected and examined the
premises and accepts them in their present condition. Prior to the commencement
of this Lease, Landlord and Tenant shall prepare and sign an inspection report
which shall establish the condition of the Leased Premises at the commencement
of the Lease.
<PAGE>
2. TERM
2.1 The term of this Lease shall be for a period of 4 years
commencing on March 1, 1993 and terminating at midnight on February 28, 1997.
2.2 Tenant shall have the option to cancel this Lease Agreement
without penalty only under the following conditions:
1) Tenant builds an addition or not less than 30,000 square feet to
the Iron Age Corporation Distribution Center located at 240 North Ave, Penn Yan,
New York for the purpose of relocating operations conducted in the Leased
Premises; and
2) Tenant gives at least 12 months notice of such relocation.
2.3 Tenant shall have the option to extend the term of this lease for
a period of two (2) years beginning March 1, 1997 and ending midnight February
28, 1999. In the event that this option is exercised all terms and conditions
of this agreement will remain in effect and rental will be paid as outlined in
paragraph 3, 3.1 and 3.2.
3. RENTAL
3.1 Tenant covenants and agrees to pay to Landlord for the use and
occupancy of the Leased Premises during the term hereof in monthly installments
as follows:
<TABLE>
<CAPTION>
Period Yearly Amount Monthly Installment
------ ------------- -------------------
<S> <C> <C>
3/1/93-2/28/94 $24,000 $2,000
3/1/94-2/28/95 $27,000 $2,250
3/1/95-2/29/96 $30,000 $2,500
3/1/96-2/28/97 $30,000 $2,500
Two Year Option:
3/1/97-2/28/98 $33,000 $2,750
3/1/98-2/28/99 $33,000 $2,750
</TABLE>
3.2 The monthly installment shall be paid in advance and on the first
day of each month during the term hereof at 1 Keuka Business Park, Suite 104.
4. UTILITIES
4.1 Landlord shall provide to Tenant for normal usage of water and
sewer for both the office and warehouse spaces.
-2-
<PAGE>
4.2 Landlord shall provide to Tenant electricity for the Leased
Premises. The Tenant shall pay the Landlord $60.00 per month for electric
consumption arising out of its occupancy of the Leased Premises. If after 6
months the electric usage is greater than $60.00, demonstrated by an increase in
the Landlord's electric bill that can be attributed to the occupancy by the
Tenant of the Leased Premises, then the Tenant agrees to renegotiate the amount
paid the Landlord for Electric Consumption of the Leased Premises. In the event
that the Landlord, at the Landlord's expense, provides separate electric
metering for the Leased Premises, the Tenant agrees to purchase electric service
for the Leased Premises directly from Penn Yan Municipal Board.
4.3 Tenant shall be responsible to make their own arrangements with
New York State Electric & Gas to provide gas for the leased premises known as
the Seneca Building.
4.4 In the event of any problem with the electrical service, the
Tenant shall first notify the Landlord and will not contact the Penn Yan
Municipal Utilities Board without Landlord's prior approval.
4.5 Tenant shall be responsible to make their own arrangements for
Trash Removal from the Leased Premises.
5. USE OF LEASED PREMISES
5.1 Tenant covenants and agrees that the leased premises shall be
used solely and exclusively for the purpose of storage for the Tenant's
products, sale of the Tenant's products and office/administration of the
aforesaid uses.
5.2 Tenant agrees to conduct its business solely within its leased
premises. Use of additional space will require prior written consent of
Landlord.
5.3 Tenant shall not obstruct any of the roadways extending through
the Leased Premises.
5.4 Tenant shall observe and comply with all laws, statutes,
ordinances, rules, regulations, orders and/or directives or governmental
authorities pertaining to the manner in which Tenant uses the leased premises.
Tenant shall also observe and comply with all reasonable rules and regulations
which Landlord may make from time to time for the management, safety, care, and
cleanliness of the building and grounds, the parking of vehicles and the
preservation of good order therein as well as for the convenience of other
occupants and tenants of the building. The violations of any such rules and
regulations shall be deemed a material breach of this Lease by Tenant.
-3-
<PAGE>
5.5 Tenant is strictly prohibited from bringing any chemicals or
toxic materials onto the premises.
6. SIGNS
Tenant shall not have the right to place signs, lights, poles, or mail
boxes in or about the Leased Premises without the prior written consent of
Landlord. If that consent is granted, Tenant agrees to remove all such signs,
lights and poles prior to expiration of this Lease, repairing any damage to
leased premises caused by such removal, and during the term of this Lease to
maintain the same in good condition and repair.
7. ALTERATIONS, REPLACEMENTS AND IMPROVEMENTS
7.1 Tenant may not make any alterations, additions or improvements to
the Leased Premises without the prior written consent of Landlord. If such
consent is granted and unless expressly agreed otherwise in writing, Tenant
agrees to remove all such alterations, replacements and improvements prior to
expiration of this Lease, repairing any damage to the leased premises caused by
such removal, and during the term of this Lease to maintain the same in good
condition and repair.
7.2 Any such alterations, additions or improvements, unless expressly
agreed otherwise, may be removed by Tenant any time, provided that Tenant shall
repair any damage to the Leased Premises caused by such removal.
8. REPAIR AND MAINTENANCE
8.1 LANDLORD'S REPAIR AND MAINTENANCE. Landlord at its cost shall
maintain the following:
a. The structural parts of the building and other improvements, that
are part of the leased premises which structural parts include the foundations,
bearing and exterior walls, subflooring and roof.
b. The unexposed electrical, plumbing and sewage systems, including,
without limitation, those portions of the systems lying outside the premises.
8.2 TENANT'S REPAIRS AND MAINTENANCE. Tenant at its costs shall
perform the following:
a. Except as provided in paragraph 8.1 above, Tenant at its costs
shall maintain the leased premises and at the expiration of the term of this
Lease Agreement, or prior termination, Tenant shall surrender the leased
premises to Landlord in the same condition as received, normal wear and tear,
damage from the elements, fire or other casualty, damage
-4-
<PAGE>
Landlord is required to repair hereunder, or damage from the negligence or
willful misconduct of Landlord, its agents or employees, excepted.
b. The Tenant shall have all snow and ice removed from the sidewalks
leading to the premises as soon as practicable.
9. LIABILITY INSURANCE & INDEMNITY
9.1 Tenant shall at all times during the term hereof, at its own
expense, maintain a comprehensive general liability insurance policy with a One
Million Dollar ($1,000,000) combined single limit for any one (1) occurrence,
insuring the Landlord and Tenant against all liability for damages to person or
property in or about the Leased Premises. Tenant shall provide to Landlord a
copy of said policy.
9.2 Tenant shall indemnify and hold Landlord harmless against any
and all claims and demands arising from the negligence of the Tenant, its
officers, agents and/or employees, as well as those arising from Tenant's
failure to comply with covenant of this Lease on its part to be performed, and
shall at its own expense defend the Landlord against any and all suits or
actions arising out of such negligence, or failure to comply, actual or alleged,
and all appeals therefrom and shall satisfy and discharge any judgment which may
be awarded against Landlord in any such suit or action.
9.3 Landlord shall maintain in effect at all times insurance against
damage or loss to the leased premises. Insurance on tenant's contents or
business operation shall be the responsibility of the tenant.
9.4 Tenant covenants and agrees to pay Landlord an amount equal to
the escalation in insurance premiums on the Landlord's premises arising out of
the occupancy of the Tenant.
10. DESTRUCTION AND/OR CONDEMNATION OF THE PREMISES
10.1 In case of the total or such partial loss of the Leased Premises
through fire, other casualty and/or condemnation, as shall make it impracticable
for Tenant's use as set forth in Paragraph 4.1, this Lease may be terminated at
the option of either party on written notice to the other, and in that case,
Tenant shall not be liable for any rent after the date of Tenant's removal from
the Leased Premises.
10.2 If the Lease is not terminated pursuant to Paragraph 10.1, then
the rent shall be equitably adjusted to reflect the portion of the Leased
Premises that are no longer available for Tenant's use.
-5-
<PAGE>
11. ASSIGNMENT OR SUBLEASE
Tenant shall not have the right to assign this Lease or sublet the
Leased Premises or any part thereof without the prior written consent of the
Landlord, which consent shall not be unreasonably withheld.
12. ACCESS TO LEASED PREMISES
Landlord shall have the right to enter the Leased Premises at all
reasonable hours for the purpose of making any repairs, alterations, additions
or improvements to the Leased Premises. All such repairs, alterations,
additions and improvements shall be done in a manner so as not to unreasonably
interfere with Tenant's use of the Leased Premises. During the repair period,
Tenant's liability for rent and other sums payable by Tenant hereunder shall be
reduced by that amount which bears the same ratio to said rent and such other
sums as the area of the Leased Premises rendered unsuitable by such repair work
for the normal operation of Tenant's business bears to the entire area of the
Leased Premises.
13. DEFAULT BY TENANT
13.1 The following shall be deemed a default by Tenant under the
terms of the Lease ("Event of Default"):
a. The failure by Tenant to pay any rent or other sum of money due
hereunder within ten (10) days after written notice from Landlord that such
payment has not been made;
b. The failure by Tenant to perform any other of the terms,
conditions or covenants of this Lease to be observed or performed by Tenant for
more than thirty (30) days after written notice from Landlord of such default,
unless such default is of a nature that it cannot practicably be cured within a
thirty (30) day period and Tenant is proceeding with due diligence to cure such
default;
c. The making by Tenant of an assignment for the benefit of
creditors;
d. The filing of a petition by or against Tenant for adjudication as
a bankrupt under the Bankruptcy Act, as now or hereafter amended or
supplemented, or for reorganization within the meaning of Chapter XI of the
Bankruptcy Act, or the commencement of any action or proceeding for the
dissolution or liquidation of Tenant, whether instituted by or against Tenant,
or for the appointment of a receiver or trustee of the property of Tenant,
provided that no such filing or proceeding instituted by a third party shall be
regarded as a default hereunder if Tenant shall promptly move to have the same
dismissed, rescinded or rendered inoperative and Tenant prosecutes such action
with due diligence and continues to perform and discharge all of the covenants
and obligations on its part to be performed or discharged under this Lease
during the pendency of such proceedings.
-6-
<PAGE>
13.2 Upon the occurrence of an Event of Default, Landlord shall have
the immediate right of re-entry and possession of the Leased Premises, which
right shall remain continuous until such time as Tenant shall have cured such
Event of Default. Notwithstanding such re-entry and possession of the Leased
Premises are relet by Landlord an [sic] for all expenses which Landlord may
incur in re-entering the Leased Premises and repairing and maintaining the same
less such proceeds, if any, which may result from the reletting of the Leased
Premises.
13.3 Additionally, upon the occurrence of any Event of Default,
Landlord shall have the right to terminate this Lease by written notice of such
intention to Tenant. In the event Landlord elects to terminate this Lease,
Tenant's liability for rent and other sums payable hereunder and to perform any
other term, condition, covenant or agreement on its part to be performed under
this Lease shall cease and terminate as to any period subsequent to the date on
which Landlord delivers to Tenant written notice of such termination. Tenant
shall remain liable, however, for all rent and the performance of all terms
conditions and agreements relating to matters prior to the date of such
termination.
14. REMEDIES CUMULATIVE
No Mention in this Lease of any specific right or remedy shall
preclude either party from exercising any other right or from having any other
remedy or from maintaining any action to which it may be otherwise entitled
either at law or in equity.
15. WAIVER
The failure of either party to insist in any one or more instances
upon a strict performance of any covenant of this Lease or the waiver by either
party of any breach of any term, covenant or condition herein contained shall
not be deemed to be a waiver or relinquishment of such term, covenant or
condition or any subsequent breach of the same or any other term, covenant or
condition herein contained. No covenant, term or condition of this Lease shall
be deemed to have been waived by either party unless waived by written
instrument.
16. HOLDING OVER
Any holding over by Tenant, with Landlord's written consent, after
expiration of this Lease shall operate and be construed as a tenancy from month
to month on the same terms, covenants, conditions, provisions and agreements
contained in this Lease, except the monthly rent payment shall increase by 200%.
-7-
<PAGE>
17. NOTICES
All notices as required by any of the terms and conditions of this
Lease shall be deemed given when the notice is prepared, adequately addressed
and deposited in the United States mail, postage prepaid. Notices to Landlord
and Tenant are adequately addressed as follows:
Landlord: Yates County Industrial Development Agency
1 Keuka Business Park, Suite 104
Penn Yan, NY 14527
Tenant: Iron Age Corporation
2406 Woodmere Drive
Pittsburgh, PA 15205
18. MECHANICS' LIENS
Tenant shall pay all costs for construction done by it or caused to be
done by it in the leased premises as permitted by this Lease Agreement. Tenant
shall keep the building, other improvements, and land of which the leased
premises are a part free and clear of all mechanics' liens resulting from
construction done by or for Tenant. Tenant shall have the right to contest the
correctness or the validity of any such lien, if immediately on demand by
Landlord, Tenant procures and records a lien release bond issued by a
corporation authorized to issue surety bonds in an amount equal to one and one-
half times the amount of the claim of the lien.
19. ATTORNEYS' FEES
If either party becomes a party to any litigation concerning this
Lease Agreement, the leased premised , or the building or other improvements in
which the leased premises are located, by reason of any act or omission of the
other party or its authorized representatives, and not by any act or omission of
the party that becomes a party to that litigation or any act or omission of its
authorized representatives, the party that causes the other party to become
involved in the litigation shall be liable to that party for reasonable
attorneys' fees and court costs incurred by it in the litigation.
If either party commences an action against the other party arising
out of or in connection with this Lease Agreement, the prevailing party shall be
entitled to have and recover from the losing party reasonable attorneys' fees
and costs of suit.
-8-
<PAGE>
20. SUCCESSORS AND ASSIGNS
This Lease and all its provisions shall be binding upon the heirs,
administrators, executors, successors and assigns of the parties hereof.
IN WITNESS WHEREOF, the respective parties have executed this
instrument as of the day and year first hereinabove written.
LANDLORD:
Yates County Industrial Development Agency
By /s/ Richard K. Chasky
TENANT:
Iron Age Corporation
By /s/ Keith McDonough
Keith McDonough, CFO
-9-
<PAGE>
EXHIBIT A
[PLAN]
-10-
<PAGE>
LEASE AMENDMENT 1
JANUARY 1, 1994
THIS AMENDMENT is made this 19th day of December, 1994, by and between
Yates County Industrial Development Agency, hereinafter referred to as
"Landlord," and Iron Age Corporation, hereinafter referred to as "Tenant." This
Amendment will be attached to and become a part of the existing Lease Agreement
dated the 9th day December, 1992, and will bound by all the terms and conditions
of said Agreement.
1. PREMISES
The leased premises will be extended to include five (5) covered parking
spaces in the Cayuga Building, further described on the attachment to be labeled
Amendment 1 - Exhibit A attached to and made a part of this agreement.
2. TERM
The Term of this agreement will run concurrent with the December 9, 1992,
Agreement ending at midnight on February 28, 1997.
3. RENTAL
Tenant covenants and agrees to pay to Landlord for the use and occupancy of
the Leased Premises during the term hereof in monthly installments as follows:
The charge for each space will be $20.00 per month. The charge per space will
increase by $5 per space on the anniversary date of each period of the lease.
The charges for the covered parking will not increase if the option to extend
for two years is exercised but will remain at the rate for the previous period.
The following is the amended rental amounts including rental for parking.
<TABLE>
<CAPTION>
PERIOD YEARLY AMOUNT MONTHLY INSTALLMENT
------ ------------- -------------------
<S> <C> <C>
1/1/95-2/28/95 $27,300 $2,350
3/1/95-2/29/96 $31,500 $2,625
3/1/96-2/28/97 $31,800 $2,650
TWO YEAR OPTION:
3/1/97-2/28/98 $34,800 $2,900
3/1/98-2/28/99 $34,800 $2,900
</TABLE>
This Lease and all its provisions shall be binding upon the heirs,
administrators, executors, successors and assigns of the parties hereof.
IN WITNESS WHEREOF, the respective parties have executed this instrument as
of the day and year first hereinabove written.
LANDLORD: TENANT:
Yates County Industrial Development Agency Iron Age Corporation
By /s/ James R. Carey By /s/ Keith McDonough
---------------------------- ---------------------------
James R. Carey, Chairman Keith McDonough, CFO
Date: 12/19/94 Date: 1/13/95
------------------------- ------------------------
<PAGE>
Amendment 1 - Exhibit A
[PLAN]
<PAGE>
IRON AGE CORPORATION
YATES COUNTY INDUSTRIAL DEVELOPMENT AGENCY
KEUKA BUSINESS PARK LEASE (DECEMBER 9, 1992)
- - --------------------------------------------------------------------------------
LEASE AMENDMENT #2
APRIL 1997
- - --------------------------------------------------------------------------------
This amends the above noted Lease Agreement for the entire Seneca Building,
which was previously amended on December 19, 1994. That amendment provided a
two year option to renew the Lease Agreement, including five (5) covered parking
spaces in the Cayuga Building at $1800/year. That renewal option was exercised
as follows:
<TABLE>
<CAPTION>
Period Annual Lease Lease
------ ------------ -----
Payment
- - -------
<S> <C> <C> <C>
3/1/97-2/28/98 $34,800 $2900/month
3/1/98-2/28/99 $34,800 $2900/month
</TABLE>
Two additional renewal options, at two years each, are now desired by both
parties. The Tenant shall provide the Landlord with six months notice of their
intention to exercise these renewal options:
<TABLE>
<CAPTION>
Period Annual Lease Lease Payment
------ ------------ -------------
<S> <C> <C> <C>
#1 3/1/99-2/29/00 $37,800 $3150/month
3/1/00-2/28/01 $37,800 $3150/month
#2 3/1/01-2/28/02 $40,800 $3400/month
3/1/02-2/28/03 $40,800 $3400/month
</TABLE>
The rest of the terms and conditions of the original Lease Agreement remain
in effect.
Landlord:
Yates County Industrial Development Agency
/s/ Gene Pierce, Chair 21 April 97
- - ----------------------------------------------------
Name/Title/Date
Tenant:
IRON AGE CORPORATION
/s/ Willie J. Taaffe, Corporate Vice Pres.
- - -----------------------------------------------------
Name/Title/Date
<PAGE>
EXHIBIT 10.23
LEASE AGREEMENT
THIS LEASE AGREEMENT is made this 20th day of June, 1997 by and between the
Yates County Industrial Development Agency, hereinafter referred to as the
"Landlord", and IRON AGE CORPORATION, referred to as the "Tenant."
1. PREMISES & TITLE
1.1 For and in consideration of the payment of the rental and
performance of the covenants and agreements hereinafter set forth, Landlord
leases to Tenant, and Tenant accepts from Landlord, the premises located a 1
Keuka Business Park, in the Town of Jerusalem, State of New York, and consisting
of the ENTIRE THIRD FLOOR OF THE KEUKA BUILDING, CONSISTING OF 5000 SQUARE FEET
OF RENOVATED AND EQUIPPED OFFICE SPACE, more fully shown on Exhibit A, attached
hereto and incorporated herein by this reference ("the Leased Premises").
1.2 Landlord warrants that it has title to the Leased Premises, and
that it has the right to lease the same for the term of this Lease. Landlord
covenants that Tenant, upon the payment of the rent herein stipulated and the
performance of all the covenants and agreements hereunder, shall have the
peaceful and quiet possession, use and enjoyment of the Leased Premises, without
hindrance on the part of the Landlord or any party claiming by, through or under
it, for the term of this Lease, and Landlord further warrants that it shall
defend the Tenant in such peaceful and quiet use, and enjoyment and possession
of the Leased Premises against any such claims.
1.3 This Lease is and shall be subordinate at all times to any
mortgage or mortgages which may now be or at any time hereafter shall be placed
upon or made a lien upon the said leased premises or any part thereof and to any
extension, spreading, or modification thereof, The Tenant will, without expense
to the Landlord, promptly execute and deliver on demand such further and
additional instrument or instruments in proper form for recording subordinating
this lease to any such mortgage or mortgages as shall be requested by the
Landlord or by any mortgage or proposed mortgage. The Tenant hereby appoints the
Landlord the attorney-in-fact of the Tenant revocable to execute and deliver any
such instrument or instruments for and on behalf of and in the name of the
Tenant.
1.4 The TENANT represents that TENANT has inspected and examined the
premises and accepts them in their present condition. Prior to the commencement
of this Lease, Landlord and Tenant shall prepare and sign an inspection report
which shall establish the condition of the Leased Premises at the commencement
of the Lease.
<PAGE>
2. TERM
2.1 THE TERM OF THIS LEASE AGREEMENT SHALL BE FOR A PERIOD COMMENCING
ON JULY 1, 1997, AND TERMINATING AT MIDNIGHT ON FEBRUARY 28, 2003. It consists
of a startup period through February 28, 1998, followed by a five year Lease
Period though February 28, 2003.
2.2 THE TENANT SHALL ALSO HAVE THE OPTION TO EXTEND THIS LEASE
AGREEMENT FOR AN ADDITIONAL FIVE YEARS (TO FEBRUARY 29, 2008).
THE TENANT SHALL PROVIDE THE LANDLORD WITH SIX MONTHS NOTICE OF
THEIR INTENTION TO EXERCISE THIS OPTION. THE TOTAL RENTAL EXPENSE
FOR THIS PERIOD WILL BE DETAILED IN SECTION 3.1 (BELOW).
2.3 The Tenant shall be able to utilize the Leased Premises, without
charge, if the renovation work is completed prior to July 1, 1997, subject to
approval of said work by the Landlord
3. RENTAL EXPENSE
3.1 TENANT COVENANT AND AGREES TO PAY RENT ON MONTHLY BASIS TO LANDLORD
FOR THE USE AND OCCUPANCY OF THE LEASED PREMISES ACCORDING TO THIS
SCHEDULE COMMENCING ON JULY 1, 1997:
<TABLE>
<CAPTION>
RENTAL PERIOD BASE RENTAL UTILITY ALLOWANCE TOTAL EXPENSE
------------- ----------- ----------------- -------------
<S> <C> <C> <C>
7/1/97-8/31/97 $ 814/MONTH $250/MONTH $1064/MONTH
9/1/97-2/28/98 $2064/MONTH $250/MONTH $2314/MONTH
3/1/98-2/28/99 $5412/MONTH $350/MONTH $5762/MONTH
3/1/99-2/29/00 $5512/MONTH $375/MONTH $5887/MONTH
3/1/00-2/28/01 $5412/MONTH $400/MONTH $6012/MONTH
3/1/01-2/28/02 $3398/MONTH $450/MONTH $3848/MONTH
3/1/02-2/28/03 $3498/MONTH $500/MONTH $3998/MONTH
<CAPTION>
3.2 THE TERMS OF THE FIVE YEAR EXTENSION OPTION ARE AS FOLLOWS:
<S> <C> <C> <C>
3/1/03-2/29/04 $2500/MONTH $500/MONTH $3000/MONTH
3/1/94-2/28/05 $2500/MONTH $500/MONTH $3000/MONTH
3/1/95-2/28/06 $2500/MONTH $500/MONTH $3000/MONTH
3/1/06-2/28/07 $2600/MONTH $550/MONTH $3150/MONTH
3/1/07-2/29/08 $2700/MONTH $600/MONTH $3300/MONTH
</TABLE>
3.4 The monthly rental installment shall be paid in advance and on the
first day of each month during the term hereof at the YCIDA office at One Keuka
Business Park, Suite 104, Penn Yan, New York.
-2-
<PAGE>
4. UTILITIES
4.1 Landlord shall provide utilities (electrical power,
heating/cooling, water and sewer, but not telecommunications service) for the
Leased Premises. Telecommunications service expenses are the responsibility of
the Tenant. Tenant shall pay a monthly utility allowance per the above schedule
to the Landlord, payable in the same manner as in 3.2 (above) for services
provided during the term of the Lease Agreement.
4.2 In the event of any problem with the electrical service, the
Tenant shall first notify the Landlord and will not contact the Penn Yan
Municipal Utilities Board without Landlord's prior approval.
5. USE OF LEASED PREMISES
5.1 Tenant covenants and agrees that the Leased Premises shall be
used solely and exclusively for the purpose of general office space. The
Landlord shall provide four reserved parking spaces at the Keuka Business Park,
if requested by the Tenant.
5.2 Tenant shall not obstruct any of the roadways extending through
the Keuka Business Park.
5.3 Tenant shall observe and comply with all laws, statutes,
ordinances, rules, regulations, orders and/or directives or governmental
authorities pertaining to the manner in which Tenant uses the leased premises.
Tenant shall also observe and comply with all reasonable rules and regulations
which Landlord may make from time to time for the management, safety, care, and
cleanliness of the building and grounds, the parking of vehicles and the
preservation of good order therein as well as for the convenience of other
occupants and tenants of the building. The violations of any such rules and
regulations shall be deemed a material breach of this Lease by Tenant.
5.4 Tenant is strictly prohibited from bringing any chemicals or
toxic materials onto the premises except those materials which will be used
directly in the conduct of Tenant's business as described above (5.1).
6. SIGNS
Tenant shall not have the right to place signs, lights, poles, or mail
boxes in or about the Leased Premises without the prior written consent of the
Landlord. If that consent is granted, Tenant agrees to remove all such signs,
lights and poles prior to expiration of this Lease, repairing any damage to
leased premises caused by such removal, and during the term of this Lease to
maintain the same in good condition and repair.
-3-
<PAGE>
7. ALTERATIONS, REPLACEMENTS AND IMPROVEMENTS
7.1 Tenant may not make any alterations, additions or improvements to
the Leased Premises without the prior written consent of Landlord. If such
consent is granted and unless expressly agreed otherwise in writing, Tenant
agrees to remove all such alterations, replacements and improvements prior to
expiration of this Lease, repairing any damage to the leased premises caused by
such removal, and during the term of this Lease to maintain the same in good
condition and repair.
7.2 Any such alterations, additions or improvement, unless expressly
agreed otherwise, may be removed by Tenant at any time, provided that Tenant
shall repair any damage to the Leased Premises caused by such removal.
8. REPAIRS & MAINTENANCE AND CLEANING SERVICES
8.1 LANDLORD'S REPAIR & MAINTENANCE OBLIGATIONS. Landlord at its own
expense shall maintain the following items:
a. The structural parts of the building and other improvements that
are part of the Leased Premises, which structural parts include the foundations,
bearing and exterior walls, subflooring and roof.
b. The heating, ventilating, air conditioning, and related systems
of the Leased Premises.
c. The unexposed electrical, plumbing and sewage systems, including,
without limitation, those portions of the systems lying outside the Leased
Premises.
d. The Landlord shall have all snow and ice removed from the
sidewalks leading to the premises as soon as practicable, and see that snow from
the parking area is properly and reasonably removed and that all refuse and
garbage is removed from the collection area.
e. The Landlord shall maintain the common areas of the Keuka
Business Park in a safe, clean, and orderly condition, including the parking
areas, hallways, stairs, and public restrooms.
8.2 TENANT'S REPAIRS & MAINTENANCE AND CLEANING SERVICE OBLIGATIONS.
Tenant at its expense shall perform the following functions:
a. Except as provided in paragraph 8.1 above, Tenant shall maintain
the Leased Premises and provide necessary cleaning services. The Tenant is also
responsible for restroom supplies, and the arrangements for vending machines for
the space, if any. At the expiration of the term of this Lease Agreement, or
prior termination, Tenant shall surrender the Leased
-4-
<PAGE>
Premises to the Landlord in the same condition as received, normal wear and
tear, damage from the elements, fire, or other casualty damage that the Landlord
is now required to repair hereunder, or damage from the negligence or willful
misconduct of Landlord, its agents or employees, excepted.
9. LIABILITY INSURANCE & INDEMNITY
9.1 TENANT SHALL MAINTAIN AT ALL TIMES DURING THE TERM OF THIS LEASE
AGREEMENT, AT ITS OWN EXPENSE, MAINTAIN A COMMERCIAL GENERAL LIABILITY INSURANCE
POLICY WITH A LIMIT OF ONE MILLION DOLLAR ($1,000,000) FOR ANY ONE (1)
OCCURRENCE, INSURING THE LANDLORD AND THE TENANT AGAINST ALL LIABILITY FOR
DAMAGES TO PERSON OR PROPERTY IN OR ABOUT THE LEASED PREMISES. THE TENANT SHALL
PROVIDE TO THE LANDLORD A COPY OF SAID POLICY, WITH THE LANDLORD LISTED AS AN
ADDITIONAL INSURED.
9.2 BOTH THE TENANT AND LANDLORD SHALL INDEMNIFY AND HOLD THE OTHER
PARTY HARMLESS AGAINST ANY AND ALL CLAIMS AND DEMANDS ARISING FROM THE
NEGLIGENCE OF THEIR OWN OFFICERS, AGENTS AND/OR EMPLOYEES, AS WELL AS THOSE
ARISING FROM THEIR FAILURE TO COMPLY WITH ANY COVENANT OF THIS LEASE ON ITS PART
TO BE PERFORMED, AND SHALL AT ITS OWN EXPENSE DEFEND THE OTHER PARTY AGAINST ANY
AND ALL SUITS OR ACTIONS ARISING OUT OF SUCH NEGLIGENCE, OR FAILURE TO COMPLY,
ACTUAL OR ALLEGED, AND ALL APPEALS THEREFROM AND SHALL SATISFY AND DISCHARGE ANY
JUDGMENT WHICH MAY BE AWARDED AGAINST THE OTHER PARTY IN ANY SUCH SUIT OR
ACTION.
9.3 Landlord shall maintain insurance against damage or loss to the
leased premises. Insurance coverage on tenant's business contents or business
operation shall be the responsibility of the tenant.
9.4 Tenant covenants and agrees to pay Landlord an amount equal to
the escalation in insurance premiums on the Landlord's premises arising out of
the occupancy of the Tenant.
10. DESTRUCTION AND/OR CONDEMNATION OF THE PREMISES
10.1 In case of the total or such partial loss of the Leased Premises
through fire, other casualty and/or condemnation, as shall make it impracticable
for Tenant's use as set forth in Paragraph 4.1, this Lease may be terminated at
the option of either party on written notice to the other, and in that case,
Tenant shall not be liable for any rent after the date of Tenant's removal from
the Leased Premises.
10.2 If the Lease is not terminated pursuant to Paragraph 10.1, then
the rent shall be equitably adjusted to reflect the portion of the Leased
Premises that are no longer available for Tenant's use.
-5-
<PAGE>
11. ASSIGNMENT OR SUBLEASE
Tenant shall not have the right to assign this Lease Agreement or
sublet the Leased Premises or any part thereof, without the prior written
consent of Landlord. Such written consent shall not be unreasonably withheld.
12. ACCESS TO LEASED PREMISES
Landlord shall have the right to enter the Leased Premises at all
reasonable hours, with appropriate notice to the Tenant, for the purpose of
making any repairs, alterations, additions or improvements to the Leased
Premises. All such repairs, alterations, additions and improvements shall be
done in a manner so as not to unreasonably interfere with Tenant's use of the
Leased Premises. During the repair period, Tenant's liability for rent and
other sums payable by Tenant hereunder shall be reduced by that amount which
bears the same ratio to said rent and such other sums as the area of the Leased
Premises rendered unsuitable by such repair work for the normal operation of
Tenant's business bears to the entire area of the Leased Premises.
If the Tenant install an alarm system for the space, the Landlord is
to have a copy of the alarm key and/or codes for emergency purposes.
13. DEFAULT BY TENANT
13.1 The following shall be deemed a default by Tenant under the
terms of the Lease ("Event of Default"):
a. The failure by Tenant to pay any rent, utility allowance, or other
sum of money due hereunder within ten (10) days after written notice from
Landlord that such payment has not been made;
b. The failure by Tenant to perform any other of the terms, conditions
or covenants of this Lease to be observed or performed by Tenant for more than
thirty (30) days after written notice from Landlord of such default, unless such
default is of a nature that it cannot practicably be cured within a thirty (30)
day period and Tenant is proceeding with due diligence to cure such default;
c. The making by Tenant of an assignment for the benefit of creditors;
d. The filing of a petition by or against Tenant for adjudication as a
bankrupt under the Bankruptcy Act, as now or hereafter amended or supplemented,
or for reorganization within the meaning of Chapter XI of the Bankruptcy Act, or
the commencement of any action or proceeding for the dissolution or liquidation
of Tenant, whether instituted by or against Tenant, or for the appointment of a
receiver or trustee of the property of Tenant, provided that
-6-
<PAGE>
no such filing or proceeding instituted by a third party shall be regarded as a
default hereunder if Tenant shall promptly move to have the same dismissed,
rescinded or rendered inoperative and Tenant prosecutes such action with due
diligence and continues to perform and discharge all of the covenants and
obligations on its part to be performed or discharged under this Lease during
the pendency of such proceedings.
13.2 Upon the occurrence of an Event of Default, Landlord shall have the
immediate right of re-entry and possession of the Leased Premises, which right
shall remain continuous until such time as Tenant shall have cured such Event of
Default. Notwithstanding such re-entry and possession of the Leased Premises by
Landlord, Tenant shall remain liable for the rent and other sums payable
hereunder whether or not the Leased Premises are relet by Landlord an for all
expenses which Landlord may incur in re-entering the Leased Premises and
repairing and maintaining the same less such proceeds, if any, which may result
from the reletting of the Leased Premises.
13.3 Additionally, upon the occurrence of any Event of Default, Landlord
shall have the right to terminate this Lease by written notice of such intention
to Tenant. In the event Landlord elects to terminate this Lease, Tenant's
liability for rent and other sums payable hereunder and to perform any other
term, condition, covenant or agreement on its part to be performed under this
Lease shall cease and terminate as to any period subsequent to the date on which
Landlord delivers to Tenant written notice of such termination. Tenant shall
remain liable, however, for all rent and the performance of all terms conditions
and agreements relating to matters prior to the date of such termination.
14. REMEDIES CUMULATIVE
No mention in this Lease of any specific right or remedy shall preclude
either party from exercising any other right or from having any other remedy or
from maintaining any action to which it may be otherwise entitled at law or in
equity.
15. WAIVER
The failure of either party to insist in any one or more instances upon a
strict performance of any covenant of this Lease or the waiver by either party
of any term, covenant or condition herein contained shall not be deemed to be a
waiver or relinquishment of such term, covenant or condition or any subsequent
breach of the same or any other term, covenant or condition herein contained. No
covenant, term or condition of this Lease shall be deemed to have been waived by
either party unless waived by written instrument.
16. HOLDING OVER
Any holding over by Tenant, with Landlord's written consent, after
expiration of this Lease shall operate and be construed as a tenancy from month
to month on the same terms,
-7-
<PAGE>
covenants, conditions, provisions and agreements contained in this Lease, except
------
the monthly rent shall increase by 100%.
- - ---------------------------------------
17. NOTICES
All notices as required by any of the terms and conditions of this Lease
Agreement shall be deemed given by facsimile or when the notice is prepared,
adequately addressed and deposited in the United States mail, postage prepaid.
Notices to Landlord and Tenant are adequately addressed as follows:
LANDLORD: YATES COUNTY INDUSTRIAL DEVELOPMENT AGENCY
ATTENTION: EXECUTIVE DIRECTOR
ONE KEUKA BUSINESS PARK, SUITE 104
PENN YAN, NY 14527
TENANT: IRON AGE CORPORATION
ATTENTION: KEITH MCDONOUGH
CHIEF FINANCIAL OFFICER
THREE ROBINSON PLAZA, SUITE #400
PITTSBURGH, PENNSYLVANIA 15205
COPY TO: WILLIE TAAFFE
CORPORATE VICE PRESIDENT
240 NORTH AVENUE
PEN YAN, NEW YORK 14527
18. MECHANICS' LIEN
Tenant shall pay all costs for construction done by it or caused to be
done by it in the leased premises as permitted by this Lease Agreement. Tenant
shall keep the building, other improvements, and land of which the leased
premises are a part free and clear of all mechanics' liens resulting from
construction done by or for Tenant. Tenant shall have the right to contest the
correctness or the validity of any such lien, if immediately on demand by
Landlord, Tenant procures and records a lien release bond issued by a
corporation authorized to issue surety bonds in an amount equal to one and one-
half times the amount of the claim of the lien.
19. ATTORNEYS' FEES
If either party becomes a party to any litigation concerning this Lease
Agreement, the leased premises, or the building or other improvements in which
the leased premises are
-8-
<PAGE>
located, by reason of any act or omission of the other party or its authorized
representatives, and not by any act or omission of the party that becomes a
party to that litigation or any act or omission of its authorized
representatives, the party that causes the other party to become involved in the
litigation shall be liable to that party for reasonable attorneys' fees and
court costs incurred by it in the litigation.
If either party commences an action against the other party arising
out of or in connection with this Lease Agreement, the prevailing party shall be
entitled to have and recover from the losing party reasonable attorneys' fees
and costs of suit.
20. SUCCESSORS AND ASSIGNS
This Lease and all its provisions shall be binding upon the heirs,
administrators, executors, successors and assigns of the parties hereof.
IN WITNESS WHEREOF, the respective parties have executed this
instrument as of the day and year first hereinabove written.
LANDLORD:
Yates County Industrial Development Agency
By: /s/ Gene Pierce, Chair 20 June 97
-----------------------------------------
Name/Title/Date
TENANT:
Iron Age Corporation
By: /s/ Willie J. Taaffe, Executive Vice President
---------------------------------------------------
Name/Title/Date
-9-
<PAGE>
- - --------------------------------------------------------------------------------
LEASE ADDENDUM
- - --------------------------------------------------------------------------------
THIS LEASE ADDENDUM is made this 9th day of JANUARY 1998 by and between the
Yates County Industrial Development Agency, hereinafter referred to as
"Landlord", and IRON AGE CORPORATION, hereinafter referred to as "Tenant." This
addendum amends the prior lease agreement, dated June 20, 1997, between Iron Age
Corporation and the Yates County Industrial Development Agency.
The Lease Addendum incorporates office space of approximately 725 square
feet, in the form of two offices on the second floor of the Keuka Building
measuring 375 square feet and 350 square feet respectively, more fully shown on
Exhibit A.
LEASE ADDENDUM TERM
- - -------------------
The term of this Lease Addendum Agreement shall be for a period of sixty
one (61) months, commencing on February 1, 1998 and terminating at midnight on
February 28, 2003.
NEW RENTAL EXPENSE SCHEDULE
- - ---------------------------
The following schedule represents the rental payments during the months of
the lease addendum.
<TABLE>
<CAPTION>
Rental Period Base Rental Utility Allowance Total Expense
- - ------------- ----------- ----------------- -------------
<S> <C> <C> <C>
2/1/98-2/28/98 $2294/month $395/month $2689/month
- - ---------------------------------------------------------------
3/1/98-2/28/99 $5642/month $495/month $6137/month
- - ---------------------------------------------------------------
3/1/99-2/29/00 $5742/month $520/month $6262/month
- - ---------------------------------------------------------------
3/1/00-2/28/01 $5842/month $545/month $6387/month
- - ---------------------------------------------------------------
3/1/01-2/28/02 $3653/month $595/month $4248/month
- - ---------------------------------------------------------------
3/1/02-2/28/03 $3778/month $645/month $4423/month
- - ---------------------------------------------------------------
</TABLE>
The remainder of the terms and conditions of the original Lease Agreement remain
in effect.
LANDLORD:
Yates County Industrial Development Agency
By /s/ Donald J. Meany
------------------------------
Name/Title/Date
TENANT:
Iron Age Corporation
By /s/ Willie J. Taaffe, President/COO Knapp Dunham Division
------------------------------------------------------------
Name/Title/Date 1/9/98
-10-
<PAGE>
EXHIBIT 10.24
FALCON SPACE LEASE
WITNESS THE FOLLOWING INDENTURE entered into the 14th day of January, 1994,
by and between ROBERT A. ROY, doing business under the name and style of ROY
CONTINENTAL MILL, of Lewiston, County of Androscoggin, State of Maine
(hereinafter called "OWNER"), and FALCON SHOE MFG. CO., a Maine corporation
having a place of business in Lewiston, County of Androscoggin, State of Maine
(hereinafter called "TENANT").
ARTICLE I
---------
Premises
- - --------
OWNER does lease, demise and let unto TENANT and TENANT does lease and take
from OWNER, for the term and upon the terms and conditions set forth in this
Indenture, the following described premises:
The fourth and fifth floors of the Canal wing, each containing
approximately 19,110 square feet, and all of the fourth floor of the Oxford
Street wing, containing approximately 30,415 square feet, and the second
floor of the Canal wing and the back room on the second floor on the
riverside of the mill containing approximately 10,156 square feet, and the
fourth floor of the Picker wing, so called, containing approximately 13,912
square feet, or a total of 111,813 square feet; all being situated in the
Continental Mill building, so-called, near the intersection of Cedar and
Oxford Streets in Lewiston, Maine (the "demised premises").
Together with the non-exclusive use of the elevator situated at the
southeasterly corner of the North wing, the non-exclusive use of the
loading dock adjacent thereto and the non-exclusive use of the stairways
located near the north wall of said North wing, provided that no more than
four tenants, in addition to the TENANT and its affiliates shall be
authorized to use the aforesaid elevator during the term hereof, also non-
exclusive use of all elevators serving the premises as well as adjacent
shipping docks.
<PAGE>
ARTICLE II
----------
Term
- - ----
To have and to hold the same for a term of five (5) years, commencing on
the first day of April, 1994.
ARTICLE III
-----------
Rent
- - ----
The TENANT agrees to pay to the OWNER rental of One Million Eighty-four
Thousand Five Hundred Sixty-six Dollars and Forty Cents ($1,084,566.40) for said
term, payable in the manner following:
Twelve equal monthly payments of $16,585.60 each in advance for the period
April 1, 1994 through March 31, 1995; twelve equal monthly payments of
$17,331.02 each in advance for the period April 1, 1995 through March 31,
1996; twelve equal monthly payments of $18,076.44 each in advance for the
period April 1, 1996 through March 31, 1997; twelve equal monthly payments
of $18,821.86 each in advance for the period April 1, 1997 through March
31, 1998; twelve equal monthly payments of $19,567.28 each in advance for
the period April 1, 1998 and March 31, 1999.
Any increases in the price of heating oil chargeable to the OWNER during
the term hereof, over those prices in effect on December 1, 1980, shall be
chargeable by the OWNER to the TENANT in proportion to the square footage
leased by the TENANT as compared to the total square footage of the
building in which the demised premises are situated.
ARTICLE III-A
-------------
In addition to the base rental provided in Article III, Tenant shall pay to
Owner twenty-four percent (24%) of the increase above the tax base year of 1980
in real estate taxes assessed by the City of Lewiston, Maine on the Continental
Mill real estate, including both land and buildings for its proportionate share
of said taxes. For the tax year 1993-1994, Tenant shall pay
-2-
<PAGE>
the sum of $4,560 in twelve monthly installments of $380. Thereafter, such
share of real estate taxes shall be adjusted annually as said taxes change.
ARTICLE IV
----------
Ownership
- - ---------
OWNER covenants that it has good and marketable title to the premises and
full and complete right to lease and demise the same to the TENANT; excepting,
however, that this lease in all its particulars shall, without further consent
on the part of this TENANT, or any sublessees of this TENANT, be subordinated to
any mortgages which may, from time to time, during the term hereof or any
renewal hereof be given to any mortgages by the OWNER as security for monies or
funds lent to the OWNER by such mortgagees; provided, however, that such
mortgagees shall recognize this Lease and this TENANT for so long as this TENANT
shall not be in default under the terms hereof.
ARTICLE V
---------
Expiration and Condition
- - ------------------------
TENANT agrees that it will, at the expiration of said term, or any
extension thereof, quit, surrender and deliver up the demised premises to the
OWNER, its successors and assigns, or the attorney for it or its successors and
assigns, peaceably and quietly, in good and reasonable repair, order and
condition in all respects, reasonable wear and use thereof and inevitable
accident thereto excepted, and will not make or suffer or permit others to
commit any strip or waste thereof.
-3-
<PAGE>
ARTICLE VI
----------
Alterations, Additions and Improvements
- - ---------------------------------------
OWNER agrees that TENANT may, at its own expense, from time to time during
the term hereof or any renewal thereof, make such changes in the interior of the
demised premises as may be reasonably required for the full use and enjoyment
thereof, PROVIDE ALWAYS, that no such change shall be made without the TENANT
having first obtained the written approval of the OWNER, which approval shall
not be unreasonable withheld; and OWNER further agrees that TENANT may, at its
own expense, make structural alterations, additions, and changes in and to the
demised premises, PROVIDED ALWAYS, that all such structural alterations,
additions and changes shall preserve at least an equivalent intrinsic value and
all of the same shall have been approved in writing by OWNER before the work of
making any such structural alterations, additions, or changes is commenced,
which approval shall not be unreasonably withheld; PROVIDED FURTHER, that the
type, style and construction of any such alteration, addition, or change shall
be similar to that of the original building. Except as hereinafter provided, any
such alterations, additions, and changes which shall remain on the demised
premises, at the termination of the Lease in accordance with any of the
provisions hereof or at the end of the term of this Lease shall be considered as
improvements to and become a part of the real estate of the OWNER, and (unless
otherwise provided at the time written assent is given) TENANT shall have
neither the right nor the obligation to remove the same or restore the demised
premises to the condition in which they were originally.
TENANT agrees that any such alterations, additions and changes will be made
by TENANT, at its sole cost, risk, and expense in a first class, workmanlike
manner in substantial
-4-
<PAGE>
compliance with all ordinances, rules and regulations of all governmental
authorities having jurisdiction and in accordance with TENANT's plans and
specifications which shall be finally approved by such governmental authorities,
if plans and specifications for such work or any part thereof shall be required
by any such ordinances, rules or regulations to be filed with or approved by any
such governmental authorities. TENANT further agrees to indemnify and hold the
OWNER forever free and harmless from and against any and all mechanics' and
other liens arising from any such work and also from and against any and all
claims for damage or alleged damage to and destruction of property and injury to
and loss of life of persons which may result from any such work. The OWNER
shall have the right to require the TENANT to prove the acquisition of
reasonable types and amounts of liability insurance, performance bonds and
payment bonds under the terms of this provision.
ARTICLE VII
-----------
Repairs and Maintenance, Arbitration
- - ------------------------------------
Except as otherwise provided in this Indenture, TENANT agrees that it will,
at its own expense, provide all maintenance and make all interior repairs
necessary to maintain the interior of the demised premises in as good order and
repair at it is at the date of the commencement of this Lease, reasonable wear
and tear and damage by accidental fire or other casualty excepted, specifically
excepting exterior repairs, structural repairs, and repairs to the heating and
plumbing systems, which excepted exterior repairs, structural repairs, and
heating system repairs the OWNER agrees to make.
The TENANT shall not be obligated to make any repair which is occasioned by
defective materials or workmanship in the construction of the building or in the
OWNER's improvements
-5-
<PAGE>
which may be required of the OWNER, and such repairs shall be made by the OWNER
at its own expense. The OWNER shall during the term of this Lease and any
renewals or extension thereof, keep the structural supports, the roof and
exterior walls of the building including windows, doors and passageways from the
lobby, street and parking areas leading to the leased property, and the adjacent
sidewalks and entrance lobby, in good order and repair and free of snow, ice,
rubbish and other obstructions. The OWNER shall maintain in good working order
and repair all plumbing and toilet facilities below the floor level, the
sprinkler system, and other fixtures and equipment installed for the general
supply of hot and cold water, heat, and electricity. OWNER acknowledges his
responsibility to arrange connections to the building from the street for
electricity, water and sewer lines or pipes but not for the operational costs of
such services.
If OWNER, during the course of any examination of the condition of the
demised premises, observes any condition of, on, or to the demised premises
which reasonably should be repaired, maintained or corrected by the TENANT, in
accordance with the provisions of this Article, OWNER may notify TENANT of said
condition, in writing, requesting prompt remedying of said condition, and if
TENANT, after thirty (30) days from the mailing of such notice, shall not have
taken the necessary action to repair, maintain or correct the same, OWNER may
proceed to have such condition corrected and all costs incurred by OWNER for
such work, including reasonable charges by OWNER for time and expenses incurred
by it as a result of TENANT's negligence or failure to act, shall be deemed to
be in addition to rent due and payable by TENANT to OWNER and shall be paid by
TENANT to OWNER, and TENANT hereby so agrees to do, promptly upon demand.
-6-
<PAGE>
If TENANT, observes any condition of, on, or to the building in which the
demised premises is located or the demised premises which reasonably should be
repaired, maintained or corrected by the OWNER, in accordance with the
provisions of this Article, TENANT may notify OWNER of said condition, and if
OWNER, after thirty (30) days from the mailing of such notice, shall not have
taken the necessary action to repair, maintain, or correct the same, TENANT may
proceed to have such condition corrected and all costs incurred by TENANT for
such work, including reasonable charges by TENANT for time and expense incurred
by it as a result of OWNER's negligence or failure to act shall be deducted from
the rent due the OWNER from the TENANT and the OWNER hereby agrees to such
deduction.
Any dispute between the parties hereto involving repairs, rentals or any
other matter shall be determined by three arbitrators, one of whom shall be
designated by OWNER, one by TENANT, and a third by the two so designated, and
the determination of said arbitrators or a majority of them shall be conclusive.
ARTICLE VIII
------------
Fixtures and Equipment
- - ----------------------
Any trade fixtures, equipment and other property installed in or attached
to the demised premises by and at the expense of TENANT shall remain the
property of TENANT and OWNER agrees that TENANT shall have the right at any time
and from time to time prior to the expiration of this Indenture or within a
reasonable time thereafter to remove any and all of its such trade fixtures,
equipment and other property which it may have stored or installed in the
demised premises. TENANT agrees to repair any damage to the demised premises
caused by the removal of any such property and to leave said premises in that
condition existing on April 1,
-7-
<PAGE>
1994, and/or as the same may have been put in since said date and/or as the same
may be put in during the term hereof.
ARTICLE IX
----------
Tenant as Owner's Attorney
- - --------------------------
OWNER hereby appoints and constitutes TENANT as OWNER's true and lawful
attorney-in-fact in the OWNER's name to apply for and secure from any
governmental authority having jurisdiction thereover any permits or licenses
which may be necessary in conjunction with the making of any alterations,
additions, changes and repairs, and OWNER agrees, upon the request by TENANT, to
execute or join in the execution of any application for such permits and
licenses, all at the expense, however, of the TENANT.
ARTICLE X
---------
Assignment and Subletting
- - -------------------------
The TENANT agrees not to assign this Indenture or underlet said premises or
any part thereof without first obtaining consent in writing of the OWNER which
covenants not unreasonably to withhold its consent.
ARTICLE XI
----------
Insurance
- - ---------
TENANT agrees that during the term hereof it will maintain such insurance
against bodily injury and property damage, not less than $100,000 per person and
$300,000 per occurrence, as will protect itself and the OWNER against any
liability for injuries occurring upon or in connection with the demised
premises. OWNER will provide and maintain public liability insurance for common
areas of the building.
-8-
<PAGE>
ARTICLE XII
-----------
Damage or Destruction
- - ---------------------
In case the demised premises or any part thereof shall be taken by any
public authority or for any public use, or shall be destroyed or substantially
damaged by fire or other unavoidable casualty, or by the action of any public
authority, or if access to demised premises is substantially interfered with as
a result thereof, then this Indenture may be terminated at the election of
either the OWNER or the TENANT, or if neither shall so elect within a reasonable
time, then a just proportion of the rent, according to the nature and extent of
the damage sustained by the demised premises, shall be suspended or abated until
the demised premises, or what may remain thereof, shall be put by the OWNER in
proper condition for use, which the OWNER agrees to do with reasonable
promptness. It is further agreed that each party shall be entitled to receive
out of any award payment of the amount for damages sustained by it.
ARTICLE XIII
------------
Conduct of Business
- - -------------------
TENANT will at all times during the term hereof conform to all laws and
ordinances relative to its use of the demised premises and will obtain all
permits and licenses necessary in connection with such use.
ARTICLE XIV
-----------
Access of Owner
- - ---------------
OWNER shall have reasonable access to the demised premises during business
hours of the TENANT for the purposes of examining or exhibiting the same, or to
make any repairs which the TENANT has failed to make in accordance with the
terms hereof, but the making of any such
-9-
<PAGE>
repairs or the exhibiting or examination of the premises shall not unreasonably
interfere with the TENANT's use of the premises nor the conducting of the
TENANT's business thereon.
ARTICLE XV
----------
Default, Violation and Bankruptcy
- - ---------------------------------
TENANT agrees that if it shall fail to pay the rent or any part thereof
within thirty (30) days after the same shall become due or shall violate or omit
(within thirty (30) days after notice of such default or breach shall have been
given, or , if a different notice period shall have been agreed upon in other
provisions hereof, then, as to such other provisions, the notice period therein
stated shall control) to perform any of the agreements or covenants hereof on
the part of TENANT to be performed, or if TENANT shall be adjudged bankrupt or
insolvent or shall make an assignment for the benefit of creditors or make a
compromise agreement with its creditors, or if a petition under the National
Bankruptcy Act as then in force shall be filed by or against TENANT and be
approved by the Court, or if a receiver or trustee of the TENANT's property
shall be appointed and such receiver or trustee of the TENANT's property shall
be appointed and such receiver or trustee shall not be discharged within forty-
five (45) days after such appointment, then and in any of such events, except as
hereinafter provided, OWNER may elect either (a) to re-enter the demised
premises by summary proceedings or otherwise and, thereupon, may expel all
persons and remove all property therefrom, either peaceably or by force without
becoming liable to prosecution therefore, and relet the premises as agent of the
TENANT, making reasonable efforts therefor, and receive the rent therefrom,
applying the same first to the payment of the reasonable expenses of such re-
entry and then to the payment of the rent accruing hereunder, the balance, if
any, to be paid by TENANT, but whether or not the demised premises
-10-
<PAGE>
be relet, TENANT shall remain liable for the equivalent of the amount of all
rent reserved herein, less avails or reletting, if any, and such amount shall be
due and payable to OWNER as damages or rent, as the case may be, on the
successive rent days hereinabove provided, and OWNER may recover such amount
periodically on said successive days, or (b) to declare this Indenture
terminated and to resume possession of the demised premises wholly discharged
from this Indenture. Such election shall be made, by written notice to the
TENANT, at any time on or before the doing of any act or the commencement of any
proceeding to recover possession of the demised premises by reason of the
default or breach then existing and shall be final as to that default or breach.
If OWNER shall elect to declare this Indenture terminated as aforesaid,
thereupon, all rights and obligations whatsoever of TENANT and of its successors
and sublessees under this Indenture, so far as the same may relate to the
unexpired portion of the term of this Indenture, shall cease and determine and,
within ten (10) days after receipt by TENANT of notice of election by OWNER to
terminate this Indenture as aforesaid, TENANT shall, by an instrument in writing
in form for record, cancel this Indenture and the unexpired portion of the term
hereof and surrender and deliver up to the OWNER the entire demised premises,
together with all improvements and additions (excepting the TENANT's own
fixtures, equipment and other property as hereinbefore provided), and, upon any
default by TENANT in so doing, OWNER shall have the right, forthwith, to re-
enter the demised premises, either by summary proceedings or otherwise and to
expel all persons and to remove all property therefrom, either peaceably or by
force without becoming liable to any prosecution therefore, and to repossess the
demised premises and to again have and enjoy the same, together with all
improvements and
-11-
<PAGE>
additions except that TENANT's fixtures, equipment and other property as
aforesaid, as fully and completely as if this Indenture had never been made.
It is agreed that, after default or breach as aforesaid, no demand for rent
and no re-entry for condition broken, as at common law, shall be necessary to
enable OWNER to recover possession pursuant to any statute relating to summary
proceedings, but all right to any such demand or any such re-entry is hereby
expressly waived by TENANT and that, except as hereinabove otherwise provided,
such re-entry of judgment shall not bar the recovery of future rent or of
damages for future breach of covenant nor shall the receipt of rent after
condition broken, except as aforesaid, be deemed a waiver of forfeiture or of
OWNER's right to terminate the term created by this Indenture. In the event of
the termination of this Indenture and re-entry by OWNER as aforesaid, TENANT
waives any and all right to redeem the premises whether given by any statute now
in effect or hereafter enacted or by any rule of common law; provided, however,
that this paragraph shall be applicable only to the defaults, violations and
breaches more or less specifically set forth in ARTICLE XV, but shall not be
applicable to the violations or defaults or breaches which are incorporated by
reference in this Article XV.
ARTICLE XVI
-----------
Performance
- - -----------
The failure of either party to this Indenture to insist upon strict
performance of any of the covenants or conditions of this Indenture or to
exercise any option herein conferred in any one or more instances shall not be
construed as a waiver or relinquishment for the future of any such covenants,
conditions or options, but the same shall be and remain in full force and
effect.
-12-
<PAGE>
ARTICLE XVII
------------
Restrictive Covenants
- - ---------------------
TENANT agrees that it will not conduct nor will it permit any sublessees to
conduct any business other than the manufacture of footwear or components
thereof and necessary storage and shipment relating thereto, except as
specifically authorized in writing by the OWNER. The OWNER agrees that it will
not unreasonably withhold such authorization. Without limiting the generality
of the foregoing, the selling of any foods or soft drinks in or about the
demised premises is specifically prohibited except to the extent which may from
time to time be authorized in writing; provided that the TENANT is hereby
authorized to maintain or provide for distribution of food and soft drinks
through the use of vending machines and/or food distribution arts if and for so
long as there shall be no other tenant of the OWNER authorized to make such
distribution and willing and able to provide services of the type and amount
required by TENANT and its employees. OWNER will not permit extra hazardous
operations to be conducted within said building.
ARTICLE XVIII
-------------
Notices
- - -------
All notices required under this Indenture shall be deemed to be promptly
served if sent by certified or registered mail to the last address previously
furnished by the parties hereto. Until hereafter changed by the parties by
notice in writing, notices shall be sent to the OWNER at P.O. Box 998, Lewiston,
Maine, and to the TENANT at P.O. Box 1286, Lewiston, Maine 04243-1286. Date of
service of such notice shall be the date such notices are deposited in the post
offices of the United States Post Office Department.
-13-
<PAGE>
ARTICLE XIX
-----------
Parking
- - -------
The OWNER will make available for the TENANT's use twenty (20) parking
spaces for cars of the TENANT's employees or visitors which shall be available
at no charge. In addition, the OWNER proposes to make available parking for
employees of this TENANT and other tenants of the OWNER at a weekly rental now
set at Three Dollars ($3.00) per space, but subject to change by the OWNER.
Such parking shall be available when practicable generally near the TENANT's
main entrance but only to the extent to which the OWNER develops the land
surrounding the buildings or adjacent thereto and the OWNER shall be under no
obligation to develop any particular amount or any specific area for such
parking. Such parking, when and as available, shall be rented on a "first
common, first served", basis, except that spaces vacated by employees of the
TENANT shall first be offered by the OWNER to the TENANT for the use of other
employees of the TENANT.
ARTICLE XX
----------
Miscellaneous
- - -------------
1) Heat. The OWNER agrees to provide heat during the necessary seasons of
----
the year to maintain the demised premises (except the landing dock and
storage area) at approximately 65 degrees Fahrenheit.
2) Water. The OWNER agrees to keep the sprinkler system in operating
-----
condition at its own expense. The TENANT is granted permission to connect
its own hot and cold water systems to the existing water mains.
3. Access. The OWNER agrees that it will not erect any properties or in
------
any way interfere with the TENANT's right of access to the demised
premises, and that it will maintain the outside of the building and keep
snow plowed from all parking spaces,
-14-
<PAGE>
hereby demised or leased at any time to TENANT's employees, as well as all
access driveways and approaches to the building.
4. Sign. The OWNER agrees to permit the TENANT to erect four (4) signs on
----
the outside walls of the demised portion of the building indicating the
TENANT's occupancy.
5. Installation of Equipment. The OWNER grants to the TENANT permission
-------------------------
to install equipment such as is usually used in shoe factories, including
but not limited to spray booths, wetting tanks, dust collectors, etc.,
including vents through walls and drains through floors. All work done
under the provisions of this paragraph shall be in compliance with the
applicable building codes, with notice to the OWNER, and so as to create no
injury to the OWNER or other persons using the building. Any opening
through floors or walls made subsequent to April 11, 1994, shall be
suitably repaired and closed at the termination of the term created by this
Indenture unless otherwise authorized.
6. All real and personal property insurance which is carried by either
party with respect to the demised premises shall include provisions which
either designate the other party as one of the insured to deny to the
insurer acquisition by subrogation of rights of recovery against the other
party to the extent such rights have been waived by the insured party prior
to occurrence of loss or injury, insofar as, and to the extent that such
provisions may be effective without making it impossible to obtain
insurance coverage from responsible companies qualified to do business in
Maine, even though extra premium may result therefrom. Each party hereby
waives all rights of recovery against the other for loss or injury against
which and to the extent that, the waiving party is protected by insurance
containing such provision.
ARTICLE XXI
-----------
Delivery of Premiums
- - --------------------
1. Water Metering and Sewerage. The OWNER may at any time or times
---------------------------
provide a separate meter for the water used in TENANT's manufacturing
process and charge the TENANT for water so used at the average rate
paid by the OWNER.
2. The OWNER hereby grants to the TENANT one option of extension of this
lease for a five year term on the same terms and conditions except as
to rental, which may be increased by mutual agreement, but in no event
shall such increase exceed ten cents (10c) per square foot per year.
3. The TENANT may at any time or from time to time introduce such
additional interior and/or exterior pipes, mains, wires, conduits,
ducts, compressed air lines, and other utilities, including
connections with adjacent premises, as may be
-15-
<PAGE>
necessary for the conduct of TENANT's business; provided that
permission of affected tenants must be obtained for any passage
through premises demised to others.
4. The TENANT shall reimburse the OWNER for its proportioned share of any
fees or charges payable by the OWNER for water and sewer charges.
5. Waste removal to be charged based on City of Lewiston dump charges and
trucking charges by OWNER.
ARTICLE XXII
------------
Construction of Lease
- - ---------------------
The covenants and conditions herein contained shall apply to and bind the
successors and assigns of each of the parties hereto. No captions or titles on
this Indenture shall be considered in the interpretation of any of the
provisions hereof. This lease shall replace and supersede all prior leases and
amendments thereto between the parties hereto or their affiliates pertaining to
any or all of the premises hereby demised, said prior lease and amendments being
hereby terminated as of the commencement of the term created by this Indenture.
IN WITNESS WHEREOF, the OWNER and the TENANT have executed these presents,
in duplicate, the day and year first above written.
SIGNED, SEALED AND DELIVERED
IN PRESENCE OF ROY CONTINENTAL MILL
Owner
/s/ Therese Cyr By: /s/ Robert A. Roy
- - ---------------------------- ---------------------------
Witness Robert A. Roy
FALCON SHOE MFG., CO.
/s/ Therese Cyr By: /s/ Theodore C. Johanson
- - ---------------------------- --------------------------
Witness President
-16-
<PAGE>
EXHIBIT 10.25
LEASE
THIS INDENTURE made at Lewiston, Maine, as of the 30th day of November, 1990,
- - --------------
between EQUITY PROPERTIES CORPORATION, a corporation of Auburn, Maine,
hereinafter referred to as Lessor, which expression shall include its successors
and assigns, and KNAPP SHOES, INC., a Massachusetts corporation with a principal
place of business in Brockton, Massachusetts, hereinafter called the Lessee,
which expression shall include its successors and assigns.
I. WITNESSETH: That the Lessor, in consideration of the covenants herein
----------
contained on the part of the Lessee to be kept and performed, does hereby demise
and lease unto the Lessee the following in Lewiston, Maine:
A. The first floor of the Knapp Shoe Building ("Main Building") on Bates,
Lowell and Middle Streets;
B. The second floor of the Main Building;
C. The first floor of the Knapp Shoe New Warehouse ("New Warehouse");
D. The second floor of the New Warehouse; (hereafter "premises"). A more
particular description of the premises may be attached hereto as Exhibit A.
II. TO HOLD FOR A TERM of three (3) months and fifteen (15) days from the first
------------------
day of June, 1991 ("the initial term"), yielding and paying therefor, in
advance, rent as follows:
A rental equal to One Dollar and Thirty-Five ($1.35) Cents per square
foot per annum based on the number of square feet comprising the premises,
prorated and payable monthly.
<PAGE>
Attached hereto also as Exhibit A is a listing of the square footage
in the various areas comprising both the Main Building and the New
Warehouse as well as the total usable space, in the aggregate, in both
buildings.
III COVENANTS:
---------
A. QUIET ENJOYMENT. If the Lessee shall pay the rent and other payments
---------------
in the nature of rent, all as hereinafter set forth, and if the Lessee shall
observe all the other covenants, terms, and conditions of this Lease and any
extensions thereof, the Lessor shall warrant and defend the Lessee to such
peaceful and quiet enjoyment of the premises against all persons claiming by,
through or under the Lessor.
B. SIGNS: The Lessee shall have the right to erect and maintain signs
-----
advertising its business, only, on the exterior front of the premises, with the
approval of the Lessor, which approval will not be unreasonably withheld. No
such sign shall endanger the structure or integrity of the building of which the
premises forms a part. Any such exterior sign shall comply with all laws,
ordinances and regulations of the City of Lewiston, Maine, the State of Maine,
and the Board of Fire Underwriters applicable thereto. The City of Lewiston has
a sign ordinance. The aggregate area encompassing Lessee's sign shall not exceed
that ratio of permitted signage that the premises bear to the total usable space
in the buildings of which the premises form a part.
C. USE. The Lessee agrees that the premises shall be used for the
---
manufacture, storage and sales of shoes and for no other purpose.
D. EXTRA HAZARD. The Lessee shall not occupy the premises for any
------------
purpose usually denominated extra hazardous as to fire by insurance companies.
-2-
<PAGE>
E. CONDITION. The premises are leased as they now are, and the Lessor
---------
shall not be responsible for the present or the future condition thereof, with
the exception of those undertakings especially entered into by the Lessor
herein.
F. ALTERATIONS AND IMPROVEMENTS.
----------------------------
(1) The Lessee may make such repairs, alterations, additions, or
improvements to the premises as it may desire at its own expense, provided,
however, that no structural alterations, or additions, may be made without
first obtaining the written consent of the Lessor, which said written
consent shall not be unreasonably withheld.
(2) All repairs, alterations, additions, or improvements made by
Lessee shall be done in a good and workmanlike manner in full compliance
with all Federal, State and Municipal Laws, ordinances, rules, and
regulations and in accordance with specifications and requirements and
standards of any Board of Fire Underwriters and fire inspectors having
jurisdiction over the premises.
(3) In the event the Lessee shall erect additions, improvements, or
any other alterations upon the premises, the said additions, improvements
and/or alterations shall at the option of the Lessor become the sole
property of the Lessor after the termination of this Lease, or any
extension thereof.
(4) The Lessor shall not be responsible for any costs of construction
arising from repairs, alterations, or the erection of any additions or
improvements to be done by the Lessee, nor for any lien or other obligation
involved in such repair or construction; and, in this connection, the
Lessee agrees to furnish the Lessor the names and addresses for all parties
to whom it shall become obligated for payment of monies for repairs and
-3-
<PAGE>
construction to be done on said premises at the time when said Lessee shall
have contracted with said parties to commence work on said premises for
said Lessee. The Lessee agrees to indemnify and to hold the Lessor
harmless form and against any lien or claim of Lessee's creditors on
account of said repairs or improvements.
G. MAINTENANCE AND REPAIRS.
-----------------------
(1) The Lessor shall maintain the exterior and structural portions of
the premises, including, without limiting the generality of the foregoing,
its roof and walls. This obligations shall not extend to any condition
caused by the negligent or intentional act of the Lessee.
(2) The Lessee shall maintain the interior of the premises. This
obligation to maintain shall include the repair and maintenance of all
doors, electrical systems, air conditioning and ventilation systems,
toilets, washrooms, elevator, plumbing systems, sprinkler systems, fire
extinguishers and security protection to the extent that same exist in and
serve the premises. The Lessor reserves the reasonable right to approve of
the person or firm to perform such work; provided, however, that with
respect to the maintenance of the elevator, Lessee shall be responsible for
the expenses of maintenance and repair. If Lessor leases other portions of
the Building to other tenant(s), then the Lessee' shares of the expense
shall be the expense multiplied by the ratio of the square footage of the
premises occupied by Lessee to the square footage occupied by all tenants
of the premises, including Lessee. With respect to damage caused by the
Lessee, Lessee shall be responsible for the entire expense of repair and
with respect to damage caused by
-4-
<PAGE>
a tenant other than the Lessee, Lessee shall be responsible for none of the
expense of repair.
(3) Lessee shall keep all windows and plate glass on the premises in
good repair regardless of fault, unless damage is caused by the act of
Lessor.
(4) If during the term of this Lease or any renewal asbestos
contamination arises on the leased premises, Lessee shall be responsible
for encapsulation or removal.
H. LESSOR'S ACCESS. Upon reasonable notice to the Lessee, the Lessor
---------------
shall have the right to enter the premises at all reasonable times for the
purpose of making repairs required of it hereunder and for inspections and to
show the same to prospective tenants or to prospective purchasers.
I. LIABILITY INSURANCE. The Lessee shall maintain in full force during
-------------------
the term of this Lease a policy of public liability insurance under which the
Lessor and such other persons as are in privity of estate with Lessor and/or
Lessee as may be set out in notice from time to time, and the Lessee are named
as insureds, and under which the insurer agrees to indemnify and hold Lessee and
Lessor (and those in privity of estate with lessor) harmless from and against
all costs, expenses and/or liability arising from any accident, injury or damage
whatsoever caused to any person occurring during the term of this Lease in or
about the premises, unless such accident or damage is the result of the exterior
or structural portions of the premises under the control of the Lessor. Such
policy shall be noncancellable with respect to Lessor and Lessor's said
designees, except upon ten (10) days written notice to Lessor. A duplicate
original of the certificate thereof shall be delivered to Lessor. The minimum
limits of such insurance
-5-
<PAGE>
shall be One Million ($1,000,000.00) Dollars for injury (or death) to more than
one person and for damage to property.
J. INDEMNIFICATION. The Lessee shall indemnify and hold harmless the
---------------
Lessor from and against all claims, demands, actions, suits and expenses for
injury to person or property occurring in the premises or occurring about the
premises if caused by negligence of the Lessee. Likewise, the Lessee shall be
liable for any fire, smoke, and water damage to the premises, if caused by the
negligence of the Lessee. This paragraph shall be operative to the extent that
fire, hazard and public liability policies of the Lessee do not cover such
claims and damage in full and to the extent that the respective insurance
carriers rightfully deny any coverage or coverage of the particular damage
claimed during the term of the Lease.
K. OTHER DAMAGE. The Lessor shall not be liable for any damage
------------
occasioned by failure to keep the premises in repairs and shall not be liable
for any damage done or occasioned by or from plumbing, water, sewer, steam, or
other pipes, or the bursting, leaking or running of any wash stand, water
closet, or waste pipe in, upon or about the premises, nor for damage occasioned
by water, snow, or ice being upon or coming through the roof, entrance door, or
otherwise, nor for any damage arising from acts of neglect of co-tenants or
other occupants of the premises during the term of the Lease.
L. SUBLEASE-ASSIGNMENT. The Lessee shall not assign this Lease or sublet
-------------------
the premises without the express written consent of the Lessor, which consent
shall not be unreasonably withheld.
-6-
<PAGE>
M. LESSOR'S RIGHT OF TERMINATION.
-----------------------------
(1) If the Lessee shall neglect or fail to perform or observe any of
its obligations herein, other than the payment of rent money previously set
out, for a period of thirty (30) days after notice in writing from the
Lessor in respect to the nature of the default; or
(2) If the Lessee shall fail to make any payment of rent money within
ten (10) days of the date when due; or
(3) If the Lessee shall be adjudicated a bankrupt or insolvent
according to law and no appeal shall be taken from such finding by the
Lessee, or if such appeal shall be taken and not prosecuted diligently, or
if the Lessee shall make an assignment of its property for the benefit of
creditors, or if a receiver, trustee, or similar officer shall be appointed
to take charge of all or any portion of the Lessee's property and it is not
removed within thirty (30) days, or if Lessee shall file a petition under
any bankruptcy law, and the same shall not be dismissed within thirty (30)
days,
then and in any of said cases (notwithstanding any license of any former breach
of covenant or waiver of the benefit thereof or consent in a former instance),
Lessors may lawfully, immediately after the expiration of any of the aforesaid
notice periods or at any time after, and without further demand or notice enter
into and upon the premises or any part thereof in the name of the whole and
repossess the same as of its former estate and expel the Lessee and those
claiming by, through, or under it and remove its effects (forcibly if necessary)
without being deemed guilty of any manner of trespass and without prejudice to
any remedies which otherwise may be used for arrears of rent or proceeding for
breach of covenant and upon entry as aforesaid, this Lease shall
-7-
<PAGE>
terminate; and the Lessee covenants that in case of such termination it shall be
liable to the Lessor for the difference between the rental stipulated in this
Lease and such rental, if any, as may be actually received by the Lessor upon a
reletting, the Lessor agreeing to use reasonable efforts to let.
N. CONDITION OF PREMISES AT EXPIRATION. The Lessee agrees to yield up
-----------------------------------
the premises in substantially the same repair and condition as leased to Lessee,
reasonable wear, tear and casualty excepted, upon termination of this Lease or
any extension thereof, which obligation shall extend to the removal by Lessee of
all solvents, glues, cleaners, chemicals and other materials used by it in its
manufacturing processes and the removal of all piping systems from the
polyurethane vats to the polyurethane machines.
O. UTILITIES, ETC. The Lessee shall pay all electrical charges relating
--------------
to the premises during the term of this Lease, including the lighting of any
parking lot if provisions for same exist. The Lessee will pay all water and
sewer charges relating to the premises during said term and shall provide its
own trash removal.
P. HEAT. The Lessee shall supply heat to the premises during the times
----
of the year as heat may be seasonally required.
Q. SNOW AND ICE. The Lessee shall keep the parking lots, walkways and
------------
driveways serving the premises free and clear of ice and snow.
R. REAL ESTATE TAXES. The Lessor shall pay the real estate taxes,
-----------------
assessments, and the like assessed or imposed against the premises by the City
of Lewiston, Maine, or any quasi-governmental agencies or any district; and
within ten (10) days of demand and presentation
-8-
<PAGE>
of a copy of the bill, Lessee shall reimburse Lessor for that proportion of the
bill that the premises bear to the total usable space in the buildings of which
the premises form a part.
S. FIRE INSURANCE, ETC. The Lessor shall keep the premises insured
-------------------
against fire, extended risk, sprinkler leakage and special form (which includes
collapse and water damage) in such amounts as the Lessor shall, from time to
time, determine with such insurance company as Lessor shall select, with the
proviso that each policy evidencing such insurance shall be non-cancelable with
respect to the Lessor except upon ten (10) days' prior written notice. Within
ten (10) days of demand and presentation of a copy of the bill for such
coverage, Lessee shall reimburse Lessor for that proportion of the bill that the
premises bear to the total usable space in the buildings of which the premises
form a party; however, Lessee's obligation to reimburse shall not exceed
premiums based on Five Hundred Thousand ($500,000.00) Dollars of valuation
unless its tenancy ultimately exceeds two (2) years, in which case there will be
no such limitation.
T. HOLDING OVER. It is agreed and understood that any holding over by
------------
the Lessee of the premises after the expiration of the original term of the
Lease, or any extension thereof, shall operate and be construed as a tenancy
from month to month under all the terms and conditions of the Lease, and at the
same rental as is in effect at the expiration thereof, providing, however, that
this shall not prevent the Lessor from insisting upon the termination of the
Lease or any extension thereof, according to its terms.
U. REMOVAL OF GOODS. The Lessee shall, at the expiration of the term of
----------------
this Lease, or any renewal thereof, remove its goods, effects, trade fixtures,
and equipment placed or installed in the premises, repairing any damage caused
by such removal.
-9-
<PAGE>
V. CUMULATIVE RIGHTS. Any and all rights and remedies which either party
-----------------
may have hereunder shall be cumulative, and the exercise of any one of such
rights shall not bar the exercise of any other right or remedy which said party
may have.
W. WAIVER. One or more waivers of the breach of any covenant or
------
condition by either party shall not be construed as a waiver of a further breach
of the same covenant or condition.
X. NOTICES. Any notices required by or useful under the terms of this
-------
Lease shall be given in the case of the Lessor, to:
Equity Properties Corporation
P.O. Box 132
Auburn, ME 04210
and, in the case of the Lessee, to:
John J. Schlueter
Knapp Shoes, Inc.
One Knapp Centre
Brockton, MA 02401
or such other persons and addresses as the appropriate party may hereafter
designate. All such notices shall be sent certified mail, prepaid, deliver to
addressee only.
Y. ENTIRE AGREEMENT. This instrument contains the entire and only
----------------
agreement between the parties and no oral statements or representations or prior
written matter not contained in this instrument shall have any force and effect.
Z. ESTOPPEL CERTIFICATES. Lessee agrees, at any time, and from time to
---------------------
time, upon not less than ten (10) days' prior request by Lessor, to execute,
acknowledge and deliver to Lessor a statement in writing certifying, if such be
the case, that this Lease is unmodified and in
-10-
<PAGE>
full force and effect (or, if there have been modifications, sating the
modifications, and that the Lease as modified is in full force and effect), and
that there are no defenses or offsets thereto then accrued, or stating those
claimed by Lessee, and the dates to which the rent and other charges have been
paid, it being intended that any such statement delivered pursuant to this
paragraph may be relied upon by any prospective purchaser of, or any prospective
holder of a mortgage upon the fee of the premises, or the property of which the
premises are a part, or by any other properly interested party.
AA. SUBORDINATION. The Lessee covenants and agrees to subordinate the
-------------
lien of the Lease to the lien of any mortgage of the Lessor now existing or
which may in the future be placed against the premises, and execute and deliver
upon demand to the Lessor, but at Lessor's expense, such instrument or
instruments in writing in form for recording, provided that such mortgagee shall
consent to the Lease, and agree that the Lessee shall not be disturbed in its
possession of the premises for any reason other than one which would entitle the
Lessor to terminate the Lease.
BB. SUBROGATION. The Lessor hereby releases the Lessee from any and all
-----------
liability for any loss or damage to the building of which the premises are a
part, caused by fire or any of the extended coverage casualties, even if such
fire or other casualty shall be brought about by the fault or negligence of the
Lessee or any persons claiming under it, provided, however, that this release
shall be in full force and effect only with respect to loss or damage occurring
during such time as the Lessor's policies of fire and extended coverage
insurance shall contain a clause to the effect that this release shall not
affect such policies or the right of the Lessor to recover thereunder. The
Lessor agrees that the fire and extended coverage insurance upon the premises
-11-
<PAGE>
to be obtained by the Lessor shall include such a clause so long as the same is
obtainable and includable without extra cost, or if such extra cost is
chargeable therefor, so long as Lessee pays such extra cost. If extra cost is
chargeable therefor, the Lessor will advise the lessee thereof and of the amount
thereof, and the Lessee at its election will pay the same but shall not be
obligated to pay the same.
The Lessee hereby releases the Lessor from any and all liability for any
loss or damage to its property in and about the premises, caused by fire or any
of the extended coverage casualties, even if such fire or other casualty shall
be brought about by the fault or negligence of the Lessor or any persons
claiming under it, provided, however, that this release shall be in full force
and effect only with respect to loss or damage occurring during such time as the
Lessee's policies of fire and extended coverage insurance shall contain a clause
to the effect that this release shall not affect such policies or the right of
the Lessee to recover thereunder.
CC. ADDITIONAL PROVISIONS WITH RESPECT TO UTILITIES AND HEAT. Currently
--------------------------------------------------------
there are no other tenants in the buildings ("buildings") of which the premises
form a part. Accordingly, Lessee is obligated to pay the entire cost of
utilities and to provide heat to the buildings; however, Lessee may reduce the
volume of heat in those areas of the buildings that are unoccupied to a level
that will prevent the freezing of all pipes in such areas. If the unoccupied
areas or any part of same do become occupied, the following shall apply:
(1) Lessor shall install separate electricity meters for them.
(2) Lessor shall install separate water/sewer meters for them.
-12-
<PAGE>
(3) Lessor will provide in its lease(s) to such occupants(s) that they
must reimburse Lessee for a percentage of the cost of heating based on the
relationship that such occupant's(s') space bears to the total usable space
in the buildings.
IV. AUTOMATIC EXTENSION. This Lease will automatically extend itself from
-------------------
month to month upon the same terms and conditions as herein contained unless,
after the term of this Lease has begun, one party gives to the other written
notice of termination in which event this Lease will terminate on the ninetieth
(90th) day following the date on which the notice is received, provided,
however, if that day is other than the last day of a month, it will terminate on
the next succeeding last day of the month. This shall not be construed to mean
that either party can terminate this Lease prior to the expiration of the full
three-month and fifteen day term set forth in Paragraph II.
V. OPTION. If the space is available, Lessee shall, upon the giving of
------
written notice to Lessor, have the option of adding additional floors in the
Main Building to this Lease. It may not add less than any complete floor; no
partial floors may be added. Any floor so added shall become a party of the
"premises" and all of the terms and conditions of this Lease shall apply to
same. If such addition is made, the prorations of taxes and insurance shall be
adjusted to accommodate the increased percentage of Lessee's liability.
VI. MISCELLANEOUS.
-------------
A. Lessee understands that it will use portions of the real estate of
which the
-13-
<PAGE>
premises form a part in common with other tenants of the Lessor. The common
areas include:
Parking Lots
Stairways
Elevators
Walkways
Loading Docks
Lessee shall take reasonable steps to accommodate the reasonable needs of such
other tenants in the use of the common areas. Lessor will require a like
covenant from the other tenants.
B. The parties to this Lease understand that there is asbestos in the
premises and common areas. Lessee knows the location of such and agrees to so
inform its employees and to instruct them to use due care in order to avoid
damage to asbestos covered areas.
VII FIRE, CASUALTY AND CONDEMNATION. In the event that the premises demised to
-------------------------------
the Lessee shall, during said term or any extension thereof, be damaged by fire
or other unavoidable casualty, then and in such event, the rent hereinbefore
reserved, or a just proportionate part thereof, according to the nature and
extent of the injury sustained, shall be suspended or abated until said premises
shall have been restored by the Lessor. In the event that fifty (50%) percent
of the buildings, of which the premises are a part, shall be destroyed or
damaged by fire, or there shall be any like destruction or damage to the said
buildings by taking by any public authorities for public uses, then, in the
happening of either of said events, the rent hereinbefore reserved shall abate,
and the Lessor or the Lessee may, at their option, within twenty (20) days of
such taking or damage or destruction, terminate this Lease. In the event that
the within Lease is not terminated as aforesaid, the Lessor shall forthwith
restore said premises to
-14-
<PAGE>
the same condition as they were in before said taking or fire; and until such
time as the premises are restored, there shall be an abatement of rent.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals of the day and year first above written.
Signed, Sealed and Delivered
in the presence of EQUITY PROPERTIES CORPORATION
/s/ Donald Simoinett By /s/ Richard J. Potvin, III
-------------------------------- ------------------------------
ITS PRESIDENT
KNAPP SHOES, INC.
/s/ Nancy M. Stern By /s/ John Schlueter
--------------------------------- ------------------------------
ITS PRESIDENT
-15-
<PAGE>
EXHIBIT A
KNAPP SHOE BUILDING
LEWISTON, MAINE
Main Building
-------------
lst Floor 18,088 sq. ft.
2nd Floor 18,088 sq. ft.
3rd Floor 16,403 sq. ft.
4th Floor 16,403 sq. ft.
5th Floor 16,403 sq. ft.
--------------
Net Sq. Ft.
Usable Main Building 85,385 sq. ft.
New Warehouse
-------------
lst Floor 18,496 sq. ft.
2nd Floor 18,496 sq. ft.
--------------
Total Sq. Ft.
Usable New Warehouse 36,992 sq. ft.
Total All Sq. Ft.
Usable 122,377 sq. ft.
<PAGE>
[LETTERHEAD OF EQUITY PROPERTIES CORPORATION]
SECOND ADDENDUM TO LEASE DATED 11/30/90 - 6/1/91
------------------------------------------------
The Lessor, Equity Properties Corporation of Auburn, Maine, currently has a
Lease agreement with Knapp Shoes, Inc., a Massachusetts corporation, dated
November 30, 1990. Said Lease charges to begin June 1, 1991.
As evident in the First Addendum to the Lease, the current extension shall
expire on March 31, 1992. This Second Addendum hereby extends the original
Lease to December 31, 1992 under the same terms and conditions and all covenants
of the existing Lease dated November 30, 1990.
Accepted:
/s/ John J. Schlueter /s/ Richard J. Potvin, III.
- - -------------------------- ------------------------------
Knapp Shoes, Inc. Equity Properties Corporation
ITS PRESIDENT ITS PRESIDENT
<PAGE>
[LETTERHEAD OF EQUITY PROPERTIES CORPORATION]
THIRD ADDENDUM TO LEASE DATE 11/30/90 - 6/1/91
The Lessor, Equity Properties Corporation of Auburn, Maine, currently has a
Lease Agreement with Knapp Shoes, Inc., a Massachusetts corporation, dated
November 30, 1990. Said Lease charges to begin June 1, 1991.
As evident in the First Addendum to the Lease, the extension expired on
March 31, 1992. The Second Addendum extended the original Lease to December 31,
1992 under the same terms and conditions and all covenants of the existing Lease
dated November 30, 1990.
Knapp Shoes Inc. now desires to extend this Lease for a period of twelve
(12) months, in advance, over and above the current Second Addendum term which
expires December 31, 1992. The new Lease expiration date shall be December 31,
1993.
This extension is hereby granted under the same terms and conditions and
all covenants of the existing Lease dated November 30, 1990; save, however, that
the rental price shall be increased by .05c per square foot per annum, prorated
and payable monthly in advance and paid contemporaneously with the existing
monthly payments.
Option to renew:
The Lessee shall have the option of renewing this Lease and its addendums
for an additional term of one (1) year upon the same terms and conditions and
all covenants of the existing Lease dated November 30, 1990; save, however, that
the rental price shall be increased by .05c per square foot per annum, prorated
and payable monthly in advance and paid contemporaneously with the existing
monthly payments.
If the Lessee wishes to exercise this option, it shall give the Lessor
notice thereof, in writing, not later than 180 days prior to the end of the
extension hereby granted above.
Accepted:
/s/ John J. Schlueter /s/ Richard J. Potvin, III.
- - ---------------------------- ----------------------------
Knapp Shoes, Inc. Equity Properties Corp.
ITS PRESIDENT ITS PRESIDENT
<PAGE>
[LETTERHEAD OF KNAPP SHOES, INC.]
June 21, 1993
Mr. Richard Potvin
Equity Properties Corp.
224 Minot Avenue
P.O. Box 182
Auburn, Maine 04210
Re: Lease - Knapp Shoes Inc.
80 Middle Street
Lewiston, Maine 04210
Dear Dick:
Please accept this letter as written notification of Knapp's intent to exercise
the lease option, on the above listed property, for the additional period of one
(1) year.
This option will commence on January 01, 1994 and the new lease rate of
$106,093.60 per year will also become effective on this date. All other terms
and conditions as defined in the original lease dated November 30, 1990 will
remain the same.
To signify your acceptance of these terms, please sign one (1) copy of this
letter of agreement and return it to the attention of Dan Morrison.
Yours truly,
/s/ John J. Schlueter
- - ------------------------
John J. Schlueter
Chairman and CEO ____________________________
Equity Properties Corp.
Its President
<PAGE>
[LETTERHEAD OF EQUITY PROPERTIES CORPORATION]
June 8, 1994
Mr. John J. Schlueter
Chairman and CEO
Knapp Shoes Inc.
One Knapp Centre
Brockton, MA 02401
Re: Lease - Knapp Shoes Inc., Lewiston, ME
--------------------------------------
Dear Mr. Schlueter:
This letter is written notification of Equity Properties Corporation's
acceptance of Knapp Shoes Inc. to exercise, on or before June 15, 1994, an
extension of its current extended Lease for a period of five (5) years at a rate
as follows:
lst year at $1.50 per square foot per annum;
2nd year at $1.55 per square foot per annum;
3rd year at $1.60 per square foot per annum;
4th year at $1.60 per square foot per annum;
5th year at $1.60 per square foot per annum.
This extension shall commence on January 1, 1995.
Additional:
If Knapp Shoes Inc. desires any additional space during its five year extension,
the rate for additional space shall be $.09 per square foot.
All other terms and conditions of the original Lease dated November 30, 1990
will remain the same.
Agreed: Agreed:
/s/ John J. Schlueter /s/ Richard J. Potvin, III.
- - --------------------------- ------------------------------
For Knapp Shoes Inc. For Equity Properties Corp.
<PAGE>
EXHIBIT 10.26
INDUSTRIAL LEASE
BETWEEN:
VON-LAND CORPORATION LIMITED
- and -
IRON AGE CANADA, LTD.
<PAGE>
INDUSTRIAL LEASE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1
Special Provisions 1
ARTICLE 2
Leased Premises, Term and
Acceptance of the Leased Premises
Section 2.1 Leased Premises 3
Section 2.2 Use of Additional Areas 3
Section 2.3 Grant and Term 3
Section 2.4 Construction of Leased Premises 3
ARTICLE 3
Rent
Section 3.1 Covenant to Pay 4
Section 3.2 Basic Rent 5
Section 3.3 Advance Rent and Security Deposit 5
Section 3.4 Rent Past Due 5
ARTICLE 4
Taxes and Operating Costs
Section 4.1 Taxes Payable by Landlord 5
Section 4.2 Taxes Payable by Tenant 5
Section 4.3 Business Taxes and Other Taxes of
of the Tenant 6
Section 4.4 Tenant's Proportionate Share of
Operating Costs 7
Section 4.5 Payment of Taxes and Operating Costs 7
ARTICLE 5
Building - Control and Services
Section 5.1 Control of Building 7
Section 5.2 Landlord's Services 8
Section 5.3 Tenant's Responsibilities 9
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Section 5.4 Relocation of the Leased Premises 10
Section 5.5 Additional Services 10
Section 5.6 Parking 10
ARTICLE 6
Utilities and Heating,
Ventilating and Air-Conditioning
Section 6.1 Charges for Utilities 11
Section 6.2 Heating, Ventilating and Air-Conditioning
ARTICLE 7
Use of the Leased Premises
Section 7.1 Use of the Leased Premises 13
Section 7.2 Conduct of Business 13
Section 7.3 Observance of Law 13
ARTICLE 8
Insurance and Indemnity
Section 8.1 Tenant's Insurance 14
Section 8.2 Increase in Insurance Premiums 16
Section 8.3 Cancellation of Insurance 16
Section 8.4 Loss or Damage 16
Section 8.5 Landlord's Insurance 17
Section 8.6 Indemnification 18
ARTICLE 9
Maintenance, Repairs and Alterations
Section 9.1 Maintenance and Repairs by the Landlord 18
Section 9.2 Maintenance and Repairs by the Tenant 18
Section 9.3 Landlord's Approval of the Tenant's
Repairs 20
Section 9.4 Removal and Restoration by the Tenant 21
Section 9.5 Tenant to Discharge all Liens 22
Section 9.6 Signs and Advertising 22
Section 9.7 Tenant Not to Overload Facilities 22
Section 9.8 Tenant Not to Overload Floors 23
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 10
Damage and Destruction
Section 10.1 Destruction of the Leased Premises 23
Section 10.2 Destruction of the Building 24
Section 10.3 Expropriation 24
Section 10.4 Architect 25
ARTICLE 11
Assignment and Subletting
Section 11.1 Assignment and Subletting 25
Section 11.2 Assignment by the Landlord 27
ARTICLE 12
Access and Alterations
Section 12.1 Right of Entry 27
ARTICLE 13
Status Statement, Subordination and
Attornment
Section 13.1 Status Statement 28
Section 13.2 Subordination and Attornment 28
Section 13.3 Attorney 29
Section 13.4 Financial Information 29
ARTICLE 14
Default
Section 14.1 Right to Re-enter 29
Section 14.2 Right to Relet 30
Section 14.3 Expenses 31
Section 14.4 Waiver of Exemption from Distress 31
Section 14.5 Landlord's Rights 31
Section 14.6 Security Deposit 32
Section 14.7 Remedies Generally 32
ARTICLE 15
Miscellaneous
Section 15.1 Rules and Regulations 33
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
Section 15.2 Intent and Interpretation 33
Section 15.3 Overholding - No Tacit Renewal 34
Section 15.4 Waiver 34
Section 15.5 Accord and Satisfaction 35
Section 15.6 Force Majeure 35
Section 15.7 Notices 35
Section 15.8 Registration 36
Section 15.9 Accrual of Basic Rent and Additional Rent 36
Section 15.10 Compliance with the Planning Act 36
Section 15.11 Quiet Enjoyment 36
Section 15.12 Consent and Approval 36
SCHEDULES
SCHEDULE "A" LEGAL DESCRIPTION 38
SCHEDULE "B" PLAN OF THE BUILDING 39
SCHEDULE "C" CONSTRUCTION OF THE LEASED 40
PREMISES
SCHEDULE "D" RULES AND REGULATIONS 45
SCHEDULE "E" DEFINITIONS 47
APPENDIX "A" INDEMNITY AGREEMENT 55
RIDERS 1 AND 2 ADDITIONAL PROVISIONS 59
</TABLE>
iv
<PAGE>
THIS LEASE is dated the 11th day of June, 1991.
BETWEEN:
VON-LAND CORPORATION LIMITED,
----------------------------
("Landlord")
OF THE FIRST PART;
- and -
IRON AGE CANADA, LTD.,
---------------------
("Tenant")
OF THE SECOND PART.
ARTICLE 1.
Special Provisions
The following are certain special provisions, which are part of, and are
referred to in subsequent provisions of this Lease. Any conflict or
inconsistency between these special provisions and the provisions contained
elsewhere in this Lease will be resolved in favour of the provisions contained
elsewhere in this Lease:
(a) Leased Premises
Those certain premises containing a Usable Area of approximately
12,538 square feet located on the ground floor of the Building as shown outlined
in red on the plan attached as Schedule "B" and designated as Unit No. 2
(Section 2.1).
- - ------------
(b) Fixturing Period
See Rider 1.
(c) Commencement Date and Term
The period of time commencing on the date (the "Commencement Date")
which is the 1st day of July, 1991, and expiring five (5) years, being June 30,
1996, following the Commencement Date (or the last day of the calendar month in
which the Commencement Date occurs if the Commencement Date is not the first day
of a calendar month) (Section 2.3).
-----------
1
<PAGE>
(d) Basic Rent
Annual payments during the Term based upon the annual rate of Three
Dollars and Fifty Cents ($3.50) per square foot of the Usable Area of the Leased
Premises and payable in accordance with the terms of this Lease (Section 3.2).
-----------
(e) Advance Rent and Security Deposit
The sum of Five Thousand Two Hundred and Twenty-Four Dollars and
Seventeen Cents ($5,224.17) to be applied by the Landlord on account of the
first month's payment of Basic Rent and Additional Rent as it falls due, and the
sum of Seven Hundred and Thirty-One Dollars and Thirty-Eight Cents ($731.38)
representing GST (Section 3.3) and Five Thousand Two Hundred and Twenty-Four
-----------
Dollars and Seventeen Cents ($5,224.17) to be held as a Security Deposit and
applied in accordance with Section 14.6.
(f) Address of Landlord (Section 15.8)
------------
30 Floral Parkway
Concord, Ontario
L4K 4R1
(g) Address of Tenant (Section 15.8)
------------
475 North Rivermede Road
Unit #2
Concord, Ontario
L4K 3R2
(h) Indemnifier (Appendix "A")
------------
Iron Age Corporation
(i) Address of Indemnifier (Appendix "A")
------------
2406 Woodmere Drive
Pittsburgh, Pennsylvania 15205
(j) Use of the Leased Premises (Section 7.1)
-----------
The Tenant will use the Leased Premises solely for the purpose of
office and warehousing for safety shoes and related items.
(k) Additional Provisions
2
<PAGE>
See Riders 1 and 2 attached hereto and forms a part hereof.
ARTICLE 2.
Leased Premises, Term and Acceptance of the Leased Premises
Section 2.1 Leased Premises
The Landlord leases to the Tenant, and the Tenant leases from the
Landlord, the Leased Premises.
Section 2.2 Use of Additional Areas
The Tenant's use of the Leased Premises includes the non-exclusive
right of the Tenant and persons having business with the Tenant in common with
the Landlord and all others entitled, to the use of the Common Areas and
Facilities.
Section 2.3 Grant and Term
The Tenant shall, subject to the terms of this Lease, have and hold
the Leased Premises during the Term (being the period referred to in Paragraph
(c) of the Special Provisions) subject to the payment of Basic Rent and
Additional Rent and the observance and performance of the terms, covenants and
conditions contained in this Lease.
Section 2.4 Construction of Leased Premises
(a) The Landlord will complete the work designated as "Landlord's Work" in
accordance with the provisions of Schedule "C".
(b) Notwithstanding anything contained in this Section 2.4, the Landlord
may upon reasonable notice to the Tenant require the Tenant to perform parts of
the Tenant's Work prior to the completion of the Landlord's Work in any case
where the nature or state of all work is such that the Landlord considers it
necessary or desirable to do so. The Landlord may require that all mechanical
and electrical work to be done with respect to the Leased Premises by or on
behalf of the Tenant shall be carried out by the Landlord's contractors and
employees at the Tenant's cost and expense which is repayable by the Tenant to
the Landlord upon demand as Additional Rent.
(c) The Landlord shall give the Tenant at least fifteen (15) days prior
written notice of the date upon which possession of the Leased Premises will be
available to the Tenant with the Landlord's Work substantially completed or
completed to the extent that the Tenant's Work can be performed by the Tenant in
conjunction with the Landlord's Work. The Tenant shall, during the Fixturing
Period (being the period referred to in Paragraph (b) of the Special
3
<PAGE>
Provisions), enter upon and take possession of the Leased Premises for the
purpose of completing the Tenant's Work, in common with the Landlord and the
Landlord's contractors and employees. During the Fixturing Period, the Tenant
shall:
(i) perform the Tenant's Work and cause its employees and contractors
to do their work so as not to interfere with the Landlord's contractors and
employees in the completion of the Landlord's Work, and
(ii) be bound by all of the terms, covenants and conditions of this
Lease (including, without limitation, the payment of all insurance premiums,
electricity, water, temporary heat, security, refuse removal and other Utilities
and services furnished to the Tenant or its contractors by the Landlord or
others and all other Additional Rent, all as estimated by the Landlord, acting
reasonably) except those requiring payment of Basic Rent.
Upon the expiration of the Fixturing Period, Basic Rent shall be
payable in accordance with the terms of this Lease.
(d) If there is a dispute as to (i) completion of the Landlord's Work, or
(ii) the availability of the Leased Premises for possession by the Tenant, or
(iii) the Usable Area of the Leased Premises, the opinion of the Landlord's
Architect will be final and binding.
(e) The Tenant will examine the Leased Premises before taking possession
and unless the Tenant serves the Landlord with written notice specifying any
deficiencies or defects within ten (10) days after taking possession, the Tenant
will be deemed to have examined the Leased Premises and to have agreed that they
are in good order and that the Landlord's Work has been satisfactorily
completed. There is no promise, representation or undertaking by or binding
upon the Landlord with respect to any alteration, remodelling [sic] or
redecorating of, or installation of equipment or fixtures in, the Leased
Premises, unless expressly set forth in this Lease.
(f) The Tenant acknowledges that if there is a delay which results in the
Building or the Landlord's Work not being completed on schedule, the Tenant
shall and does hereby release the Landlord from all costs, expenses, claims,
losses or damages suffered or incurred as a result of such delay whether or not
caused, or to the extent contributed to, by the acts, omissions or negligence of
the Landlord or those for whom it is at law responsible.
See Rider 1.
See Rider 2.
ARTICLE 3.
Rent
Section 3.1 Covenant to Pay
4
<PAGE>
The Tenant will pay Basic Rent and Additional Rent when due and
payable as set out in this Lease and without any set-off, deduction, abatement
or demand.
Section 3.2 Basic Rent
The Tenant will, from and after the Commencement Date and thereafter
throughout the Term, pay the Landlord as Basic Rent, in equal consecutive
monthly installments, in advance on the first day of each calendar month of each
Rental Year, without any prior demand therefor, the annual sum based upon the
annual rate specified in Paragraph (d) of the Special Provisions. Basic Rent
will be pro-rated on a daily basis for any fractional month period at the
beginning or end of the Term.
Section 3.3 Advance Rent and Security Deposit
The Landlord acknowledges receipt of the sum specified in Paragraph
(e) of the Special Provisions as Advance Rent to be held without interest by the
Landlord and applied on account of the Basic Rent and Additional Rent payable
during the first month of the Term.
Section 3.4 Rent Past Due
If the Tenant fails to pay any Rent when due, then, in addition to all
other rights and remedies available to the Landlord, the unpaid amounts will
bear interest upon demand from the due date to the date of payment at an annual
rate of four (4) percentage points above the Prime Rate, calculated and
compounded monthly.
ARTICLE 4.
Taxes and Operating Costs
Section 4.1 Taxes Payable by Landlord
The Landlord will, subject to Sections 4.2 and 4.4 pay directly to the
taxing authority all Taxes. The Landlord may, nevertheless, defer payment of
Taxes to the fullest extent permitted by law, so long as it diligently
prosecutes any contest or appeal of Taxes.
Section 4.2 Taxes Payable by Tenant
(a) The Tenant shall, on or before the due date therefor, pay to the
lawful taxing authorities, or to the Landlord, as it may direct, as Additional
Rent, all Taxes levied or assessed against the Leased Premises based upon a
separate real property tax bill or separate real property assessment notice
issued by any taxing authority in respect of the Leased Premises. Payment of
Taxes will be made by the Tenant upon demand and in no event later than seven
(7) days prior to the date when such Taxes are due to the relevant governmental
5
<PAGE>
authority. If separate tax bills or assessment notices are not available, then
the Tenant will pay to the Landlord for each Rental Year, its Proportionate
Share of those Taxes that are imposed against the Property, including without
limitation, the Common Areas and Facilities, whether or not there are separate
real property tax bills or separate real property assessment notices issued by a
taxing authority.
(b) In addition to the Rent payable hereunder, the Tenant will pay to the
Landlord (acting as agent for the taxing authority if applicable) or directly to
the taxing authority (if required by the applicable legislation) in the manner
specified by the Landlord, the full amount of all goods and services taxes,
sales taxes, value-added taxes, multi-stage taxes, business transfer taxes and
any other taxes imposed on the Tenant in respect of the Rent payable by the
Tenant under this Lease or in respect of the rental of space by the Tenant under
this Lease (collectively and individually, "GST"). GST is payable by the
Tenant whether characterized as a goods and services tax, sales tax, value-added
tax, multi-stage tax, business transfer tax, or otherwise. GST so payable by
the Tenant will: (i) be calculated by the Landlord in accordance with the
applicable legislation; (ii) be paid by the Tenant at the same time as the
amounts to which the GST applies are payable to the Landlord under the terms of
this Lease (or upon demand at such other time or times as the Landlord from time
to time determines); and (iii) despite anything else in this Lease, be
considered not to be Rent, but the Landlord shall have all of the same remedies
for and rights of recovery with respect to such amounts as it have for non-
payment of Rent under this Lease or at law.
(c) If the Landlord, acting equitably, determines that as a result of the
construction or installation of any Leasehold Improvements or Fixtures in the
Leased Premises, the use of the Leased Premises or the particular location of
the Leased Premises within the Building, the Tenant's Proportionate Share of
Taxes payable in accordance with subparagraph (a) above does not accurately
reflect the proper share of the Taxes which should in the Landlord's opinion be
payable by the Tenant, the Landlord may increase or decrease the Tenant's
Proportionate Share of Taxes and the Tenant will pay such adjusted amount rather
than the Tenant's Proportionate Share as set out in subparagraph (a) above.
(d) If the Tenant or permitted Transferee or other occupant of the Leased
Premises shall elect to have the Leased Premises or any part thereof assessed
for separate school taxes, the Tenant shall pay to the Landlord as Additional
Rent, as soon as the amount of such separate school taxes is ascertained, any
amount of which the amount of separate school taxes exceeds the amount which
would otherwise have been payable for school taxes had such election not been
made by the Tenant or the Transferee or other occupant of the Leased Premises.
Section 4.3 Business Taxes and Other Taxes of the Tenant
(a) The Tenant will pay to the lawful taxing authorities or to the
Landlord, as the Landlord directs, all business taxes, personal property taxes,
licence [sic] fees or other similar
6
<PAGE>
rates and assessments levied or assessed against or in relation to the Tenant's
business, assets, Leasehold Improvements and Fixtures in the Leased Premises and
shall promptly deliver to the Landlord receipts evidencing payment of all such
taxes and furnish such other information in connection therewith as the Landlord
reasonably requires.
(b) The Tenant will indemnify and hold the Landlord harmless from and
against payment of all loss, costs, charges and expenses occasioned by or
arising from all Taxes and the amounts payable pursuant to Section 4.3(a) and
any taxes which may in future be levied in lieu of or in addition to such
amounts or which may be assessed against any rentals payable pursuant to this
Lease in lieu of such amounts, whether against the Landlord or the Tenant,
including, without limitation, any increase in Taxes and the amounts payable
pursuant to Section 4.3(a) arising directly or indirectly out of any appeal or
contestation of the Tenant. The Tenant will deliver to the Landlord such
security for any increase in Taxes or other amounts payable hereunder as the
Landlord deems advisable.
Section 4.4 Tenant's Proportionate Share of Operating Costs
The Tenant will pay, in accordance with Section 4.5, the Tenant's
Proportionate Share of Operating Costs.
Section 4.5 Payment of Taxes and Operating Costs
(a) The amounts payable by the Tenant under Sections 4.2 and 4.4 (and
Section 4.3, if applicable) may be estimated (and estimates may be revised) by
the Landlord. Subject to Sections 4.2(a) and (c), the Tenant agrees to pay the
Landlord the Tenant's Proportionate Share of the amounts payable under Sections
4.2 and 4.4 (and the amounts payable under Section 4.3, if applicable) as
estimated, in monthly installments in advance, together with Basic Rent. Any
amounts received by the Landlord pursuant to Sections 4.2 and 4.3 during any
Rental Year after the Tenant has paid its full share of Taxes for such Rental
Year shall be credited against the Tenant's share of Taxes for the subsequent
Rental Year.
(b) Within one hundred and twenty (120) days after the end of the period
for which the estimated payments have been made, the Landlord will determine and
advise the Tenant of the exact amount of the Tenant's Proportionate Share of
Taxes and Operating Costs. If necessary, an adjustment will be made between the
parties within fifteen (15) days after the Tenant has been advised of the actual
amounts. This provision shall survive the expiration or earlier termination of
the Term of this Lease.
ARTICLE 5.
Building - Control and Services
Section 5.1 Control of the Building
7
<PAGE>
(a) The Landlord will operate and maintain the Building as would a prudent
landlord of a similar industrial building having regard to size, age and
location.
(b) The Building is at all times subject to the exclusive control,
management and operation of the Landlord. The Landlord has the right with
respect to such control, management and operation to:
(i) obstruct or close off all or any part of the Property for the
purpose of maintenance, repair or construction;
(ii) employ all personnel necessary for the operation and management
of the Building, either directly or through a third party property management
company;
(iii) construct other improvements and make alterations, additions,
subtractions or re-arrangements, build additional storeys and construct
facilities adjoining or proximate to the Building, including underground tunnels
and pedestrian walkways and overpasses;
(iv) do and perform such other acts in and to the Building, as, in
the use of good business judgment, the Landlord determines to be advisable for
the more efficient and proper operation of the Building; and
(v) control, supervise and regulate the Parking Areas in such manner
as the Landlord determines from time to time, including, without limitation,
imposing charges or rates as may from time to time be determined by the Landlord
for the use of the Parking Areas.
(c) The Landlord is not subject to any liability, nor is the Tenant
entitled to any compensation or abatement of Rent as a result of the Landlord's
exercise of its rights conferred under Section 5.1 so long as the Landlord
proceeds as expeditiously as reasonably possible to minimize interference with
the Tenant's business.
Section 5.2 Landlord's Services
(a) During the Term, the Landlord shall provide to the Leased Premises
upon the terms and subject to the conditions set out in Section 5.2(b) hereof,
Utilities in such quantities as the Landlord, in its sole discretion, determines
to be reasonable. If the Tenant's equipment requires Utilities in excess of the
quantities normally supplied by the Landlord and the Tenant requests the
Landlord to supply such excess quantities, facilities to supply such excess
quantities may be provided by the Landlord at the sole expense of the Tenant, if
such excess quantities are available, subject to the following conditions:
(i) the Landlord will have the right to refuse to supply such excess
utilities if the supplying of additional facilities or excess utilities shall in
any way affect the operation,
8
<PAGE>
the aesthetics or the structure of the Building, or in any way reduce the
efficiency of existing electricity, water or other utilities supplied to the
Building; and
(ii) the actual cost of supplying such additional facilities or excess
utilities shall be paid by the Tenant to the Landlord upon demand and in
accordance with Section 6.1 hereof, together with an amount equal to fifteen
percent (15%) of the total cost thereof representing the Landlord's overhead and
administrative costs.
(b) The provision by the Landlord of the services and utilities referred
to in Section 5.2(a) shall be subject to the following terms and conditions:
(i) any use of the Leased Premises not in accordance with the design
standards of the Building or any arrangement of partitions which interferes with
the normal operation of the climate control system for the Building may require
changes or alterations in the system or the ducts. Any changes or alterations
so required, if such changes can be accommodated by the Landlord's equipment,
shall be made by the Landlord, at the Tenant's expense, and only after such
changes or alterations have received the Landlord's prior written consent. If
installation of partitions, equipment or fixtures by or on behalf of the Tenant
(other than the partitions installed pursuant to the Landlord's Work as set out
in Schedule "C") necessitates the rebalancing of the portion of the climate
control equipment serving the Leased Premises, such work will be performed by
the Landlord at the Tenant's expense, together with an amount equal to fifteen
percent (15%) of the total expense thereof representing the Landlord's overhead
and administrative costs, and shall be payable by the Tenant within five (5)
days after written demand as Additional Rent; and
(ii) the Landlord will not be responsible for any inadequacy of
performance of the climate control system serving the Leased Premises. If the
use of the Leased Premises does not accord with the building requirements and
changes in the climate control system are desirable or necessary to accommodate
such use, the Landlord may make such changes and the entire cost thereof shall
be paid by the Tenant to the Landlord as Additional Rent as set out in
subparagraph (ii) hereof. If, in the opinion of the Landlord, such changes
result in Operating Costs in excess of those which would have occurred had such
changes not been made, the Landlord may estimate the amount of such excess on a
reasonable basis and such amount shall be payable by the Tenant as Additional
Rent in accordance with the terms of this Lease.
Section 5.3 Tenant's Responsibilities
The Tenant will set temperature levels on those portions of the
climate control equipment within and exclusively serving the Leased Premises so
as to maintain such reasonable conditions of temperature and humidity within the
Leased Premises as are determined by the Landlord and its Architect and
engineers. The Tenant shall comply with such stipulations and with all Rules
and Regulations of the Landlord pertaining to the operation of such equipment.
If the Tenant fails to comply with such stipulations and the Rules and
9
<PAGE>
Regulations, the Landlord shall be entitled to take such steps as it deems
advisable to correct such defaults (including, without limitation, entering upon
the Leased Premises and assuming control of such equipment) without liability to
the Tenant, and the Tenant will pay to the Landlord forthwith upon demand as
Additional Rent all costs and expenses incurred by the Landlord in so doing,
together with an amount equal to fifteen percent (15%) of such costs and
expenses representing the Landlord's overhead and administrative costs.
Section 5.4 Relocation of the Leased Premises
At any time and from time to time during the Term, the Landlord shall
be entitled to relocate or rearrange the Leased Premises from the location shown
on Schedule "B" or to make alterations, additions or reductions to the Leased
Premises provided that:
(a) the Usable Area of the Leased Premises is not increased or decreased
by more than ten percent (10%); and
(b) the Landlord effects such alterations, additions, reductions,
relocation or rearrangement at its expense, including all Leasehold Improvements
in the Leased Premises, all moving costs and all other reasonable direct costs
incurred by the Tenant as evidenced by paid invoices delivered by the Tenant to
the Landlord.
Section 5.5 Additional Services
If the Tenant requires any Additional Services to be performed in or
relating to the Leased Premises, it shall so advise the Landlord in writing, and
the Landlord shall have the right, but shall not be obligated, to perform any
such Additional Services. If the Landlord performs any such Additional
Services, the Tenant shall pay all costs and expenses incurred by the Landlord
or on the Landlord's behalf in performing or completing such Additional Services
forthwith upon receipt of the invoice therefore from the Landlord, together with
an amount equal to fifteen percent (15%) of such costs and expenses representing
the Landlord's overhead and administrative costs. If the Landlord does not wish
to exercise its right to perform any Additional Services, the Tenant shall not
cause any such Additional Services to be performed by any other Person unless
and until it has obtained the consent of the Landlord in writing to (i) the
performance of such Additional Services; and (ii) the Person to be performing
such Additional Services, such consent not to be unreasonably withheld.
Section 5.6 Parking
The Landlord shall provide free surface parking in the Parking Areas
on a first-come, first-served basis. It is understood and agreed that the use
of such Parking Areas by the Tenant and its employees and invitees shall be
subject to the following provisions:
10
<PAGE>
(a) the Landlord reserves the right to make such rules and regulations
with respect to the use of the Parking Areas provided for the Building as the
Landlord deems advisable from time to time;
(b) the Tenant shall use the Parking Areas at its sole risk; and
(c) the use by the Tenant of the Parking Areas is subject to the exclusive
control of the Landlord.
See Rider 1 (Parking).
ARTICLE 6.
Utilities and Heating
Ventilating and Air-Conditioning
Section 6.1 Charges for Utilities
(a) If there are separate meters (other than check meters) installed
pursuant to Section 6.1(d) for the Leased Premises, the Tenant will pay
Utilities directly to the Utility suppliers on the basis of the separate meters.
(b) If there are no separate meters for the Leased Premises, the Tenant
will pay to the Landlord, or as the Landlord otherwise directs, as Additional
Rent, the aggregate, without duplication, of:
(i) the cost of all Utilities applicable or attributable to the
Leased Premises, as determined by the Landlord;
(ii) the costs of any other charges levied or assessed in lieu of or
in addition to such Utilities as determined by the Landlord;
(iii) all costs incurred by the Landlord in determining or allocating
the charge for Utilities including, without limitation, professional engineering
and consulting fees; and
(iv) an administration fee of fifteen percent (15%) of the costs and
charges referred to in subparagraphs (i) to (iii) hereof.
Charges for Utilities will be paid in equal monthly instalments [sic] in
advance on the basis of an initial rate determined by the Landlord's engineers.
Such initial rate shall be based upon the Tenant's Proportionate Share of the
Utilities. If the Landlord or its engineers determine that the Tenant is
obligated to pay an additional charge for the supply and usage of water
electricity, steam and other Utilities to the Leased Premises in excess of the
standard usage of general industrial premises in the Building, the additional
charge for Utilities shall be
11
<PAGE>
calculated on the basis determined by the Landlord's engineers, together with
all costs incurred by the Landlord in determining or allocating the additional
charge for Utilities. If the public utility rate is increased or decreased
during the Term, the charges will be equitably adjusted and the decision of the
Landlord, acting reasonably, will be final. If the Tenant requests the supply of
Utilities to the Leased Premises after Normal Business Hours, the Tenant will,
in addition, pay forthwith upon demand as Additional Rent, all costs of
supplying Utilities to the Leased Premises after Normal Business Hours as
determined by the Landlord's engineers.
(c) The Tenant shall, as required and at its sole expense, attend to the
replacement of standard electric light bulbs, tubes and ballasts in the Leased
Premises throughout the Term. If the Tenant requests that the Landlord relamp
and reballast as required, then the replacement of standard electric light
bulbs, tubes and ballasts in the Leased Premises will be undertaken by the
Landlord at such time as they actually burn out and after notice from the Tenant
that replacement is required. In that event, the cost of replacement and
installation will be paid by the Tenant with the next monthly payment of
Additional Rent, together with an amount equal to fifteen percent (15%) of such
cost representing the Landlord's overhead and administrative costs.
(d) The Tenant shall pay for the costs of any metering which the Tenant
requests the Landlord to install in the Leased Premises, or which the Landlord
wishes to install in the Building, for the purpose of assisting in determining
the consumption of any Utility in the Leased Premises.
(e) In no event shall the Landlord be liable for, nor shall the Landlord
have any obligation with respect to any interruption or cessation of, or failure
in the supply of, any Utilities, services or systems in, to or serving the
Building or the Leased Premises, whether or not supplied by the Landlord or
otherwise.
Section 6.2 Heating, Ventilating and Air-Conditioning
(a) Subject to Section 6.2(b) hereof, the Tenant shall, throughout the
Term, operate, regulate, maintain, repair and, if necessary, replace the
heating, ventilating and air-conditioning equipment within and serving the
Leased Premises, including without limitation, the heating, ventilating and air-
conditioning unit which is located on the roof of the Leased Premises.
(b) Notwithstanding anything to the contrary contained herein, in the
event that access to the roof is required in order [sic] maintain, repair or
replace any portion of the heating, ventilating and air-conditioning unit
located thereon, the Tenant shall advise the Landlord in writing and such
maintenance, repairs or replacements will be performed only by the Landlord. The
Tenant shall pay to the Landlord, upon demand, the cost of completing such
maintenance, repairs or replacements together with an amount equal to fifteen
percent (15%) of such costs representing the Landlord's overhead and
administrative costs. The
12
<PAGE>
Tenant acknowledges and agrees that it shall not, nor shall it permit any Person
to, enter onto the roof for any purpose whatsoever at any time during the Term
hereof.
See Rider 1 (Conditions of mechanical installations).
ARTICLE 7.
Use of the Leased Premises
Section 7.1 Use of the Leased Premises
The Leased Premises will be used solely for the purpose specified in
Paragraph (j) of the Special Provisions and the Tenant will not use or permit or
suffer the use of, the Leased Premises or any part thereof for any other
business or purpose.
Section 7.2 Conduct of Business
The Tenant will occupy the Leased Premises and commence its business
operations in the Leased Premises from and after the Commencement Date and will
thereafter throughout the Term use the whole of the Leased Premises in a
reputable and prudent manner. The Tenant will not commit or permit to be
committed any waste or injury to the Leased Premises, the Leasehold Improvements
or Fixtures or any other part of the Property or any nuisance therein or any use
or manner of use causing annoyance to other tenants and occupants of the
Building. The Tenant will not use or permit, or suffer the use of the Leased
Premises or any part of it for any business which, either directly or
indirectly, involves the preparation, production or storage of any toxic or
hazardous substances or materials including, without limitation, any products of
waste, asbestos, urea formaldehyde foam insulation, radon gas, PCBs or any other
contaminant as defined in the Environmental Protection Act, R.S.O. 1980, c. 141,
as amended. Any business conducted by the Tenant, whether through advertising
or selling procedures or otherwise, which in the opinion of the Landlord may
harm or tend to harm the business or reputation of the Landlord or reflect
unfavourably on the whole or any part of the Property, the Landlord or other
tenants in the Building, will be immediately discontinued by the Tenant at the
request of the Landlord. The Tenant agrees not to refer to the Building by any
name other than that designated from time to time by the Landlord and the Tenant
will use the name of the Building for the business address of the Tenant but for
no other purpose. Upon at least thirty (30) days prior written notice to the
Tenant, the Landlord may change the name of the Building and the Landlord shall
not be responsible for any costs or expenses incurred by the Tenant as a result
of such change of name.
Section 7.3 Observance of Law
The Tenant will, at its expense, and subject to Section 9.3:
13
<PAGE>
(a) comply with all provisions or changes of law and other requirements of
all governmental bodies which pertain to or affect the Leased Premises or
require or govern the making of any repairs, alterations or other changes of or
to the Leased Premises or the Tenant's use of it; and
(b) obtain all necessary permits, licences [sic] and approvals relating to
the use of the Leased Premises and the conduct of business therein, including,
without limitation, those required under the Business Corporations Act (Ontario)
and the Investment Canada Act.
ARTICLE 8.
Insurance and Indemnity
Section 8.1 Tenant's Insurance
(a) The Tenant shall, throughout the period that the Tenant is given
possession of the Leased Premises and during the entire Term at its sole cost
and expense, take out and keep in full force and effect and in the names of the
Tenant, the Landlord, the Owners and the Mortgagee as their respective interests
may appear, the following insurance:
(i) "All Risks" (including flood and earthquake) insurance in an
amount equal to the full replacement cost of all property owned by the Tenant,
or for which the Tenant is legally liable or installed by or on behalf of the
Tenant, and located within the Building including, but not limited to,
furniture, fixtures, installations, alterations, additions, partitions and all
other Leasehold Improvements. Such insurance shall include a standard joint
loss agreement;
(ii) Broad Form Boiler and Machinery insurance on a blanket repair
and replacement basis with limits for each accident in an amount of at least the
replacement cost of all Leasehold Improvements, contents and of all boilers,
pressure vessels, air-conditioning equipment and miscellaneous electrical
apparatus owned or operated by the Tenant or by others (except for the Landlord)
on behalf of the Tenant in the Leased Premises. Such insurance shall include a
joint loss agreement;
(iii) Comprehensive General Liability Insurance including personal
injury, broad form contractual liability, owners' and contractors' protective,
contingent employers' liability, employers' liability, medical payments,
products liability, completed operations, non-owned automobile liability, all
coverages with respect to the Leased Premises and the Tenant's use of the Common
Areas. Such policies shall be written on a comprehensive basis with inclusive
limits of not less than Five Million Dollars ($5,000,000.00) or such higher
limits as the Landlord or the Mortgagee may require from time to time. Such
insurance shall contain severability of interests and cross-liability clauses
and the Owners, the Landlord and the Mortgagee shall be added as additional
named insureds with respect to liability arising out of the Tenant's operations,
including the Tenant's use and occupation of the Leased Premises;
14
<PAGE>
(iv) All Risks Tenant's Legal Liability insurance for the
replacement cost value of the Leased Premises including loss of use thereof;
(v) insurance covering the cost of repair and replacement of glass
broken on the Leased Premises including outside windows and doors on the
perimeter of the Leased Premises; and
(vi) any other forms of insurance as the Landlord, acting
reasonably, or the Mortgagee requires from time to time, in forms and amounts
and for risks against which a prudent tenant would insure.
(b) The following terms and conditions are applicable to the insurance
policies specified under Section 8.1(a):
(i) the policies specified under Sections 8.1(a)(i), (ii) and (iii)
shall contain the Mortgagee's standard mortgage clause and may have reasonable
deductibles. If there is a dispute as to the full replacement cost, the
Landlord's evaluation will prevail;
(ii) the policies specified under Sections 8.1(a)(i), (ii) and (iii)
shall contain a mutual waiver of any subrogation rights which the Tenant's
insurance may have against the Landlord, the Owners and the Mortgagee and those
for whom they are in law responsible, whether the damage is caused or
contributed to by their act, omission or negligence;
(iii) all of the policies shall be taken out with insurers reasonably
acceptable to the Landlord and in a form reasonably satisfactory to the
Landlord;
(iv) all of the policies shall be non-contributing with and only
apply as primary and not as excess to any other insurance available to the
Landlord, the Owners and the Mortgagee;
(v) none of the policies shall be invalidated as respects the
interests of the Landlord, the Owners and the Mortgagee by reason of any breach
or violation of any warranties, representations, declarations or conditions
contained in the policies; and
(vi) all of the policies shall contain an undertaking by the
insurers to notify the Landlord, the Owners and the Mortgagee in writing not
less than thirty (30) days prior to any material change, cancellation or
termination.
The Tenant agrees to deliver certificates of insurance or, if requested by
the Landlord, complete certified copies of policies, to the Landlord within
thirty (30) days after the placing of the required insurance. No review or
approval of such insurance documentation by the
15
<PAGE>
Landlord shall derogate from or diminish the Landlord's rights or the Tenant's
obligations contained in this Lease including, without limitation, those
contained in Article 8.
(c) If there is damage or destruction to the Leasehold Improvements in the
Leased Premises, the Tenant will use the full insurance proceeds received in
respect of such damage or destruction for the sole purpose of repairing or
restoring them. If there is damage to or destruction of the Building entitling
the Landlord to terminate this Lease under Section 10.2, then, if the Leased
Premises have also been damaged or destroyed, the Tenant will pay the Landlord
all of its insurance proceeds relating to the Leasehold Improvements.
Section 8.2 Increase in Insurance Premiums
If (a) the occupancy of the Leased Premises; (b) the conduct of business in
the Leased Premises; or (c) any acts or omissions of the Tenant in the Leased
Premises or in any other part of the Building results in any increase in
premiums to the insurance carried by the Landlord with respect to any part of
the Building, the Tenant will pay the increase in premiums within five (5) days
after invoices for additional premiums are rendered by the Landlord. In
determining whether the Tenant is liable for increased premiums and the amount
for which the Tenant is responsible, a schedule issued by the organization that
computes the insurance rate on the Property showing the components of the rate
will be conclusive evidence of the items that make up the rate.
Section 8.3 Cancellation of Insurance
If any insurance policy in respect of any part of the Building is cancelled
or threatened by the insurer to be cancelled, or the coverage reduced by the
insurer by reason of the use and occupation of the Leased Premises and if the
Tenant fails to remedy the condition giving rise to cancellation, threatened
cancellation or reduction of coverage within forty-eight (48) hours after notice
by the Landlord, the Landlord may, at its option, either (a) exercise its rights
of re-entry including termination under Article 14, or (b) at the Tenant's
expense, enter upon the Leased Premises and remedy the condition giving rise to
the cancellation, threatened cancellation or reduction.
Section 8.4 Loss or Damage
The Landlord and the Owners are not liable for any death or injury arising
from or out of any occurrence in, upon, at, or relating to the Building or
damage to property of the Tenant or of others wherever located, whether or not
resulting from (a) the negligence of the Landlord or the Owners or those for
whom they may in law be responsible; (b) the Landlord's failure to supply any
services or utilities required by this Lease where the failure is beyond the
Landlord's reasonable control; (c) the existence of any hazardous or toxic
substances or materials (including, without limitation, products of waste,
asbestos, urea formaldehyde foam insulation, radon gas, PCBs or any other
contaminant as defined in the Environmental
16
<PAGE>
Protection Act, R.S.O 1980, c. 141, as amended) which are or have been located,
stored or incorporated in or on any part of the Building; or (d) the exercise by
the Landlord of any of its rights under this Lease. Without limiting the
generality of the foregoing, the Landlord and the Owners shall not be liable for
any injury or damage to Persons or property resulting from fire, explosion,
falling plaster, falling ceiling tile, falling ceiling fixtures and diffuser
coverings, steam, gas, electricity, water, rain, flood, snow or leaks from any
part of the Building, including pipes, sprinklers, appliances, plumbing works,
roof, windows or the surface of any floor or ceiling of the Building or from any
Lands adjoining the Building. In addition, the Landlord and the Owners shall not
be liable for any damage to or destruction of any negotiable instruments, cash
or other valuable property belonging to the Tenant or others and stored or
otherwise contained in the Leased Premises. All property of the Tenant kept or
stored on the Leased Premises will be so kept or stored at the risk of the
Tenant only and the Tenant shall indemnify the Landlord and the Owners and save
them harmless from any claims arising out of any damages to the same including,
without limitation, any subrogation claims by the Tenant's insurers. The intent
of this Section is that the Tenant (and all other Persons having business with
the Tenant) is to look solely to its insurers to satisfy any claim which may
arise on account of death, injury, loss or damage, irrespective of its cause.
Section 8.5 Landlord's Insurance
The Landlord shall at all times throughout the Term carry:
(a) broad form boiler and machinery insurance on items owned by the
Landlord and the Owners (except property that the Tenant and other tenants of
the Building are required to insure);
(b) insurance on the Building (excluding the foundations and excavations)
and the equipment contained in or servicing the Building against damage by fire
and extended perils;
(c) public liability and property damage insurance with respect to the
Landlord's operations in the Building; and
(d) other forms of insurance as would be carried by a prudent owner of a
similar industrial building or considered advisable by the Owners, the Landlord
or any Mortgagee.
Notwithstanding the Landlord's obligation to insure as set out above and
the Tenant's contribution to the cost of the Landlord's insurance premiums, the
Tenant has no right to receive proceeds from the Landlord's insurance policies.
Notwithstanding anything to the contrary contained herein, the Landlord shall be
entitled to self insure with respect to any of the insurance required to be
maintained by the Landlord pursuant to this Section 8.5 and the premiums and all
other costs that would otherwise have been incurred with respect to such
insurance may be included in Operating Costs in accordance with the provisions
of Schedule "E".
17
<PAGE>
Section 8.6 Indemnification
The Tenant will indemnify the Landlord and the Owners and save them
harmless from and against all loss, claims, actions, damages, costs, liability
and expense in connection with loss of life, personal injury, damage to property
(including any portion of the Building and its equipment, machinery, services
and Leasehold Improvements) or any other loss or injury arising from or out of
this Lease, or any occurrence on the Property or any part thereof, or the
Tenant's occupancy of the Leased Premises, or occasioned wholly or in part by
any act or omission of the Tenant or by anyone permitted to be in the Leased
Premises or the Building by the Tenant. If the Landlord or the Owners are,
without fault on their part, made a party to any litigation commenced by or
against the Tenant, then the Tenant will protect, indemnify and hold the
Landlord and the Owners harmless and pay all expenses and reasonable legal fees
incurred or paid by the Landlord or the Owners in connection with the
litigation. The Tenant will also pay all costs and legal fees (on a solicitor
and his client basis) that may be incurred or paid by the Landlord in enforcing
the terms, covenants and conditions in this Lease. The indemnity contained in
this Section 8.6 shall survive the expiration or earlier termination of the Term
of this Lease.
ARTICLE 9.
Maintenance, Repairs and Alterations
Section 9.1 Maintenance and Repairs by the Landlord
The Landlord will maintain and repair the Structure of the Building and,
subject to Section 6.2 hereof, the mechanical, electrical, heating, ventilating,
air-conditioning and other base building systems of the Building, as would a
prudent owner of a similar industrial building. Subject to the provisions of
Schedule "E", the cost of such maintenance and repairs will be included in
Operating Costs. However, if the Landlord is required, due to the business
carried on by the Tenant, to make repairs or replacements to the Structure or
any other part of the Building by reason of the application of laws, ordinances
or other regulations of any governmental body, or by reason of any act, omission
or default of the Tenant or those for whom the Tenant is in law responsible,
then the Tenant will be liable for the total cost of those repairs or
replacements plus fifteen percent (15%) of the total cost representing the
Landlord's overhead and administrative costs.
Section 9.2 Maintenance and Repairs by the Tenant
(a) The Tenant will at all times, at its expense, maintain the whole of
the Leased Premises including without limitation, all interior partitions,
doors, electrical, lighting, wiring, plumbing fixtures and equipment and the
heating, ventilating and air-conditioning systems and equipment within or
exclusively serving the Leased Premises in good order, first-class condition and
repair, as determined by the Landlord. The Tenant will make all needed repairs
and replacements with due diligence and dispatch. If required by the Landlord or
any
18
<PAGE>
governmental authority, the Tenant will, at its expense, remove from the Leased
Premises any toxic or hazardous substances or materials (including without
limitation, any products of waste, asbestos, urea formaldehyde foam insulation,
radon gas, PCBs or any other contaminant as defined in the Environmental
Protection Act, R.S.O. 1980, c. 141, as amended) which are or have been located,
stored or incorporated in or on any part of the Leased Premises. The foregoing
obligation to remove such toxic or hazardous substances or materials shall
survive the expiration or earlier termination of the Term of this Lease.
Notwithstanding anything contained in this Lease, if any such repairs or
replacements to the Leased Premises or to any Leasehold Improvements installed
by or on behalf of the Tenant in the Leased Premises, affect the Structure of
the Building, or any part of the electrical, mechanical, plumbing, heating,
ventilating, air-conditioning, lighting or other base building systems of the
Building, such work shall be performed only by the Landlord at the Tenant's sole
cost and expense. Upon completion thereof, the Tenant shall pay to the Landlord,
as Additional Rent within five (5) days after demand, both the Landlord's costs
relating to such repairs or replacements including the fees of any architectural
and engineering consultants plus a sum equal to fifteen percent (15%) of the
total cost thereof representing the Landlord's overhead and administrative
costs.
(b) The Tenant will advise the Landlord of any damage to or breakage of
the glass in or forming part of the Leased Premises (including outside windows
and doors on or at the perimeter of the Leased Premises) and the Landlord will
complete all needed repairs and replacements to such glass with due diligence.
The cost of completing such repairs and replacement shall be payable by the
Tenant as part of the Operating Costs except in the event that the repairs or
replacements to the glass are required as a result of the negligence or wilful
acts or omissions of the Tenant or those for whom it is at law responsible, in
which event the cost thereof shall be payable by the Tenant to the Landlord,
upon demand as Additional Rent.
(c) At the expiration or earlier termination of the Term, the Tenant will
surrender the Leased Premises to the Landlord in as good a condition as the
Tenant is required to maintain them throughout the Term, subject to reasonable
wear and tear.
(d) Notwithstanding any other provision of this Lease, if the Building or
any part thereof, or any equipment, machinery, facilities or Leasehold
Improvements contained therein or made thereto, or the Structure thereof
requires repair or replacement or becomes damaged or destroyed through the
negligence, carelessness or misuse of the Tenant or those for whom it is in law
responsible or by any Person having business with the Tenant or by the Tenant or
those for whom it is in law responsible in any way stopping up or damaging the
climate control, heating and air-conditioning apparatus, water pipes, drainage
pipes or other equipment or facilities or parts of the Building, the cost of the
resulting repairs, replacements or alterations plus a sum equal to fifteen
percent (15%) of the cost thereof representing the Landlord's overhead and
administrative costs will be paid by the Tenant to the Landlord as Additional
Rent within five (5) days after presentation of an account of such expenses
incurred by the Landlord.
19
<PAGE>
(e) The Tenant shall, when it becomes aware of it, notify the Landlord of
damage to, or deficiency or defect in any part of the Building, including the
Leased Premises, any equipment or utility systems, or any installations located
in the Building or the Leased Premises, provided the Landlord shall not have any
obligation in respect thereof, subject to the terms of this Lease.
See Rider 1.
Section 9.3 Landlord's Approval of the Tenant's Repairs
The Tenant will not make any Alterations to any part of the Leased Premises
without first obtaining the Landlord's written approval. The Landlord will not
be required to consider any request for its approval until the Tenant has
submitted to it details of the proposed work, including professionally prepared
drawings if requested by the Landlord, and specifications conforming to good
engineering practice. Any approval shall be conditional upon the Tenant
delivering to the Landlord prior to the commencement of any such Alterations:
(a) evidence satisfactory to the Landlord that the Tenant has obtained, at
its expense, all necessary consents, permits, licences [sic] and inspections
from all governmental and regulatory authorities having jurisdiction; and
(b) security in an amount and form required by the Landlord, as an
indemnification against construction liens, costs, damages and expenses
resulting from such Alterations.
All Alterations will be performed by competent workmen: (i) at the
Tenant's expense; (ii) in a good and workmanlike manner; (iii) in accordance
with the drawings and specifications approved by the Landlord; and (iv) subject
to the reasonable regulations, controls and inspection of the Landlord.
Notwithstanding the foregoing, the Landlord shall be entitled to withhold
its consent or approval to any proposed Alterations if, in its sole opinion,
such Alterations decrease the Market Rental value of the Leased Premises or are
inconsistent or incompatible with the general design or quality of the Building.
Any Alterations made by the Tenant without the prior consent of the
Landlord or not made in accordance with the drawings and specifications approved
by the Landlord will, if requested by the Landlord, be promptly removed by the
Tenant and the Leased Premises restored to their previous condition at the
Tenant's expense.
If however, all or any portion of the proposed Alterations affect the
Structure or any of the electrical, mechanical or other base building systems of
any part of the Building, such Alterations (or the appropriate portion of them),
if approved by the Landlord, will be performed only by the Landlord, and the
Tenant shall pay to the Landlord, upon demand, the
20
<PAGE>
cost of completing such Alterations together with an amount equal to fifteen
percent (15%) of such cost representing the Landlord's overhead and
administrative costs.
Section 9.4 Removal and Restoration by the Tenant
(a) All Leasehold Improvements made by the Tenant, or made by the Landlord
on the Tenant's behalf immediately become the property of the Landlord upon
affixation or installation and will not be removed from the Leased Premises at
any time unless permitted or required by the Landlord. The Landlord is under no
obligation to repair, maintain or insure these Leasehold Improvements. The
Tenant will, prior to the end of the Term, at its cost, remove all of its
Fixtures and those Leasehold Improvements which the Landlord requires the Tenant
to remove and shall forthwith repair any damage to the Leased Premises caused by
their installation or removal. In addition, the Tenant will, prior to the end
of the Term, at its cost, remove from the Leased Premises any toxic or hazardous
substances or materials (including without limitation, any products of waste,
asbestos, urea formaldehyde foam insulation, radon gas, PCBs or any other
contaminant as defined in the Environmental Protection Act, R.S.O. 1980, c. 141,
as amended), which are located, stored or incorporated in or on any part of the
Leased Premises. The Tenant's obligation to observe and perform this covenant
shall survive the expiration of the Term or earlier termination of this Lease.
(b) If the Tenant does not remove all of its Fixtures and those Leasehold
Improvements which the Landlord requires the Tenant to remove at the end of the
Term, all of such Leasehold Improvements and Fixtures may, without further
notice to the Tenant, be immediately removed from the Leased Premises and may be
disposed of, sold or stored, at the option of the Landlord, and as the Landlord
sees fit. Any costs or expenses incurred by the Landlord in removing,
disposing, selling or storing such Leasehold Improvements or Fixtures shall be
paid by the Tenant to the Landlord, upon demand, together with an amount equal
to fifteen percent (15%) of such costs and expenses representing the Landlord's
overhead and administrative costs. Any Fixtures not removed from the Leased
Premises at the end of the Term, will at the Landlord's option, become the
property of the Landlord (and, in such event, this paragraph shall have the
effect of assigning the Tenant's right and title in such Fixtures to the
Landlord) and may be removed from the Leased Premises and sold or disposed of by
the Landlord in such manner as it deems advisable.
(c) If the Tenant does not remove any toxic or hazardous substances or
materials from the Leased Premises at the end of the Term, such hazardous or
toxic substances or materials may, without further notice to the Tenant, be
immediately removed from the Leased Premises and may be disposed of or stored,
at the option of the Landlord, and as the Landlord sees fit. Any costs or
expenses incurred or damages suffered by the Landlord in removing, disposing or
storing such hazardous or toxic substances or materials shall be paid by the
Tenant to the Landlord, upon demand, together with an amount equal to fifteen
percent (15%) of such costs and expenses representing the Landlord's overhead
and administrative costs.
21
<PAGE>
Section 9.5 Tenant to Discharge all Liens
(a) The Tenant shall ensure that no construction liens or other liens or
encumbrances in respect of materials supplied or work done or to be done by the
Tenant or on behalf of the Tenant or related to the Tenant's Work shall be
registered against or shall otherwise affect the Building, the Lands or the
Leased Premises or any part thereof or the Landlord's, the Owners' or the
Tenant's interest in the Leased Premises.
(b) If a lien or other encumbrance is registered against or otherwise
affects the Building or the Leased Premises or the Landlord's, the Owners' or
the Tenant's interest therein, and the Tenant fails to discharge or cause any
such lien or encumbrance to be discharged within five (5) days after it is filed
or registered, then, in addition to any other rights or remedies of the
Landlord, the Landlord may (but shall not be obligated to) discharge the lien or
encumbrance by paying the amount claimed into court or directly to the lien
claimant and the amount so paid, a sum equal to fifteen percent (15%) thereof
representing the Landlord's overhead and administrative costs, together with all
costs and expenses (including legal costs and expenses) plus interest at the
Prime Rate shall be immediately due and payable by the Tenant to the Landlord as
Additional Rent forthwith on demand.
Section 9.6 Signs and Advertising
The Tenant will not place or permit any notice, lettering or other signage
on any part of the outside of the Building or on the exterior or in the interior
of the Leased Premises which is visible from the outside of the Leased Premises.
The Landlord may prescribe a uniform pattern of identification signs for tenants
to be placed in a location designated by the Landlord. The Landlord shall
install, at the Tenant's sole cost, the Landlord's standard tenant
identification signs in accordance with the Landlord's Design Criteria, on or
near the main door to the Leased Premises and, at the Landlord's option, at
other locations on the floor on which the Leased Premises are located. At the
expiration of the Term of this Lease, the Tenant will remove all signs,
pictures, advertisements, notices, letterings or decorations from the Leased
Premises at the Tenant's expense and will promptly repair all damages caused by
its installation and removal. The Landlord may provide a directory board in the
main lobby of the Building in a location designated by the Landlord in which
event the Tenant's name may be displayed therein and, if so displayed, the
Tenant shall pay to the Landlord as Additional Rent the cost of such display and
the ongoing cost thereof.
See Rider 1 (Sign).
Section 9.7 Tenant Not to Overload Facilities
The Tenant will not install any equipment which will exceed or overload the
capacity of any utility, electrical or mechanical facilities in the Leased
Premises and the Tenant will not bring into the Leased Premises or install any
utility, electrical or mechanical facility or service
22
<PAGE>
which the Landlord does not approve. The Tenant agrees that if any equipment
installed by the Tenant requires additional utility, electrical or mechanical
facilities, the Landlord may, in its sole discretion, if they are available,
elect to install them at the Tenant's expense and in accordance with plans and
specifications to be approved in advance in writing by the Landlord.
Section 9.8 Tenant Not to Overload Floors
The Tenant will not bring upon the Building or the Leased Premises any
machinery, equipment, article or thing that by reason of its weight, size or
use, might in the opinion of the Landlord damage the Building or the Leased
Premises and will not at any time overload the floors of the Leased Premises.
If any damage is caused to the Building or the Leased Premises by any machinery,
equipment, object or thing or by overloading, the Tenant will forthwith repair
such damage, or, at the option of the Landlord, pay the Landlord within five (5)
days after demand as Additional Rent the cost of repairing such damage plus a
sum equal to fifteen percent (15%) of such cost representing the Landlord's
overhead and administrative costs.
ARTICLE 10.
Damage and Destruction
Section 10.1 Destruction of the Leased Premises
(a) If the Leased Premises are destroyed or damaged as a result of fire or
any other peril which is insured against by the Landlord, then if:
(i) the Leased Premises are rendered wholly or partially
untenantable, this Lease will continue in effect and the Landlord will commence
diligently to restore the Leased Premises to the extent only of insurance
proceeds actually received by the Landlord and only to the extent of the
Landlord's Work set out in Schedule "C". To the extent of insurance proceeds
actually received by the Landlord, Basic Rent will abate entirely or
proportionately, as the case may be, to the portion of the Leased Premises
rendered untenantable from the date of the destruction or damage until the
Landlord has completed its restoration work; or
(ii) the Leased Premises are not rendered untenantable in whole or in
part, this Lease will continue in effect, the Rent and other amounts payable by
the Tenant will not abate and the Landlord will commence diligently to restore
the Leased Premises to the extent required by this Section 10.1(a).
(b) Once the Landlord has substantially completed its restoration work the
Tenant will complete all work required to fully restore the Leased Premises for
business. Nothing in this Section 10.1 requires the Landlord to rebuild the
Leased Premises in the condition and state that existed before the damage, but
the Leased Premises, as rebuilt, will have reasonably similar facilities and
services to those in the Leased Premises prior to the damage.
23
<PAGE>
(c) Notwithstanding Section 10.1(a), if the Leased Premises are damaged or
destroyed by any cause whatsoever, and if, in the opinion of the Architect
reasonably arrived at, the Leased Premises cannot be rebuilt to the extent of
the Landlord's Work as set out in Schedule "C" attached, within ninety (90) days
of the damage or destruction (assuming normal working days without overtime),
the Landlord, instead of rebuilding or making the Leased Premises fit for the
Tenant in accordance with Section 10.1(a) may, at its option, elect to terminate
this Lease by giving the Tenant, within thirty (30) days after the damage or
destruction, written notice of termination, and thereupon Rent will be
apportioned and paid to the date of damage or destruction.
Section 10.2 Destruction of the Building
(a) Notwithstanding Section 10.1, if twenty-five percent (25%) or more of
the Rentable Area of the Building is damaged or destroyed (irrespective of
whether the Leased Premises are damaged or destroyed) and if, in the opinion of
the Architect reasonably arrived at, the damaged or destroyed parts of the
Building cannot be rebuilt to the extent of the Landlord's Work as set out in
Schedule "C" attached, or made fit for the purposes of the respective tenants of
the space within ninety (90) days of the damage or destruction, then, the
Landlord may, at its option (to be exercised by written notice to the Tenant
within sixty (60) days following the occurrence), elect to terminate this Lease.
In the case of such election, the Term and the tenancy hereby created will
expire upon the thirtieth day after such notice is given, without indemnity or
penalty payable by, or any other resource against, the Landlord. The Tenant
shall, within such thirty (30) day period, vacate and surrender the Leased
Premises to the Landlord. All Rent will be payable without reduction or
abatement subsequent to the destruction or damage and until the date of
termination, unless the Leased Premises has been destroyed or damaged as well,
in which event Section 10.1 will apply.
(b) If any part of the Building is destroyed or damaged and the Landlord
does not elect to terminate this Lease, the Landlord will commence diligently to
restore the Building, but only to the extent of the Landlord's Work as set out
pursuant to the terms of the various leases for the premises in the Building,
and exclusive of any tenant's responsibilities set out therein. If the Landlord
elects to restore the Building, the Landlord may restore according to plans and
specifications and working drawings other than those used in the original
construction of the Building.
Section 10.3 Expropriation
Both the Landlord and Tenant agree to co-operate with the other regarding
an expropriation of the Leased Premises or the Property or any part thereof, so
that each may receive the maximum award to which they are respectively entitled
at law. To the extent that any portion of the Property other than the Leased
Premises is expropriated, then, the full proceeds accruing or awarded as a
result will belong to the Landlord and the Tenant will abandon or assign to the
Landlord any rights which the Tenant may have or acquire by
24
<PAGE>
operation of law to those proceeds or awards and will execute all such documents
as in the opinion of the Landlord are necessary to give effect to this
intention.
Section 10.4 Architect
The opinion, decision or certificate of the Architect will bind the parties
as to (a) the percentage of the Rentable Area of the Building damaged or
destroyed; (b) the period of time required to restore the Leased Premises or the
Building; (c) whether or not the Leased Premises are rendered untenantable and
the extent of such untenantability; (d) the date upon which the Landlord's Work
or Tenant's Work of restoration is completed or substantially completed and the
date when the Leased Premises are rendered tenantable; and (e) the state of
completion of any work of either the Landlord or the Tenant under this Lease.
ARTICLE 11.
Assignment and Subletting
Section 11.1 Assignment and Subletting
(a) The Tenant will not: (i) assign this Lease; (ii) sublet, share or part
with possession of all or any part of the Leased Premises; nor (iii) mortgage or
encumber this Lease, its Leasehold Improvements and Fixtures, or the Leased
Premises (collectively, a "Transfer"), by or in favour of any Person (a
"Transferee") without the prior written consent of the Landlord which consent
will not be unreasonably withheld. The foregoing provision is subject to the
Landlord's right to cancel this Lease in preference to giving its consent to a
proposed Transfer. However, notwithstanding any statutory provisions to the
contrary, the Landlord will be deemed to be reasonable if it bases its decision
whether or not to consent on any or all of the following factors:
(i) whether in the Landlord's opinion the financial background,
business history and capability of the Transferee is satisfactory;
(ii) whether the Landlord at that time has or will have in the next
ensuing three month period, other premises elsewhere in the Building which might
be suitable for the needs of the Transferee; and
(iii) whether in the opinion of the Landlord, the nature or character
of the proposed business of the Transferee is unethical, immoral, illegal or
such that it might harm or tend to harm the business or reputation of the
Landlord or reflect unfavorably on the whole or any part of the Building, the
Landlord or the other tenants of the Building.
The consent by the Landlord to any Transfer will not constitute a waiver of
the necessity for consent to any subsequent Transfer.
25
<PAGE>
This prohibition against a Transfer without first obtaining the Landlord's
consent applies to a change in the direct or indirect effective voting control
the Tenant, unless (A) the Tenant is a public corporation whose shares are
listed and traded ion any recognized stock exchange in Canada or the United
States, and (B) the Landlord receives assurances satisfactory to the Landlord
that there will be a continuity of the management of the Tenant, and of its
business practices and policies. If the Tenant is a partnership or is
controlled by a partnership (either directly or indirectly), this prohibition
against a Transfer also includes a change in the constitution of the partnership
resulting from the withdrawal of any of the partners existing as of the
Commencement Date or the addition of any partners to the partnership subsequent
thereto. This prohibition against a Transfer also includes an assignment by
operation of law. No Transfer may be made where any portion of Rent is lower
than that provided for in this Lease or otherwise on terms more favorable to the
Transferee than the terms set forth in this Lease.
(b) If the Tenant intends to effect a Transfer, then the Tenant will give
prior written notice to the Landlord of such intent, specifying the proposed
Transferee and providing additional information including, without limitation, a
copy of a bona fide written offer with respect to the proposed Transfer which
the Tenant is prepared to accept subject to compliance with the provisions of
this Lease and which must disclose any and all monetary payments or other
consideration made or to be made by the proposed Transferee as consideration for
such Transfer and any other information concerning the financial or business
status of the Transferee that the Landlord requires. The Landlord will, within
thirty (30) days after having received notice and all necessary information,
notify the Tenant in writing either that (i) it consents or does not consent to
the Transfer, or (ii) it elects to cancel this Lease in preference to giving
consent. If the Landlord elects to cancel this Lease it will not be considered
to be an unreasonable withholding of consent pursuant to this Lease or at law.
If the Landlord elects to cancel this Lease, the Tenant will notify the Landlord
in writing within fifteen (15) days thereafter of the Tenant's intention either
to refrain from the Transfer or to accept the cancellation of this Lease. If
the Tenant fails to deliver its notice within the fifteen (15) day period, this
Lease will be terminated upon the date stipulated by the Landlord in its notice
of cancellation. If the Tenant advises the Landlord it intends to refrain from
the Transfer, then the Landlord's election to cancel this Lease will be void.
(c) If there is a Transfer, the Landlord may collect Rent from the
Transferee, and apply the net amount collected to the Rent required to be paid
pursuant to this Lease, but no acceptance by the Landlord of any payments by a
Transferee will be a waiver of the requirement for the Landlord's consent to
such Transfer, or the acceptance of the Transferee as the Tenant, or a release
of the Tenant from the further performance by the Tenant from the further
performance by the Tenant of its covenants or obligations. Any documents
evidencing the Transfer will be prepared by the Landlord or its solicitors, and
all legal costs incurred by the Landlord will be paid by the Tenant to the
Landlord or its solicitors as Additional Rent. Notwithstanding a Transfer, the
Tenant will be jointly and severally liable with the Transferees on this Lease
and will not be released from performing any of its obligations.
26
<PAGE>
(d) If the Tenant receives consent under Section 11.1, it will be subject
to the following conditions that:
(i) The Basic Rent payable by the Transferee will not be less than
the greater of:
(A) the Landlord's current posted rental rate for premises in
the Building similar to the Leased Premises at the time of the Landlord's
consent;
(B) the Basic Rent payable under Section 3.2 immediately prior
to the Transfer; or
(C) the Market Rental at the time the Landlord gives its
consent, as determined by the Landlord in accordance with the provisions hereof;
(ii) any money or other value (including, without limitation, any
amount payable by the Transferee to the Tenant in excess of the amount payable
by the Tenant in accordance with Section 3.2 hereof) which is paid by any
Transferee to the Tenant in connection with a Transfer, shall be paid by the
Tenant to the Landlord as Additional Rent;
(iii) at the Landlord's option, the Transferee shall enter into a
written agreement directly with the Landlord to be bound by all of the terms
contained in this Lease.
(e) The Tenant acknowledges and agrees that the Landlord will not be
liable for any claims, actions, damages, liabilities or expenses of the Tenant
or any proposed Transferee arising out of the Landlord unreasonably withholding
its consent to any Transfer and the Tenant's only recourse will be to bring an
application for a declaration that the Landlord must grant its consent to the
Transfer.
See Rider 1 (Sublease) & (Assignment).
Section 11.2 Assignment by the Landlord
If there is a sale, lease or other disposition by the Landlord of the
Property or any part thereof, or the assignment by the Landlord of this Lease or
any interest of the Landlord hereunder, and to the extent that the purchaser or
assignee assumes the covenants and obligations of the Landlord hereunder, the
Landlord will, thereupon and without further agreement, be relieved of all
further liability with respect to its covenants and obligations.
ARTICLE 12.
Access and Alterations
Section 12.1 Right of Entry
27
<PAGE>
The Landlord and its agents have the right to enter the Leased Premises at
all reasonable times (except in the event of an emergency, when the Landlord can
enter at any time) to show them to prospective purchasers, lessees or
mortgagees, and to examine them and make repairs, alterations or changes to the
Leased Premises or the Building as the Landlord considers necessary including,
without limitation, repairs, alterations or change to the pipes, conduits,
wiring, ducts and other installations in the Leased Premises where necessary to
serve another part of the Building. For that purpose, the Landlord may take all
required material into the Leased Premises and may have access to all ducts
located under the floor or above the ceiling and access panels to mechanical
shafts and the Landlord has the right to check, calibrate, adjust and balance
controls and other parts of the heating, ventilating and air-conditioning. The
Landlord and its agents shall also be entitled from time to time to enter the
Leased Premises in order to conduct an environmental audit or any testing
required to satisfy itself that the Tenant's operation is being run in
compliance with applicable environmental laws and regulations. The Rent will
not abate while any repairs, alterations or changes are being made due to loss
or interruption of the business of the Tenant or otherwise, and the Landlord
will not be liable for any damage, injury or death caused to any Person, or to
the property of the Tenant or of others located on the Leased Premises as a
result of the entry.
ARTICLE 13.
Status Statement, Subordination and Attornment
Section 13.1 Status Statement
Within ten (10) days after written request by the Landlord, the Tenant will
deliver in a form supplied by the Landlord, a status statement or a certificate
to any proposed purchaser, assignee, lessor or mortgagee, or to the Landlord,
which will contain such statements, acknowledgments and information as is
customarily called for in status statements and estoppel certificates delivered
in conjunction with commercial tenancies.
Section 13.2 Subordination and Attornment
(a) This Lease and the Tenant's rights hereunder are, and will at all times
be, subordinate to all ground or underlying leases, mortgages, trust deeds or
the charge or lien resulting from, or any instruments of, any financing,
refinancing or collateral financing (collectively, an "Encumbrance") or any
renewals or extensions thereof from time to time in existence against the
Property or any part thereof, and the Tenant will, upon request, execute any
document requested by the Landlord to confirm the subordination of this Lease to
any Encumbrance and to the advances made or to be made on the security of the
Encumbrance. The Tenant will also, if requested, (i) attorn to the Owners, the
holder of any Encumbrance or any representative, receiver or receiver-manager
appointed or designated by the Owner or the holder of any Encumbrance, and (ii)
attorn to the purchaser or transferee of the Property (or any part of it) or of
any ownership or equity interest in the Property (or any part of it).
28
<PAGE>
(b) The Tenant will, if possession is taken under, or any proceedings are
brought for possession under or the foreclosure of, or in the event of the
exercise of the power of sale under, any Encumbrance, attorn to the Encumbrancer
or the purchaser upon any such foreclosure, sale or other proceeding and
recognize the Encumbrancer or the purchaser as the Landlord under this Lease.
(c) The form and content of any document confirming or effecting the
subordination and attornment provided for in this Section 13.2 will be that
required by the Landlord or the holder of any Encumbrance or the purchaser or
transferee in each case, and each such document will be executed and delivered
by the Tenant to the Landlord within ten (10) days after the Landlord requests
it.
(d) Upon written request of the Tenant, the Landlord shall use its
reasonable efforts to obtain, at the Tenant's expense, an agreement from any
Mortgagee of the Building to the effect that upon the execution and delivery by
the Tenant to the Landlord of the Lease, if the Tenant will pay the Rent and
comply with all terms and conditions contained in the Lease and attorn to the
Mortgagee, the Tenant shall be permitted to remain in quiet possession of the
Leased Premises without interruption or disturbance from the Mortgagee; or, at
the option of the Mortgagee, the Tenant shall be entitled to obtain a new lease
for the unexpired Term of the Lease, on the same terms and conditions as
contained in this Lease. The Tenant shall (i) promptly execute such documents
as may be required by the Landlord to give effect to the foregoing, and (ii)
indemnify the Landlord from and against all costs including legal costs incurred
by the Landlord in connection with obtaining and preparing any such agreement.
Section 13.3 Attorney
The Tenant will, upon request of the Landlord, execute and deliver promptly
any statements, instruments and certificates required to carry out the intent of
Sections 13.1 or 13.2. Failure by the Tenant to deliver any of the foregoing
within ten (10) days after the date of a request by the Landlord shall
constitute a default under this Lease and the Landlord shall be entitled to
exercise all of its remedies pursuant to Article 14 hereof.
Section 13.4 Financial Information
The Tenant will, upon request, provide the Landlord with such information
as to the Tenant's financial standing and corporate organization as the Landlord
or the Mortgagee requires. All such information will be held in strict
confidence by the Landlord.
ARTICLE 14.
Default
Section 14.1 Right to Re-enter
29
<PAGE>
If and whenever:
(a) the Tenant fails to pay any Basic Rent or Additional Rent on the day or
dates appointed for payment (provided the Landlord first gives five (5) days'
written notice to the Tenant of the Tenant's failure); or
(b) the Tenant fails to observe or perform any other of the terms,
covenants or conditions of this Lease to be observed or performed by the Tenant
(other than the terms, covenants or conditions set out below in subparagraph (c)
for which no notice shall be required), provided the Landlord first gives the
Tenant ten (10) days' written notice of the Tenant's failure, or such shorter
period of time as is otherwise provided in this Lease, and the Tenant within the
ten (10) day or shorter period fails to commence diligently and thereafter to
proceed diligently to cure its failure; or
(c) the Tenant or any Indemnifier becomes bankrupt or insolvent or takes
the benefit of any act now or hereafter in force for bankrupt or insolvent
debtors or files any proposal or makes any assignment for the benefit of
creditors or any arrangement or compromise; a receiver or a receiver-manager is
appointed for all or a portion of the Tenant's property; any steps are taken or
any action or proceedings are instituted by the Tenant or by any other party to
dissolve, wind-up or liquidate the Tenant or its assets; the Tenant abandons the
Leased Premises, or sells or disposes of the trade fixtures, goods or chattels
of the Tenant or removes them from the Leased Premises so that there would not
in the event of such sale or disposal be sufficient trade fixtures, goods or
chattels of the Tenant on the Leased Premises subject to distress to satisfy all
Rent due or accruing hereunder for a period of at least three (3) months; the
Leased Premises become and remain vacant for a period of five (5) consecutive
days; the Tenant effects or permits a Transfer without the Landlord's consent
where required; this Lease or any of the Tenant's assets are taken under any
writ of execution; or re-entry is permitted under any other terms of this Lease,
then the Landlord, in addition to any other rights or remedies available to it,
has the immediate right of re-entry upon the Leased Premises and it may
repossess the Leased Premises and enjoy them as of its former estate and may
expel all Persons and remove all property from the Leased Premises and such
property may be removed and sold or disposed of by the Landlord as it deems
advisable or may be stored in a public warehouse or elsewhere at the cost and
for the account of the Tenant, all without service of notice or resort to legal
process and without the Landlord being considered guilty of trespass or becoming
liable for any loss or damage which may be occasioned.
Section 14.2 Right to Relet
(a) If the Landlord elects to re-enter the Leased Premises, or if it takes
possession pursuant to legal proceedings or pursuant to any notice provided for
by law, it may either terminate this Lease or it may without terminating this
Lease make any alterations and repairs as are necessary in order to relet the
Leased Premises. Upon each reletting all rent received by the Landlord will be
applied, first to the payment of any indebtedness other than Basic Rent or
30
<PAGE>
Additional Rent due hereunder; second, to the payment of any costs and expenses
of reletting including brokerage fees and solicitor's fees and the costs of
alterations and repairs; third, to the payment of Basic Rent and Additional Rent
due and unpaid hereunder; and the residue, if any, will be held by the Landlord
and applied in payment of future Rent as it becomes payable hereunder. No re-
entry or taking possession of the Leased Premises will be construed as an
election on its part to terminate this Lease unless a written notice of that
intention is given to the Tenant.
(b) If the Landlord terminates this Lease, in addition to other remedies
available, it may recover from the Tenant all damages the Landlord incurs by
reason of the Tenant's breach, including the cost of recovering the Leased
Premises, all legal costs incurred by the Landlord and the Basic Rent and
Additional Rent which would have been payable for the remainder of the Term had
the Lease not otherwise have been terminated, all of which shall be immediately
due and payable by the Tenant to the Landlord. In any of the events referred to
in Section 14.1, in addition to all other rights, the full amount of the current
month's installment of Basic Rent and Additional Rent, together with the next
three months' instalments [sic] of Basic Rent and Additional Rent, all of which
will be deemed to be accruing due on a day-to-day basis, will immediately become
due and payable as accelerated rent, and the Landlord may immediately distrain
for the same, together with any arrears then unpaid.
Section 14.3 Expenses
If legal action is brought for recovery of possession of the Leased
Premises, for the recovery of Basic Rent and Additional Rent or any other amount
due under this Lease, or because of the breach of any other of the Tenant's
obligations, the Tenant will pay to the Landlord all expenses incurred therefor,
including a solicitor's fee (on a solicitor and his client basis), unless a
court otherwise awards, plus fifteen percent (15%) of such expenses to cover the
Landlord's overhead and administrative costs.
Section 14.4 Waiver of Exemption from Distress
The Tenant agrees that notwithstanding anything contained in the Landlord
and Tenant Act (Ontario), or any statute or provision subsequently passed to
take the place of or amend the Act, none of the goods and chattels of the Tenant
which are on or have at any time been on the Leased Premises will be exempt from
levy by distress for Basic Rent or Additional Rent in arrears by the Tenant.
Section 14.5 Landlord's Rights
If the Tenant fails to pay any Additional Rent payable to a third party
when due, the Landlord, after giving five (5) days' notice in writing to the
Tenant, may, but will not be obligated to, pay all or any part of the same. If
the Tenant is in default in the performance of any of its other covenants or
obligations under this Lease, the Landlord may, but will not be
31
<PAGE>
obligated to, after giving such notice as it considers sufficient (or without
notice in the case of an emergency), perform or cause to be performed any of the
unperformed covenants or obligations. All expenses incurred and expenditures
made by the Landlord plus a sum equal to fifteen percent (15%) representing the
Landlord's overhead and administrative costs will be paid by the Tenant as
Additional Rent within five (5) days after demand.
Section 14.6 Security Deposit
(a) The Tenant has deposited with the Landlord, the sum specified in
Paragraph (e) of the Special Provisions (the "Security Deposit"), receipt of
which is hereby acknowledged by the Landlord. The Security Deposit shall be
held by the Landlord, prior to and throughout the Term, without liability for
interest, as security for the faithful performance by the Tenant of all of the
terms, covenants and conditions of this Lease by the Tenant to be kept, observed
and performed.
(b) If at any time prior to or during the Term the Basic Rent, Additional
Rent or other sums payable by the Tenant hereunder are overdue and unpaid, or if
the Tenant fails to keep and perform any of the terms, covenants and conditions
of this Lease to be kept, observed and performed by the Tenant, then the
Landlord at its option may, in addition to any and all other rights and remedies
provided for in this Lease or by law, appropriate and apply the entire Security
Deposit, or so much thereof as is necessary to compensate the Landlord for loss
or damage sustained or suffered by the Landlord due to or arising from such
breach on the part of the Tenant. If the entire Security Deposit, or any
portion thereof, is appropriated and applied by the Landlord as aforesaid, then
the Tenant shall, upon written demand of the Landlord, forthwith remit to the
Landlord a sufficient amount to restore the Security Deposit to the original sum
deposited and the Tenant's failure to do so within five (5) days after receipt
of such demand constitutes a breach of this Lease. If the Tenant complies with
all of the terms, covenants and conditions and promptly pays all the Rent and
other sums herein provided and payable by the Tenant, the Security Deposit shall
be returned in full to the Tenant without interest within sixty (60) days after
the end of the Term, or within sixty (60) days after the earlier termination of
the Term, as the case may be, or at the option of the Landlord shall be applied
in respect of the Basic Rent and Additional Rent payable hereunder at the end of
the Term.
(c) The Landlord may deliver the Security Deposit to any purchaser of the
Landlord's interest in the Leased Premises or the Building or any part thereof,
if such interest is sold, and thereupon the Landlord is discharged from any
further liability with respect to the Security Deposit.
Section 14.7 Remedies Generally
Mention in this Lease of any particular remedy of the Landlord in respect
of the default by the Tenant does not preclude the Landlord from any other
remedy in respect thereof,
32
<PAGE>
whether available at law or in equity or by statute or expressly provided for in
this Lease. No remedy shall be exclusive or dependent upon any other remedy, but
the Landlord may from time to time exercise any one or more of such remedies
generally or in combination, such remedies being cumulative and not alternative.
Subject to Section 11.1(e), whenever the Tenant seeks a remedy in Court to
enforce the observance or performance of one of the terms, covenants and
conditions contained in this Lease on the part of the Landlord to be observed or
performed, the Tenant's only remedy shall be for damages the Tenant shall be
able to prove in a Court of competent jurisdiction that it has suffered as a
result of a breach (if established) by the Landlord in the observance or
performance of any of the terms, covenants and conditions contained in this
Lease on the part of the Landlord to be observed or performed.
ARTICLE 15.
Miscellaneous
Section 15.1 Rules and Regulations
The Rules and Regulations adopted by the Landlord including, without
limitation, those set out in Schedule "D", are made a part of this Lease, and
the Tenant will observe them. The Landlord reserves the right to amend or
supplement the Rules and Regulations applicable to the Leased Premises or the
Property or any part thereof as in the Landlord's judgment are needed for the
safety, care, cleanliness and efficient operation of the Building. Notice of
the Rules and Regulations and amendments and supplements, if any, will be given
to the Tenant and the Tenant, its invitees or those for whom the Tenant is at
law responsible, will thereupon observe them provided that they do not
contradict any terms, covenants and conditions of this Lease. Any breach of any
of the Rules and Regulations by the Tenant, its invitees or those for whom the
Tenant is at law responsible, shall constitute a breach under this Lease and all
remedies and rights generally available to the Landlord for a breach by the
Tenant under this Lease shall be available and may be applied against the
Tenant.
Section 15.2 Intent and Interpretation
(a) Net Lease
The Tenant acknowledges that it is intended that this Lease is a
completely carefree net lease to the Landlord, except as expressly herein set
out, that the Landlord is not responsible during the Term for any costs,
charges, expenses and outlays of any nature whatsoever arising from or relating
to the Leased Premises, or the use and occupancy thereof and the Tenant will pay
all charges, impositions, costs and expenses of every nature and kind relating
to the Leased Premises except as expressly herein set out.
See Rider 1 (Net Lease).
(b) Obligations as Covenants and Severability
33
<PAGE>
Each obligation or agreement of the Landlord or the Tenant expressed
in this Lease, even though not expressed as a covenant, is considered to be a
covenant for all purposes. If any provision of this Lease is or becomes
invalid, void, illegal or unenforceable, it shall be considered separate and
severable from the Lease and the remaining provisions shall remain in force and
be binding upon the parties as though such provision had not been included.
(c) Entire Agreement and Amendment or Modification
This Lease and the Schedules, and Riders, if any, attached together
with the Rules and Regulations set forth all covenants, promises, agreements,
conditions or understandings, either oral or written, between the Landlord and
the Tenant. No alteration or amendment to this Lease will be binding upon the
Landlord or the Tenant unless in writing and signed by the Tenant and the
Landlord.
(d) Governing Law
This Lease will be construed in accordance with and governed by the
laws of the Province of Ontario.
(e) Time of the Essence
Time is of the essence of this Lease and of every part of it.
Section 15.3 Overholding - No Tacit Renewal
If the Tenant remains in possession of the Leased Premises after the end of
the Term without having signed a new lease or an extension of Term agreement,
there is no tacit renewal of this Lease or the Term, notwithstanding any
statutory provisions or legal presumptions to the contrary, and the Tenant will
be deemed to be occupying the Leased Premises as a tenant from month-to-month at
a monthly Basic Rent equal to twice the monthly amount of Basic Rent payable
during the last month of the Term, and otherwise, upon the same terms, covenants
and conditions as are set forth in this Lease (including the payment of
Additional Rent) so far as these are applicable to a monthly tenancy.
Section 15.4 Waiver
The waiver by either party of any breach of the other of any term, covenant
or condition herein contained, is not deemed to be a waiver of such term,
covenant or condition or of any subsequent breach of the same or of any other
term, covenant or condition herein contained. The subsequent acceptance of Rent
by the Landlord is not deemed to be a waiver of
34
<PAGE>
any preceding breach by the Tenant regardless of the Landlord's knowledge of the
preceding breach at the time of acceptance of the Rent. No term, covenant or
condition of this Lease is deemed to have been waived by the Landlord unless the
waiver is in writing by the Landlord.
All Basic Rent and Additional Rent to be paid by the Tenant to the Landlord
will be paid without any deduction, abatement, set-off or compensation
whatsoever (except for the Basic Rent to the extent it may be abated pursuant to
Section 10.1), and the Tenant hereby waives the benefit of any statutory or
other rights in respect of abatement, set-off or compensation in its favour at
the time hereof or at any future time.
Section 15.5 Accord and Satisfaction
No payment by the Tenant or receipt by the Landlord of a lesser amount than
the monthly payment of Rent stipulated is deemed to be other than on account of
the earliest stipulated Rent, nor is any endorsement or statement on any cheque
or any letter accompanying any cheque or payment as Rent deemed an
acknowledgment of full payment of accord and satisfaction. The Landlord may
accept and cash any cheque or payment without prejudice to the Landlord's right
to recover the balance of the Rent due or to pursue any other remedy provided in
this Lease.
Section 15.6 Force Majeure
Notwithstanding anything in this Lease, if either party is bona fide
delayed or hindered in or prevented from the performance of any term, covenant
or act required hereunder by reason of strikes or labour troubles; inability to
procure materials or services; power failure; restrictive governmental laws or
regulations; riots, insurrection; sabotage; rebellion; war; act of God; or other
reason whether of a like nature or not which is not the fault of the party
delayed in performing work or doing acts required under the terms of this Lease,
then the performance of that term, covenant or act is excused for the period of
the delay and the party delayed will be entitled to perform that term, covenant
or act within the appropriate time period after the expiration of the period of
the delay. However, the provisions of this Section do not operate to excuse the
Tenant from the prompt payment of Rent.
Section 15.7 Notices
Any notice, demand, request or other instrument which may be or is required
to be given under this Lease will be personally delivered or sent by telecopy,
fax or registered mail postage prepaid and will be addressed (a) if to the
Landlord, to the address specified in Paragraph (f) of the Special Provisions,
and (b) if to the Tenant, at the Leased Premises or, at the Landlord's option to
the Tenant's office at the address specified in Paragraph (g) of the Special
Provisions. Any notice, demand, request or consent is conclusively deemed to
have been given or made on the day upon which it is personally delivered or sent
by telecopy or fax, or, if mailed, then four (4) business days (excluding
Saturdays, Sundays and statutory
35
<PAGE>
holidays) following the day of mailing, as the case may be. Either party may
give written notice of any change of its address and thereafter the new address
is deemed to be the address of that party for the giving of notices. If the
postal service is interrupted or is substantially delayed, any notice, demand,
request or other instrument must be personally delivered.
Section 15.8 Registration
Neither the Tenant nor any one on the Tenant's behalf or claiming under the
Tenant will register this Lease. If either party intends to register a document
for the purpose only of giving notice of this Lease or of any assignment or
sublease of this Lease, then, upon request, both parties will join in the
execution of a short form or notice of this Lease which will (a) be prepared by
the Landlord or its solicitors at the Tenant's expense, and (b) only describe
the parties, the Leased Premises and the Commencement Date and the expiration
date of the Term, and any options to extend the Term.
Section 15.9 Accrual of Basic Rent and Additional Rent
Rent will be considered as annual and accruing from day-to-day based upon a
three hundred and sixty-five (365) day calendar year and where it becomes
necessary for any reason to calculate Rent for an irregular period of less than
one (1) year, an appropriate apportionment and adjustment will be made.
Section 15.10 Compliance with the Planning Act
It is a condition of this Lease that the subdivision control provisions of
the Planning Act (Ontario), and amendments thereto, be complied with if they
apply. If the provisions of the Planning Act do apply, then until any necessary
consent to the Lease is obtained, the Term (including any extensions thereof)
and the Tenant's rights granted by this Lease are deemed to extend for a period
only of twenty-one (21) years less one (1) day from the Commencement Date.
Section 15.11 Quiet Enjoyment
If the Tenant pays the Rent and observes and performs all its terms,
covenants and conditions, the Tenant will quietly hold and enjoy the Leased
Premises for the Term without interruption by the Landlord, unless otherwise
permitted under the terms of this Lease.
Section 15.12 Consent and Approval
The Landlord and each Person acting for or on behalf of the Landlord,
making a determination, designation, calculation, estimate, conversion or
allocation under this Lease, will act reasonably and in good faith and each
accountant, architect, engineer or surveyor, or
36
<PAGE>
other professional Person employed or retained by the Landlord will act in
accordance with the applicable principles and standards of that Persons's [sic]
profession.
IN WITNESS WHEREOF, the Landlord and the Tenant have signed and sealed this
Lease.
SIGNED, SEALED AND DELIVERED ) VON-LAND CORPORATION LIMITED
in the presence of: ) (Landlord)
)
) Per: /s/ [Signature unreadable]
------------------------------------
)
)
) c/s
)
) Per:____________________________________
)
)
)
)
) IRON AGE CANADA, LTD.
)
) (Tenant)
)
) Per: /s/ Donald R. Jensen
------------------------------------
) President
)
) c/s
) Per: /s/ Keith A. McDonough
------------------------------------
Treasurer
37
<PAGE>
SCHEDULE "A"
LEGAL DESCRIPTION
Lots 3 and 4, Registered Plan 65M-2330, City of Vaughan, Regional
Municipality of York.
38
<PAGE>
SCHEDULE "B"
PLAN OF THE BUILDING
[PLAN]
The purpose of this plan into identify the approximate location of the
Leased Premises in the Building. The Landlord reserves the right at any time to
relocate, rearrange, alter or expand any part of the Leased Premises from that
shown on this floor plan.
39
<PAGE>
SCHEDULE "C"
CONSTRUCTION OF THE LEASED PREMISES
A. Landlord's Work
---------------
1. The Landlord shall finish the Leased Premises in the manner and colour
standard to the Building which, without limiting the generality of the
foregoing, will include the following:
See Rider 1 (Office and Sales Area).
See Rider 2 (Paragraphs 1-4).
2.(a) Any additional equipment supplied or work performed by the Landlord
specifically for the Tenant and any excess or additional cost in the Landlord's
Work occasioned by the Tenant's requirements or revisions to such requirement
shall be paid by the Tenant to the Landlord as a "back charge", as Additional
Rent, in accordance with the Landlord's payment schedule to be determined by the
Landlord.
(b) The amount so payable shall be the total cost to the Landlord and shall
include (in addition to direct labour, materials and applicable taxes),
architectural and engineering fees, any costs attributable to changes requested
by the Tenant after approval of the Tenant's plans and specifications by the
Landlord, plus the Landlord's overhead and administrative costs of fifteen
percent (15%) of the total cost to the Landlord of such equipment or work.
(c) Failure by the Tenant to pay any amounts due under the provisions of this
Schedule in the manner provided herein shall entitle the Landlord to terminate
this Lease, to retain the Security Deposit and Advance Rent paid by the Tenant
and to retain for its own use without payment therefor, any Tenant's Work which
has been commenced or completed within the Leased Premises, without prejudice to
the Landlord's rights to claim and prove any additional damages from the Tenant.
B. Tenant's Work
-------------
1. Any alterations or construction not included as part of the Landlord's
Work and any changes desired by the Tenant which depart from the Building's
standard or which involve the use of materials not standard to the Building are
the Tenant's Work. The Tenant's Work is subject to the Landlord's prior written
approval and shall be completed at the expense of the Tenant.
40
<PAGE>
2. All permits necessary for the installation of the Tenant's Leasehold
Improvements and approval of plans must be obtained from the applicable
authorities prior to the commencement of installations by the Tenant, at its
expense.
3. The Tenant and its contractors are responsible to remove garbage and debris
from the Leased Premises daily and place same into garbage containers provided
for that purpose. All tenants will be assessed their proportionate share, as
reasonably determined by the Landlord, of the cost of providing empty garbage
containers on the job site during the construction of their leased premises.
Any of the Tenant's garbage or debris removed by the Landlord's employees will
be charged to the Tenant's account and shall be payable as Additional Rent by
the Tenant forthwith upon demand.
4. The Tenant will pay to the Landlord forthwith upon demand (a) all
reasonable costs incurred by the Landlord with respect to supervision and
administration during the installation of the Leasehold Improvements, including
without limitation, supervision by mechanical, engineering and other
consultants; (b) all reasonable costs incurred by the Landlord during the period
the Tenant fixtures the Leased Premises for vertical transport of men and
materials with respect to the carrying out of the Tenant's Work in the Leased
Premises; and (c) all other costs incurred by the Landlord during the period the
Tenant fixtures the Leased Premises as more particularly set out in Section 2.4
of the Lease.
See Rider 1 (Tenant Improvements).
C. Procedures
----------
1. The Tenant shall, prior to entering any portion of the Building or the
Leased Premises for the commencement of the Tenant's Work, complete each of the
following obligations to the Landlord's satisfaction:
(a) obtain the Landlord's written approval of the Tenant's plans and
specifications;
(b) provide the Landlord with certificates of insurance in a form
satisfactory to the Landlord, duly executed by the Tenant's insurers
evidencing that the insurance required to be placed by the Tenant
pursuant to the Lease has been obtained;
(c) ensure that all work on or in respect of the Leased Premises is
performed by competent workmen in a good and workmanlike manner. All
contractors shall be subject to the prior reasonable approval of the
Landlord;
(d) provide evidence satisfactory to the Landlord that the Tenant has
obtained at its expense all necessary consents, permits and licenses
from all appropriate governmental and regulatory authorities. Should
the Tenant fail to obtain any such required consent, permit or license,
the Landlord may, but shall not be
41
<PAGE>
obliged to, obtain same on behalf of the Tenant, the cost or expense
incurred by the Landlord shall be payable by the Tenant as Additional
Rent forthwith on demand, and the Landlord shall be entitled to
exercise all of the remedies contained in Article 14 hereof; and
(c) provide evidence satisfactory to the Landlord of the Tenant's work
schedule for completion of the Tenant's Work.
2. Notwithstanding Section 2.3 of the Lease, if:
(a) there is any delay by the Landlord in completing the Landlord's Work in
connection with the Leased Premises or in making available the services
which the Landlord is obliged to furnish to the Leased Premises and if
such delay has been occasioned by the Tenant's delay in furnishing its
plans or any other information required by this Lease or any Schedule
attached hereto on or before the respective dates set out for the
furnishing of such plans or the giving of such information; or
(b) the Landlord has been impeded in completing the Leased Premises or in
making available the services which the Landlord is obliged to furnish
by any failure of the Tenant to comply with any of the provisions of
this Lease or any Schedule hereto, or by the performance by the Tenant
of the Tenant's Work (as to any and all of which the Landlord's
Architect shall be the sole judge), then the Commencement Date of the
Term of this Lease shall be conclusively deemed to be the date fixed by
the Landlord's Architect as the date when the Fixturing Period would
have expired had the Landlord not been delayed by the Tenant in
completing the Landlord's Work as aforesaid. The Tenant shall not be
entitled to any abatement of Basic Rent or Additional Rent by reason of
any such delay in occupancy following such date so fixed by the
Landlord's Architect.
D. Requirements after Performance of Tenant's Work
-----------------------------------------------
The Tenant shall, upon completion of the Tenant's Work and if requested by
the Landlord:
1. Provide the Landlord with statutory declarations of the head contractor and
one of the Tenant's officers (the "declaration"):
(a) stating that the Tenant's Work has been performed in accordance with
all of the provisions of the plans and specification approved by the
Landlord and Schedule "C" and that all deficiencies (if any) which the
Landlord has brought to the Tenant's attention have been corrected;
42
<PAGE>
(b) stating that there are no construction lien or other liens or
encumbrances registered or otherwise outstanding against the Leased
Premises or the Building in respect of work, services or materials
relating to the Tenant's Work and that all accounts for work, services
or materials have been paid in full with respect to all of the Tenant's
Work;
(c) listing each contractor and subcontractor who did work or provided
materials in connection with the Tenant's Work;
(d) confirming the date on which the last work was performed and materials
were supplied.
2. Provide to the Landlord an itemized list certified by the Tenant showing
the costs actually expended by the Tenant for the completion of the Tenant's
Work.
3. Provide to the Landlord a clearance certificate issued under the Workmen's
Compensation Act in respect of each contractor and subcontractor listed on the
declaration.
4. Obtain and provide to the Landlord a copy of every occupancy and other
permit which may be required by any governmental or other regulatory authority
having jurisdiction, to permit the Tenant to open for business.
5. Provide the Landlord with a certificate of a professional engineer or
architect acceptable to the Landlord, certifying that the Tenant's Work has been
carried out in accordance with the plans and specifications as approved by the
Landlord, the Architect and the Landlord's engineering consultants.
E. Liens
-----
1. The Tenant shall ensure that no construction liens or other liens or
encumbrances in respect of materials supplied or work done or to be done by the
Tenant or on behalf of the Tenant or related to the Tenant's Work shall be
registered against or shall otherwise affect the Property or any part thereof or
the Landlord's, the Owners' or the Tenant's interest in the Property or any part
thereof.
2. If a lien or other encumbrance is registered against or otherwise affects
the Building or the Leased Premises or the Landlord's, the Owners' or the
Tenant's interest therein, and the Tenant fails to discharge or cause any such
lien or encumbrance to be discharged within five (5) days after it is filed or
registered, then, in addition to any other rights or remedies of the Landlord,
the Landlord may (but shall not be obligated to) discharge the lien or
encumbrance by paying the amount claimed into court or directly to the lien
claimant and the amount so paid, a sum equal to fifteen percent (15%) thereof
representing the Landlord's overhead and administrative costs, together with all
costs and expenses (including legal costs and expenses)
43
<PAGE>
plus interest at the Prime Rate shall be immediately due and payable by the
Tenant to the Landlord as Additional Rent forthwith on demand.
44
<PAGE>
SCHEDULE "D"
RULES AND REGULATIONS
1. The Tenant will not place or permit any debris, garbage, trash or refuse to
be placed or left in or upon any part of the Building outside of the Leased
Premises.
2 The Landlord will permit the Tenant and the Tenant's employees and all
Persons lawfully requiring communication with them to have the use during Normal
Business Hours of the main entrance and the stairways, corridors, elevators, if
any, or other mechanical means of access leading to the Leased Premises. At
times other than during Normal Business Hours the Tenant and its employees will
have access to the Building and to the Leased Premises only in accordance with
the Rules and Regulations and will be required to identify themselves
satisfactorily and to register in any book which may at the Landlord's option be
kept by the Landlord for that purpose. In no event will the Tenant be permitted
to move in or out of the Leased Premises during Normal Business Hours.
3. The Landlord will permit the Tenant and its employees to use the washrooms
on the Tenant's floor of the Building.
4. The Tenant will permit access to the Leased Premises for window cleaners to
clean the windows of the Leased Premises during Normal Business Hours.
5. The sidewalks, entrances, passages, elevators and staircases will not be
obstructed or used by the Tenant, its agents, servants, contractors, invitees or
employees for any purpose other than ingress to and egress from the Leased
Premises or the Building.
6. The Tenant, its agents, servants, contractors, invitees or employees, will
not bring in or take out, position, construct, install or move any safe or other
heavy machinery or equipment or anything liable to injure or destroy any part of
the Building without first obtaining the written consent of the Landlord. The
Landlord will have the right to prescribe the weight permitted and the position
thereof, and the use and design of planks, skids or platforms, to distribute
weight. All damage done to the Building by moving or using any heavy equipment
or other equipment or furniture will be repaired at the expense of the Tenant.
The moving of all heavy equipment or other equipment or furniture will occur
only by prior arrangement with the Landlord. No Tenant will employ anyone to do
its moving in the Building other than staff of the Building, unless permission
to employ anyone else is given by the Landlord and the reasonable cost of such
moving will be paid by the Tenant. Safes and other heavy equipment and
machinery will be moved through the halls and corridors only upon steel bearing
plates. No freight or bulky matter of any description will be received into the
Building or carried in the elevators except during hours approved by the
Landlord.
45
<PAGE>
7. The Tenant will not place or cause to be placed any additional locks upon
any doors of the Leased Premises without the approval of the Landlord and
subject to any conditions imposed by the Landlord.
8. The Tenant will not permit any cooking or any heating of any food or
liquids in the Leased Premises without the written consent of the Landlord.
9. Canvassing, soliciting and peddling in or about the Building are
prohibited.
10. The Tenant will not place or maintain any supplies, merchandise or other
articles in any vestibule or entry of the Leased Premises, on the footwalks
adjacent thereto or elsewhere on the exterior of the Leased Premises or
elsewhere in the Building.
11. The Tenant will not permit or allow any odours, vapours, steam, water,
vibrations, noises or other undesirable effects to emanate from the Leased
Premises or any equipment or installation therein, which in the Landlord's
opinion, are objectionable or cause any interference with the safety, comfort or
convenience or the Building by the Landlord or the occupants and tenants thereof
or their agents, servants, invitees or employees.
12. The Tenant will use only the Building standard window blinds as determined
by the Landlord and will not install or permit to be installed on or adjacent to
the windows in the Leased Premises any other window coverings or shades of any
type whatsoever whether or not visible from the outside of the Building,
including, without limitation, drapes, curtains, blinds or shades.
13. The Tenant shall not receive or ship fixtures, equipment or articles of any
kind whatsoever except through facilities, doors and elevators designated by the
Landlord and at hours prescribed by the Landlord and under the supervision of
the Landlord, its agents or employees.
46
<PAGE>
SCHEDULE "E"
DEFINITIONS
In this Lease and in the Schedules to this Lease the following definitions
are applicable:
"Additional Rent" means all sums of money or charges required to be paid by
the Tenant under this Lease (except Basic Rent) whether or not designated
"Additional Rent" or payable to the Landlord.
"Additional Services" means the services and supervision thereof by the
Landlord referred to in Section 5.5 hereof, and all other services of any nature
or kind supplied by the Landlord in addition to those required to be supplied by
the Landlord to the Tenant pursuant to this Lease, except for any services
which the Landlord elects to supply to all of the tenants of the Building the
cost of which is included in the Operating Costs.
"Alterations" means any repairs, replacements, decorations, Leasehold
Improvements or other alterations made by the Tenant or its representatives to
any part of the Leased Premises, or made by any other tenant to any other leased
premises in the Building.
"Architect" means the architect, surveyor or space planner from time to
time named by the Landlord. The decision of the Architect whenever required by
this Lease (or requested by the Landlord) and any certificate prepared or
approved by the Architect will be final and binding.
"Basic Rent" means the sums payable by the Tenant to the Landlord as set
out in Section 3.2 of this Lease.
"Building" means the industrial building erected or to be erected on the
Lands and located in the City of Vaughan, Province of Ontario, known municipally
as 475 North Rivermede Road, Unit #2, Concord, Ontario and forming a part of the
project known generally as "(n\a)", from and including the lowest floor or level
of the Building to and including the roof thereon, the Common Areas and
Facilities, the Parking Areas, and the areas and facilities serving the
Building, as determined by the Landlord, which areas and facilities may include,
without limitation, lobbies, foyers and vestibules, sidewalks, storage and
mechanical areas, janitor rooms, mail rooms, telephone, mechanical and
electrical rooms, stairways, escalators, elevators, truck and receiving areas,
driveways, loading docks and corridors and shall also include the Storage Areas
and those areas designated or intended by the Landlord to be leased or used for
service, administration, management, safety and operational purposes.
"Common Areas and Facilities" means (a) those areas, facilities, utilities,
improvements, equipment and installations in the Building which, from time to
time, are not designated or intended by the Landlord to be leased to tenants of
the Building, and (b) those
47
<PAGE>
areas, facilities, utilities, improvements, equipment and installations which
serve or are for the benefit of the Property, whether or not located within,
adjacent to, or near the Building and which are designated from time to time by
the Landlord as part of the Common Areas and Facilities, including, without
limitation, all areas, facilities, utilities, improvements, equipment and
installations which are provided or designated (and which may be changed from
time to time) by the Landlord for the use or benefit of the tenants, their
employee, customers and other invitees in common with others entitled to the use
and benefit thereof in the manner and for the purposes permitted by this Lease.
"Fixtures" means all furniture, trade fixtures and equipment installed by
the Tenant in the Leased Premises and not affixed in any manner thereto.
"Fixturing Period" means the period referred to in Paragraph (b) of the
Special Provisions during which the Tenant is required to complete the Tenant's
Work.
"Indemnifier" means the Person who has executed or agreed to execute the
Indemnity Agreement that is attached to this Lease as Appendix "A".
"Landlord means the party of the First Part and includes the Landlord and
its duly authorized representatives.
"Landlord's Work" means all construction and other work referred to as
"Landlord's Work" in Schedule "C" attached hereto.
"Lands" means the lands underneath, adjacent and appurtenant to the
Building, as more particularly described in Schedule "A" attached to this Lease
or as such Lands may be altered, expanded or reduced from time to time.
"Lease" means this agreement and all the terms, covenants and conditions
set out herein, as amended from time to time in accordance with Section 15.2(c)
hereof.
"Leased Premises" means the premises demised by this Lease as set out in
Section 2.1 hereof.
"Leasehold Improvements" means all items generally considered as leasehold
improvements, including without limitation all installations, alterations and
additions from time to time made, erected or installed in the Leased Premises by
or on behalf of the Tenant, or any previous occupant of the Leased Premises or
by or on behalf of tenants in other premises in the Building including, without
limitation, all partitions however affixed and whether or not moveable,
heating, ventilating and air-conditioning systems, facilities and equipment,
light fixtures, internal stairways and doors, floor, wall and ceiling coverings,
and any and all fixtures, facilities, equipment or installations installed by or
on behalf of the Landlord in accordance with Schedule "C".
48
<PAGE>
"Major Repairs" means all repairs and replacements to the Leased Premises
or the Building, including the Structure, which are structural or capital in
nature or which are deemed to be capital items in accordance with generally
accepted accounting principles, and which are the responsibility of the Landlord
to perform and complete. Except as otherwise specifically set out herein, the
cost of performing the Major Repairs shall be included in Operating Costs.
"Market Rental" means, at any given time, the then current market net
rental rate for net leases with similar terms (including, without limitation,
the length of the term and the frequency of adjustments in rent, if any) entered
into at arm's length for premises of similar size, age, quality and use,
similarly improved and fixtured in similar industrial buildings in the City of
Vaughan.
"Mortgagee" means any mortgagee or chargee (including any trustee for
bondholders), from time to time, of the Property or any part thereof, or of the
Landlord's or the Owners' interest in the Property.
"Normal Business Hours" means the hours from 8:00 a.m. to 6:00 p.m. on
Mondays to Fridays unless such a day is a statutory holiday.
"Office Area" means the portion of the Building designated by the Landlord
from time to time for office purposes located on all floors of the Building and
such changes, alterations and improvements as may be made thereto from time to
time in the sole discretion of the Landlord.
(a) "Operating Costs" means the total amounts incurred, paid or payable whether
by the Landlord or by others on behalf of the Landlord which are applicable or
attributable to the Property, as determined by the Landlord in the manner set
forth in the following sentence, for the maintenance, operation, repair,
replacement, management and administration of the Building, calculated as if the
Building were fully occupied and operational during each Rental Year of the
Term.
(b) Operating Costs include, without limitation and without duplication, the
aggregate of:
(i) the total annual costs of insuring the Building and equipment and
other property servicing the Building from time to time as the Landlord, or
the Mortgagee, from time to time determines, provided that if the Landlord
self insures with respect to any of the insurance required to be maintained
by it in accordance with the terms of this Lease, reasonable reserves not
to exceed insurance premiums that otherwise would be payable or
attributable by the Landlord to such insurance may be included hereunder;
(ii) the cost of cleaning, snow removal, garbage and waste collection and
disposal, including the cost of performing the work referred to in Section
5.2(a), and the cost of security, supervision and traffic control;
49
<PAGE>
(iii) the aggregate of the costs and amounts paid by the Landlord, to the
extent such costs are not separately metered and paid for directly by
individual tenants, for Utilities used in the maintenance, operation,
heating, ventilating and air-conditioning of the Building;
(iv) salaries, wages and other amounts paid or payable for all
management, supervisory, and operational personnel including the
Building manager, engineers, janitors, caretakers, security staff,
management personnel (in each case whether employed by the Landlord
or pursuant to a third party management contract) and all other
related staff and the total charges (including contributions and
premiums for fringe benefits, unemployment insurance, and Workers'
Compensation, pension plan contributions and similar premiums and
contributions) of any independent contractors or managers, engaged
in the repair, care, maintenance, security, management and cleaning
of the Property;
(v) the cost of the rental of any equipment and signs, and the costs of
supplies, used by the Landlord in the maintenance and operation of the
Property;
(vi) the cost of accounting services incurred in the preparation of the
statements referred to in this Lease and the financial statements related
thereto, and in the computation of the Rent and other charges payable by
tenants of the Building.
(vii) the cost of all repairs (including Major Repairs) and replacements
to and maintenance (including, without limitation, landscaping maintenance)
and operation of the Property and the systems, facilities and equipment
serving the Building (including without limitation, the components of the
heating, ventilating and air-conditioning systems serving portions of the
Building which are maintained and repaired by the Landlord) and all repairs
and replacements undertaken by the Landlord for the general safety and
benefit of the tenants of the Building or to reduce the Operating Costs;
(viii) depreciation or amortization over the economic life, (not to exceed
fifteen (15) years), together with interest calculated at two (2)
percentage points above the Prime Rate, of the costs, including repairs and
replacements of the maintenance, cleaning, operating, heating, ventilating
and air-conditioning equipment, master utility meters and all other
fixtures, equipment and facilities that are part of the Building and not
intended to be leased to tenants, which, in accordance with generally
accepted accounting principles, are not fully expensed or deducted in the
Rental Year in which they are incurred;
(ix) all business taxes and other Taxes, if any, from time to time
payable by the Landlord with respect to the Common Areas and Facilities and
Capital Taxes as defined herein;
50
<PAGE>
(x) the Market Rental, business taxes and other Taxes, if any,
attributable to space in the Building occupied by the Landlord or the
Building manager for management, supervisory or administrative purposes
including, without limitation, space leased or used for service,
administration, management, safety and operational purposes;
(xi) the cost of operating, maintaining, insuring, repairing and
replacing the heating, ventilating and air-conditioning system, if any used
in common by the tenants of the Building; and
(xiii) an administration and management fee of at least four percent (4%)
of the Rent (including Basic Rent and Additional Rent) received or
receivable by the Landlord from the tenants of the Building; the actual
amount of the administration fee referred to herein shall be determined by
the Landlord and may be increased from time to time by the Landlord in
accordance with the then current rate for such fees in comparable buildings
in the vicinity.
From the total of the above costs, there shall be deducted or excluded, as
the case may be:
(aa) all net recoveries which reduce Operating Costs received by the
Landlord from tenants as a result of any act, omission, default or
negligence of such tenants or by reason of a breach by such tenants of
provisions in their respective leases (other than recoveries from such
tenants under clauses in their respective leases requiring their
contribution to Operating Costs);
(bb) net proceeds received by the Landlord from insurance policies taken
out by the Landlord to the extent that the proceeds relate to Operating
Costs;
(cc) ground rent payable to any ground lessor if the Landlord is not the
owner of the Lands and principal and interest payments on any mortgages,
charges or other encumbrances registered against the title of the Property;
(dd) costs or expenses directly resulting from repairs or replacements
due to inherent structural defects or weaknesses in the original
construction of the Building;
(ee) costs and expenses relating to the leasing of space or premises in
the Building including leasing commissions and advertising costs; and
(ff) the cost of Alterations to specific leased premises in the Building
which are completed at the request of the tenant of such premises and which
are not specifically referred to as costs or expenses which are the
responsibility of the Tenant pursuant to the provisions of this Lease.
51
<PAGE>
(c) "Capital Tax" means the amount imputed by the Landlord to the Building for
Taxes, rates, duties and assessments imposed from time to time upon the Landlord
or the Owners and payable by the Landlord or the Owners on account of the
capital that it or they have invested in the Building or any part of it. Capital
Tax will be imputed (i) as if the Building were the only property of the
Landlord or the Owner; and (ii) on the basis of the Landlord's determination of
the amount of capital attributable to the Building. The Landlord's determination
of the capital attributable to the Building will be based solely on the costs of
acquiring, developing and constructing the Building and any expansions or
additions to it. Capital Tax will not be increased by any mortgage or other
financing or refinancing of the Building or any part of it.
"Owners" means the registered owners and holders of the freehold or
leasehold title of the Property or any part thereof from time to time. In
sections that contain a release or other exculpatory language in favour of the
Owners, "Owners" includes the officers, directors, employees (while in the
ordinary course of their employment) and agents of the Owners.
"Parking Areas" means the improvements constructed, or which may be
constructed, in or as part of the Building for use as parking facilities and the
areas and facilities that are appurtenant solely to those improvements.
"Person", if the context allows, includes any person, firm, partnership or
corporation, or any group of persons, firms, partnerships or corporations or any
combination thereof.
"Prime Rate" means the commercial lending rate of interest, expressed as an
annual rate, that the trust company or chartered bank designated by the
Landlord from time to time quotes from time to time at its principal office in
the City of Toronto as the reference rate of interest (which is commonly known
as its "prime rate"), and which serves as the basis upon which effective rates
of interest are calculated for Canadian dollar loans made in Canada to its
commercial customers with interest payable as a function of its prime rate.
"Property" means the Building and the Lands as herein defined.
"Proportionate Share" means a fraction to be calculated by the Landlord, in
each case being a fraction which has as its numerator the Usable Area of the
Leased Premises and as its denominator the Rentable Area of the Building. The
Landlord may recalculate or adjust the Tenant's Proportionate Share from time to
time due to changes, additions or improvements to the Building.
"Rent" means all Basic Rent and Additional Rent payable hereunder.
"Rentable Area of the Building" means the calculation of the Rentable Area
of the Building whether rented or not as determined by the Architect upon
completion of the Building. The Rentable Area of the Building shall be
calculated as if the Building were
52
<PAGE>
entirely occupied by tenants renting the Usable Area of each floor of the
Building. The Rentable Area of the Building shall be adjusted from time to time
to give affect to any structural, functional or other change affecting same.
"Rental Year" means a period of time, the first Rental Year commencing on
the first day of the Term hereof, and ending on the 31st day of December next
following; thereafter Rental Years shall consist of consecutive periods of
twelve (12) calendar months. If, however, the Landlord considers it necessary
or convenient for the Landlord's accounting purposes, the Landlord may at any
time and from time to time, by written notice to the Tenant, specify an annual
day from which each subsequent Rental Year is to commence, and, in such event,
the then current Rental Year shall terminate on the day preceding the
commencement of such new Rental Year. The last Rental Year of the Term shall
terminate upon the expiration or earlier termination of this Lease, as the case
may be.
"Storage Areas" means all those areas (which in all cases are separate and
apart from leasable premises) to be used by tenants for storage in conjunction
with use of leasable premises.
"Structure" means the foundations, roof (excluding the roof membrane),
exterior wall assemblies including weather walls and bearing walls, subfloor and
structural columns and beams of the Building and any other portions of the
Building designated by the Landlord from time to time as Structure.
"Taxes" means all real property taxes, rates, duties and assessments
(including local improvement taxes), imposts, charges or levies, whether general
or special, that are levied, rated, charged or assessed against the Property or
any part thereof or Rent therefrom from time to time by any lawful taxing
authority, whether federal, provincial, municipal, school or otherwise, and any
taxes or other amounts which are imposed in lieu of, or in addition to, any such
real property taxes whether of the foregoing character or not and whether in
existence at the Commencement Date or not, including, without limitation, any
commercial concentration levy, excise tax, business transfer tax, value-added
tax, sales tax or any tax levied, rated, charged or assessed in respect of Basic
Rent and Additional Rent payable by the Tenant under this Lease or in respect of
the rental of space by the Tenant under this Lease, and any such real property
taxes or other taxes levied or assessed against the Landlord or the Owners on
account of their respective interests in the Property or any part thereof, or
their ownership thereof, as the case may be, calculated on the basis of the
Building being assessed as a fully leased and operational building, and the
costs and expenses incurred for consulting, appraisal, legal and other services
to the extent they are incurred in an attempt to minimize or reduce any of the
foregoing real property taxes or other taxes referred to above.
"Tenant" means the party of the Second Part. If there is more than one
Tenant, any notice required or permitted by this Lease may be given by or to any
one of them and has the same force and effect as if given by or to all of them.
Any reference to "Tenant" includes,
53
<PAGE>
where the context allows, the servants, employees, agents, invitees and
licensees of the Tenant and all others over whom the Tenant may reasonably be
expected to exercise control.
"Tenant's work" means all construction and other work required to be
provided or performed in order to render the Leased Premises complete and
suitable to open for business, including without limitation, all work designated
as Tenant's Work in Schedule "C" attached hereto but excluding those items
specifically referred to as "Landlord's Work".
"Usable Area of the Leased Premises" means the floor area of the Leased
Premises calculated in accordance with BOMA standards for multi-tenant office or
industrial buildings and without deductions for columns or projections necessary
to the Building.
"Utilities" means all gas, electricity, water, sewer, steam, fuel, power,
telephone and other utilities used in or for the Building or the Leased
Premises, as the case may be, or allocated to the Leased Premises by the
Landlord in accordance with the terms of this Lease.
54
<PAGE>
APPENDIX "A"
INDEMNITY AGREEMENT
THIS AGREEMENT is dated the 11th day of June, 1991.
B E T W E E N:
VON-LAND CORPORATION LIMITED
----------------------------
(the "Landlord")
OF THE FIRST PART,
- and -
IRON AGE CORPORATION
--------------------
(the "Indemnifier")
OF THE SECOND PART.
In order to induce the Landlord to enter into the lease (the "Lease") dated
the 11th day of June, 1991 and made between the Landlord and IRON AGE CANADA,
LTD., Tenant, and for other good and valuable consideration, the receipt and
sufficiency whereof is hereby acknowledged, the Indemnifier hereby covenants and
makes the following indemnity and agreement (the "Indemnity") with and in favour
of the Landlord.
1. The Indemnifier hereby agrees with the Landlord that at all times during
the Term and any extension or renewal of the Term it will (a) make the due and
punctual payment of all Basic Rent, Additional Rent, monies, charges and other
amounts of any kind whatsoever payable under the Lease by the Tenant whether to
the Landlord or otherwise and whether the Lease has been disaffirmed or
disclaimed; (b) effect prompt and complete performance of all and singular the
terms, covenants and conditions contained in the Lease on the part of the Tenant
to be kept, observed and performed; and (c) indemnify and save the Landlord
harmless from any loss, costs or damages arising out of any failure by the
tenant to pay the aforesaid Basic Rent, Additional Rent, monies, charges or
other amounts due under the Lease or resulting from any failure by the Tenant to
observe or perform any of the terms, covenants and conditions contained in the
Lease.
2. This Indemnity is absolute and unconditional and the obligations of the
Indemnifier shall not be released, discharged, mitigated, impaired or affected
by (a) any extension of time,
55
<PAGE>
indulgences or modifications which the Landlord extends to or makes with the
Tenant in respect of the performance of any of the obligations of the Tenant
under the Lease; (b) any waiver by or failure of the Landlord to enforce any of
the terms, covenants and conditions contained in the Lease; (c) any assignment
or sublease of the Lease by the Tenant or by any trustee, receiver or
liquidator; (d) any consent which the Landlord gives to any such assignment or
subletting; (e) any amendment to the Lease or any waiver by the Tenant of any of
its rights under the Lease; or (f) the expiration of the Term.
3. The Indemnifier hereby expressly waives notice of the acceptance of this
Agreement and all notice of non-performance, non-payment or non-observance on
the part of the Tenant of the terms, covenants and conditions contained in the
Lease. Without limiting the generality of the foregoing, any notice which the
Landlord desires to give to the Indemnifier shall be sufficiently given if
delivered personally to the Indemnifier or if mailed by prepaid registered or
certified post addressed to the Indemnifier at the Leased Premises. Every such
notice is deemed to have been given upon the day it was so delivered personally,
or if mailed, upon the fourth business day (excluding Saturdays, Sundays and
statutory holidays) after it was mailed. The Indemnifier may designate by notice
in writing a substitute address for that set forth above and thereafter notices
shall be directed to such substitute address. If two or more Persons are named
as Indemnifier, any notice given hereunder or under the Lease shall be
sufficiently given if delivered or mailed in the foregoing manner to any one of
such Persons.
4. In the event of a default under the Lease or under this Agreement, the
Indemnifier waives any right to require the Landlord to (a) proceed against the
Tenant or pursue any rights or remedies against the Tenant with respect to the
Lease, (b) proceed against or exhaust any security of the Tenant held by the
Landlord, or (c) pursue any other remedy whatsoever in the Landlord's power.
The Landlord has the right to enforce this Indemnity regardless of the
acceptance of additional security from the Tenant and regardless of any release
or discharge of the Tenant by the Landlord or by others or by operation of any
law.
5. Without limiting the generality of the foregoing, the liability of the
Indemnifier under this Indemnity is not and is not deemed to have been waived,
released, discharged, impaired or affected by reason of the release or discharge
of the Tenant in any receivership, bankruptcy, winding-up or other creditors'
proceedings or the rejection, disaffirmance or disclaimer of the Lease in any
proceeding and shall continue with respect to the periods prior thereto and
thereafter, for and with respect to the Term as if the Lease had not been
disaffirmed or disclaimed. In furtherance hereof, the Indemnifier agrees, upon
any such disclaimer, that the Indemnifier shall, at the option of the Landlord,
become the Tenant of the Landlord upon the same terms and conditions as are
contained in the Lease, applied mutatis mutandis. The liability of the
Indemnifier shall not be affected by any repossession of the Leased Premises by
the Landlord, provided, however, that the net payments received by the Landlord
after deducting all costs and expenses of repossessing and reletting the Leased
Premises shall be credited from time to time by the Landlord against the
indebtedness of the Indemnifier
56
<PAGE>
hereunder and the Indemnifier shall pay any balance owing to the Landlord from
time to time immediately upon demand.
6. No action or proceedings brought or instituted under this Indemnity and no
recovery in pursuance thereof shall be a bar or defence to any further action or
proceeding which may be brought under this Indemnity by reason of any further
default hereunder or in the performance and observance of the terms, covenants
and conditions contained in the Lease.
7. No modification of this Indemnity shall be effective unless the same is in
writing and signed by both the Indemnifier and the Landlord.
8. The Indemnifier shall, without limiting the generality of the foregoing, be
bound by this Indemnity in the same manner as though the Indemnifier were the
Tenant named in the Lease.
9. If two or more individuals, corporations, partnerships or other business
associations (or any combination of two or more thereof) execute this Indemnity
as Indemnifier, the liability of each such individual, corporation, partnership
or other business association hereunder is joint and several. In like manner,
if the Indemnifier named in the Indemnity is a partnership or other business
association, the members of which are by virtue of statutory or general law,
subject to personal liability, the liability of each such member is joint and
several.
10. All of the terms, covenants and conditions of this Indemnity extend to and
are binding upon the Indemnifier, his or its heirs, executors, administrators,
successors and assigns, as the case may be, and enure to the benefit of and may
be enforced by the Landlord, its successors and assigns, as the case may be, and
any mortgagee, charges, trustee under a deed of trust or other encumbrancer of
all or any part of the Building referred to in the Lease.
11. The expressions "Landlord", Tenant", "Basic Rent", "Additional Rent",
"Term" and "Leased Premises" and other terms or expressions where used in this
Indemnity, respectively, have the same meaning as in the Lease.
12. This Agreement shall be construed in accordance with the laws of the
Province of Ontario.
13. Wherever in this Indemnity reference is made to either the Landlord or the
Tenant, the reference is deemed to apply also to the heirs, executors,
administrators, successors and permitted assigns of the Tenant, named in the
Lease, and the successors and assigns of the Landlord. Any assignment by the
Landlord of any of its interests in the Lease operates automatically as an
assignment to such assignee of the benefit of this Indemnity.
57
<PAGE>
IN WITNESS WHEREOF the Landlord and the Indemnifier have signed and sealed
this Indemnity.
SIGNED, SEALED AND DELIVERED ) VON-LAND CORPORATION LIMITED
in the presence of: ) (Landlord)
)
)
) Per: /s/ [Signature unreadable]
----------------------------
)
) c/s
)
) Per:___________________________
)
)
)
) IRON AGE CORPORATION
)
)
/s/ Keith A. McDonough ) /s/ Donald R. Jensen
-------------------------- --------------------------------
Witness ) Donald R. Jensen (Indemnifier)
Treasurer President
58
<PAGE>
ADDITIONAL PROVISIONS
RIDER 1
-------
1. Office and Sales Area
It is understood and agreed that the Lessee may utilize the existing partitions
in the demised premises and may relocate such partitions and build additional
partitions as required by the Lessee. It is further understood and agreed that
the Lessor will, at its own expense and in a good and workmanlike manner prior
to the date of possession reconstruct the office area in accordance with
Schedule "B" attached hereto. Said office space shall be completed to standard
office finishing standards and shall include, without limiting the generality of
the foregoing a T-bar ceiling with recessed standard 2 x 4 fluorescent light
fixtures, painted drywall partitions, and the Lessor's standard commercial grade
carpeting (color to be selected by the Lessee from the Lessor's samples).
2. Tenant Improvements
The Lessee may make any necessary non-structural alterations and improvements to
said premises at its own expense, in a good and workmanlike manner subject to
the Lessor's prior written consent, which consent shall not be arbitrarily
withheld.
3. Sign
The Lessee may, in a good and workmanlike manner, and at its own expense install
upon the said building signs which shall remain the property of the Lessee,
provided that all such installations are first approved by the Lessor in writing
within five days of acceptance of this offer, and conform to all relevant
governmental by-laws, which approval shall not be arbitrarily withheld. The
Lessee shall have the right to remove said signs at the expiration of its
tenancy provided that any damaged [sic] caused by this removal shall
immediately be repaired by the Lessee in a good and workmanlike manner and at
the Lessee's sole expense.
4. Sublease
The Lessee shall, if not in default of any of its covenants, have the right to
assign or sublet the demised premises in whole or in part at any time or times
during the term or any renewal thereof, provided that the Lessee has obtained
the prior written consent of the Lessor, which consent shall not be arbitrarily
withheld.
5. Renewal
Provided that the Lessee is not in default of any of its covenants under the
Lease, the Lessee shall have the right to renew the Lease for an extended term
of up to FIVE (5) years on the same terms and conditions save and except the
right to renew and the rental rate which shall be
59
<PAGE>
mutually negotiated rates for similar space at the time of renewal. Should the
Lessee decide to renew the Lease then he shall so notify the Lessor in writing
not less than six (6) months prior to the expiration of the initial Lease term.
6. Net Lease
The Lease shall be entirely net to the Lessor, who shall, however, be
responsible for repairs to the building structure including roof, walls and
floors, unless caused by the negligence of the Lessee.
The Lessee shall pay its proportionate share of realty taxes, applicable Goods
and Services Tax the "GST", building insurance, property management, outside
maintenance and all other utilities hereafter called the "operating expenses".
The Lessor shall forthwith upon receipt, send to the Lessee a copy of invoices
and bills that the Lessee is responsible to pay and the Lessee shall, if so
requested, forward proof of payment of these invoices and bills to the Lessor.
The estimated operating expenses are $1.50 per square foot consisting of $0.90
per square foot for realty taxes and $0.60 per square foot for maintenance and
insurance.
7. Parking.
The Lessor will provide the Lessee with unreserved parking in the front and at
the side of the leased premises for autos and trucks free of charge during the
term of the Lease or any renewal thereof, and the Lessee, its customers,
representatives, agents, and employees shall have the rights to these parking
spaces, subject to the Lessee maintaining the parking area free and clear of all
vehicles for the purpose of snow removal.
8. Conditions of mechanical installations
The Lessor shall at its own expense and in a good and workmanlike manner, take
such action as is necessary so that all heating, electrical, plumbing, and
sprinkler systems are in good working order as of the date set for occupancy.
9. Assignment
The Lessee shall have the right at any time before the closing date to assign
all of its rights, title and interest and obligations in the herein Agreement
either to another corporation, firm or person, and upon such assignment and
notice being given, all rights and obligations under this Offer to Lease shall
terminate, and at the time of such assignment, all the rights and obligations of
this Agreement shall be assumed by such assignee, at which time the Lessor shall
have no recourse against the Lessee herein.
60
<PAGE>
10. Condition
This Offer is conditional through June 14, 1991, subject upon the Lessee
entering into a binding Agreement to Purchase an existing Company. In the event
that the Lessee has not made this above mentioned Purchase then this Offer shall
be null and void and the Purchaser's deposit shall be returned in full without
bonus or deduction.
As time is of the essence, and subject to the preceding paragraph, Lessor agrees
to insure Lessee that the warehouse portion of the building will be available to
Lessee no later than July 1, 1991. Lessee agrees to use existing office
facilities while Lessor remodels. Lessor agrees to complete all construction
work by August 1, 1991 if offer to lease is binding by June 14, 1994.
If binding Lease is signed by Lessee on or before June 14, 1991, Lessor agrees
to refurbish offices, 1, 2, 3, 4, 5 and 6 noted on Schedule B prior to July 1,
1991.
11. Guaranty
Iron Age Corporation shall execute as Guarantor Appendix "A" of attached
standard lease.
61
<PAGE>
RIDER 2
-------
1. All office areas (both existing and new) will be painted with Glidden Spred
Satin, #16851 -shell white, or equal color. All doors and trim to be
painted with blending color.
2. All areas, new and existing, will be carpeted with new carpeting selected
from Lessor's sample. If carpet in existing offices can be cleaned and
blended with new carpeting, Lessee will consider that possibility.
3. Vestibule walls will be a minimum of 50% glass. Floor to be tile or vinyl.
4. All new areas to have ample electrical outlets and phone lines, as needed.
Please note: I did not draw in existing doors in existing offices, side and
entrance door, as my memory could not recall their exact locations. All
existing doors and offices are acceptable, other than painting and carpeting.
62
<PAGE>
LEASE RENEWAL AGREEMENT
THIS AGREEMENT made as of the 23rd. day of November, 1995
BETWEEN:
VON-LAND CORPORATION LIMITED
("Landlord")
- and -
IRON AGE CANADA, LTD.
("Tenant")
WHEREAS, the Landlord and the Tenant have executed a lease dated the 11th
day of June, 1991, (the "Lease"), the Landlord leased to the Tenant for a term
(the "Term") of Five (5) years, commencing on the 1st day of July, 1991 and
expiring on the 30th day of June, 1996 certain premises (the "Leased Premises")
designated as Unit No. 2 comprising of approximately 12,538 square feet and
located in the building municipally known as 475 North Rivermede Road, (the
"Building") in the City of Vaughan, in the Province of Ontario;
AND WHEREAS the Tenant shall have the option to renew the Lease for a
period of five (5) years commencing July 1, 1996 and expiring June 30, 2001,
under the same terms and conditions save and except the right to renew and the
rental rate which shall be mutually negotiated rates for similar space at the
time of renewal. Notice of intent to renew must be given, in writing, by the
Tenant to the Landlord at least six (6) months prior to the expiry of the lease
term.
NOW THEREFORE, in consideration of the sum of ONE ($1.00) DOLLAR and other
goods and valuable consideration (the receipt and sufficiency whereof being
hereby acknowledged), the parties agreed as follows:
1. The Tenant hereby elects to renew said Lease Agreement at 475 North
Rivermede road, Unit No. 2, containing an area of approximately 12,538 square
feet for a term of Five (5) years commencing July 1, 1996 and expiring June 30,
2001 at a net rental rate of:
Period Per Sq.Ft Per Annum Per Month
July 1/96-June 30/01 $4.00 $50,152.00 $4,179.33*
*(G.S.T. extra)
2. The Landlord hereby acknowledges and accepts the Tenant's election as
aforesaid.
63
<PAGE>
3. In addition to net rent the Tenant shall be responsible for payment of
realty taxes currently estimated at $1.20 per square foot per annum payable
$1,253.80 per month (plus G.S.T.) and adjusted annually; Outside maintenance,
insurance, domestic water and sewer charges estimated at $0.70 per square foot
per annum payable $731.38 per month (plus G.S.T.) and adjusted annually.
4. The parties hereby agree that the Lease shall expire on June 30, 2001.
5. The Agreement shall enure to the benefit of, and shall be binding upon the
parties hereto and their respective successors and assigns.
6 All other terms and conditions shall remain the same as set out in the
Lease Agreement.
This Agreement shall be irrevocable until midnight December 31, 1995 after which
time, if not accepted, shall be null and void.
IN WITNESS WHEREOF, the parties have executed this Lease Renewal Agreement.
SIGNED, SEALED AND DELIVERED ) VON-LAND CORPORATION LIMITED
in the presence of: ) (Landlord)
)
)
) Per: /s/ [Signature unreadable]
------------------------------------
)
)
) Per:____________________________________
) IRON AGE CANADA, LTD.
) (Tenant))
)
) Per: /s/ Keith A. McDonough, Treasurer
--------------------------------------
)
)
) Per: /s/ William J. Mills, Vice President
---------------------------------------
64
<PAGE>
EXHIBIT 10.27
EMPLOYMENT AGREEMENT
--------------------
This AGREEMENT is made this 26th day of February, 1997, among IA Holdings
Corp., a Delaware corporation ("Holdings"), IAH Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Holdings (the "Company"), and Donald
R. Jensen ("Executive").
RECITALS
--------
WHEREAS, the Executive has been employed for a number of years as President
and Chief Executive Officer of Iron Age Holdings Corporation, a Delaware
corporation ("Old Holdings") and Iron Age Corporation, a Delaware corporation
and wholly owned subsidiary of Old Holdings ("Iron Age") with increasing
responsibilities;
WHEREAS, on the date hereof the Company will acquire all of the outstanding
shares of stock of Old Holdings and immediately thereafter the Company will be
merged with and into Old Holdings with Old Holdings being the surviving entity
and Old Holdings will then be merged with and into Iron Age with Iron Age being
the surviving entity (collectively, the "Acquisition Transactions");
WHEREAS, upon consummation of the Acquisition Transactions, Iron Age will,
by operation of law, assume all of the rights and obligations of the Company
hereunder;
WHEREAS, the Executive, Holdings and the Company desire to enter into a
mutually satisfactory employment relationship under the terms and conditions
hereinafter provided; and
WHEREAS, the execution and delivery of this Agreement have been duly
authorized by the Board of Directors of each of Holdings and the Company.
<PAGE>
AGREEMENT
---------
NOW, THEREFORE, Holdings, the Company and the Executive, each intending to
be legally bound, hereby mutually covenant and agree as follows:
1. CERTAIN MATTERS OF CONSTRUCTION AND DEFINITIONS
1.1 The words "hereof", "herein", "hereunder" and words of similar import
shall refer to this Agreement as a whole and not to any particular Section or
provision of this Agreement, and reference to a particular Section of this
Agreement shall include all subsections thereof.
1.2. The words "party" and "parties" shall refer to Holdings, the Company
and the Executive.
1.3 For purposes hereof, after the date of the Acquisition Transactions
the term "Company" shall be deemed to mean Iron Age as successor by merger to
IAH Acquisition Corp.
1.4. For purposes hereof, the term "Subsidiary" shall mean any Person of
which Holdings, the Company or any other specified Person shall own directly or
indirectly through a Subsidiary, a nominee arrangement or otherwise at least a
majority of the outstanding capital stock (or other shares of beneficial
interest) entitled to vote generally or shall otherwise control.
1.5 For purposes hereof, the term "Person" shall mean any individual,
partnership, corporation, association, trust, joint venture, unincorporated
organization or other entity other than any governmental authority.
1.6 Accounting terms used herein and not otherwise defined herein are used
herein as defined by generally accepted accounting principles as in effect and
applied in the preparation of the financial statements of Holdings.
1.7 All references in this Agreement to any Appendix shall, unless the
context
-2-
<PAGE>
otherwise requires, be deemed to be a reference to an Appendix to this
Agreement, all of which are made a part of this Agreement. Any term used in any
Appendix to this Agreement which is not defined therein shall have the meaning
set forth in this Agreement.
2. EMPLOYMENT
2.1 Agreement. Holdings and the Company hereby agree to employ the
---------
Executive, and the Executive hereby agrees to serve each of Holdings and the
Company, in each case on the terms and conditions set forth herein.
2.2 Commencement and Expiration Date. The employment of the Executive
--------------------------------
hereunder shall be for the period commencing on the date of this Agreement and
expiring on December 31, 2001 (the "Expiration Date"), unless such employment
shall have sooner been terminated as hereinafter set forth. In the event of any
direct or indirect acquisition by Holdings or the Company or any of their
Subsidiaries of any business enterprise for an aggregate purchase price in
excess of $50,000,000, whether by merger, consolidation, share exchange, sale or
acquisition of stock or assets or similar transaction, the parties hereto agree
to renegotiate in good faith the terms of this Agreement.
As of the date of this Agreement, the Employment Agreement among Old
Holdings, Iron Age and the Executive dated May 4, 1994 shall be deemed
terminated and of no further force and effect.
3. POSITION; DUTIES
3.1 Duties Prior to February 1, 1999. Unless and until Section 3.2(b) is
--------------------------------
in effect, the Executive shall serve in accordance with the by-laws of Holdings
and the Company in the capacity or capacities of Chairman of the Board of
Directors, President and Chief Executive Officer of
-3-
<PAGE>
Holdings and the Company and shall be accountable to and shall have such other
powers, duties and responsibilities as may from time to time be prescribed by,
the Board of Directors of Holdings; provided, however, that the Executive may
-------- -------
resign as President and Treasurer of the Company not sooner than May 1, 1997 so
long as the Executive continues in his capacity as Chairman of the Board of
Directors and Chief Executive Officer of the Company.
The Executive shall perform and discharge, faithfully, diligently and
competently, such duties and responsibilities. The Executive shall devote
substantially all his working time (reasonable sick leave excepted, subject to
Section 8.2) and best efforts to the business and affairs of Holdings and the
Company.
3.2 Duties on and After February 1, 1999. (a) Either Holdings and the
------------------------------------
Company or the Executive shall have the right to, by written notice to the other
party on or before June 30, 1998, amend the Executive's duties under Section 3.1
in accordance with the duties set forth in section 3.2(b). If such notice is
given by either party, Section 3.2(b) shall automatically become effective on
February 1, 1999, and all the provisions of this Agreement except for Sections
3.1 and 4.1(a) shall continue in full force and effect. If this notice is not
given by either party, this Agreement shall continue in full force and effect
without regard to Sections 3.2(b) and 4.1(b).
(b) In the event the notice described in Section 3.2(a) is given by either
party, the Executive shall effective February 1, 1999 resign as President and
Chief Executive Officer of Holdings and as President (if the Executive still
holds such position at that time) and Chief Executive Officer of the Company and
shall continue in his position as Chairman of the respective Boards of Directors
of Holdings and the Company. On and after February 1, 1999, the Executive shall
serve in accordance with the by-laws of Holdings and the Company in the capacity
of
-4-
<PAGE>
Chairman of the respective Boards of Directors of the Company and Holdings and
shall be accountable to and shall have such powers, duties and responsibilities
as are customarily enjoyed by a chairman of a business corporation which has a
president and chief executive officer. The Executive shall perform and
discharge, faithfully, diligently and competently such duties and
responsibilities and shall devote such amount of time as is reasonably necessary
and appropriate to carry out such duties and responsibilities.
4. COMPENSATION
Subject to the performance by the Executive of his duties and
responsibilities to Holdings and the Company:
4.1 Base Salary. (a) Unless and until Section 3.2(b) is in effect,
-----------
Holdings shall, or shall cause the Company to, pay the Executive during each
year of his employment hereunder beginning on March 1, 1997, a base Salary (as
defined in Section 4.1(b)) at the annual rate of $400,000.
(b) In the event that Section 3.2(b) is in effect, Holdings shall, or
shall cause the Company to, pay the Executive a base Salary at an annual rate of
$250,000 for the period of his employment hereunder after February 1, 1999 in
lieu of the annual rate of base Salary set forth in Section 4.1(a) (the annual
rate of base Salary in effect from time to time under this Section 4 referred to
as "Salary").
(c) Salary will be payable in substantially equal bi-monthly installments.
Except as otherwise provided in this Agreement, Salary shall be pro-rated for
any period of service less than a full year or less than a full month.
4.2 Bonuses. For the fiscal year ending on the last Saturday of January
-------
1998 and each
-5-
<PAGE>
fiscal year thereafter, in each case during the term of the Executive's
employment hereunder, the Executive shall be entitled to receive, and Holdings
shall pay, or cause the Company to pay, to the Executive, in addition to Salary,
a bonus payment (the "Bonus") as determined pursuant to the plan adopted and set
forth and more particularly described in Appendix A. The Bonus with respect to
each fiscal year shall be payable, to the extent earned as described in Appendix
A, promptly after Holdings sends audited financial statements for such fiscal
year to its stockholders, but in any event not later than the one hundred and
twentieth (120th) day following the end of such fiscal year.
4.3 Expenses. During the term of his employment hereunder, Holdings shall
--------
pay, or shall cause the Company to pay, to the Executive prompt reimbursement
for all business expenses reasonably incurred by him on behalf of Holdings, the
Company or any of their Subsidiaries (in accordance with any policies and
procedures established by the Board of Directors of Holdings from time to time
for Holdings' senior executive officers) in performing services hereunder,
provided that the Executive properly accounts therefor in accordance with
Holdings' policies and procedures.
4.4 Fringe Benefits. During the term of his employment hereunder, the
---------------
Executive shall be entitled to participate in or receive, and Holdings shall, or
shall cause the Company to provide, the benefits set forth in Appendix B.
4.5 Vacations. During the term of his employment hereunder, the Executive
---------
shall be entitled to receive the number of vacation days in each calendar year
determined by the Board of Directors of Holdings from time to time for the
Executive (but not in any event fewer than five weeks) and shall also be
entitled to all holidays given by the Company to its employees generally.
-6-
<PAGE>
4.6 Stock Options. The Executive shall receive options to purchase common
-------------
stock of Holdings as set forth in Appendix C.
5. OFFICES.
Subject to Section 3, the Executive agrees to serve without additional
compensation, if elected or appointed thereto, in one or more additional
positions as an officer or director of Holdings or the Company or any of their
Subsidiaries; provided, however, that the Executive shall not be required to
-------- -------
serve as President or Chief Operating Officer of any such Subsidiary on and
after May 1, 1997.
6. UNAUTHORIZED DISCLOSURE; INVENTIONS.
6.1 Unauthorized Disclosure. The Executive shall not, without the written
-----------------------
consent of the Board of Directors of Holdings or a person duly authorized
thereby, disclose to any person, other than an employee or adviser of Holdings
or the Company or any of their Subsidiaries or Affiliates or other person to
whom disclosure is in the reasonable judgment of the Executive necessary or
appropriate in connection with the performance by the Executive of his duties as
an executive officer of Holdings or the Company or any of their Subsidiaries,
any confidential or proprietary information possessed by him; provided, however,
-------- --------
that such information shall not include any information known generally to the
public (other than as a result of unauthorized disclosure by the Executive) or
which becomes available to the Executive on a non-confidential basis from a
source other than Holdings or the Company or any of their Subsidiaries or
Affiliates prior to it becoming available to the Executive from Holdings or the
Company or any of their Subsidiaries or Affiliates, which source is not bound by
a confidentiality agreement with Holdings; and provided further, that the
-------- -------
Executive's duties under this Section 6.1 shall not extend to any
-7-
<PAGE>
disclosure that may be required by law in connection with any judicial or
administrative proceeding or inquiry. The Executive understands and agrees that
this restriction shall continue to apply after his employment terminates,
regardless of the reason for such termination.
6.2 Proprietary Rights. Any and all inventions, discoveries,
------------------
developments, methods, processes, compositions, works, concepts and ideas
(whether or not patentable or copyrightable) conceived, made, developed, created
or reduced to practice by the Executive (whether at the request or suggestion of
Holdings or the Company or otherwise, whether alone or in conjunction with
others, and whether during regular hours of work or otherwise) during the period
of his employment by Holdings or the Company or any of their Subsidiaries
(including without limitation the period of his employment by Childs
Corporation, Old Holdings and Iron Age prior to the date of this Agreement),
which may be directly or indirectly useful in, or relate to, the business,
ventures or other activities of or products manufactured or sold by Holdings or
the Company or any of their Subsidiaries or any business or products
contemplated by Holdings or the Company or any of their Subsidiaries (and known
by the Executive to be so contemplated) while the Executive is employed by
Holdings or the Company or any of their Subsidiaries (collectively, "Proprietary
Rights"), shall be promptly and fully disclosed by the Executive to an
appropriate executive officer of Holdings and shall be Holdings' exclusive
property as against the Executive and his heirs and personal representatives,
and the Executive hereby assigns to Holdings his entire right, title and
interest therein and shall promptly deliver to an appropriate executive officer
of Holdings all papers, drawings, models, data and other material relating to
any of the foregoing Proprietary Rights, conceived, made, developed, created or
reduced to practice by him as aforesaid. All copyrightable Proprietary Rights
shall be considered "works made for hire."
-8-
<PAGE>
The Executive shall, upon Holdings' request and without any payment
therefor, execute any documents necessary or advisable in the opinion of
Holdings' counsel to assign, and confirm Holdings' title in, Executive's entire
right, title and interest in the foregoing Proprietary Rights and to direct
issuance of patents or copyrights to Holdings with respect to such Proprietary
Rights as are Holdings' exclusive property as against the Executive and his
heirs and personal representatives under this Section or to vest in Holdings or
its designee title to such Proprietary Rights as against the Executive and his
heirs and personal representatives, the expense of securing any such patent or
copyright, however, to be borne by Holdings or the Company.
7. NON-COMPETITION.
The Executive agrees that during the term of his employment hereunder,
during the period in which the Executive is receiving post Date of Termination
payments based upon Salary under Sections 9.2 or 9.4 by virtue of the
termination of his employment for Good Reason or other than for Cause, and for a
period of one year following the later of his Date of Termination and the date
of cessation of such post Date of Termination payments based upon Salary (the
"Non Competition Period End Date"), he will not, directly or indirectly, (A)
own, manage, operate, control or participate in any manner in the ownership,
management, operation or control of, or be connected as an officer, employee,
partner, director, principal, consultant, agent or otherwise with, or have any
financial interest in any company or business entity of any kind (or any direct
or indirect parent or subsidiary thereof) engaged directly or indirectly in the
design, manufacture, distribution or sale (or any other activity related
thereto) of workshoes or workboots, whether or not protective, within or into
the continental United States, Canada, Mexico or Puerto Rico; (B) solicit or
encourage any customer or supplier of Holdings or the Company or any of their
Subsidiaries
-9-
<PAGE>
to terminate or otherwise alter its relationship with Holdings, the Company or
any of their Subsidiaries; or (C) directly or indirectly, recruit or otherwise
seek to induce any employee or agent of Holdings or the Company or any of their
Subsidiaries to terminate or otherwise alter his or her employment or agency or
violate any agreement with Holdings, the Company or any of their Subsidiaries.
Notwithstanding the foregoing, ownership of not to exceed five percent of the
voting stock of any publicly held corporation shall not, of itself, constitute a
violation of this Section 7. In the event that Holdings or the Company exercises
its rights under this Section 7 to enjoin or otherwise prevent the Executive's
employment within the year immediately following the later of the Date of
Termination and the date of cessation of payment of post Date of Termination
payments based upon Salary under Sections 9.2 or 9.4, Holdings or the Company
shall pay the Executive at an annual rate equal to the annual Salary that the
Executive would have received during the period described below (assuming for
these purposes that notice would be given by Holdings pursuant to Section 3.2
such that Section 4.1(b) would apply as of February 1, 1999) in equal monthly
installments for each month (but never more than 12) in which his employment is
so enjoined or prevented, reduced by the amount of any post Date of Termination
payments based upon Salary made under Sections 9.2 or 9.4; provided, however,
-------- -------
that neither Holdings nor the Company will be obligated to pay such amounts in
the event that the Executive has been terminated for Cause pursuant to Section
8.4 or in the event that the Executive has terminated his own employment other
than for Good Reason.
After the Non Competition Period End Date, the taking by the Executive of
any action or actions which, if taken prior to the Non Competition Period End
Date, would have given rise to a breach or violation of this Section 7, shall
relieve Holdings and the Company from any
-10-
<PAGE>
obligation to make subsequent payments, or provide subsequent benefits, pursuant
to this Agreement in respect of participation in any group medical, hospital or
life insurance plans or policies.
8. TERMINATION.
8.1 Death. The Executive's employment hereunder shall terminate upon his
-----
death.
8.2 Incapacity. If as a result of the Executive's incapacity due to
----------
physical or mental illness or otherwise, which incapacity has been certified by
a competent physician, the Executive shall for six consecutive months during the
term of this Agreement have been unable to perform satisfactorily all of his
duties hereunder on a full-time basis, Holdings and the Company may terminate
the Executive's employment hereunder by written notice to the Executive. The
Executive agrees, upon reasonable request by Holdings or the Company from time
to time and at its expense, promptly to submit to examination by a physician
selected by Holdings or the Company for purposes of obtaining the certification
required by the preceding sentence, such examination to be of such scope and to
include without limitation such follow-up visits for additional examination,
testing and so forth, as such physician in his or her professional judgment
shall deem reasonably necessary in order to reach a determination as to whether
the Executive is so incapacitated; provided, however, that the Executive shall
-------- --------
not be required to submit to more than two such examinations during any period
of twelve consecutive months.
8.3 Termination by the Executive. The Executive may terminate his
----------------------------
employment hereunder upon thirty days' prior written notice to Holdings and the
Company for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean (i) a reduction in the Executive's Salary or base amount of Bonus other
than as provided herein, (ii) material diminution of any of
-11-
<PAGE>
his positions, authority, duties or responsibilities so as to be inconsistent
with his positions hereunder, (iii) any material failure or refusal by Holdings
or the Company to perform and discharge its obligations hereunder, or (iv) any
willful action by Holdings or the Company that is materially inconsistent with
the terms of this Agreement.
8.4 Cause. Holdings and the Company may terminate the Executive's
-----
employment hereunder for Cause by written notice to the Executive. For the
purposes of this Agreement, Holdings and the Company shall have "Cause" to
terminate the Executive's employment hereunder upon the Executive's (i) material
failure or refusal to perform and discharge his duties and responsibilities
hereunder, (ii) willful action that is materially inconsistent with the terms
hereof, (iii) material breach of his fiduciary duties as an officer or member of
the Board of Directors of Holdings, the Company or any of their Subsidiaries, or
(iv) conviction of a felony or any other crime involving the personal dishonesty
or moral turpitude of the Executive which in either case materially and
adversely reflects on Holdings, the Company or any of their Subsidiaries.
8.5 Termination by Holdings and the Company Other Than for Cause.
------------------------------------------------------------
Holdings and the Company may terminate the Executive's employment hereunder
other than for Cause at any time upon thirty days' prior written notice to the
Executive.
8.6 Date of Termination; Term of Employment. The term "Date of
---------------------------------------
Termination" shall mean the earlier of (A) the Expiration Date or (B) if the
Executive's employment is terminated (i) by his death, the date of his death, or
(ii) for any other reason, the date on which such termination is to be effective
pursuant to the notice of termination given hereunder by the party terminating
the employment relationship. For all purposes of this Agreement, references to
the "term" of the Executive's employment hereunder shall mean the period
commencing on the date of this
-12-
<PAGE>
Agreement and ending on the Date of Termination.
9. COMPENSATION UPON TERMINATION.
9.1 Death. Notwithstanding any other provision of this Agreement, if the
-----
Executive's employment shall be terminated by reason of his death, Holdings
shall pay, or cause the Company to pay, to his surviving spouse, or, if he is
not survived by a spouse, to his estate, an amount equal to his full Salary
through the end of the month in which his death occurs at the rate in effect at
the time of his death, plus a pro rata portion (to the date of death) of any
Bonus for the then current fiscal year (to be paid at the time when such Bonus
would normally be paid) and prompt reimbursement of all expenses incurred prior
to his date of death reimbursable under Sections 4.3 or 4.4.
In addition, if the Executive is survived by his spouse, Holdings shall
pay, or cause the Company to pay to his surviving spouse, in substantially equal
monthly installments an amount equal to the Executive's annual Salary that the
Executive would have received (assuming for these purposes that notice would be
given by Holdings pursuant to Section 3.2 such that Section 4.1(b) would apply
as of February 1, 1999) during the period beginning with the month following the
Executive's death and ending on the last day of the month in which he would have
attained age 62. Furthermore, Holdings shall, or cause the Company to, continue
to provide the Executive's surviving spouse, during the period beginning on the
Executive's death and ending on her 65th birthday, coverage under all group
medical and hospital plans or policies maintained by Holdings or the Company in
which the Executive would have been entitled to participate under Appendix B had
the Executive been employed hereunder during such period.
9.2 Incapacity. Notwithstanding any other provision of this Agreement, if
----------
the
-13-
<PAGE>
Executive's employment shall be terminated by reason of his incapacity, Holdings
shall pay, or cause the Company to pay, the Executive an amount equal to his
full Salary through the end of the month in which the Date of Termination
occurs, at the rate in effect at the time the notice of termination is given as
provided under Section 8.2, plus a pro rata portion (to the Date of Termination)
of any Bonus for the then current fiscal year (to be paid at the time when such
Bonus would normally be paid). Holdings shall also pay, or cause the Company to
pay, to the Executive prompt reimbursement of all expenses incurred prior to the
Date of Termination reimbursable under Sections 4.3 and 4.4. In addition, during
the period following the end of the month in which the Date of Termination
occurs and ending on the earlier of the date of his death and his 65th birthday,
Holdings shall pay, or cause the Company to pay, in substantially equal monthly
installments, to the Executive an amount equal to the difference between the sum
of (i) the amounts the Executive receives with respect to such period under
disability insurance policies owned by Holdings and the Company and Social
Security disability benefits, and (ii) the amount equal to the annual Salary
that the Executive would have received (assuming for these purposes that notice
would be given by Holdings pursuant to Section 3.2 such that Section 4.1(b)
would apply as of February 1, 1999) during such period had the Executive been
employed hereunder during such period. Further, Holdings shall, or shall cause
the Company to, continue to provide the Executive, during the period between his
Date of Termination and his 65th birthday, coverage under all group medical and
hospital and life insurance plans or policies maintained by Holdings or the
Company in which the Executive would have been entitled to participate under
Appendix B had the Executive been employed hereunder during such period. If the
Executive shall die after his termination by reason of incapacity, but prior to
his 65th birthday, and is survived by his
-14-
<PAGE>
spouse, Holdings shall, or cause the Company to, continue to provide the
Executive's surviving spouse, during the period beginning on the Executive's
death and ending on her 65th birthday, coverage under all group medical and
hospitalization plans and policies maintained by Holdings or the Company in
which the Executive was entitled to participate on the date of his death. The
obligations of Holdings and the Company under this Section 9.2 after the Date of
Termination to pay or cause to be paid any amount, or provide or cause to be
provided any benefit, are subject to the performance by the Executive of his
obligations under Sections 6 and 7.
9.3 Cause. Notwithstanding any other provision of this Agreement, if
-----
Holdings or the Company shall terminate the Executive's employment for Cause,
neither Holdings nor the Company nor any of this Subsidiaries or Affiliates
shall have any further obligations to the Executive under this Agreement;
provided, however, that Holdings shall pay, or cause the Company to pay, to the
- - -------- --------
Executive his full Salary through the Date of Termination at the rate in effect
at the time notice of termination is given and prompt reimbursement of all
expenses incurred prior to the Date of Termination reimbursable under Sections
4.3 and 4.4. The obligations of Holdings and the Company under this Section 9.3
after the Date of Termination to pay or cause to be paid any amount, or provide
or cause to be provided any benefit, are subject to the performance by the
Executive of his obligations under Sections 6 and 7.
9.4 Good Reason or Other Termination. If Holdings and the Company shall
--------------------------------
terminate the Executive's employment pursuant to Section 8.5 or if the Executive
shall termination his own employment for Good Reason in accordance with Section
8.3, then Holdings shall pay, or cause the Company to pay, to the Executive his
Salary through the Date of Termination at the rate in effect at the time notice
of termination is given, plus a pro-rata portion (to the Date of
-15-
<PAGE>
Termination) of any Bonus for the then current fiscal year (to be paid at the
time when such Bonus would normally be paid). Holdings shall also pay, or cause
the Company to pay, to the Executive prompt reimbursement of all expenses
incurred prior to the Date of Termination reimbursable under Sections 4.3 and
4.4. Further, Holdings shall, or shall cause the Company to, continue to provide
the Executive, during the period between his Date of Termination and his 65th
birthday, coverage under all group medical and hospital plans or policies
maintained by Holdings or the Company in which the Executive would have been
entitled to participate under Appendix B had the Executive been employed
hereunder during such period. If the Executive shall die after his termination
pursuant to Sections 8.3 or 8.5 but prior to his 65th birthday, and is survived
by his spouse, then Holdings shall, or cause the Company to, continue to provide
the Executive's surviving spouse, during the period beginning on the Executive's
death and ending on her 65th birthday, coverage under all group medical and
hospitalization plans and policies maintained by Holdings or the Company in
which the Executive was entitled to participate on the date of his death. In
addition, in lieu of any further payments to the Executive for periods
subsequent to the Date of Termination, Holdings shall, as liquidated damages, in
lieu of any severance pay, pay, or cause the Company to pay, to the Executive,
in substantially equal monthly installments, from the Date of Termination to the
Expiration Date, an amount equal to the annual Salary that the Executive would
have received (assuming for these purposes that notice would be given by
Holdings pursuant to Section 3.2 such that Section 4.1(b) would apply as of
February 1, 1999) during such period had the Executive been employed hereunder
during such period. The obligations of the Company under this Section 9.4 after
the Date of Termination to pay or cause to be paid any amount, or provide or
cause to be provided any benefit, are subject to the
-16-
<PAGE>
performance by the Executive, at all times on or prior to the Expiration Date,
of his obligations under Sections 6 and 7.
Further, upon termination of employment pursuant to Sections 8.3 or 8.5 all
non-vested stock options awarded to the Executive by Holdings or the Company on
or before the Date of Termination which have not thereto lapsed shall become
fully vested and nonforfeitable as of the Date of Termination; provided,
--------
however, that if any non-vested stock options are subject to future performance
- - -------
criteria, such non-vested options shall become vested only if such performance
criteria are satisfied in future periods following the Executive's Date of
Termination.
9.5 Post-Termination Obligations Generally. (a) Subject to Section
--------------------------------------
9.5(b), on and after the Expiration Date, Holdings and the Company shall have
the following exclusive obligations to the Executive (in addition to the
obligation to pay all amounts previously due and payable hereunder):
(i) On the Expiration Date, Holdings or the Company, as applicable,
will transfer ownership to the Executive of (A) all of Executive's personal
furniture and equipment in the Company's offices at 130 Main Street, Penn
Yan, New York, (B) Executive's country club deposit at Bonita Bay Country
Club and (C) a Company owned or leased car to be chosen by the Executive;
(ii) From January 1, 2002 and thereafter, Executive will be entitled
to (i) group medical and hospital insurance covering the Executive, his
spouse and dependents in accordance with the Company's then current plan
and practice which such coverage shall be provided until the earlier of the
Executive's resignation as a director of the Company and Holdings and the
date on which Executive no longer holds any equity interests in the
-17-
<PAGE>
Company or Holdings and (ii) appropriate and customary directors fees and
expenses (in accordance with the policies of Holdings and the Company for
directors generally) for so long as the Executive is a member of the Board
of Directors of the Company or Holdings; and
(iii) From and after January 1, 2002, upon the Executive's request,
Holdings will cause the Company to make available to the Executive loans in
amounts up to $125,000 per fiscal quarter with a maximum aggregate amount
equal to 100% of the fair market value of the vested options to purchase
common stock of Holdings and the Company (and any shares of stock issuable
or issued upon exercise thereof) then held by the Executive, with such fair
market value to be determined by the good faith judgment of the Board of
Directors of Holdings; provided, however, that such maximum aggregate
-------- -------
amount shall in no event exceed (i) $1,800,000 plus (ii) $200,000 times a
----
fraction, the numerator of which is 550 minus the number of shares of stock
-----
of Holdings purchased by Fenway Capital Partners, L.P. pursuant to Section
8.3 of the Stockholders Agreement dated the date hereof between Holdings
and certain stockholders of Holdings (the "Stockholders Agreement") and the
denominator of which is 550. The Executive's obligation to repay each such
quarterly loan will be evidenced by a secured note in the principal amount
of such loan, substantiality in the form set forth in Appendix D (each, a
"Secured Note"). Executive's obligations under such Secured Notes will be
secured by a pledge of the Executive's options to purchase common stock of
Holdings and the Company (and any shares of stock issuable or issued upon
exercise thereof) pursuant to a security agreement substantially in the
form set forth in Appendix E.
-18-
<PAGE>
The obligations of Holdings and the Company under this Section 9.5(a) after
the Expiration Date to pay or cause to be paid any amount, or provide or cause
to be provided any benefit, are subject to the performance by the Executive of
his obligations under Sections 6 and 7.
(b) In the event of the termination of the Executive's employment prior
to the Expiration Date, the provisions of Section 9.5(a) shall not apply and
neither Holdings nor the Company shall have any obligation to the Executive nor
his surviving spouse except as otherwise specifically provided in Sections 9.1,
9.2, 9.3 and 9.4, and performance by Holdings and the Company thereof shall
constitute full settlement of any claim that the Executive may have against
Holdings, the Company or any of their directors, officers, agents, Subsidiaries
or affiliates, or against any successor of Iron Age or Holdings, on account of
such termination.
10. WITHHOLDING; PRO-RATIONS.
All payments made by Holdings or the Company under this Agreement shall be
reduced by the amount of any tax or other amounts required to be withheld by
Holdings or the Company under applicable legal requirements. In the event the
provisions hereof require the pro-ration of any Bonus for any fiscal year, such
pro-ration shall be made by determining the Bonus that would have been payable
had the Executive been employed hereunder throughout such fiscal year and
multiplying such Bonus by a fraction, the numerator of which shall be the number
of days elapsed from the first day of such fiscal year through the date as of
which such pro-ration is to be made and the denominator of which shall be three
hundred and sixty-five.
11. NOTICES.
For all purposes of this Agreement, notices and all other communications to
either party provided for in this Agreement shall be in writing and shall be
deemed to have been duly given
-19-
<PAGE>
when delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed, in the case of Holdings and the
Company, to them at Robinson Plaza Three, Suite 400, Pittsburgh, Pennsylvania
15205, Attention: Corporate Secretary, with a copy to Fenway Partners, Inc., 152
West 57th Street, New York, New York, 10019, Attention: Andrea Geisser, or, in
the case of the Executive, to the Executive at 506 Christopher Circle,
Pittsburgh, Pennsylvania 15205, or to such other address as either party shall
designate by giving like notice of such change to the other party.
12. INDEMNIFICATION.
Holdings and the Company shall indemnify, defend and hold the Executive
harmless to the fullest extent permitted by applicable law in connection with
any claim, action, suit, investigation or proceeding arising out of or relating
to performance by the Executive of services for, or action of the Executive as a
Director, officer or employee of, Holdings or the Company or any of their
Subsidiaries, or of any other company or business organization at the request of
Holdings. Expenses incurred by the Executive in defending a claim, action, suit
or investigation or criminal proceeding shall be paid by Holdings or the Company
in advance of the final disposition thereof upon the receipt by Holdings or the
Company of an undertaking by or on behalf of the Executive to repay said amount
unless it shall ultimately be determined that the Executive is entitled to be
indemnified hereunder. The foregoing shall be in addition to any indemnification
rights the Executive may have by law, contract, charter, by-law or otherwise.
This Section 12 shall not apply to an action commenced between Holdings or the
Company and the Executive.
13. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit or the heirs
and personal
-20-
<PAGE>
representative of the Executive and the successors of each of Holdings and the
Company. Holdings and the Company shall each require any successor (whether
direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of property or stock, liquidation, or otherwise) to all or
substantially all their respective assets expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that Holdings
or the Company would be required to perform this Agreement if no such succession
had taken place. Regardless of whether such agreement is executed, this
Agreement shall be binding upon any successor of each of Holdings and the
Company in accordance with the operation of law and such successor shall be
deemed to be "Holdings" and the "Company" for purposes of this Agreement without
further action of any kind.
14. DISPUTE RESOLUTION.
(a) Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement or the breach thereof (including the arbitrability of any
controversy or claim), shall be settled by arbitration in accordance with the
internal laws of the State of Delaware by three arbitrators, one of whom shall
be appointed by the Board of Directors of Holdings, one by the Executive and the
third of whom shall be appointed by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association.
The arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, except with respect to the
selection of arbitrators which shall be as provided in this Section 14(a). The
cost of any arbitration proceeding hereunder shall be borne equally by Holdings
or the Company and the Executive. The award of the arbitrators shall be binding
upon the parties. Judgment upon the
-21-
<PAGE>
award (including without limitation equitable remedies) rendered by the
arbitrators may be entered in any court having jurisdiction thereof. The
foregoing arbitration proceedings may be commenced by any party by notice to the
other party. The parties hereby exclude any right of appeal to any court on the
merits of the dispute.
(b) Legal Expenses. In the event that it shall be necessary or desirable
--------------
for the Executive to retain legal counsel and/or incur other costs and expenses
in connection with the enforcement of any of his rights under this Agreement
except with respect to or related to Section 7, and provided that the Executive
substantially prevails in the enforcement of such rights, Holdings and the
Company shall pay (or the Executive shall be entitled to recover from Holdings
and the Company) the Executive's reasonable attorneys' fees not to exceed
$25,000 and court costs in connection with the enforcement of the Executive's
rights, including the enforcement of any arbitration award.
15. NO ASSIGNMENT.
Except as otherwise expressly provided herein, this Agreement is not
assignable by any party and no payment to be made hereunder shall be subject to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
other charge.
16. EXECUTION IN COUNTERPARTS.
This Agreement may be executed by the parties hereto in two or more
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall constitute one and the same instrument, and all signatures
need not appear on any one counterpart.
17. JURISDICTION AND GOVERNING LAW.
Subject to Section 14(a), jurisdiction over disputes with regard to this
Agreement shall be
-22-
<PAGE>
exclusively in the courts of the State of Delaware, and this Agreement shall be
construed and interpreted in accordance with and governed by the laws of the
State of Delaware, other than the conflict of laws provisions of such laws.
18. JOINT AND SEVERAL OBLIGATIONS; SURVIVAL.
Notwithstanding any provision of this Agreement to the contrary, Holdings
and the Company shall be jointly and severally liable to the Executive, his
surviving spouse, and Executive's heirs or personal representatives for all
payment obligations under this Agreement, including, without limitation, the
payment obligations under Sections 4, 9, 12 and 14. The provisions of this
Section 18 and Sections 4, 6, 7, 9, 10, 11, 12, 13, 14, 17 and 19 of this
Agreement shall survive the Termination Date of this Agreement to the extent
necessary or appropriate to effectuate the respective purposes of such
provisions.
19. NO MITIGATION REQUIRED.
The Executive shall not be required to mitigate damages or the amount of
any payment provided for under this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for under this Agreement
be reduced by any compensation earned by the Executive as the result of
employment by another employer or otherwise after the Date of Termination.
20. SEVERABILITY.
If any provision of this Agreement shall be adjudged by any arbitrator or
court of competent jurisdiction to be invalid or unenforceable for any reason,
such judgment shall not affect, impair or invalidate the remainder of this
Agreement.
In the event that any provision hereof would, under applicable law, be
invalid or
-23-
<PAGE>
unenforceable, such provision shall, to the extent permitted under applicable
law, be construed by modifying or limiting it so as to be valid and enforceable
to the maximum extent possible under applicable law.
21. MISCELLANEOUS.
No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is approved by the Board of Directors of
Holdings and agreed to in writing signed by the Executive and such officer as
may be specifically authorized by the Board of Directors of Holdings. No waiver
by either party hereto at any time of breach of, or compliance with, any
condition or provision of this Agreement to be performed by the other party
hereto shall be deemed a waiver of the same or similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The headings in this Agreement are for convenience
and reference only and shall not be construed as part of this Agreement or to
limit or otherwise affect the meaning hereof. The Executive acknowledges and
agrees that, because any legal remedies available to Holdings and the Company
may be inadequate in the event of the Executive's breach of, or other failure to
perform, any of the covenants and agreements set forth in Section 6 or 7,
Holdings and the Company may, in addition to obtaining any other remedy or
relief available to them (including without limitation damages at law), enforce
the provisions of said Section 6 or 7 by injunction and other equitable relief
without the posting of any bond.
22. ENTIRE AGREEMENT.
This Agreement, including the Appendices hereto, constitutes the entire
agreement between
-24-
<PAGE>
the parties hereto, and supersedes any and all prior communications, agreements
and understandings, written or oral, with respect to the terms and conditions of
the Executive's employment on and after the date hereof; provided, however, that
-------- -------
this Agreement shall not modify or otherwise affect the terms of the
Stockholders Agreement or the options listed on Appendix C hereof.
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands, under
seal, as of the date first above written.
IA HOLDINGS CORP.
By: /s/ Andrea Geisser
___________________________________
Title: Vice President
IRON AGE CORPORATION
By: /s/ J. Richard Lauver
___________________________________
Title: Secretary
EXECUTIVE
/s/ Donald R. Jensen
______________________________________
Donald R. Jensen
-26-
<PAGE>
APPENDIX A
----------
BONUS
-----
The Bonus with respect to each of the fiscal years set forth in the table
below shall be calculated and payable as hereinafter set forth. The Base Amount
of the Bonus for each such fiscal year shall be the amount set forth opposite
such fiscal year in the table below, subject to adjustment as hereinafter set
forth and to the prerogative of the Board of Directors of Holdings to increase
the Bonus or pay any additional bonus to which the Executive would not otherwise
be entitled hereunder in their sole discretion; provided, however, that the
-------- -------
Executive shall not be entitled to receive any Bonus hereunder with respect to
any fiscal year unless the Iron Age EBITDA for such fiscal year shall equal or
exceed an amount equal to 85% of the Target Amount as defined below.
<TABLE>
<CAPTION>
=======================================
FISCAL YEAR ENDING
ON THE LAST
SATURDAY IN JANUARY BASE AMOUNT
=======================================
<S> <C>
1998 $225,000
---------------------------------------
1999 $225,000
---------------------------------------
2000 To be determined
---------------------------------------
2001 To be determined
---------------------------------------
2002 To be determined
=======================================
</TABLE>
The Target Amount of Iron Age EBITDA for each fiscal year shall be the
amount of Iron Age EBITDA set forth in the annual budget prepared by management
and approved by the Board of Directors of Holdings for such fiscal year.
Unless Section 3.2(b) of the Employment Agreement is in effect beginning
February 1,
<PAGE>
1999, the Base Amount for the fiscal years ending in January of 2000, 2001 and
2002 shall be determined in good faith discussions between the Executive and the
Board of Directors of Holdings. In the event the parties are unable to agree on
the Base Amount, the Base Amount shall be $225,000.
In the event that the notice described in Section 3.2(a) of the Employment
Agreement is given by either party, the Base Amount for the fiscal years ending
in January of 2000, 2001 and 2002 shall be $100,000.
In the event that actual Iron Age EBITDA for any fiscal year shall exceed
an amount equal to 99% of the Target Amount for such fiscal year but be less
than an amount equal to 101% of the Target Amount for such fiscal year, the
Bonus with respect to such fiscal year shall be equal to the Base Amount. In
the event that actual Iron Age EBITDA for any fiscal year set forth in the table
above shall equal or exceed an amount equal to 101% of the Target Amount for
such fiscal year, the Bonus with respect to such fiscal year shall be equal to
the sum of (a) the Base Amount plus (b) 4% of the Base Amount for each 1% of
such Target Amount by which actual Iron Age EBITDA for such fiscal year shall
exceed such Target Amount. In the event that actual Iron Age EBITDA for any
fiscal year set forth in the table above shall be equal to or less than 99% of
the Target Amount for such fiscal year, the Bonus with respect to such fiscal
year shall be equal to the sum of (a) the Base Amount minus (b) 4% of the Base
Amount for each 1% of such Target Amount by which actual Iron Age EBITDA shall
be less than such Target Amount. In no event shall the Bonus with respect to any
fiscal year exceed an amount equal to the Executive's Salary for such fiscal
year, nor shall any Bonus be payable hereunder with respect to any fiscal year
unless the Iron Age EBITDA for such fiscal year shall equal or exceed an amount
equal to 85%
-2-
<PAGE>
of the Target Amount for such fiscal year.
Determinations of the amount of Iron Age EBITDA and all other matters in
connection with the Bonus shall be made in good faith by the Board of Directors
of Holdings and such determination, if made in good faith, shall be conclusive
and binding upon all the parties. In the event of any direct or indirect
acquisition by Holdings or any of its Subsidiaries of any business enterprise
(an "Acquired Business") for an aggregate purchase price in excess of
$2,000,000, whether by merger, consolidation, share exchange, sale or
acquisition of stock or assets or similar transaction, financed in whole or in
part, directly or indirectly, from or in anticipation of any part of the
proceeds of any indebtedness directly or indirectly incurred or to be incurred
or any equity or other securities directly or indirectly issued or to be issued
by Holdings or any of its Subsidiaries or Affiliates (an "Acquisition
Transaction"), the Executive agrees, if requested by Holdings, to make such
amendments and modifications hereto as may be necessary or appropriate to ensure
that the Executive's right to receive any Bonus hereunder depends upon the
results of operations of Holdings and its Specified Subsidiaries as of
immediately prior to such Acquisition Transaction on a stand alone basis,
without any augmentation or reduction by the operating results of any Acquired
Business as a result of such Acquisition Transaction.
For purposes hereof:
(i) "Specified Subsidiaries" shall mean the Subsidiaries of Holdings in
existence as of the date hereof.
(ii) "Iron Age EBITDA" shall mean, for any period, the sum, determined on
a consolidated basis, of (a) net income (or net loss) measured on a first-in
first-out method of accounting, (b) Interest Expense, (c) income tax expense,
(d) depreciation expense,
-3-
<PAGE>
(e) amortization expense, (f) extraordinary or unusual losses deducted in
calculating net income less extraordinary or unusual gains added in calculating
net income and non-cash expenses associated with any variable stock plan plus
the management fee paid under the Management Agreement dated February 26, 1997
between Iron Age and Fenway Partners, Inc. (g) fees and expenses incurred by
Holdings and the Company in connection with the Acquisition Transactions and (h)
directors fees and similar expenses in excess of $100,000 incurred by Holdings
at the direction of the members of the Board of Directors of Holdings
representing the majority stockholder of Holdings, in each case determined in
accordance with GAAP (as such term is defined in the Credit Agreement dated as
of the date hereof among the Company, Holdings and the banks named therein).
(iii) "Interest Expense" means, for any period, the amount by which (i)
interest expense (including the interest component on obligations under
capitalized leases but excluding (1) paid-in-kind interest, (2) commitment fees
paid to lenders and (3) amortization of original issue discount created upon the
issuance of debt), whether paid or accrued, on all debt of Holdings and its
Subsidiaries for such period, including, without limitation and without
duplication, (a) interest expense in respect of debt resulting from advances
under Iron Age's senior credit facility, (b) interest expense in respect of
subordinated debt (other than paid-in-kind interest) and (c) any net payment
payable in connection with currency or interest rate hedge agreements less any
----
net credits received in connection with such hedge agreements exceeds (ii)
interest income, whether paid or accrued, of Holdings and its Subsidiaries for
such period.
-4-
<PAGE>
APPENDIX B
----------
BENEFITS
--------
(a) Clubs: Country Club membership fees and dues not to
exceed an aggregate for all such fees and dues of
$10,000 annually.
(b) Automobiles: Use of a Cadillac, Lincoln Continental or other
similar suitable automobile, in each of
Pittsburgh, Pennsylvania and Penn Yan, New York,
plus all fuel, maintenance and insurance costs
thereof.
(c) Insurance: Participation in all group insurance arrangements
maintained by Holdings or Iron Age for their
respective senior executive officers as the same
may in each case be modified from time to time by
the Board of Directors of Holdings or Iron Age,
such arrangements to initially include the
following:
(i) Group disability insurance in accordance
with Iron Age current plan and practice.
(ii) Group term life insurance providing to the
Executive's beneficiaries an aggregate
death benefit of $800,000 in accordance
with Iron Age current plan and practice.
(iii) Group 24-hour risk insurance providing an
aggregate benefit to the Executive of
$1,000,000 in
<PAGE>
accordance with Iron Age current plan and
practice.
(iv) Group medical and hospital insurance
covering the Executive, his spouse and
dependents in accordance with Iron Age
current plan and practice.
-2-
<PAGE>
APPENDIX C
----------
STOCK OPTIONS
-------------
Series A ("Rollover") Options to purchase 6404.83 shares.
Series B ("Performance") Options to purchase a number of shares to be
determined.
<PAGE>
APPENDIX D
----------
FORM OF NOTE TO SECURE LOANS
----------------------------
[Attached]
<PAGE>
APPENDIX E
----------
PLEDGE AND SECURITY AGREEMENT
-----------------------------
[Attached]
<PAGE>
APPENDIX D
----------
SECURED PROMISSORY NOTE
([DATE])
FOR VALUE RECEIVED, the undersigned, Donald R. Jensen (the "Borrower"),
--------
hereby promises to pay to Iron Age Corporation, a Delaware corporation (the
"Company"), or to the legal holder of this Note at the time of payment, the
- - --------
principal sum of _____________ Dollars ($_________) in lawful money of the
United States of America. This Note shall not bear interest. The entire amount
of this Note, to the extent not theretofore prepaid as provided herein, shall be
repaid on the Maturity Date (as defined below). If the date set for any payment
or prepayment of principal hereof is a Saturday, Sunday or legal holiday, then
such payment or prepayment shall be made on the next preceding business day.
This Note has been delivered to evidence indebtedness of the Borrower to
the Company arising in connection with certain loans made to the Borrower
pursuant to the Employment Agreement, dated as of February 26, 1997 (the
"Employment Agreement"), among IA Holdings Corp. ("Holdings"), the Company (as
- - ---------------------
successor by merger to IAH Acquisition Corp.) and the Borrower, and this Note is
one of the "Secured Notes" of the Borrower referred to in Section 9.5(a)(iii) of
the Employment Agreement. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Employment Agreement.
Payment of this Note is secured pursuant to the terms of a Pledge Agreement,
dated as of the date hereof between the Borrower and the Company (the "Pledge
------
Agreement"), reference to which is made for a description of the collateral (the
- - ---------
"Collateral") provided thereby and the rights of the Company and any subsequent
----------
holder of this Note in respect of such collateral.
As used in this Note: (a) the term "Maturity Date" means the earliest of
-------------
(i) the closing of any public offering of shares of the Company registered under
the Securities Act of 1933, as amended, in connection with which the Borrower is
given an opportunity to sell shares having a value equal to or greater than the
amount of borrowings evidenced by this Note outstanding at the time of such
offering, and (ii) the first date on which a Liquidity Event (as defined below)
shall occur; and (b) the term "Liquidity Event" means any of the following: (i)
---------------
any sale of a majority of the capital stock or assets of the Company (including
without limitation a sale of a majority of the capital stock resulting from a
merger, corporate combination or similar transaction which triggers tag along
rights pursuant to the Stockholders Agreement
<PAGE>
dated as of February 26, 1997 among Holdings and certain stockholders of
Holdings (the "Stockholders Agreement") or in which take along rights are
exercised with respect to the Borrower pursuant to the Stockholders Agreement),
(ii) the exercise of any put right by the Borrower or his estate pursuant to the
Stockholders Agreement or (iii) any liquidation or winding-up of the Company or
distribution of a majority of the Company's assets; in each case on the day on
which the Borrower receives (or in the case of public offering on which the
Borrower had the opportunity to sell and receive but declined to do so) cash or
cash equivalents or freely tradable securities in an amount equal to or greater
than the principal amount of this Note then outstanding.
This Note is subject to the following further terms and conditions:
1. Mandatory Prepayments. If at any time the Borrower receives any
---------------------
proceeds from the sale by the Borrower of Collateral to anyone (including the
Company), the proceeds from such sale of Collateral shall be applied first to
the prepayment of the accrued and unpaid interest hereon and then to the unpaid
principal hereof. For purposes of this Section 1, the term "sale" in the
context of a sale of Collateral shall include, in addition to any direct sale of
Collateral, any transaction (including, without limitation, a merger,
consolidation or recapitalization) pursuant to which Collateral is converted
into a right to receive, in whole or partial exchange or substitution for
Collateral, cash or cash equivalents.
The right of the Borrower to receive proceeds upon the sale of Collateral
is subject to the prior right of the Company (or other holder of this Note) (i)
in the case of a sale of Collateral to the Company (or other holder of this
Note), in lieu of the Company (or such other holder) paying the proceeds from
such sale to the Borrower or his heirs, successors or permitted assigns to set
off against amounts owed under this Note an amount equal to the proceeds of such
sale, or (ii) in the case of a sale of Collateral to any other person or entity
(collectively, the "Transfer Parties"), in lieu of any of such Transfer Parties
----------------
paying the purchase price therefor to the Borrower or his heirs, successors or
permitted assigns, to direct such Transfer Parties to pay an amount equal to the
proceeds of such sale to the Company (or other holder of this Note) which shall
set off such amount against this Note.
Concurrently with any prepayment (including by set-off) of any portion of
this Note pursuant to this Section 1 or Section 2 hereof, the Company (or other
holder of this Note) shall make a notation of such payment hereon. If full
payment of this Note is made, this Note shall be canceled.
-2-
<PAGE>
If at any time, or from time to time, after the date hereof and following
the occurrence and during the continuance of an Event of Default (as hereinafter
defined), the Borrower shall receive or shall otherwise become entitled to
receive from the Company (or other holder of this Note) any cash payments, cash
dividends or other cash distributions in respect of any Collateral, then and in
each case, the Borrower or any of his heirs, successors or permitted assigns to
whom such distribution may be made shall, upon the receipt thereof, return to
the Company (or other holder of this Note) such payments, dividends and
distributions, and the Company (or other holder of this Note) shall, upon
receipt thereof, apply such amount to the prepayment of this Note in the manner
set forth in the first paragraph of this Section 1, and the Company (or other
holder of this Note) shall not be obligated to make any such cash payment, cash
dividend or other cash distribution not theretofore made to which the Borrower
or any of his heirs, successor or permitted assigns are otherwise entitled in
respect of their Collateral and may, in lieu of paying such amount to the
Borrower, set off the amount of such cash payment, cash dividend or other cash
distribution against this Note in the manner set forth in the third paragraph of
this Section 1.
2. Payment and Prepayment. All payments and prepayments of this Note
----------------------
shall be made to the Company or its order, or to the legal holder of this Note
or such holder's order, in lawful money of the United States of America at the
principal offices of the Company (or at such other place as the holder hereof
shall notify the Borrower in writing). The Borrower may, at his option, prepay
this Note in whole or in part at any time or from time to time without penalty
or premium. Upon final payment of this Note, the Note shall be surrendered for
cancellation. THE PLEDGE AGREEMENT REQUIRES PAYMENT OR PREPAYMENT OF ALL
OBLIGATIONS UNDER THIS NOTE AS A CONDITION PRECEDENT TO THE RELEASE OF, OR
TRANSFER OF THE BORROWER'S INTERESTS IN, THE COLLATERAL SUBJECT TO THE PLEDGE
AGREEMENT, ALL AS DESCRIBED MORE FULLY IN THE PLEDGE AGREEMENT.
3. Events of Default. Upon the occurrence of any of the following events
-----------------
("Events of Default"):
-----------------
(a) Failure to pay the principal of this Note, including any
prepayments required hereunder or under the Pledge Agreement, when due; or
(b) Failure of the Borrower to perform the Borrower's obligations
under the Pledge Agreement;
-3-
<PAGE>
then, and in any such event, the holder of this Note may declare, by notice of
default given to the Borrower, the entire principal amount of this Note to be
forthwith due and payable, whereupon the entire principal amount of this Note
outstanding shall become due and payable without presentment, demand, protest,
notice of dishonor and all other demands and notices of any kind, all of which
are hereby expressly waived. On and after the occurrence of an Event of
Default, the unpaid amount of the Note shall bear interest at a rate of ten
percent (10%) per annum. If an Event of Default shall occur hereunder, the
Borrower shall pay costs of collection, including reasonable attorneys' fees,
incurred by the holder in the enforcement hereof.
No delay or failure by the holder of this Note in the exercise of any right
or remedy shall constitute a waiver thereof, and no single or partial exercise
by the holder hereof of any right or remedy shall preclude other or future
exercise thereof or the exercise of any other right or remedy.
4. Miscellaneous.
-------------
(a) The provisions of this Note shall be governed by and
construed in accordance with the laws of the State of Delaware, without
regard to the conflicts of law rules thereof.
(b) All notices and other communications hereunder shall be in
writing and will be deemed to have been duly given if delivered or mailed
in accordance with the Employment Agreement.
(c) The headings contained in this Note are for reference
purposes only and shall not affect in any way the meaning or interpretation
of the provisions hereof.
-4-
<PAGE>
IN WITNESS WHEREOF, this Note has been duly executed and delivered by the
Borrower on the date first above written.
___________________________________
(Signature of Donald R. Jensen)
Witness
______________________
-5-
<PAGE>
Payments and Prepayments of Principal
for the
Secured Promissory Note of Donald R. Jensen
(original principal amount $____________)
<TABLE>
<CAPTION>
DATE AMOUNT OF BALANCE OF NOTATION MADE
PRINCIPAL PAID PRINCIPAL BY:
OR PREPAID UNPAID
- - --------------------------------------------------------------
<S> <C> <C> <C>
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
</TABLE>
-6-
<PAGE>
APPENDIX E
----------
PLEDGE AGREEMENT
----------------
PLEDGE AGREEMENT dated as of _________ __, ____ (the "Pledge Agreement"),
between Donald R. Jensen (the "Pledgor") and Iron Age Corporation, a Delaware
corporation (the "Company").
WITNESSETH
----------
WHEREAS, Iron Age Holdings Company, a Delaware corporation formerly named
IA Holdings Corp. and the ultimate parent of the Company (the "Parent"), and the
Company (as successor by merger to IAH Acquisition Corp. ) have entered into an
employment agreement, dated as of February 26, 1997 (the "Employment Agreement")
with the Pledgor pursuant to which, among other things, the Company has agreed
to issue Series A Options and Series B Options (as defined in the 1997 Stock
Option Plan (the "Plan") of the Parent) (such Series A Options and Series B
Options together with any shares of stock issuable or issued with respect
thereto referred to herein as the "Pledged Options"), to the Pledgor.
Capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to them in the Employment Agreement, and the Pledgor hereunder is the
"Executive" as such term is defined in the Employment Agreement;
WHEREAS, the Pledgor is delivering to the Company a duly executed Secured
Promissory Note (the "Note" and, together with any other such notes issued on,
before or after the date hereof in connection with loans made to the Pledgor
pursuant to the Employment Agreement, the "Notes") of the Pledgor in the
principal amount of $_________ dated as of the date hereof;
WHEREAS, the Pledgor wishes to grant further security and assurance to the
Company in order to secure the payment of the Notes and all other amounts
payable by the Pledgor thereunder or under this Pledge Agreement (including,
without limitation, any and all reasonable fees and expenses, including
reasonable legal fees and expenses, incurred by the Company in connection with
any exercise of its rights under the Notes or hereunder) (hereinafter
collectively referred to as the "Note Obligations") to pledge to the Company the
Pledged Options, all as more particularly described herein;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Pledge. As collateral security for the full and timely payment of the
------
Note Obligations, the Pledgor hereby delivers, deposits, pledges, transfers and
assigns to the Company, and creates in the Company a security interest in all of
the Pledgor's right, title and interest on and to, all Pledged Options (or
shares of Common Stock issued or issuable upon exercise thereof) and all
certificates evidencing the Pledged Options (or shares of Common Stock issued or
issuable upon exercise thereof) and other instruments or documents evidencing
the same now owned by the Pledgor and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Options or such shares.
The Pledged Options (together with any securities issued or issuable upon
exercise thereof and any other securities or property delivered to the Pledgor
pursuant to Section 2(b) hereof (the "Additional Securities")) are hereinafter
collectively referred to as the "Pledged Securities".
The Pledgor hereby delivers to the Company appropriate undated security
transfer powers duly executed in blank for the Pledged Securities set forth
above and will deliver appropriate undated security transfer powers duly
executed in blank for the Pledged Securities to be pledged hereunder from time
to time hereafter. The Pledgor further agrees, with respect to the Additional
Securities, to deliver written notice to each issuer of an Additional Security
of the pledge of such security to the Company.
2. Administration of Security. The following provisions shall govern the
--------------------------
administration of the Pledged Securities:
(a) So long as no Event of Default has occurred and is continuing (as
used herein, "Event of Default" shall mean the occurrence of any Event of
Default as defined in the Note), the Pledgor shall be entitled to act with
respect to the Pledged Securities in any manner not inconsistent with this
Pledge Agreement, the Employment Agreement, the Note Obligations or any document
or instrument delivered or to be delivered pursuant to or in connection with the
Employment Agreement, including surrender of the Pledged Securities for purposes
of exercising the options as provided in paragraph (b) below, and/or voting the
Pledged Securities and
-2-
<PAGE>
receiving all cash distributions thereon and giving consents, waivers and
ratifications in respect thereof.
(b) If while this Pledge Agreement is in effect, the Pledgor shall
become entitled to receive or shall receive any debt or equity security
certificate (including, without limitation, any certificates representing shares
of stock received in connection with the exercise of any Pledged Option, any
certificate representing a stock dividend or a distribution in connection with
any reclassification, increase or reduction of capital, or issued in connection
with any reorganization), option or right, whether as a dividend or distribution
in respect of, in substitution of, or in exchange for any Pledged Securities,
the Pledgor agrees to accept the same as the Company agent and to hold the same
in trust on behalf of and for the benefit of the Company and to deliver the same
forthwith to the Company in the exact form received, with the endorsement of the
Pledgor when necessary and/or appropriate undated security transfer powers duly
executed in blank, to be held by the Company, subject to the terms of this
Pledge Agreement, as additional collateral security for the Note Obligations.
Notwithstanding the foregoing, it is agreed that the Pledgor may exercise any
option or right received as contemplated in the preceding sentence, and the
Company will exercise any such option or right upon receipt of written
instructions to that effect and any required payments or documents from the
Pledgor, and the securities received upon such exercise of any such option or
right shall thereafter be held by the Pledgor or the Company as contemplated by
the preceding sentence.
(c) The Pledgor shall immediately upon request by the Company and in
confirmation of the security interests hereby created, execute and deliver to
the Company such further instruments, deeds, transfers, assurances and
agreements, in form and substance as the Company shall request, including any
financing statements and amendments thereto, or any other documents, as required
under applicable law to protect the security interests created hereunder.
(d) Subject to any sale by the Company or other disposition by the
Company of the Pledged Securities or other property pursuant to this Pledge
Agreement and subject to Sections 5 and 6 below, the Pledged Securities shall be
returned to the Pledgor upon payment in full of the Note Obligations.
3. Remedies in Case of an Event of Default.
---------------------------------------
(a) In case an Event of Default shall have occurred and be
continuing, the Company shall have in each case all of the remedies of a secured
party under the Delaware
-3-
<PAGE>
Uniform Commercial Code, and, without limiting the foregoing, shall have the
right, in its sole discretion, to sell, resell, assign and deliver all or, from
time to time, any part of the Pledged Securities, or any interest in or option
or right to purchase any part thereof, on any securities exchange on which the
Pledged Securities or any of them may be listed, at any private sale or at
public auction, with or without demand of performance or other demand,
advertisement or notice of the time or place of sale or adjournment thereof or
otherwise (except that the Company shall give ten days' notice to the Pledgor of
the time and place of any sale pursuant to this Section 3), for cash, on credit
or for other property, for immediate or future delivery, and for such price or
prices and on such terms as the Company shall, in its sole discretion,
determine, the Pledgor hereby waiving and releasing any and all right or equity
of redemption whether before or after sale hereunder. At any such sale the
Company may bid for and purchase the whole or any part of the Pledged Securities
so sold free from any such right or equity of redemption. The Company shall
apply the proceeds of any such sale first to the payment of all costs and
-----
expenses, including reasonable attorneys' fees, incurred by the Company in
enforcing its rights under this Pledge Agreement and second to the payment of
------
accrued and unpaid interest, if any, on the Notes and third to the payment of
-----
the unpaid principal of the Notes and all other unpaid Note Obligations, and the
Pledgor shall continue to be liable for any deficiency.
(b) The Pledgor recognizes that the Company may be unable to effect a
public sale of all or a part of the Pledged Securities by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), or in the rules and regulations promulgated thereunder or in
applicable state securities or "blue sky" laws, but may be compelled to resort
to one or more private sales to a restricted group of purchasers who will be
obliged to agree, among other things, to acquire the Pledged Securities for
their own account, for investment and not with a view to the distribution or
resale thereof. The Pledgor understands that private sales so made may be at
prices and on other terms less favorable to the seller than if the Pledged
Securities were sold at public sale, and agrees that the Company has no
obligation to delay the sale of the Pledged Securities for the period of time
necessary to permit the registration of the Pledged Securities for public sale
under the Securities Act and under applicable state securities or "blue sky"
laws. The Pledgor agrees that a private sale or sales made under the foregoing
circumstances shall be deemed to have been made in a commercially reasonable
manner.
(c) If any consent, approval or authorization of any state, municipal
or other governmental department, agency or authority should be necessary to
effectuate any sale or disposition by the Company pursuant to this Section 3 of
the Pledged Securities, the Pledgor will
-4-
<PAGE>
execute all such applications and other instruments as may be required in
connection with securing any such consent, approval or authorization, and will
otherwise use his best efforts to secure the same.
(d) Neither failure nor delay on the part of the Company to exercise
any right, remedy, power or privilege provided for herein or by statute or at
law or in equity shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.
4. Pledgor's Obligations Not Affected. The obligations of the Pledgor
----------------------------------
under this Pledge Agreement shall remain in full force and effect without regard
to, and shall not be impaired or affected by: (a) any subordination, amendment
or modification of or addition or supplement to the Employment Agreement or the
Note Obligations, or any assignment or transfer of any thereof; (b) any exercise
or non-exercise by the Company of any right, remedy, power or privilege under or
in respect of this Pledge Agreement, the Employment Agreement or the Note
Obligations, or any waiver of any such right, remedy, power or privilege; (c)
any waiver, consent, extension, indulgence or other action or inaction in
respect of this Pledge Agreement, the Employment Agreement or the Note
Obligations, or any assignment or transfer of any thereof; or (d) any
bankruptcy, insolvency, reorganization, arrangement, readjustment, composition,
liquidation or the like, of the Company, whether or not the Pledgor shall have
notice or knowledge of any of the foregoing.
5. No Disposition by Pledgor. The Pledgor will not sell, assign,
-------------------------
transfer or otherwise dispose of, grant any option with respect to, or mortgage,
pledge or otherwise encumber (collectively, a "Disposition") the Pledged
Securities or any interest therein.
6. Attorney-in-Fact. The Company is hereby appointed the attorney-in-
----------------
fact of the Pledgor for the purpose of carrying out the provisions of this
Pledge Agreement and taking any action and executing any instrument which the
Company reasonably may deem necessary or advisable to accomplish the purposes
hereof, including without limitation, the execution of the applications and
other instruments described in Section 3(c) hereof, which appointment as
attorney-in-fact is irrevocable as one coupled with an interest.
7. Termination. Upon payment in full of the principal of and accrued and
-----------
unpaid interest on the Note Obligations and upon the due performance of and
compliance with all the
-5-
<PAGE>
provisions of the Note Obligations, this Pledge Agreement shall terminate and
the Pledgor shall be entitled to the return of such of the Pledged Securities as
have not theretofore been sold, released pursuant to Sections 5 and 6 hereof or
otherwise applied pursuant to the provisions of this Pledge Agreement.
8. Notices. All notices or other communications required or permitted to
-------
be given hereunder shall be delivered as provided in the Employment Agreement.
9. Binding Effect, Successors and Assigns. This Pledge Agreement shall
--------------------------------------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns and nothing herein is intended or shall be
construed to give any other person any right, remedy or claim under, to or in
respect of this Pledge Agreement.
10. Miscellaneous. The Company and its assigns shall have no obligation
-------------
in respect of the Pledged Securities, except to hold and dispose of the same in
accordance with the terms of this Pledge Agreement. Neither this Pledge
Agreement nor any provision hereof may be amended, modified, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the amendment, modification, waiver, discharge or
termination is sought. The provisions of this Pledge Agreement shall be binding
upon the heirs, representatives, successors and permitted assigns of the
Pledgor. The captions in this Pledge Agreement are for convenience of reference
only and shall not define or limit the provisions hereof. This Pledge Agreement
shall be governed by and construed and enforced in accordance with the laws of
the State of Delaware, without regard to the conflicts of law rules thereof.
This Pledge Agreement may be executed simultaneously in several counterparts,
each of which is an original, but all of which together shall constitute one
instrument.
-6-
<PAGE>
In witness whereof, the parties hereto have caused this Pledge Agreement to
be executed and delivered as of the date first above written.
IRON AGE CORPORATION
By____________________________
Title:
PLEDGOR
______________________________
Donald R. Jensen
-7-
<PAGE>
EXHIBIT 10.28
EMPLOYMENT AGREEMENT
--------------------
This AGREEMENT is made this 20th day of November, 1995, between Iron Age
Holdings Corporation, a Delaware corporation ("Holdings"), Iron Age Corporation,
a Delaware corporation and wholly-owned subsidiary of Holdings ("Iron Age"), and
William J. Mills ("Executive").
RECITALS
--------
WHEREAS, the Executive has been employed for a number of years as Executive
Vice President of Holdings and Iron Age with increasing responsibilities; and
WHEREAS, the Executive, Holdings and Iron Age are mutually desirous that
such satisfactory employment relationship shall continue under the terms and
conditions hereinafter provided; and
WHEREAS, the execution and delivery of this Agreement have been duly
authorized by the Board of Directors of each of Holdings and Iron Age.
AGREEMENT
---------
NOW, THEREFORE, Holdings, Iron Age and the Executive, each intending to be
legally bound, hereby mutually covenant and agree as follows:
1. DEFINITIONS
Terms used and not otherwise defined herein (including without limitation
in any Appendix or Annex hereto) are used herein as defined in the Acquisition
Financing Agreement dated January 29, 1990 and as thereafter amended from time
to time and as in effect on the date hereof (the "Acquisition Financing
Agreement") among Holdings, Iron Age and the
<PAGE>
Purchasers named therein. As used herein, the term "Board of Directors" shall
mean the Board of Directors of Holdings.
2. EMPLOYMENT
2.1. Agreement. Holdings and Iron Age hereby agree to employ the
---------
Executive, and the Executive hereby agrees to serve each of Holdings and Iron
Age, in each case on the terms and conditions set forth herein.
2.2. Commencement and Expiration Date. The employment of the Executive by
--------------------------------
Holdings and Iron Age hereunder shall be for the period commencing on November
20, 1995 and expiring on January 30, 1999 (the "Expiration Date"), unless such
employment shall be [sic] have sooner terminated as hereinafter set forth. The
Expiration Date will be extended from year to year following the original
Expiration Date unless either party notifies the other party at least three
months prior to end of any Expiration Date, including any extended Expiration
Date, that he or it does not desire to extend the current Expiration Date for an
additional one year.
3. POSITION AND DUTIES
The Executive shall serve in accordance with the By-laws of Holdings and
Iron Age in the capacity of Executive Vice President of Holdings and Iron Age
and shall be accountable to and shall have such other powers, duties and
responsibilities as may from time to time be prescribed by the Chief Executive
Officer of Holdings and Iron Age.
The Executive shall perform and discharge, faithfully, diligently and
competently, such duties and responsibilities. The Executive shall devote all
his working time (reasonable sick
-2-
<PAGE>
leave and incapacity excepted) and best efforts to the business and affairs of
Holdings and Iron Age.
4. COMPENSATION
Subject to the performance by the Executive of his duties and
responsibilities to Holdings and Iron Age:
4.1. Base Salary. (a) Holdings shall, or shall cause Iron Age to, pay the
-----------
Executive during each year of his employment hereunder beginning November 20,
1995, a base Salary at the annual rate of $142,500.
(b) For purposes of this Agreement, "Salary" shall mean the annual rate of
the Executive's base Salary, as adjusted in accordance with paragraph 4.2, as in
effect from time to time.
(c) Salary will be payable in substantially equal bi-monthly installments.
Except as otherwise provided in this Agreement, Salary shall be pro-rated for
any period of service less than a full year or less than a full month.
4.2. Salary Adjustments. (a) The Executive's Salary as in effect from time
------------------
to time on the last day of April of each year shall be adjusted annually on May
1 of each year by the Chief Executive Officer of Holdings; provided, however,
that such adjustment shall not be less than the cost of living adjustment
described in (b) below. The Executive's Salary shall never be reduced below his
base Salary of $142,500 by operation of this paragraph 4.2.
(b) The cost of living adjustment in any Fiscal Year shall be based upon
the annual percentage increase in the Consumer Price Index-All Items ("CPI-U").
The percentage increase shall be based upon the difference between the CPI-U on
December 1 of the prior year
-3-
<PAGE>
and December 1 of the year immediately preceding the first day of each Fiscal
Year. The percentage increase shall then be multiplied by the Executive's Salary
as in effect immediately prior to the adjustment.
4.3. Bonus. For the fiscal year ending January 27, 1996 and each fiscal
-----
year thereafter, in each case during the term of the Executive's employment
hereunder, the Executive shall be entitled to receive, and Holdings shall pay,
or cause Iron Age to pay, to the Executive, in addition to Salary, a bonus
payment (the "Bonus") as determined pursuant to the plan adopted and set forth
and more particularly described on Appendix I. The Bonus with respect to each
fiscal year shall be payable promptly after Holdings sends audited financial
statements for such fiscal year to its stockholders, but not in any event later
than the one hundred and twentieth (120th) day following the end of such fiscal
year.
4.4. Expenses. During the term of his employment hereunder, Holdings shall
--------
pay, or shall cause Iron Age to pay, to the Executive prompt reimbursement for
all business expenses reasonably incurred by him on behalf of Holdings, Iron Age
or any of their Subsidiaries (in accordance with any policies and procedures
established by the Board of Directors from time to time for Holdings' senior
executive officers) in performing services hereunder, provided that the
Executive properly accounts therefor in accordance with Holdings' policies and
procedures.
4.5. Fringe Benefits. During the term of his employment hereunder, the
---------------
Executive shall be entitled to participate in or receive, and Holdings shall, or
shall cause Iron Age to provide, the benefits set forth in Appendix II.
-4-
<PAGE>
4.6. Vacations. During the term of his employment hereunder, the Executive
---------
shall be entitled to receive the number of vacation days in each calendar year
determined by the Board of Directors of Holdings from time to time for the
Executive (but not in any event fewer than three weeks) and shall also be
entitled to all holidays given by Iron Age to its employees.
5. OFFICES.
The Executive agrees to serve without additional compensation, if elected
or appointed thereto, in one or more additional positions as an officer or
director of Holdings or Iron Age or any of their Subsidiaries.
6. UNAUTHORIZED DISCLOSURE; INVENTIONS.
6.1. Unauthorized Disclosure. The Executive shall not, without the written
-----------------------
consent of the Board of Directors or a person duly authorized thereby, disclose
to any person, other than an employee or adviser of Holdings or Iron Age or any
of their Subsidiaries or Affiliates or other person to whom disclosure is in the
reasonable judgment of the Executive necessary or appropriate in connection with
the performance by the Executive of his duties as an executive officer of
Holdings or Iron Age or any of their Subsidiaries, any confidential or
proprietary information possessed by him; provided, however, that such
information shall not include any information known generally to the public
(other than as a result of unauthorized disclosure by the Executive) or which
becomes available to the Executive on a non-confidential basis from a source
other than Holdings or Iron Age or any of their Subsidiaries or Affiliates prior
to it becoming available to the Executive from Holdings or Iron Age or any of
their Subsidiaries or Affiliates, which source is not bound by a confidentiality
agreement with Holdings; and provided, further, that the Executive's duties
under this paragraph 6.1 shall not extend to any
-5-
<PAGE>
disclosure that may be required by law in connection with any judicial or
administrative proceeding or inquiry. The Executive understands and agrees that
this restriction shall continue to apply after his employment terminates,
regardless of the reason for such termination.
6.2. Proprietary Rights. Any and all inventions, discoveries,
------------------
developments, methods, processes, compositions, works, concepts and ideas
(whether or not patentable or copyrightable) conceived, made, developed, created
or reduced to practice by the Executive (whether at the request or suggestion of
Holdings or Iron Age or otherwise, whether alone or in conjunction with others,
and whether during regular hours of work or otherwise) during the period of his
employment by Holdings or Iron Age or any of their Subsidiaries (including
without limitation the period of his prior employment by Childs Corporation),
which may be directly or indirectly useful in, or relate to, the business,
ventures or other activities of or products manufactured or sold by Holdings or
Iron Age or any of their Subsidiaries or any business or products contemplated
by Holdings or Iron Age or any of their Subsidiaries (and known by the Executive
to be so contemplated) while the Executive is employed by the Holdings or Iron
Age or any of their Subsidiaries (collectively, "Proprietary Rights"), shall be
promptly and fully disclosed by the Executive to an appropriate executive
officer of Holdings and shall be Holdings' exclusive property as against the
Executive and his heirs and personal representatives, and the Executive hereby
assigns to Holdings his entire right, title and interest therein and shall
promptly deliver upon request to an appropriate executive officer of Holdings
all papers, drawings, models, data and other material relating to any of the
foregoing
-6-
<PAGE>
Proprietary Rights, conceived, made, developed, created or reduced to
practice by him as aforesaid. All copyrightable Proprietary Rights shall be
considered "works made for hire."
The Executive shall, upon Holdings' request and without any payment
therefor, execute any documents reasonably necessary or advisable in the opinion
of Holdings' counsel to assign, and confirm Holdings' title in, his entire
right, title and interest in the foregoing Proprietary Rights and to direct
issuance of patents or copyrights to Holdings with respect to such Proprietary
Rights as are Holdings' exclusive property as against the Executive and his
heirs and personal representatives under this paragraph or to vest in Holdings
title to such Proprietary Rights as against the Executive and his heirs and
personal representatives, the expense of securing any such patent or copyright,
however, to be borne by Holdings.
7. NON-COMPETITION.
The Executive agrees that during the term of his employment hereunder,
during the period in which the Executive is receiving post Date of Termination
payments based upon Salary under paragraphs 9.2 or 9.4 and for a period of one
year following the later of his Date of Termination and the date of cessation of
such post Date of Termination payments based upon Salary (the "Non Competition
Period End Date"), he will not, directly or indirectly, (A) own, manage,
operate, control or participate in any manner in the ownership, management,
operation or control of, or be connected as an officer, employee, partner,
director, principal, consultant, agent or otherwise with, or have any financial
interest in any company or business entity of any kind (or any direct or
indirect parent or subsidiary thereof) engaged directly or indirectly in the
design, manufacture, distribution or sale (or any other activity related
thereto) of workshoes or workboots, whether or not protective, within or into
the continental United
-7-
<PAGE>
States or Puerto Rico; (B) solicit or encourage any customer or supplier of
Holdings or Iron Age or any of their Subsidiaries to terminate or otherwise
alter its relationship with Holdings or Iron Age or any of their Subsidiaries;
or (C) directly or indirectly, recruit or otherwise seek to induce any employee
or agent of Holdings or Iron Age or any of their Subsidiaries to terminate or
otherwise alter his or her employment or agency or violate any agreement with
Holdings, Iron Age or any of their Subsidiaries. Notwithstanding the foregoing,
ownership of not to exceed five percent of the voting stock of any publicly held
corporation shall not, of itself, constitute a violation of this Section 7.
After the Non Competition Period End Date, the taking by the Executive of
any action or actions which, if taken prior to the Non Competition Period End
Date, would have given rise to a breach or violation of this paragraph 7, shall
relieve Holdings and Iron Age from any obligation to make subsequent payments,
or provide subsequent benefits, pursuant to this Agreement in respect of
participation in any group medical, hospital or life insurance plans or
policies.
8. TERMINATION.
8.1. Death. The Executive's employment hereunder shall terminate upon his
-----
death.
8.2. Incapacity. If as a result of the Executive's incapacity due to
----------
physical or mental illness or otherwise, which incapacity has been certified by
a competent physician, the Executive shall for six consecutive months during the
term of this Agreement have been unable to perform satisfactorily all of his
duties hereunder on a full-time basis, Holdings and Iron Age may terminate the
Executive's employment hereunder by written notice to the Executive. The
Executive agrees, upon reasonable request by Holdings or Iron Age from time to
time at its
-8-
<PAGE>
expense, promptly to submit to examination by a physician selected by Holdings
or Iron Age for purposes of obtaining the certification required by the
preceding sentence, such examination to be of such scope, and to include without
limitation such follow-up visits for additional examination, testing and so
forth, as such physician in his or her professional judgment shall deem
necessary in order to reach a determination as to whether the Executive is so
incapacitated; provided, however, that the Executive shall not be required to
submit more than two such examinations during any period of twelve consecutive
months.
8.3. Termination by the Executive. The Executive may terminate his
----------------------------
employment hereunder upon thirty days' prior written notice to Holdings and Iron
Age for Good Reason. For purposes of this Agreement, "Good Reason" shall mean
(i) a reduction in the Executive's Salary or Base Amount of Bonus as defined in
Appendix I, (ii) material diminution of any of his positions, authority, duties
or responsibilities so as to be inconsistent with his positions hereunder, (iii)
any material failure or refusal by Holdings or Iron Age to perform and discharge
its obligations hereunder, or (iv) any willful action by Holdings or Iron Age
that is materially inconsistent with the terms of this Agreement.
8.4. Cause. Holdings and Iron Age may terminate the Executive's employment
-----
hereunder for Cause by written notice to the Executive. For the purposes of
this Agreement, Holdings and Iron Age shall have "Cause" to terminate the
Executive's employment hereunder upon the Executive's (i) material failure or
refusal to perform and discharge, or material breach of, his duties and
responsibilities hereunder, (ii) material breach of his fiduciary duties as an
officer or member of the Board of Directors of Holdings, Iron Age or any of
their Subsidiaries, or (iii) conviction of a felony of any other crime involving
the personal
-9-
<PAGE>
dishonesty or moral turpitude of the Executive which in either case materially
and adversely reflects on Holdings, Iron Age or any of their Subsidiaries.
8.5. Termination by Holdings and Iron Age Other Than for Cause. Holdings
---------------------------------------------------------
and Iron Age may terminate the Executive's employment hereunder other than for
Cause at any time upon thirty days' prior written notice to the Executive.
8.6. Date of Termination; Term of Employment. The term "Date of
---------------------------------------
Termination" shall mean the earlier of (A) the Expiration Date as it may be
extended from time to time or (B) if the Executive's employment is terminated
(i) by his death, the date of his death, or (ii) for any other reason, the date
on which such termination is to be effective (which date may not be earlier than
the date of the notice of termination) pursuant to the notice of termination
given hereunder by the party terminating the employment relationship. For all
purposes of this Agreement, referenced to the "term" of the Executive's
employment hereunder shall mean the period commencing on November 20, 1995 and
ending on the Date of Termination.
9. COMPENSATION UPON TERMINATION.
9.1. Death. Notwithstanding any other provision of this Agreement, if the
-----
Executive's employment shall be terminated by reason of his death, Holdings
shall pay, or cause Iron Age to pay, to his surviving spouse, or, if he is not
survived by a spouse, to his estate, an amount equal to his full Salary through
the end of the month in which his death occurs at the rate in effect at the time
of his death, plus a pro rata portion (to the date of death) of any Bonus for
the then current fiscal year (to be paid at the time when such Bonus would
normally be paid) and prompt reimbursement of all expenses incurred prior to his
date of death reimbursable under paragraph 4.4 or Appendix II.
-10-
<PAGE>
In addition, Holdings shall, or cause Iron Age to, continue to provide the
Executive's surviving spouse, during the period beginning on the Executive's
death and ending on the earlier of the surviving spouse's 65th birthday or the
Expiration Date, coverage under all group medical and hospital plans or policies
maintained by Holdings or Iron Age in which the Executive would have been
entitled to participate under Appendix II had the Executive been employed
hereunder during such period.
9.2. Incapacity. Notwithstanding any other provision of this Agreement, if
----------
the Executive's employment shall be terminated by reason of his incapacity,
Holdings shall pay, or cause Iron Age to pay, the Executive an amount equal to
his full Salary through the end of the month in which the Date of Termination
occurs, at the rate in effect at the time the notice of termination is given as
provided under paragraph 8.2, plus a pro rata portion (to the Date of
Termination) of any Bonus for the then current fiscal year (to be paid at the
time when such Bonus would normally be paid). Holdings shall also pay, or cause
Iron Age to pay, to the Executive prompt reimbursement under paragraph 4.4
hereof and Appendix II. In addition, Holdings shall, or shall cause Iron Age
to, continue to provide the Executive, during the period between his Date of
Termination and the Expiration Date, coverage under all group medical and
hospital plans and policies and, to the extent coverage is available without
additional premiums, under all life insurance plans and policies maintained by
Holdings or Iron Age in which the Executive would have been entitled to
participate under Appendix II had the Executive been employed hereunder during
such period. The obligations of Holdings and Iron Age under this paragraph 9.2
after the Date of Termination to pay or cause to be paid any
-11-
<PAGE>
amount, or provide or cause to be provided any benefit, are subject to the
performance by the Executive of his obligations under Sections 6 and 7.
9.3. Cause. Notwithstanding any other provision of this Agreement, if
-----
Holdings or Iron Age shall terminate the Executive's employment for Cause,
neither Holdings nor Iron Age nor any of their Subsidiaries or Affiliates shall
have any further obligations to the Executive under this Agreement; provided,
however, that Holdings shall pay, or cause Iron Age to pay, to the Executive his
full Salary through the Date of Termination at the rate in effect at the time
notice of termination is given and prompt reimbursement of all expenses incurred
prior to the Date of Termination reimbursable under paragraph 4.4 and Appendix
II. The obligations of Holdings and Iron Age under this paragraph 9.3 after the
Date of Termination to pay or cause to be paid any amount, or provide or cause
to be provided any benefit, are subject to the performance by the Executive of
his obligations under Sections 6 and 7.
9.4. Good Reason or Other Termination. If Holdings and Iron Age shall
--------------------------------
terminate the Executive's employment pursuant to paragraph 8.5 or if the
Executive shall terminate his employment for Good Reason in accordance with
paragraph 8.3, then Holdings shall pay, or cause Iron Age to pay, to the
Executive his Salary through the Date of Termination at the rate in effect at
the time notice of termination is given, plus a pro-rata portion (to the Date of
Termination) of any Bonus for the then current fiscal year (to be paid at the
time when such Bonus would normally be paid). Holdings shall also pay, or cause
Iron Age to pay, to the Executive prompt reimbursement of all expenses incurred
prior to the Date of Termination reimbursable under paragraph 4.4 and Appendix
II. Further, Holdings shall, or shall cause Iron Age to, continue to provide
the Executive, during the period between his Date of
-12-
<PAGE>
Termination and the first anniversary of his Date of Termination, coverage under
all group medical, hospital and life insurance plans and policies maintained by
Holdings or Iron Age in which the Executive would have been entitled to
participate under Appendix II had the Executive been employed hereunder during
such period. In addition, in lieu of any further payments to the Executive for
periods subsequent to the Date of Termination, Holdings shall, as liquidated
damages, in lieu of any severance pay, pay, or cause Iron Age to pay, to the
Executive, in substantially equal monthly installments, for a period of eighteen
months from the Date of Termination, an amount equal to the annual Salary that
the Executive would have received (at the rate in effect at the time the notice
of termination is given) during such period had the Executive been employed
hereunder during such period. The obligations of the Company under this
paragraph 9.4 after the Date of Termination to pay or cause to be paid any
amount, or provide or cause to be provided any benefit, are subject to the
performance by the Executive, at all times on or prior to the Expiration Date,
of his obligations under Sections 6 and 7.
9.5. Post-Termination Obligations Generally. Neither Holdings nor Iron Age
--------------------------------------
shall have any further obligations to the Executive following expiration of the
term of this Agreement and payment of all amounts due and payable hereunder on
or prior to the expiration of the term of this Agreement. In the event of the
termination of the Executive's employment other than by expiration of the term
of this Agreement, neither Holdings nor Iron Age shall have any obligation to
the Executive nor his surviving spouse except as otherwise specifically provided
in this Section 9, and performance by Holdings and Iron Age thereof shall
constitute full settlement of any claim that the Executive may have against
Holdings, Iron Age or any of
-13-
<PAGE>
their directors, officers, agents, Subsidiaries or Affiliates, or against any
Purchaser or any Affiliate of any Purchaser, on account of such termination.
10. WITHHOLDING; PRO-RATIONS.
All payments made by Holdings or Iron Age under this Agreement shall be
reduced by the amount of any tax or other amounts required to be withheld by
Holdings or Iron Age under applicable legal requirements. In the event the
provisions hereof require the pro-ration of any Bonus for any fiscal year, such
pro-ration shall be made by determining the Bonus that would have been payable
had the Executive been employed hereunder throughout such fiscal year and
multiplying such Bonus by a fraction, the numerator of which shall be the number
of days elapsed from the first day of such fiscal year through the date as of
which such pro-ration is to be made and the denominator of which shall be three
hundred and sixty-five.
11. NOTICES.
For all purposes of this Agreement, notices and all other communications to
either party provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed, in the case of Holdings and Iron Age, to them at Robinson Plaza
Three, Suite 400, Pittsburgh, Pennsylvania 15205, Attention: Corporate
Secretary, with a copy to Butler Capital Corporation, 767 Fifth Avenue, New
York, New York, 10153, Attention: Elaine Gilde, or, in the case of the
Executive, to the Executive at 2451 Wedgewood Drive, Wexford, PA 15090, or to
such other address as either party shall designate by giving like notice of such
change to the other party.
-14-
<PAGE>
12. INDEMNIFICATION.
Holdings and Iron Age shall indemnify, defend and hold the Executive
harmless to the fullest extent permitted by applicable law in connection with
any claim, action, suit, investigation or proceeding arising out of or relating
to performance by the Executive of services for, or action of the Executive as a
Director, officer or employee of Holdings or Iron Age or any of their
Subsidiaries, or of any other company or business organization at the request of
Holdings. Expenses incurred by the Executive in defending a claim, action, suit
or investigation or criminal proceeding shall be paid by Holdings or Iron Age in
advance of the final disposition thereof upon the receipt by Holdings or Iron
Age of an undertaking by or on behalf of the Executive to repay said amount
unless it shall ultimately be determined that the Executive is entitled to be
indemnified hereunder. The foregoing shall be in addition to any
indemnification rights the Executive may have by law, contract, charter, by-law
or otherwise. This Section 12 shall not apply to an action commenced between
Holdings or Iron Age and the Executive.
13. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the heirs
and personal representative of the Executive and the successors of each of
Holdings and Iron Age. Holdings and Iron Age shall each require any successor
(whether direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of property or stock, liquidation, or otherwise) to all or
substantially all their respective assets expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that Holdings
or Iron Age would be required to perform this Agreement if no such succession
had taken place.
-15-
<PAGE>
Regardless of whether such agreement is executed, this Agreement shall be
binding upon any successor of each of Holdings and Iron Age in accordance with
the operation of law and such successor shall be deemed to be "Holdings" and
"Iron Age" for purposes of this Agreement without further action of any kind.
14. DISPUTE RESOLUTION.
(a) Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement or the breach thereof (including the arbitrability of any
controversy or claim), shall be settled by arbitration in accordance with the
internal laws of the Commonwealth of Pennsylvania by three arbitrators, one of
whom shall be appointed by the Board of Directors, one by the Executive and the
third of whom shall be appointed by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association.
The arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, except with respect to the
selection of arbitrators which shall be as provided in this paragraph 14(a).
The cost of any arbitration proceeding hereunder shall be borne equally by
Holdings or Iron Age and the Executive. The award of the arbitrators shall be
binding upon the parties. Judgment upon the award (including without limitation
equitable remedies) rendered by the arbitrators may be entered in any court
having jurisdiction thereof. The foregoing arbitration proceedings may be
commenced by any party by notice to the other party. The parties hereby exclude
any right of appeal to any court on the merits of the dispute. Notwithstanding
the foregoing, any party shall have the right to seek preliminary or temporary
equitable relief in
-16-
<PAGE>
any court in the Commonwealth of Pennsylvania prior to the outcome of
arbitration proceedings.
(b) Legal Expenses. In the event that it shall be necessary or desirable
--------------
for the Executive to retain legal counsel and/or incur other costs and expenses
in connection with the enforcement of any of his rights under this Agreement
except with respect to or related to Section 7, and provided that the Executive
substantially prevails in the enforcement of such rights, Holdings and Iron Age
shall pay (or the Executive shall be entitled to recover from Holdings and Iron
Age) the Executive's reasonable attorneys' fees not to exceed $5,000 and court
costs in connection with the enforcement of the Executive's rights, including
the enforcement of any arbitration award.
15. NO ASSIGNMENT.
Except as otherwise expressly provided herein, this Agreement is not
assignable by any party and no payment to be made hereunder shall be subject to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
other charge.
16. EXECUTION IN COUNTERPARTS.
This Agreement may be executed by the parties hereto in two or more
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall constitute one and the same instrument, and all signatures
need not appear on any one counterpart.
-17-
<PAGE>
17. JURISDICTION AND GOVERNING LAW.
Subject to paragraph 14(a), jurisdiction over disputes with regard to this
Agreement shall be exclusively in the courts of the Commonwealth of
Pennsylvania, and this Agreement shall be construed and interpreted in
accordance with and governed by the laws of the Commonwealth of Pennsylvania,
other than the conflict of laws provisions of such laws.
18. JOINT AND SEVERAL OBLIGATIONS; SURVIVAL.
Notwithstanding any provision of this Agreement to the contrary, Holdings
and Iron Age shall be jointly and severally liable to the Executive, his
surviving spouse, and Executive's heirs or personal representatives for all
payment obligations under this Agreement, including, without limitation, the
payment obligations under Sections 4, 9, 12 and 14. The provisions of this
Section 18 and Sections 4, 6, 7, 9, 10, 11, 12, 13, 14 and 17 of this Agreement
shall survive the Termination Date of this Agreement to the extent necessary of
appropriate to effectuate the respective purposes of such provisions.
19. SEVERABILITY.
If any provision of this Agreement shall be adjudged by any arbitrator or
court of competent jurisdiction to be invalid or unenforceable for any reason,
such judgment shall not affect, impair or invalidate the remainder of this
Agreement.
In the event that any provision hereof would, under applicable law, be
invalid or unenforceable, such provision shall, to the extent permitted under
applicable law, be construed by modifying or limiting it so as to be valid and
enforceable to the maximum extent possible under applicable law.
-18-
<PAGE>
20. MISCELLANEOUS.
No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is approved by the Board of Directors and
agreed to in writing signed by the Executive and such officer as may be
specifically authorized by the Board of Directors. No waiver by either party
hereto at any time of breach of, or compliance with, any condition or provision
of this Agreement to be performed by the other party hereto shall be deemed a
waiver of the same or similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
The headings in this Agreement are for convenience and reference only and shall
not be construed as part of this Agreement or to limit or otherwise affect the
meaning hereof. The Executive acknowledges and agrees that, because Holdings'
and Iron Age's legal remedies may be inadequate in the event of a breach of, or
other failure to perform, any of the covenants and agreements set forth in
Section 6 or 7 by the Executive, Holdings and Iron Age may, in addition to
obtaining any other remedy or relief available to them (including without
limitation damages at law), enforce the provisions of said Section 6 or 7 by
injunction and other equitable relief without the posting of any bond.
21. ENTIRE AGREEMENT.
This Agreement, including the Appendices hereto, constitutes the entire
agreement between the parties hereto, and supersedes any and all prior
communications, agreements and understandings, written or oral, with respect to
the terms and conditions of the Executive's
-19-
<PAGE>
employment on and after the date hereof; provided, however, that this Agreement
shall not modify or otherwise affect the Stockholders Agreement or the
Executive's Stock Options.
IN WITNESS WHEREOF, the parties hereunto set their hands, under seal, as of
the date first above written.
WITNESS: EXECUTIVE:
/s/ J. Richard Lauver /s/ William J. Mills
- - ------------------------- -----------------------------
ATTEST: IRON AGE HOLDINGS CORPORATION
By:/s/ J. Richard Lauver By: /s/ Donald R. Jensen
- - ------------------------- --------------------------
Secretary President
ATTEST: IRON AGE CORPORATION
By:/s/ J. Richard Lauver By: /s/ Donald R. Jensen
- - ---------------------------- --------------------------
Secretary President
-20-
<PAGE>
APPENDIX I
----------
BONUS
-----
The Bonus with respect to each of the fiscal years during the Term of the
Employment Agreement shall be calculated and payable as hereinafter set forth.
The Base Amount of the Bonus for each such fiscal year shall be determined in
the sole discretion of the Chief Executive Officer of Holdings and the Board of
Directors; provided, however, that the Base Amount shall not be less than the
greater of (a) the Base Amount in effect for the preceding year or (b) $35,000.
Notwithstanding the foregoing, however, the Executive shall not be entitled to
receive any Bonus hereunder with respect to any fiscal year unless the Iron Age
Stand Alone Net Operating Income for such fiscal year shall equal or exceed an
amount equal to 85% of the Target Amount as defined below.
The Target Amount of Iron Age Stand Alone Net Operating Income for each
fiscal year shall be the amount of such Income as defined and approved by the
Board of Directors for such fiscal year.
In the event that actual Iron Age Stand Alone Net Operating Income for any
fiscal year shall exceed an amount equal to 99% of the Target Amount for such
fiscal year but be less than an amount equal to 101% of the Target Amount for
such fiscal year, the Bonus with respect to such fiscal year shall be equal to
the Base Amount. In the event that actual Iron Age Stand Alone Net Operating
Income for any fiscal year shall equal or exceed an amount equal to 101% of the
Target Amount for such fiscal year, the Bonus with respect to such fiscal year
-21-
<PAGE>
shall be equal to the sum of (a) the Base Amount plus (b) 4% of the Base Amount
for each 1% of such Target Amount by which actual Iron Age Stand Alone Net
Operating Income for such fiscal year shall exceed such Target Amount. In the
event that actual Iron Age Stand Alone Net Operating Income for any fiscal year
shall be equal to or less than 99% of the Target Amount for such fiscal year,
the Bonus with respect to such fiscal year shall be equal to the sum of (a) the
Base Amount minus (b) 4% of the Base Amount for each 1% of such Target Amount by
which actual Iron Age Stand Alone Net Operating Income shall be less than such
Target Amount. In no event shall the Bonus with respect to any fiscal year
exceed an amount equal to the Executive's Salary for such fiscal year, nor shall
any Bonus be payable hereunder with respect to any fiscal year unless the Iron
Age Stand Alone Net Operating Income for such fiscal year shall equal or exceed
an amount equal to 85% of the Target Amount for such fiscal year.
Determinations of the amount of Iron Age Stand Alone Net Operating Income
and all other matters in connection with the Bonus shall be made in good faith
by the Board of Directors and such determination, if made in good faith, shall
be conclusive and binding upon all the parties. In the event of any direct or
indirect acquisition by Holdings or any of its Subsidiaries of any business
enterprise (an "Acquired Business"), whether by merger, consolidation, share
exchange, sale or acquisition of stock or assets or similar transaction,
financed in whole or in part, directly or indirectly, from or in anticipation of
any part of the proceeds of any indebtedness directly or indirectly incurred or
to be incurred or any equity or other securities directly or indirectly issued
or to be issued by Holdings or any of its
-22-
<PAGE>
Subsidiaries or Affiliates (an "Acquisition Transaction"), the Executive agrees,
if requested by Holdings, to make such amendments and modifications hereto as
may be necessary or appropriate to ensure that the Executive's right to receive
any Bonus hereunder depends upon the results of operations of Holdings and the
Specified Subsidiaries as of immediately prior to such Acquisition Transaction
on a stand alone basis, without any augmentation or reduction by the operating
results of any Acquired Business as a result of such Acquisition Transaction.
-23-
<PAGE>
APPENDIX II
-----------
BENEFITS
--------
(a) Clubs: One Country Club membership fees and dues not to exceed an
aggregate for all such fees and dues of $5,000 annually.
(b) Automobiles: Use of a Lincoln Continental or other similar suitable
automobile, plus all fuel, maintenance and insurance costs
thereof.
(c) Insurance: Participation in the Iron Age Corporation Group Benefits
Plan and other arrangements maintained by Holdings or Iron
Age for their respective senior executive officers as the
same may in each case be modified from time to time by the
Board of Directors of Holdings, such arrangements to
initially include the following:
(i) Group disability insurance in accordance with Iron
Age current plan and practice.
(ii) Group term life insurance providing to the
Executive's beneficiaries an aggregate death
benefit of two times Base Salary not to exceed
$300,000 in accordance with Iron Age current plan
and practice.
-24-
<PAGE>
(iii) Group 24-hour risk insurance providing an aggregate
benefit to the Executive of $500,000 in accordance
with Iron Age current plan and practice.
(iv) Group medical and hospital insurance covering the
Executive, his spouse and dependents in accordance
with Iron Age current plan and practice.
(d) Profit
Sharing Plan: Participation in the Iron Age Corporation Profit Sharing
Plan in accordance with the terms thereof or in any other
substitute profit sharing arrangements maintained by
Holdings or Iron Age for their respective senior executive
officers as the same may in each case be modified from time
to time by the Board of Directors of Holdings or Iron Age.
-25-
<PAGE>
EXHIBIT 10.29
EMPLOYMENT AGREEMENT
--------------------
This AGREEMENT is made this 20th day of November, 1995, between Iron Age
Holdings Corporation, a Delaware corporation ("Holdings"), Iron Age Corporation,
a Delaware corporation and wholly-owned subsidiary of Holdings ("Iron Age"), and
Keith A. McDonough ("Executive").
RECITALS
--------
WHEREAS, the Executive has been employed for a number of years as Vice
President and Chief Financial Officer of Holdings and Iron Age with increasing
responsibilities; and
WHEREAS, the Executive, Holdings and Iron Age are mutually desirous that
such satisfactory employment relationship shall continue under the terms and
conditions hereinafter provided; and
WHEREAS, the execution and delivery of this Agreement have been duly
authorized by the Board of Directors of each of Holdings and Iron Age.
AGREEMENT
---------
NOW, THEREFORE, Holdings, Iron Age and the Executive, each intending to be
legally bound, hereby mutually covenant and agree as follows:
1. DEFINITIONS
Terms used and not otherwise defined herein (including without limitation
in any Appendix or Annex hereto) are used herein as defined in the Acquisition
Financing Agreement dated January 29, 1990 and as thereafter amended from time
to time and as in effect on the date hereof (the "Acquisition Financing
Agreement") among Holdings, Iron Age and the
<PAGE>
Purchasers named therein. As used herein, the term "Board of Directors" shall
mean the Board of Directors of Holdings.
2. EMPLOYMENT
2.1. Agreement. Holdings and Iron Age hereby agree to employ the
---------
Executive, and the Executive hereby agrees to serve each of Holdings and Iron
Age, in each case on the terms and conditions set forth herein.
2.2. Commencement and Expiration Date. The employment of the Executive by
--------------------------------
Holdings and Iron Age hereunder shall be for the period commencing on November
20, 1995 and expiring on January 30, 1999 (the "Expiration Date"), unless such
employment shall be [sic] have sooner terminated as hereinafter set forth. The
Expiration Date will be extended from year to year following the original
Expiration Date unless either party notifies the other party as least three
months prior to end of any Expiration Date, including any extended Expiration
Date, that he or it does not desire to extend the current Expiration Date for an
additional one year.
3. POSITION AND DUTIES
The Executive shall serve in accordance with the By-laws of Holdings and
Iron Age in the capacity of Vice President and Chief Financial Officer of
Holdings and Iron Age and shall be accountable to and shall have such other
powers, duties and responsibilities as may from time to time be prescribed by
the Chief Executive Officer of Holdings and Iron Age.
The Executive shall perform and discharge, faithfully, diligently and
competently, such duties and responsibilities. The Executive shall devote all
his working time (reasonable sick
-2-
<PAGE>
leave and incapacity excepted) and best efforts to the business and affairs of
Holdings and Iron Age.
4. COMPENSATION
Subject to the performance by the Executive of his duties and
responsibilities to Holdings and Iron Age:
4.1. Base Salary. (a) Holdings shall, or shall cause Iron Age to, pay the
-----------
Executive during each year of his employment hereunder beginning November 20,
1995, a base Salary at the annual rate of $100,000.
(b) For purposes of this Agreement, "Salary" shall mean the annual rate of
the Executive's base Salary, as adjusted in accordance with paragraph 4.2, as in
effect from time to time.
(c) Salary will be payable in substantially equal bi-monthly installments.
Except as otherwise provided in this Agreement, Salary shall be pro-rated for
any period of service less than a full year or less than a full month.
4.2. Salary Adjustments. (a) The Executive's Salary as in effect from
------------------
time to time on the last day of April of each year shall be adjusted annually on
May 1 of each year by the Chief Executive Officer of Holdings; provided,
however, that such adjustment shall not be less than the cost of living
adjustment described in (b) below. The Executive's Salary shall never be
reduced below his base Salary of $100,000 by operation of this paragraph 4.2.
(b) The cost of living adjustment in any Fiscal Year shall be based upon
the annual percentage increase in the Consumer Price Index-All Items ("CPI-U").
The percentage increase shall be based upon the difference between the CPI-U on
December 1 of the prior year
-3-
<PAGE>
and December 1 of the year immediately preceding the first day of each Fiscal
Year. The percentage increase shall then be multiplied by the Executive's Salary
as in effect immediately prior to the adjustment.
4.3. Bonus. For the fiscal year ending January 27, 1996 and each fiscal
-----
year thereafter, in each case during the term of the Executive's employment
hereunder, the Executive shall be entitled to receive, and Holdings shall pay,
or cause Iron Age to pay, to the Executive, in addition to Salary, a bonus
payment (the "Bonus") as determined pursuant to the plan adopted and set forth
and more particularly described on Appendix I. The Bonus with respect to each
fiscal year shall be payable promptly after Holdings sends audited financial
statements for such fiscal year to its stockholders, but not in any event later
than the one hundred and twentieth (120th) day following the end of such fiscal
year.
4.4. Expenses. During the term of his employment hereunder, Holdings shall
--------
pay, or shall cause Iron Age to pay, to the Executive prompt reimbursement for
all business expenses reasonably incurred by him on behalf of Holdings, Iron Age
or any of their Subsidiaries (in accordance with any policies and procedures
established by the Board of Directors from time to time for Holdings' senior
executive officers) in performing services hereunder, provided that the
Executive properly accounts therefor in accordance with Holdings' policies and
procedures.
4.5. Fringe Benefits. During the term of his employment hereunder, the
---------------
Executive shall be entitled to participate in or receive, and Holdings shall, or
shall cause Iron Age to provide, the benefits set forth in Appendix II.
-4-
<PAGE>
4.6. Vacations. During the term of his employment hereunder, the Executive
---------
shall be entitled to receive the number of vacation days in each calendar year
determined by the Board of Directors of Holdings from time to time for the
Executive (but not in any event fewer than three weeks) and shall also be
entitled to all holidays given by Iron Age to its employees.
5. OFFICES.
The Executive agrees to serve without additional compensation, if elected
or appointed thereto, in one or more additional positions as an officer or
director of Holdings or Iron Age or any of their Subsidiaries.
6. UNAUTHORIZED DISCLOSURE; INVENTIONS.
6.1. Unauthorized Disclosure. The Executive shall not, without the written
-----------------------
consent of the Board of Directors or a person duly authorized thereby, disclose
to any person, other than an employee or adviser of Holdings or Iron Age or any
of their Subsidiaries or Affiliates or other person to whom disclosure is in the
reasonable judgment of the Executive necessary or appropriate in connection with
the performance by the Executive of his duties as an executive officer of
Holdings or Iron Age or any of their Subsidiaries, any confidential or
proprietary information possessed by him; provided, however, that such
information shall not include any information known generally to the public
(other than as a result of unauthorized disclosure by the Executive) or which
becomes available to the Executive on a non-confidential basis from a source
other than Holdings or Iron Age or any of their Subsidiaries or Affiliates prior
to it becoming available to the Executive from Holdings or Iron Age or any of
their Subsidiaries or Affiliates, which source is not bound by a confidentiality
agreement with Holdings; and provided, further, that the Executive's duties
under this paragraph 6.1 shall not extend to any
-5-
<PAGE>
disclosure that may be required by law in connection with any judicial or
administrative proceeding or inquiry. The Executive understands and agrees that
this restriction shall continue to apply after his employment terminates,
regardless of the reason for such termination.
6.2. Proprietary Rights. Any and all inventions, discoveries,
------------------
developments, methods, processes, compositions, works, concepts and ideas
(whether or not patentable or copyrightable) conceived, made, developed, created
or reduced to practice by the Executive (whether at the request or suggestion of
Holdings or Iron Age or otherwise, whether alone or in conjunction with others,
and whether during regular hours of work or otherwise) during the period of his
employment by Holdings or Iron Age or any of their Subsidiaries (including
without limitation the period of his prior employment by Childs Corporation),
which may be directly or indirectly useful in, or relate to, the business,
ventures or other activities of or products manufactured or sold by Holdings or
Iron Age or any of their Subsidiaries or any business or products contemplated
by Holdings or Iron Age or any of their Subsidiaries (and known by the Executive
to be so contemplated) while the Executive is employed by the Holdings or Iron
Age or any of their Subsidiaries (collectively, "Proprietary Rights"), shall be
promptly and fully disclosed by the Executive to an appropriate executive
officer of Holdings and shall be Holdings' exclusive property as against the
Executive and his heirs and personal representatives, and the Executive hereby
assigns to Holdings his entire right, title and interest therein and shall
promptly deliver upon request to an appropriate executive officer of Holdings
all papers, drawings, models, data and other material relating to any of the
foregoing
-6-
<PAGE>
Proprietary Rights, conceived, made, developed, created or reduced to
practice by him as aforesaid. All copyrightable Proprietary Rights shall be
considered "works made for hire."
The Executive shall, upon Holdings' request and without any payment
therefor, execute any documents reasonably necessary or advisable in the opinion
of Holdings' counsel to assign, and confirm Holdings' title in, his entire
right, title and interest in the foregoing Proprietary Rights and to direct
issuance of patents or copyrights to Holdings with respect to such Proprietary
Rights as are Holdings' exclusive property as against the Executive and his
heirs and personal representatives under this paragraph or to vest in Holdings
title to such Proprietary Rights as against the Executive and his heirs and
personal representatives, the expense of securing any such patent or copyright,
however, to be borne by Holdings.
7. NON-COMPETITION.
The Executive agrees that during the term of his employment hereunder,
during the period in which the Executive is receiving post Date of Termination
payments based upon Salary under paragraphs 9.2 or 9.4 and for a period for one
year following the later of his Date of Termination and the date of cessation of
such post Date of Termination payments based upon Salary (the "Non Competition
Period End Date"), he will not, directly or indirectly, (A) own, manage,
operate, control or participate in any manner in the ownership, management,
operation or control of, or be connected as an officer, employee, partner,
director, principal, consultant, agent or otherwise with, or have any financial
interest in any company or business entity of any kind (or any direct or
indirect parent or subsidiary thereof) engaged directly or indirectly in the
design, manufacture, distribution or sale (or any other activity related
thereto) of workshoes or workboots, whether or not protective, within or into
the continental United
-7-
<PAGE>
States or Puerto Rico; (B) solicit or encourage any customer or supplier of
Holdings or Iron Age or any of their Subsidiaries to terminate or otherwise
alter its relationship with Holdings, Iron Age or any of their Subsidiaries; or
(C) directly or indirectly, recruit or otherwise seek to induce any employee or
agent of Holdings or Iron Age or any of their Subsidiaries to terminate or
otherwise alter his or her employment or agency or violate any agreement with
Holdings, Iron Age or any of their Subsidiaries. Notwithstanding the foregoing,
ownership of not to exceed five percent of the voting stock of any publicly held
corporation shall not, of itself, constitute a violation of this Section 7.
After the Non Competition Period End Date, the taking by the Executive of
any action or actions which, if taken prior to the Non Competition Period End
Date, would have given rise to a breach or violation of this paragraph 7, shall
relieve Holdings and Iron Age from any obligation to make subsequent payments,
or provide subsequent benefits, pursuant to this Agreement in respect of
participation in any group medical, hospital or life insurance plans or
policies.
8. TERMINATION.
8.1. Death. The Executive's employment hereunder shall terminate upon his
-----
death.
8.2. Incapacity. If as a result of the Executive's incapacity due to
----------
physical or mental illness or otherwise, which incapacity has been certified by
a competent physician, the Executive shall for six consecutive months during the
term of this Agreement have been unable to perform satisfactorily all of his
duties hereunder on a full-time basis, Holdings and Iron Age may terminate the
Executive's employment hereunder by written notice to the Executive. The
Executive agrees, upon reasonable request by Holdings or Iron Age from time to
time and at
-8-
<PAGE>
its expense, promptly to submit to examination by a physician selected by
Holdings or Iron Age for purposes of obtaining the certification required by the
preceding sentence, such examination to be of such scope, and to include without
limitation such follow-up visits for additional examination, testing and so
forth, as such physician in his or her professional judgment shall deem
reasonably necessary in order to reach a determination as to whether the
Executive is so incapacitated; provided, however, that the Executive shall not
be required to submit to more than two such examinations during any period of
twelve consecutive months.
8.3. Termination by the Executive. The Executive may terminate his
----------------------------
employment hereunder upon thirty days' prior written notice to Holdings and Iron
Age for Good Reason. For purposes of this Agreement, "Good Reason" shall mean
(i) a reduction in the Executive's Salary or Base Amount of Bonus as defined in
Appendix I, (ii) material diminution of any of his positions, authority, duties
or responsibilities so as to be inconsistent with his positions hereunder, (iii)
any material failure or refusal by Holdings or Iron Age to perform and discharge
its obligations hereunder, (iv) any willful action by Holdings or Iron Age that
is materially inconsistent with the terms of this Agreement, or (v) relocating
the Executive's principal office outside of Allegheny, Beaver or Washington
Counties of Pennsylvania.
8.4. Cause. Holdings and Iron Age may terminate the Executive's employment
-----
hereunder for Cause by written notice to the Executive. For the purposes of
this Agreement, Holdings and Iron Age shall have "Cause" to terminate the
Executive's employment hereunder upon the Executive's (i) material failure or
refusal to perform and discharge, or material breach of, his duties and
responsibilities hereunder, (ii) material breach of his fiduciary duties as an
officer or member of the Board of Directors of Holdings, Iron Age or any of
their
-9-
<PAGE>
Subsidiaries, or (iii) conviction of a felony or any other crime involving the
personal dishonesty or moral turpitude of the Executive which in either case
materially and adversely reflects on Holdings, Iron Age or any of their
Subsidiaries.
8.5. Termination by Holdings and Iron Age Other Than for Cause. Holdings
---------------------------------------------------------
and Iron Age may terminate the Executive's employment hereunder other than for
Cause at any time upon thirty days' prior written notice to the Executive.
8.6. Date of Termination; Term of Employment. The term "Date of
---------------------------------------
Termination" shall mean the earlier of (A) the Expiration Date as it may be
extended from [sic] to time, or (B) if the Executive's employment is terminated
(i) by his death, the date of his death, or (ii) for any other reason, the date
on which such termination is to be effective (which date may not be earlier than
the date of the notice of termination) pursuant to the notice of termination
given hereunder by the party terminating the employment relationship. For all
purposes of this Agreement, references to the "term" of the Executive's
employment hereunder shall mean the period commencing on November 20, 1995 and
ending on the Date of Termination.
9. COMPENSATION UPON TERMINATION.
9.1. Death. Notwithstanding any other provision of this Agreement, if the
-----
Executive's employment shall be terminated by reason of his death, Holdings
shall pay, or cause Iron Age to pay, to his surviving spouse, or, if he is not
survived by a spouse, to his estate, an amount equal to his full Salary through
the end of the month in which his death occurs at the rate in effect at the time
of his death, plus a pro rata portion (to the date of death) of any Bonus for
the then current fiscal year (to be paid at the time when such Bonus would
-10-
<PAGE>
normally be paid) and prompt reimbursement of all expenses incurred prior to his
date of death reimbursable under paragraph 4.4 or Appendix II.
In addition, Holdings shall, or cause Iron Age to, continue to provide the
Executive's surviving spouse, during the period beginning on the Executive's
death and ending on the earlier of the surviving spouse's 65th birthday or the
Expiration Date, coverage under all group medical and hospital plans or policies
maintained by Holdings or Iron Age in which the Executive would have been
entitled to participate under Appendix II had the Executive been employed
hereunder during such period.
9.2. Incapacity. Notwithstanding any other provision of this Agreement, if
----------
the Executive's employment shall be terminated by reason of his incapacity,
Holdings shall pay, or cause Iron Age to pay, the Executive an amount equal to
his full Salary through the end of the month in which the Date of Termination
occurs, at the rate in effect at the time the notice of termination is given as
provided under paragraph 8.2, plus a pro rata portion (to the Date of
Termination) of any Bonus for the then current fiscal year (to be paid at the
time when such Bonus would normally be paid). Holdings shall also pay, or cause
Iron Age to pay, to the Executive prompt reimbursement of all expenses incurred
prior to the Date of Termination reimbursable under paragraph 4.4 hereof and
Appendix II. In addition, Holdings shall, or shall cause Iron Age to, continue
to provide the Executive, during the period between his Date of Termination and
the Expiration Date, coverage under all group medical and hospital plans and
policies and, to the extent coverage is available without additional premiums,
under all life insurance plans and policies maintained by Holdings or Iron Age
in which the Executive would have been entitled to participate under Appendix II
had the Executive been employed
-11-
<PAGE>
hereunder during such period. The obligations of Holdings and Iron Age under
this paragraph 9.2 after the Date of Termination to pay or cause to be paid any
amount, or provide or cause to be provided any benefit, are subject to the
performance by the Executive of his obligations under Section 6 and 7.
9.3. Cause. Notwithstanding any other provision of this Agreement, if
-----
Holdings or Iron Age shall terminate the Executive's employment for Cause,
neither Holdings nor Iron Age nor any of their Subsidiaries or Affiliates shall
have any further obligations to the Executive under this Agreement; provided,
however, that Holdings shall pay, or cause Iron Age to pay, to the Executive his
full Salary through the Date of Termination at the rate in effect at the time
notice of termination is given and prompt reimbursement of all expenses incurred
prior to the Date of Termination reimbursable under paragraph 4.4 and Appendix
II. The obligations of Holdings and Iron Age under this paragraph 9.3 after the
Date of Termination to pay or cause to be paid any amount, or provide or cause
to be provided any benefit, are subject to the performance by the Executive of
his obligations under Section 6 and 7.
9.4. Good Reason or Other Termination. If Holdings and Iron Age shall
--------------------------------
terminate the Executive's employment pursuant to paragraph 8.5 or if the
Executive shall terminate his employment for Good Reason in accordance with
paragraph 8.3, then Holdings shall pay, or cause Iron Age to pay, to the
Executive his Salary through the Date of Termination at the rate in effect at
the time notice of termination is given, plus a pro-rata portion (to the Date of
Termination) of any Bonus for the then current fiscal year (to be paid at the
time when such Bonus would normally be paid). Holdings shall also pay, or cause
Iron Age to pay, to the
-12-
<PAGE>
Executive prompt reimbursement of all expenses incurred prior to the Date of
Termination reimbursable under paragraph 4.4 and Appendix II. Further, Holdings
shall, or shall cause Iron Age to, continue to provide the Executive, during the
period between his Date of Termination and the first anniversary of his Date of
Termination, coverage under all group medical, hospital and life insurance plans
and policies maintained by Holdings or Iron Age in which the Executive would
have been entitled to participate under Appendix II had the Executive been
employed hereunder during such period. In addition, in lieu of any further
payments to the Executive for periods subsequent to the Date of Termination,
Holdings shall, as liquidated damages, in lieu of any severance pay, pay, or
cause Iron Age to pay, to the Executive, in substantially equal monthly
installments, for the period of eighteen months from the Date of Termination
until the 540th day after the Date of Termination, (or, in the case of an event
described in Section 8.3(v), from the Date of Termination until the 540th day
after the date the notice of further relocation of the Executive's principal
office is given to the Executive) an amount equal to the annual Salary that the
Executive would have received (at the rate in effect at the time the notice of
termination is given) during such period had the Executive been employed
hereunder during such period. The obligations of the Company under this
paragraph 9.4 after the Date of Termination to pay or cause to be paid any
amount, or provide or cause to be provided any benefit, are subject to the
performance by the Executive, at all times on or prior to the Expiration Date,
of his obligations under Section 6 and 7.
9.5. Post-Termination Obligations Generally. Neither Holdings nor Iron Age
--------------------------------------
shall have any further obligations to the Executive following expiration of the
term of this
-13-
<PAGE>
Agreement and payment of all amounts due and payable hereunder on or prior to
the expiration of the term of this Agreement. In the event of the termination of
the Executive's employment other than by expiration of the term of this
Agreement, neither Holdings nor Iron Age shall have any obligation to the
Executive nor his surviving spouse except as otherwise specifically provided in
this Section 9, and performance by Holdings and Iron Age thereof shall
constitute full settlement of any claim that the Executive may have against
Holdings, Iron Age or any of their directors, officers, agents, Subsidiaries or
Affiliates, or against any Purchaser or any Affiliate of any Purchaser, on
account of such termination.
10. WITHHOLDING; PRO-RATIONS.
All payments made by Holdings or Iron Age under this Agreement shall be
reduced by the amount of any tax or other amounts required to be withheld by
Holdings or Iron Age under applicable legal requirements. In the event the
provisions hereof require the pro-ration of any Bonus for any fiscal year, such
pro-ration shall be made by determining the Bonus that would have been payable
had the Executive been employed hereunder throughout such fiscal year and
multiplying such Bonus by a fraction, the numerator of which shall be the number
of days elapsed from the first day of such fiscal year through the date as of
which such pro-ration is to be made and the denominator of which shall be three
hundred and sixty-five.
11. NOTICES.
For all purposes of this Agreement, notices and all other communications to
either party provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed, in the case of Holdings and Iron Age, to them at
-14-
<PAGE>
Robinson Plaza Three, Suite 400, Pittsburgh, Pennsylvania 15205, Attention:
Corporate Secretary, with a copy to Butler Capital Corporation, 767 Fifth
Avenue, New York, New York, 10153, Attention: Elaine Gilde, or, in the case of
the Executive, to the Executive at 8 Highlandview Road, Carnegie, PA 15106, or
to such other address as either party shall designate by giving like notice of
such change to the other party.
12. INDEMNIFICATION.
Holdings and Iron Age shall indemnify, defend and hold the Executive
harmless to the fullest extent permitted by applicable law in connection with
any claim, action, suit, investigation or proceeding arising out of or relating
to performance by the Executive of services for, or action of the Executive as a
Director, officer or employee of Holdings or Iron Age or any of their
Subsidiaries, or of any other company or business organization at the request of
Holdings. Expenses incurred by the Executive in defending a claim, action, suit
or investigation or criminal proceeding shall be paid by Holdings or Iron Age in
advance of the final disposition thereof upon the receipt by Holdings or Iron
Age of an undertaking by or on behalf of the Executive to repay said amount
unless it shall ultimately be determined that the Executive is entitled to be
indemnified hereunder. The foregoing shall be in addition to any
indemnification rights the Executive may have by law, contract, charter, by-law
or otherwise. This Section 12 shall not apply to an action commenced between
Holdings or Iron Age and the Executive.
13. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the heirs
and personal representative of the Executive and the successors of each of
Holdings and Iron Age. Holdings
-15-
<PAGE>
and Iron Age shall each require any successor (whether direct or indirect, by
purchase, merger, reorganization, consolidation, acquisition of property or
stock, liquidation, or otherwise) to all or substantially all their respective
assets expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that Holdings or Iron Age would be required to
perform this Agreement if no such succession had taken place. Regardless of
whether such agreement is executed, this Agreement shall be binding upon any
successor of each of Holdings and Iron Age in accordance with the operation of
law and such successor shall be deemed to be "Holdings" and "Iron Age" for
purposes of this Agreement without further action of any kind.
14. DISPUTE RESOLUTION.
(a) Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement or the breach thereof (including the arbitrability of any
controversy or claim), shall be settled by arbitration in accordance with the
internal laws of the Commonwealth of Pennsylvania by three arbitrators, one of
whom shall be appointed by the Board of Directors, one by the Executive and the
third of whom shall be appointed by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association.
The arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, except with respect to the
selection of arbitrators which shall be as provided in this paragraph 14(a).
The cost of any arbitration proceeding hereunder shall be borne equally by
Holdings or Iron Age and the Executive. The award of the arbitrators shall be
binding upon the parties. Judgment upon the award (including without limitation
equitable remedies)
-16-
<PAGE>
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. The foregoing arbitration proceedings may be commenced by any party by
notice to the other party. The parties hereby exclude any right of appeal to any
court on the merits of the dispute. Notwithstanding the foregoing, any party
shall have the right to seek preliminary or temporary equitable relief in any
court in the Commonwealth of Pennsylvania prior to the outcome of arbitration
proceedings.
(b) Legal Expenses. In the event that it shall be necessary or desirable
--------------
for the Executive to retain legal counsel and/or incur other costs and expenses
in connection with the enforcement of any of his rights under this Agreement
except with respect to or related to Section 7, and provided that the Executive
substantially prevails in the enforcement of such rights, Holdings and Iron Age
shall pay (or the Executive shall be entitled to recover from Holdings and Iron
Age) the Executive's reasonable attorneys' fees not to exceed $5,000 and court
costs in connection with the enforcement of the Executive's rights, including
the enforcement of any arbitration award.
15. NO ASSIGNMENT.
Except as otherwise expressly provided herein, this Agreement is not
assignable by any party and no payment to be made hereunder shall be subject to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
other charge.
16. EXECUTION IN COUNTERPARTS.
This Agreement may be executed by the parties hereto in two or more
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall constitute one and the same instrument, and all signatures
need not appear on any one counterpart.
-17-
<PAGE>
17. JURISDICTION AND GOVERNING LAW.
Subject to paragraph 14(a), jurisdiction over disputes with regard to this
Agreement shall be exclusively in the courts of the Commonwealth of
Pennsylvania, and this Agreement shall be construed and interpreted in
accordance with and governed by the laws of the Commonwealth of Pennsylvania,
other than the conflict of laws provisions of such laws.
18. JOINT AND SEVERAL OBLIGATIONS; SURVIVAL.
Notwithstanding any provision of this Agreement to the contrary, Holdings
and Iron Age shall be jointly and severally liable to the Executive, his
surviving spouse, and Executive's heirs or personal representatives for all
payment obligations under this Agreement, including, without limitation, the
payment obligations under Sections 4, 9, 12 and 14. The provisions of this
Section 18 and Sections 4, 6, 7, 9, 10, 11, 12, 13, 14 and 17 of this Agreement
shall survive the Termination Date of this Agreement to the extent necessary or
appropriate to effectuate the respective purposes of such provisions.
19. SEVERABILITY.
If any provision of this Agreement shall be adjudged by any arbitrator or
court of competent jurisdiction to be invalid or unenforceable for any reason,
such judgment shall not affect, impair or invalidate the remainder of this
Agreement.
In the event that any provision hereof would, under applicable law, be
invalid or unenforceable, such provision shall, to the extent permitted under
applicable law, be construed by modifying or limiting it so as to be valid and
enforceable to the maximum extent possible under applicable law.
-18-
<PAGE>
20. MISCELLANEOUS.
No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is approved by the Board of Directors and
agreed to in writing signed by the Executive and such officer as may be
specifically authorized by the Board of Directors. No waiver by either party
hereto at any time of breach of, or compliance with, any condition or provision
of this Agreement to be performed by the other party hereto shall be deemed a
waiver of the same or similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
The headings in this Agreement are for convenience and reference only and shall
not be construed as part of this Agreement or to limit or otherwise affect the
meaning hereof. The Executive acknowledges and agrees that, because Holdings'
and Iron Age's legal remedies may be inadequate in the event of a breach of, or
other failure to perform, any of the covenants and agreements set forth in
Section 6 or 7 by the Executive, Holdings and Iron Age may, in addition to
obtaining any other remedy or relief available to them (including without
limitation damages at law), enforce the provisions of said Section 6 or 7 by
injunction and other equitable relief without the posting of any bond.
21. ENTIRE AGREEMENT.
This Agreement, including the Appendices hereto, constitutes the entire
agreement between the parties hereto, and supersedes any and all prior
communications, agreements and understandings, written or oral, with respect to
the terms and conditions of the Executive's
-19-
<PAGE>
employment on and after the date hereof; provided, however, that this Agreement
shall not modify or otherwise affect the Stockholders Agreement or the
Executive's Stock Options.
IN WITNESS WHEREOF, the parties hereunto set their hands, under seal, as of
the date first above written.
WITNESS: EXECUTIVE:
/s/ J. Richard Lauver /s/ Keith A. McDonough
- - -------------------------------- ------------------------------------
ATTEST: IRON AGE HOLDINGS CORPORATION
By: /s/ J. Richard Lauver By: /s/ Donald R. Jensen
----------------------------- ---------------------------------
Secretary President
ATTEST: IRON AGE CORPORATION
By: /s/ J. Richard Lauver By: /s/ Donald R. Jensen
----------------------------- ---------------------------------
Secretary President
-20-
<PAGE>
APPENDIX I
----------
BONUS
-----
The Bonus with respect to each of the fiscal years during the Term of the
Employment Agreement shall be calculated and payable as hereinafter set forth.
The Base Amount of the Bonus for each such fiscal year shall be determined in
the sole discretion of the Chief Executive Officer of Holdings and the Board of
Directors; provided, however, that the Base Amount shall not be less than the
greater of (a) the Base Amount in effect for the preceding year or (b) $30,000.
Notwithstanding the foregoing, however, the Executive shall not be entitled to
receive any Bonus hereunder with respect to any fiscal year unless the Iron Age
Stand Alone New Operating Income for such fiscal year shall equal or exceed an
amount equal to 85% of the Target Amount as defined below.
The Target Amount of Iron Age Stand Alone Net Operating Income for each
fiscal year shall be the amount of such Income as defined and approved by the
Board of Directors for such fiscal year.
In the event that actual Iron Age Stand Alone Net Operating Income for any
fiscal year shall exceed an amount equal to 99% of the Target Amount for such
fiscal year but be less than an amount equal to 101% of the Target Amount for
such fiscal year, the Bonus with respect to such fiscal year shall be equal to
the Base Amount. In the event that actual Iron Age Stand Alone Net Operating
Income for any fiscal year shall equal or exceed an amount equal to 101% of the
Target Amount for such fiscal year, the Bonus with respect to such fiscal year
shall be equal to the sum of (a) the Base Amount plus (b) 4% of the Base Amount
for each 1% of such Target Amount by which actual Iron Age Stand Alone Net
Operating Income for such
-21-
<PAGE>
fiscal year shall exceed such Target Amount. In the event that actual Iron Age
Stand Alone Net Operating Income for any fiscal year shall be equal to or less
than 99% of the Target Amount for such fiscal year, the Bonus with respect to
such fiscal year shall be equal to the sum of (a) the Base Amount minus (b) 4%
of the Base Amount for each 1% of such Target Amount by which actual Iron Age
Stand Alone Net Operating Income shall be less than such Target Amount. In no
event shall the Bonus with respect to any fiscal year exceed an amount equal to
the Executive's Salary for such fiscal year nor shall any Bonus be payable
hereunder with respect to any fiscal year, unless the Iron Age Stand Alone Net
Operating Income for such fiscal year shall equal or exceed an amount equal to
85% of the Target Amount for such fiscal year.
Determinations of the amount of Iron Age Stand Alone Net Operating Income
and all other matters in connection with the Bonus shall be made in good faith
by the Board of Directors and such determination, if made in good faith, shall
be conclusive and binding upon all parties. In the event of any direct or
indirect acquisition by Holdings or any of its Subsidiaries or any business
enterprise (an "Acquired Business"), whether by merger, consolidation, share
exchange, sale or acquisition or stock or assets or similar transaction,
financed in whole or in part, directly or indirectly, from or in anticipation of
any part of the proceeds of any indebtedness directly or indirectly incurred or
to be incurred or any equity or other securities directly or indirectly issued
or to be issued by Holdings or any of its Subsidiaries or Affiliates (an
"Acquisition Transaction"), the Executive agrees, if requested by Holdings, to
make such amendments and modifications hereto as may be necessary or appropriate
to ensure that the Executive's right to receive any Bonus hereunder depends upon
-22-
<PAGE>
the results of operations at Holdings and the Specified Subsidiaries as of
immediately prior to such Acquisition Transaction on a stand alone basis,
without any augmentation or reduction by the operating results of any Acquired
Business as a result of such Acquisition Transaction.
-23-
<PAGE>
APPENDIX II
-----------
BENEFITS
--------
(a) Clubs: One Country Club membership fees and dues not to exceed an
aggregate for all such fees and dues of $5,000 annually.
(b) Automobiles: Use of a Lincoln Continental or other similar suitable
automobile, plus all fuel, maintenance and insurance costs
thereof.
(c) Insurance: Participation in the Iron Age Corporation Group Benefits
Plan and other arrangements maintained by Holdings or Iron
Age for their respective senior executive officers as the
same may in each case be modified from time to time by the
Board of Directors of Holdings, such arrangements to
initially include the following:
(i) Group disability insurance in accordance with Iron
Age current plan and practice.
(ii) Group term life insurance providing to the
Executive's beneficiaries an aggregate death benefit
of two times Base Salary not to exceed $300,000 in
accordance with Iron Age current plan and practice.
(iii) Group 24-hour risk insurance providing an aggregate
benefit to the Executive of $500,000 in accordance
with Iron Age current plan and practice.
-24-
<PAGE>
(iv) Group medical and hospital insurance covering the
Executive, his spouse and dependents in accordance
with Iron Age current plan and practice.
(d) Profit
Sharing Plan: Participation in the Iron Age Corporation Profit Sharing
Plan in accordance with the terms thereof or in any other
substitute profit sharing arrangements maintained by
Holdings or Iron Age for their respective senior executive
officers as the same may in each case be modified from time
to time by the Board of Directors of Holdings or Iron Age.
-25-
<PAGE>
EXHIBIT 10.30
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of August 1, 1994 between FALCON SHOE MFG. CO., a Maine
corporation (the "Company"), and THEODORE C. JOHANSON (the "Employee").
WHEREAS, the Company desires to employ the Employee and the Employee
desires to be employed by the Company;
NOW THEREFORE, in consideration of the mutual covenants and promises
hereinafter stated, the parties hereto agree as follows:
1. EMPLOYMENT AND TERM.
-------------------
The Company agrees to employ the Employee, and the Employee hereby agrees
to work for the Company, as a full-time employee for the term set forth in
Section 6 hereof. The Employee shall be employed as President and Chief
Executive Officer of the Company. The Employee agrees to serve the Company
faithfully and to the best of his ability and to perform such services and
duties of an executive nature in connection with the business, affairs and
operations of the Company as may be assigned or delegated to him from time to
time by or under the authority of the Board of Directors of the Company, and to
use his best efforts in the promotion and advancement of the Company and its
welfare and business.
2. INVENTIONS; TRADE SECRETS.
-------------------------
(a) The Employee understands and agrees that his employment creates a
relationship of confidence and trust between him and the Company with respect to
(i) all Proprietary Information, as defined below, and (ii) the confidential
information of others with which the Company has a business relationship. At
all times, both during his employment by the Company and after its termination,
the Employee will keep in confidence and trust all such information, and will
not use or disclose any such information without the written consent of the
Company, except as may be necessary in the ordinary course of performing his
duties to the Company. "Proprietary Information" means proprietary,
confidential information that the Company possesses or has rights to, which
information has commercial value in the business of the Company and its
affiliates, including, without limitation, trade secrets, product ideas,
processes, formulas, designs, software, improvements, inventions, data and know-
how, copyrightable materials, marketing plans and strategies, sales and
financial reports and forecasts and customer lists, provided that "Proprietary
Information" shall not include any such information which is generally known to
the public or in the trade unless such knowledge results from a breach of this
Agreement by the Employee.
(b) The Employee further agrees that:
<PAGE>
(i) All Proprietary Information shall be the sole property of the
Company and its assigns, and the Company and its assigns shall be the sole owner
of all trade secrets, patents, copyrights, and other rights in connection
therewith, and the Employee hereby assigns to the Company his entire right,
title and interest in the foregoing. The Employee shall, upon the Company's
request, execute any documents necessary or advisable in the opinion of the
Company counsel to assign, and confirm the Company's title in, the foregoing.
(ii) All documents, records, apparatus, equipment and other physical
property, whether or not pertaining to Proprietary Information, furnished to the
Employee by the Company or produced by him or others in connection with the
[sic] his employment shall be and remain the sole property of the Company.
3. SALARY.
------
The Employee's salary for the term of the employment herein provided will
be One Hundred Ninety Thousand Dollars ($190,000.00) per year, payable no less
often than monthly, subject to increases at the discretion of the Board of
Directors.
4. EXPENSES.
--------
Upon presentation of appropriate documentation, the Company shall reimburse
the Employee for travel, entertainment and other expenses reasonably incurred by
him in performing his duties hereunder.
5. OTHER BENEFITS.
--------------
(a) During the term of his employment hereunder, the Employee shall be
entitled to up to twenty (20) vacation days per calendar year and shall also be
entitled to all holidays given by the Company to its employees.
(b) During the term of his employment hereunder, the Employee shall be
entitled to participate in the other benefits specified in EXHIBIT A attached
hereto.
6. TERM AND TERMINATION.
--------------------
(a) TERM. Subject to the earlier termination of the
----
employment of the Employee as hereinafter set forth, this Agreement shall be
effective from and as of August 1, 1994 (the "Commencement Date"), and shall
remain in effect until January 31, 2000. The last day of such period is herein
sometimes referred to as the "Expiration Date." Subject to the earlier
termination of the employment of the Employee hereinafter set forth, on each
date during the term of the Employee's employment hereunder that is one hundred
eighty (180) days prior to the Expiration Date then in effect, the Expiration
Date shall be automatically extended for one
-2-
<PAGE>
(1) year, unless either party shall have previously given the other notice that
the Expiration Date shall not be so extended.
(b) MUTUAL CONSENT. This Agreement and the Employee's employment
--------------
hereunder may be terminated at any time by the mutual consent of the parties
hereto.
(c) WITH CAUSE. The Employee's employment hereunder may be
----------
terminated at any time by the affirmative vote of a majority of the members of
the Board of Directors of the Company taken at any regular or special meeting at
which the Employee has been afforded the opportunity to participate (without
considering the vote of the Employee for any purpose other than for purposes of
establishing a quorum), and shall be effective upon written notice of actual
termination for cause to the Employee:
(i) if the Employee shall have been guilty of acts of
dishonesty, fraud, theft or embezzlement;
(ii) if the Employee shall have been guilty of gross and willful
failure to perform a substantial portion of his duties and responsibilities
hereunder;
(iii) if the Employee shall have violated any provision of a
non-competition agreement between him and the Company of even date herewith
to an extent that shall have caused material harm to the interests of the
Company; or
(iv) if the Employee shall have been convicted of any crime
involving moral turpitude or fraud.
Upon termination for cause as provided in this subsection (c), the Employee
shall be entitled to receive any compensation accrued under the terms of this
Agreement that remains unpaid as of the termination date specified in the above-
mentioned notice of actual termination for cause.
(d) DEATH OF EMPLOYEE. In the event of the Employee's death during
-----------------
the Employee's employment hereunder, the Employee's employment shall terminate
on the date of his death.
(e) DISABILITY. If due to physical or mental illness, the Employee
----------
shall be disabled so as to be unable to perform substantially all of his duties
and responsibilities hereunder, the Board of Directors may designate another
executive to act in his place during the period of such disability.
Notwithstanding any such designation, the Employee shall continue to receive his
full salary and benefits under Sections 3 and 5 of this Agreement until he
becomes eligible for disability income under the Company's disability income
plan as supplemented. While receiving disability income payments under such
supplemented plan, the Employee shall not receive any salary under Section 3,
but shall continue to participate in benefits as set out in Sections 1 and 4 of
EXHIBIT A attached hereto (but no other benefits) until the Expiration Date.
-3-
<PAGE>
In the absence of a disability income plan at the time of such disability, the
Company shall pay the Employee benefits equal to those the Employee would have
received if the Company's current disability income plan as supplemented were in
effect at such time. Any question arising as to whether during any period the
Employee was disabled so as to be unable to perform substantially all of his
duties and responsibilities hereunder due to physical or mental illness shall be
determined in accordance with the disability income plan of the Company as
supplemented then in effect, or if there is no such plan in effect, by an
independent physician mutually acceptable to the Company and the Employee.
(f) TERMINATION BY EMPLOYEE. The Employee may terminate his
-----------------------
employment hereunder at any time by written notice to the Company in the event
of the following:
(i) Failure of the Board of Directors to elect the Employee to
the offices of the President and Chief Executive Officer of the Company, or to
continue the Employee in such offices, or
(ii) Material breach by the Company of any provision of this
Agreement.
(g) TERMINATION BY THE COMPANY WITHOUT CAUSE. The Employee's
----------------------------------------
employment with the Company may be terminated without cause by the affirmative
vote of a majority of the members of the Board of Directors on written notice to
the Employee.
(h) CERTAIN TERMINATION BENEFITS. In the event of termination
----------------------------
pursuant to Sections 6(f) or 6(g), the Employee shall be entitled to the
following benefits:
(i) For the period subsequent to the date of termination until
the Expiration Date, the Company shall continue to pay the Employee an amount
equal to, and payable in the same installments as, the Employee's salary at the
rate in effect on the date of termination.
(ii) For the period subsequent to the date of termination until
the Expiration Date, the Employee shall continue to receive the benefits
described in Sections 1 and 4 of the attached EXHIBIT A (but no other benefits).
(iii) If, in spite of the provisions of Section 6(h)(ii) above,
the benefits or service credits under any benefit plan specified in Section 4 of
the attached EXHIBIT A shall not be payable or provided under any such plan to
the Employee, or the Employee's dependents, beneficiaries or estate, because the
Employee is no longer deemed to be an employee of the Company, the Company
itself shall pay or provide for payment of the benefits and service credits for
such benefits as described in Section 5 of the attached EXHIBIT A to the
Employee, or to the Employee's dependents, beneficiaries or estate.
-4-
<PAGE>
(i) SET-OFF. The Company shall be entitled to set off against any
-------
cash compensation to be provided to the Employee under Section 6(h)(i) above
one-half of the amount of any cash compensation received by the Employee from
other employment during the period in which the Employee receives cash
compensation under Section 6(h)(i). The Employee shall inform the Company of
any such amounts of cash compensation and shall refund to the Company any
amounts which the Company has paid which exceed the amounts due from the Company
after application of the set-off provided for in this paragraph.
Notwithstanding the foregoing and any other provision of this Agreement, the
Employee shall be under no obligation to seek or accept any employment after
termination of employment with the Company for any reason.
(j) CONTINUING OBLIGATIONS. Notwithstanding the foregoing, the
----------------------
Employee's obligations under Section 2 hereof shall survive the termination of
his employment under any of the preceding subsections of this Section 6.
7. MISCELLANEOUS.
-------------
(a) WAIVERS. The failure of any of the parties to this Agreement to
-------
require the performance of a term or obligation or to exercise any right under
this Agreement or the waiver by any of the parties to this Agreement of any
breach hereunder shall not prevent subsequent enforcement of such term or
obligation or exercise of such right or the enforcement at any time of any other
right hereunder or be deemed a waiver of any subsequent breach of the provision
so breached, or of any other breach, hereunder.
(b) GOVERNING LAW; CONSTRUCTION, ETC. This Agreement shall be
---------------------------------
governed by and construed under the laws of the State of Maine, and shall not be
modified or discharged in whole or in part except by an agreement in writing
signed by the parties hereto and approved by the Board of Directors of the
Company. It shall inure to the benefit of successors of the Company by way of
merger, consolidation or transfer of substantially all the assets of the
Company. In case any one or more of the provisions or parts of a provision
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement,
but this Agreement shall be construed as if such invalid or illegal or
unenforceable provision or part of a provision had been limited or modified
(consistent with its general intent) to the extent necessary so that it shall be
valid, legal and enforceable, or if it shall not be possible to so limit or
modify such invalid or illegal or unenforceable provision or part of a
provision, this Agreement shall be construed as if such invalid or illegal or
unenforceable provision or part of a provision had never been contained herein.
This Agreement sets forth the entire agreement between the parties, and
supersedes any and all contemporaneous or prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Employee's employment on and after the date hereof.
(c) ARBITRATION.
-----------
-5-
<PAGE>
(i) Generally. Except solely as set forth in Section 7(c)(iii)
---------
hereof, each dispute, difference, controversy or claim arising in connection
with or related or incidental to, or question occurring under, this Agreement or
the subject matter hereof shall be finally settled under the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA") by an
arbitral tribunal composed of three arbitrators, at least one of whom shall be
an attorney experienced in corporate transactions, appointed by agreement of the
parties in accordance with said Rules. In the event the parties fail to agree
upon a panel of arbitrators from the first list of potential arbitrators
proposed by the AAA, the AAA will submit a second list in accordance with said
Rules. In the event the parties shall have failed to agree upon a full panel of
arbitrators from said second list, any remaining arbitrators to be selected
shall be appointed by the AAA in accordance with said Rules. If, at the time of
the arbitration, the parties agree in writing to submit the dispute to a single
arbitrator, said single arbitrator shall be appointed by agreement of the
parties in accordance with the foregoing procedure, or, failing such agreement,
by the AAA in accordance with said Rules. The foregoing arbitration proceedings
may be commenced by any party by notice to the other party.
(ii) Place of Arbitration. The place of arbitration shall be
--------------------
Suffolk County, Massachusetts.
(iii) Recourse to Courts. The parties hereby exclude any
------------------
right of appeal to any court on the merits of the dispute. The provisions of
this Section 7(c) may be enforced in any court having jurisdiction over the
award or any of the parties or any of their respective assets and judgment on
the award (including without limitation equitable remedies) granted in any
arbitration hereunder may be entered in any such court. Nothing contained in
this Section 7(c) shall prevent any party from seeking interim measures of
protection in the form of the pre-award attachment of assets of preliminary or
temporary equitable relief.
(iv) Reliance. Each of the parties hereto acknowledges that
--------
such party has been informed by the other party that the provisions of Section
7(c) constitute a material inducement upon which such party is relying and will
rely in entering into this Agreement and the transactions contemplated hereby.
(d) WITHHOLDING, ETC. All amounts and other benefits to be paid or
-----------------
provided hereunder shall be reduced by the amount of any applicable tax or other
withholding.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement as
of the day and year above first written.
FALCON SHOE MFG. CO.
/s/ Theodore C. Johanson
---------------------------------
By: Theodore C. Johanson
-6-
<PAGE>
Its: President
/s/ Theodore C. Johanson
---------------------------------
Theodore C. Johanson
-7-
<PAGE>
EXHIBIT A
---------
1. Automobile.
----------
(a) During Employment. During the term of his employment hereunder,
-----------------
the Company shall provide the Employee with the use of a vehicle of his
choice of a purchase value when new not exceeding Thirty-Five Thousand
Dollars ($35,000), such vehicle to be replaced by a new such vehicle when
specified by the Employee, but not more often than once every thirty (30)
months. The Company shall be the lessor or owner of such vehicle and shall
pay the cost of all maintenance, fuel and insurance with respect to such
vehicle.
(b) Following Employment. In the event the Company is required
--------------------
pursuant to Section 6(e) or 6(h) to provide the benefit specified in this
Section 1 at a time when the Employee is not employed by the Company, the
Company shall be obligated to convey title to the vehicle in question (upon
termination of the Employee's employment or as soon as permitted under the
terms of any lease); provided, however, that the Company shall only be
required to convey such title to the extent that the cost to the Company
does not exceed Seventeen Thousand Five Hundred Dollars ($17,500).
2. Basic Bonus. The Employee shall be entitled to participate in the Basic
-----------
Bonus Plan attached hereto as Annex I.
3. Super Incentive Bonus. The Employee shall be entitled to participate in
---------------------
the Super Incentive Bonus Plan attached hereto as Annex II.
4. Other. The Employee shall be entitled to participate in the employee
-----
benefit plans (other than bonus or profit sharing or similar plans other
than the Quarterly Bonus Plan referred to below) maintained from time to
time by the Company for its senior executive officers, subject to the terms
of such plans. Such benefits shall initially include without limitation
those under the Company's flexible benefits plan entitled "Falcon Shoe Flex
Plan," the Company's Long Term Disability Plan with Reliance Standard Life
as amended effective April 1, 1993, and a Quarterly Bonus Profit Sharing
Plan described in a corporate resolution of the directors of the Company on
December 22, 1992.
5. Benefits under Paragraph 6(h)(iii).
----------------------------------
(a) Nominal Employee. At the request of the Company, in the event
----------------
that the Employee may retain the benefits described in Section 4 of this
EXHIBIT A through service as a nominal employee of the Company following
termination under Paragraph 6(h)(iii), the Employee agrees to so serve,
upon such reasonable terms and conditions,
-8-
<PAGE>
and in exchange for reasonable reimbursement, as the Company and the
Employee may agree.
(b) If No Longer Employee. In the event that the benefits described
---------------------
in Section 4 of this EXHIBIT A are not payable or provided under any such
plan to the Employee, or to the Employee's dependents, beneficiaries or
estate, because the Employee is no longer deemed to be an employee of the
Company, the Employee shall be entitled to equivalent health, disability
(as supplemented) and life insurance benefits at the Company's expense.
(c) If Other Employment. In the event that the Employee obtains
-------------------
other employment following termination under Paragraph 6(h)(iii), and is
entitled to employee benefits as a result of such employment at no cost to
the Employee, the Company shall be entitled to proportionately reduce the
benefits provided to the Employee at the cost of the Company under this
Section 5; provided, however, that in all events, the aggregate benefits
provided by the new employer and the Company to the Employee following such
employment shall be at least equivalent to those benefits provided prior to
such employment.
6. Profit Sharing Plan. The Employee shall be entitled to participate in the
-------------------
Company's Profit-Sharing Plan.
-9-
<PAGE>
ANNEX I
-------
BASIC BONUS PLAN
----------------
The Executive shall be entitled to annual bonus payments ("Bonus Payments")
during the term of his Employment Agreement in the event the Company achieves
certain target amounts of Net Operating Income (as defined in Schedule B to
Annex II hereto), for the fiscal years set forth on Table I hereto. The Bonus
Payments shall be calculated and payable as hereinafter set forth. The maximum
Bonus Payment ("Maximum Bonus") for each such fiscal year shall be the amount
equal to the Executive's salary pursuant to Section 3 of his Employment
Agreement for such fiscal year multiplied by the Bonus Percentage set forth
-------------
opposite such fiscal year in Table I below; provided, however, that the
-------- -------
Executive shall not be entitled to receive any Bonus Payments hereunder with
respect to any fiscal year unless the Company's Net Operating Income for such
fiscal year shall equal or exceed an amount equal to 91% of the Target Amount as
defined below.
Table I
-------
Fiscal Year Ending on the
Last Saturday in January Bonus Percentage
------------------------ ----------------
1996 .25
1997 .25
1998 .25
1999 .30
2000 .35
The Target Amount of the Company's Net Operating Income for each fiscal
year shall be established by the Board of Directors of the Company for such
fiscal year.
In the event the Company's Net Operating Income equals or exceeds the
Target Amount established by the Board of Directors for such fiscal year the
Executive shall be entitled to receive a Bonus Payment for such fiscal year in
an amount equal to the Maximum Bonus for such fiscal year.
If the Company's Net Operating Income shall fail to equal or exceed the
Target Amount established by the Board of Directors for such fiscal year but
shall equal or exceed 91% of such Target Amount, the Executive shall be entitled
to a Bonus Payment equal to the Maximum Bonus for such fiscal year multiplied by
-------------
the applicable Bonus Payment Percentage Factor (corresponding to the Percentage
of Net Operating Income Target achieved) set forth in Table II below.
-10-
<PAGE>
Table II
--------
Percentage of
Net Operating Bonus Payment
Income Target Percentage Factor
- - ------------- -----------------
100% 1.00
99% .90
98% .80
97% .70
96% .60
95% .50
94% .40
93% .30
92% .20
91% .10
Less than 91% .00
Determinations of the amount of Net Operating Income and all other matters
in connection with this Bonus Plan shall be made in good faith by the Board of
Directors of the Company and such determination, if made in good faith, shall be
conclusive and binding upon all parties. Payments shall be paid by the Company
in cash as soon as reasonably practicable following determination thereof.
The Board may make such adjustments to the terms and provisions of the
Bonus Plan to take into account material changes in law or in accounting
practices or principles, mergers, consolidations, acquisitions, dispositions or
similar corporate transactions, or any other event, if it is determined by the
Board that adjustments are appropriate to avoid distortion in the operation of
the Plan. Such changes may include, without limitation and as an example,
changes in the Net Operating Income definition or targeted amounts in connection
with mergers, consolidations, acquisitions, dispositions or other events.
-11-
<PAGE>
EXHIBIT 10.31
NON-COMPETITION AGREEMENT
-------------------------
NON-COMPETITION AGREEMENT dated as of August 1, 1994, by and among Iron Age
Holdings Corporation, a Delaware corporation ("Holdings"), Falcon Shoe Mfg. Co.,
a Maine corporation (the "Company") and a wholly-owned subsidiary of Holdings
and Theodore C. Johanson. Holdings, the Company and Mr. Johanson are referred
to collectively as the "Parties."
WHEREAS, Holdings acquired all of the common stock of the Company held by
Mr. Johanson pursuant to the terms of the Stock Purchase Agreement dated August
1, 1994 (the "Stock Purchase Agreement") among Holdings, Mr. Johanson, Patricia
J. Lundholm and the Falcon Shoe Mfg. Co. Employee Stock Ownership Plan Trust
created under the Falcon Shoe Mfg. Co. Employee Stock Ownership Plan dated
November 13, 1989 between the Company and Mr. Johanson, as Trustee;
WHEREAS, Mr. Johanson has entered into an Employment Agreement with the
Company dated August 1, 1994 (the "Employment Agreement") in connection with the
transactions relating to the Stock Purchase Agreement;
WHEREAS, the Parties desire to enter into a non-competition agreement for
the period of time set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained and other good and valuable consideration the receipt
and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Term and Termination. This Agreement shall be effective from and as
--------------------
of the date hereof and shall remain in effect during each Non-Competition Period
(as defined below).
2. Non-Competition Period.
----------------------
2.1. Defined. As used herein the term "Non-Competiton Period" shall
-------
mean each of:
2.1.1 the period during which Mr. Johanson is employed by the
Company under the Employment Agreement (as the same may be extended or
modified from time to time);
2.1.2 the periods, if any, following the termination of the
period referred to in Section 2.1.1 above during which the Company is
required to provide benefits to Mr. Johanson pursuant to Section 6(e)
of the Employment
<PAGE>
Agreement or to make payments to Mr. Johanson pursuant to Section 6(h)
of the Employment Agreement; and
2.1.3 each period, if any, during which the Company shall have
elected to extend Mr. Johanson's obligations under this Agreement
pursuant to Section 2.3 of this Agreement.
2.2. Consideration. In consideration for the execution of this
-------------
Agreement, the Buyer agrees to pay to Mr. Johanson the sum of One Hundred
Thousand Dollars ($100,000.00) in cash payable by certified check or wire
transfer upon such execution.
2.3. Elective Non-Competition Periods. Upon the later of either (i)
--------------------------------
the termination for any reason of the Employment Agreement, or (ii) upon
the expiration of the periods, if any, under which Mr. Johanson receives
benefits from the Company as specified in Section 2.1.2 of this Agreement,
the Company shall have the option, upon written notice given to Mr.
Johanson within ten (10) days of such termination or expiration, to invoke
the application of this Agreement for a period of one (1) year from the
giving of such notice. In addition, the Company shall have the option to
renew such one-year period upon written notice given to Mr. Johanson not
later than one hundred eighty (180) days prior to the expiration of such
one-year period, for one, and only one, additional period of one-year from
expiration of such initial one-year period. During each such one-year
period, the Company shall pay Mr. Johanson an aggregate amount of Seventy-
Five Thousand Dollars ($75,000.00), payable in monthly installments in
arrears on the first business day of each calendar month.
2.4. Set-Off. In the event Mr. Johanson receives cash compensation
-------
with respect to any such one-year period (excluding any payment received
under this Agreement) in excess of $75,000, the Company shall be entitled
to set-off against any cash compensation to be provided to Mr. Johanson
under Section 2.3 above by an amount equal to one-third of the total of (i)
any cash compensation received by Mr. Johanson with respect to each one-
year period (excluding any payments received under this Agreement) minus
-----
(ii) $75,000 subject to a maximum set-off of $50,000 per one-year period.
Mr. Johanson shall inform the Company of any such amounts of cash
compensation and shall refund to the Company any amounts which the Company
has paid which exceed the amounts due from the Company after application of
the set-off provided for in this paragraph. Notwithstanding the foregoing
and any other provision of this Agreement, Mr. Johanson shall be under no
obligation to seek or accept any employment during the term of this
Agreement for any reason.
3. Consulting Agreement. At any time and from the time at or after the
--------------------
termination of Mr. Johanson's employment with the Company, Mr. Johanson will
negotiate in good faith with respect to the provision by Mr. Johanson of such
consulting services as the Company may request. Such consulting services shall
be provided on such terms and
-2-
<PAGE>
conditions, and in exchange for such per diem fees and reimbursement of
expenses, as the Company and the Employee may agree.
4. Confidentiality and Non-Competition Covenants. Mr. Johanson
---------------------------------------------
acknowledges tha tthe success of Holdings, the Company and its subsidiaries
depends upon the continued preservation of the confidentiality of certain
information possessed by Mr. Johanson and the agreement by Mr. Johanson not to
engage directly or indirectly in businesses competitive with the business of
Holdings, the Company and its subsidiaries, that the preservation of the
confidentiality of such information by Mr. Johanson and the agreement not to
compete of Mr. Johanson are essential premises of the bargain between Mr.
Johanson and each of Holdings and the Buyer pursuant to the Stock Purchase
Agreement, and that Holdings and the Buyer would be unwilling to enter into the
Stock Purchase Agreement in the absence of this Non-Competition Agreement.
Accordingly, Mr. Johanson hereby agrees with Holdings and the Company as
follows:
4.1. Confidentiality Covenant. During the Non-Competition Period,
------------------------
Mr. Johanson will not, and will cause his affiliates (other than Holdings,
the Company and their respective subsidiaries) not to, directly or
indirectly, without the prior written consent of Holdings and the Company,
disclose or use, in any way harmful to Holdings, the Company or any of
their respective subsidiaries, or otherwise contrary to the interests of
Holdings, the Company or any of their respective subsidiaries, any
confidential or proprietary information involving or relating to Holdings,
the Company or any of their respective subsidiaries; provided, however,
-------- -------
that the information subject to the foregoing provisions of this sentence
shall be deemed not to include any information known generally in the
industry (other than as a result of disclosure in violation hereof by Mr.
Johanson or any such affiliate thereof); and provided, further, that the
-------- -------
provisions of this Section 4.1 shall not prohibit any retention of records
or disclosure required by law or made in connection with the enforcement of
any right or remedy relating to the Stock Purchase Agreement or the
transactions contemplated thereby.
4.2. Non-Competition Covenant. During the Non-Competition Period,
------------------------
Mr. Johanson will not, and will cause his affiliates (other than Holdings,
the Company and their respective subsidiaries) not to, directly or
indirectly, or by or through any other person, whether as an officer,
director, shareholder, guarantor, partner, joint venturer, consultant,
agent or otherwise, (i) engage in any business which is the same as or
similar to or which otherwise competes with the business of Holdings, the
Company or any of their respective subsidiaries in any geographic area
specified in Schedule A hereto, or (ii) hire or attempt to hire any
employee or agent of Holdings, the Company or any of their respective
affiliates, assist in such hiring by any person, encourage any such
employee or agent to terminate his relationship with Holdings, the Company
or any of their respective affiliates, or solicit or encourage any
customer, supplier, vendor or distributor of the Company or any of their
respective affiliates to terminate its relationship with them, or to
conduct with any person any business or
-3-
<PAGE>
activity which competes with the business or which such customer, supplier,
vendor or distributor conducts with Holdings, the Company or any of their
respective affiliates; provided, however, that the ownership or acquisition
-------- -------
by Mr. Johanson or any such affiliate thereof of an aggregate of (for Mr.
Johanson and each such affiliate, collectively) less than five percent (5%)
of the outstanding stock of any publicly traded company shall not,
considered alone, constitute a violation of this Section 4.2.
4.3. Enforcement. Mr. Johanson acknowledges and agrees that, because
-----------
the legal remedies of Holdings and the Company may be inadequate in the
event of a breach of, or other failure to perform, any of the convenants
and obligations set forth in this Section 4, Holdings or the Company may,
in addition to obtaining any other remedy or relief available to it
(including without limitation consequential and other damages at law),
obtain specific enforcement of this Section 4 and other equitable remedies,
without the necessity of posting any bond. In the event a good faith
dispute arises between Mr. Johanson, on the one hand, and the Company or
Holdings, on the other hand, regarding any amounts allegedly owed by Mr.
Johanson to either the Company or Holdings, the Company or Holdings shall
be entitled to withhold payments to Mr. Johanson hereunder, provided,
--------
however, the Company or Holdings shall place such withheld amounts in
-------
escrow pending resolution of such dispute. The exercise by either the
Company or Holdings of such right to withhold payments shall not relieve
Mr. Johanson of his obligations hereunder.
5. Miscellaneous.
-------------
5.1. No Third-Party Beneficiaries. This Agreement shall not confer
----------------------------
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
5.2. Entire Agreement. This Agreement constitutes the entire
----------------
agreement among the Parties with respect to its subject matter and
supersedes any prior or contemporaneous understandings, agreements, or
representations by or among the Parties, written or oral, to the extent
they have related in any way to the subject matter hereof.
5.3. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without
the prior written approval of the other parties hereto; provided, however,
-------- -------
that Holdings or the Company may (i) assign any or all of its rights and
interests hereunder to one or more of its subsidiaries; or (ii) designate
one or more of its subsidiaries to perform its obligations hereunder (in
any or all of which cases each of Holdings and the Company nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
-4-
<PAGE>
5.4. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
5.5. Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
5.6. Notices. All notices, requests, demands, claims, and other
-------
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then five business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to Mr. Johanson:
Theodore C. Johanson
P.O. Box 897
Auburn, Maine 04212
Copy to:
Brann & Isaacson
184 Main Street
P.O. Box 3070
Lewiston, Maine 04243-3070
Attention: Irving Isaacson, Esq.
If to Holdings or the Company:
Iron Age Holdings Corporation
Robinson Plaza Three
Suite 400
Pittsburgh, Pennsylvania 15205
Attention: Donald R. Jensen and Keith A. McDonough
-5-
<PAGE>
Copy to:
Butler Capital Corporation
767 Fifth Avenue, 6th Floor
New York, New York 10153
Attention: Andrea Geisser
Elaine S. Gilde
and
R. Newcomb Stillwell, Esq.
Ropes & Gray
One International Place
Boston, MA 02110
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set
forth above using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail,
or electronic mail), but no such notice, request, demand, claim, or
other communication shall be deemed to have been duly given unless and
until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
5.7. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the domestic laws of Maine without giving
effect to any choice or conflict of law provision or rule (whether of Maine
or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than Maine; provided, however, any dispute relating
-------- -------
to provisions of Section 5.11 shall be governed by the United States
Arbitration Act as then in force.
5.8. Amendments and Waivers. No amendment, waiver or other
----------------------
modification of any provision of this Agreement shall be valid unless the
same shall be in writing and signed by all of the Parties hereto. No
waiver by any Party of any default or breach of covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default or breach of covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
5.9. Invalid Provisions. Any term or provision of this Agreement
------------------
that is invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof, which shall remain in full force and effect, and each
such invalid or unenforceable provision shall be
-6-
<PAGE>
construed by limiting it so as to be valid and enforceable to the maximum
extent permitted by law.
5.10. Incorporation of Schedules. The Schedules identified in this
--------------------------
Agreement are incorporated herein by reference and made a part hereof.
5.11. Arbitration.
-----------
5.11.1 Generally. Except solely as set forth in Section 5.11
---------
hereof, each dispute, difference, controversy or claim arising in
connection with or related or incidental to, or question occurring
under, this Agreement or the subject matter hereof shall be finally
settled under the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA") by an arbitral tribunal composed
of three arbitrators, at least one of whom shall be an attorney
experienced in corporate transactions, appointed by agreement of the
Parties in accordance with said Rules. In the event the Parties fail
to agree upon a panel of aribtrators from the first list of potential
arbitrators proposed by the AAA, the AAA will submit a second list in
accordance with said Rules. In the event the Parties shall have
failed to agree upon a full panel of arbitrators from said second
list, any remaining arbitrators to be selected shall be appointed by
the AAA in accordance with said Rules. If, at the time of the
arbitration, the Parties agree in writing to submit the dispute to a
single arbitrator, said single arbitrator shall be appointed by
agreement of the parties in accordance with the foregoing procedure,
or, failing such agreement, by the AAA in accordance with said Rules.
The foregoing arbitration proceedings may be commenced by any Party by
notice to all other Parties.
5.11.2 Place of Arbitration. The place of arbitration shall be
--------------------
Suffolk County, Massachusetts.
5.11.3 Recourse to Courts. The Parties hereby exclude any right
------------------
of appeal to any court on the merits of the dispute. The provisions
of this Section 5.11 may be enforced in any court having jurisdiction
over the award or any of the Parties or any of their respective assets
and judgment on the award (including without limitation equitable
remedies) granted in any arbitration hereunder may be entered in any
such court. Nothing contained in this Section 5.11 shall prevent any
party from seeking interim measures of protection in the form of pre-
award attachment of assets or preliminary or temporary equitable
relief.
5.11.4 Reliance. Each of the Parties hereto acknowledges that
--------
such Party has been informed by each other Party that the provisions
of Section 5.11 constitute a material inducement upon which such Party
is relying
-7-
<PAGE>
and will rely in entering into this Agreement and the transactions
contemplated hereby.
5.12. Further Assurances. In case at any time after the date hereof
------------------
any further action is necessary or desirable to carry out the purposes of
this Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments and
documents) as any other Party reasonably may request, all at the sole cost
and expense of the requesting Party.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
IRON AGE HOLDINGS CORP.
By: /s/ Donald R. Jensen
-----------------------------------------
Title: President
FALCON SHOE MFG. CO.
By: /s/ Theodore C. Johanson
-----------------------------------------
Title: President
/s/ Theodore C. Johanson
----------------------------------------
Theodore C. Johanson
-8-
<PAGE>
SCHEDULE A
----------
The United States of America, including without limitation its territories
and possessions, Canada and Mexico.
-9-
<PAGE>
EXHIBIT 12.1
STATEMENT RE:COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FISCAL YEARS ENDING FEBRUARY 27,
----------------------------------------------- JANUARY 26, FEBRUARY 27, 1997 THROUGH THREE MONTHS
1997 THROUGH 1997 THROUGH APRIL 25, ENDED MAY 2,
JANUARY 29, JANUARY 28, JANUARY 27, JANUARY 25, FEBRUARY 26 JANUARY 31, 1997 1998
1994 1995 1996 1997 1997 1998 (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss)
before income
taxes............. $5,120 $ 5,519 $ 6,927 $ 6,390 $(1,147) $ 3,643 $ 533 $ (855)
Interest.......... 3,817 6,163 6,702 6,515 1,116 9,855 1,449 2,742
Interest portion
of rental expense
.................. 270 334 429 551 49 919 159 211
------ ------- ------- ------- ------- ------- ------ ------
Earnings........ $9,207 $12,016 $14,058 $13,456 $ 18 $14,417 $2,141 $2,098
Interest.......... 3,817 6,163 6,702 6,515 1,116 9,855 1,449 2,742
Interest portion
of rental expense
.................. 270 334 429 551 49 919 159 211
------ ------- ------- ------- ------- ------- ------ ------
Fixed charges... $4,087 $ 6,497 $ 7,131 $ 7,066 $ 1,165 $10,774 $1,608 $2,953
------ ------- ------- ------- ------- ------- ------ ------
Ratio of earnings
to fixed charges.. 2.3x 1.8x 2.0x 1.9x 0.0x 1.3x 1.3x 0.7x
====== ======= ======= ======= ======= ======= ====== ======
<CAPTION>
UNAUDITED PRO FORMA
------------------------
YEAR ENDED THREE MONTHS
JANUARY 31, ENDED MAY 2,
1998 1998
----------- ------------
<S> <C> <C>
Income (loss)
before income
taxes............. $ 229 $ 245
Interest.......... 15,238 3,887
Interest portion
of rental expense
.................. 968 211
----------- ------------
Earnings........ $16,435 $4,343
Interest.......... 15,238 3,887
Interest portion
of rental expense
.................. 968 211
----------- ------------
Fixed charges... $16,206 $4,098
----------- ------------
Ratio of earnings
to fixed charges.. 1.0x 1.1x
=========== ============
</TABLE>
1
<PAGE>
Exhibit 21.1
Iron Age Holdings Corporation-- Subsidiaries
- - --------------------------------------------
Name % Owned by State of Incorporation
- - ---- ----------- ----------------------
Iron Age Holdings
-----------------
Corporation
-----------
Iron Age Corporation 100% Delaware
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated March 13, 1998, in the Registration Statement
(Form S-4) and related Prospectus of Iron Age Holdings Corporation for the
registration of $45,140,000 of its 12-1/8% senior discount notes due 2009.
/s/ Ernst & Young LLP
Ernst & Young LLP
Pittsburgh Pennsylvania
June 16, 1998
<PAGE>
- - --------------------------------------------------------------------------------
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
________________________________________
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
____________________________________________
IRON AGE HOLDINGS CORPORATION
(Exact name of obligor as specified in its charter)
DELAWARE 04-3349775
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
ROBINSON PLAZA THREE
SUITE 400
PITTSBURGH, PENNSYLVANIA 15205
(Address of principal executive offices) (Zip Code)
____________________________________________
12-1/8% SENIOR DISCOUNT NOTES DUE MAY 1, 2009
(Title of the indenture securities)
- - --------------------------------------------------------------------------------
<PAGE>
GENERAL
Item 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.
New York State Banking Department, State House, Albany, New York 12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996,
in connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 11th day of June, 1998.
THE CHASE MANHATTAN BANK
By: /s/ R. Lorenzen
-------------------------
R. Lorenzen
-3-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 1998, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin............................................... $ 12,037
Interest-bearing balances....................................... 4,054
Securities:.......................................................
Held to maturity securities....................................... 2,340
Available for sale securities..................................... 50,134
Federal funds sold and securities purchased under
agreements to resell............................................ 24,982
Loans and lease financing receivables:............................
Loans and leases, net of unearned income $127,958
Less: Allowance for loan and lease losses 2,797
Less: Allocated transfer risk reserve........................... 0
--------
Loans and leases, net of unearned income........................
allowance, and reserve.......................................... 125,161
Trading Assets.................................................... 61,820
Premises and fixed assets (including capitalized
leases)......................................................... 2,961
Other real estate owned........................................... 347
Investments in unconsolidated subsidiaries and
associated companies............................................ 242
Customers' liability to this bank on acceptances
outstanding..................................................... 1,380
Intangible assets................................................. 1,549
Other assets...................................................... 11,727
--------
TOTAL ASSETS...................................................... $298,734
========
LIABILITIES
Deposits
In domestic offices............................................. $ 96,682
Noninterest-bearing............................................. $38,074
Interest-bearing................................................ 58,608
In foreign offices, Edge and Agreement,
subsidiaries and IBF's.......................................... 72,630
Noninterest-bearing ............................................ $ 3,289
Interest-bearing................................................ 69,341
Federal funds purchased and securities sold under
agreements to repurchase....................................... 42,735
Demand notes issued to the U.S. Treasury.......................... 872
Trading liabilities............................................... 45,545
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less................... 4,454
With a remaining maturity of more than one year
through three years........................................ 231
With a remaining maturity of more than three
years...................................................... 106
Bank's liability on acceptances executed and
outstanding...................................................... 1,380
Subordinated notes and debentures................................. 5,708
Other liabilities................................................. 11,295
TOTAL LIABILITIES................................................ 281,638
--------
EQUITY CAPITAL
Perpetual preferred stock and related surplus..................... 0
Common stock...................................................... 1,211
Surplus (exclude all surplus related to preferred stock)......... 10,291
Undivided profits and capital reserves............................ 5,579
Net unrealized holding gains (losses)
on available-for-sale securities.................................. (1)
Cumulative foreign currency translation adjustments............... 16
TOTAL EQUITY CAPITAL.............................................. 17,096
--------
TOTAL LIABILITIES AND EQUITY CAPITAL.............................. $298,734
========
</TABLE>
-4-
<PAGE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the in-structions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
-5-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ERNST &
YOUNG CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JANUARY 31,
1998 AND THE THREE MONTHS ENDED MAY 2, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> JAN-31-1998 JAN-30-1999
<PERIOD-START> JAN-26-1997 FEB-01-1998
<PERIOD-END> JAN-31-1998 MAY-02-1998
<CASH> 2,069 38
<SECURITIES> 0 0
<RECEIVABLES> 16,378 17,856
<ALLOWANCES> 382 429
<INVENTORY> 36,841 38,397
<CURRENT-ASSETS> 57,186 62,215
<PP&E> 12,112 13,045
<DEPRECIATION> 1,633 2,530
<TOTAL-ASSETS> 174,801 182,569
<CURRENT-LIABILITIES> 14,481 10,718
<BONDS> 97,976 149,454
17,031 0
0 0
<COMMON> 1 1
<OTHER-SE> 37,847 14,737
<TOTAL-LIABILITY-AND-EQUITY> 174,801 182,569
<SALES> 125,075 32,167
<TOTAL-REVENUES> 125,075 32,167
<CGS> 58,914 16,043
<TOTAL-COSTS> 41,661 12,967
<OTHER-EXPENSES> 4,664 1,270
<LOSS-PROVISION> 40 47
<INTEREST-EXPENSE> 10,971 2,742
<INCOME-PRETAX> 2,496 (885)
<INCOME-TAX> 1,234 (128)
<INCOME-CONTINUING> 1,262 (727)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 (4,015)
<CHANGES> 0 0
<NET-INCOME> 1,262 (4,742)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
IRON AGE HOLDINGS CORPORATION
OFFER TO EXCHANGE ITS
12 1/8% SENIOR DISCOUNT NOTES DUE MAY 1, 2009
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
FOR AN EQUAL PRINCIPAL AMOUNT AT MATURITY OF ITS
12 1/8% SENIOR DISCOUNT NOTES DUE MAY 1, 2009
WHICH HAVE NOT BEEN SO REGISTERED
PURSUANT TO THE PROSPECTUS
DATED JUNE , 1998
The Exchange Agent for the Exchange Offer is:
THE CHASE MANHATTAN BANK
By Registered or Certified Mail
or Hand or Overnight Delivery:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Richard Lorenzen
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 946-8158
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON JULY , 1998, UNLESS THE OFFER IS EXTENDED.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Original Notes
(as defined below) either if Original Notes are to be forwarded herewith or if
tenders of Original Notes are to be made by book-entry transfer to an account
maintained by The Chase Manhattan Bank (the "Exchange Agent") at The
Depository Trust Company ("DTC") pursuant to the procedures set forth in "The
Exchange Offer--Procedures for Tendering" in the Prospectus and an Agent's
Message (as defined herein) is not delivered.
<PAGE>
Holders of Original Notes whose certificates (the "Certificates") for such
Original Notes are not immediately available or who cannot deliver their
Certificates and all other required documents to the Exchange Agent on or
prior to the Expiration Date (as defined in the Prospectus) or who cannot
complete the procedures for book-entry transfer on a timely basis, must tender
their Original Notes according to the guaranteed delivery procedures set forth
in "The Exchange Offer--Procedures for Tendering" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
ALL TENDERING HOLDERS COMPLETE THIS BOX:
- - -------------------------------------------------------------------------------
DESCRIPTION OF ORIGINAL NOTES TENDERED
- - -------------------------------------------------------------------------------
IF BLANK, PLEASE PRINT NAME AND ADDRESS ORIGINAL NOTES
OF REGISTERED HOLDER. (ATTACH ADDITIONAL LIST)
- - -------------------------------------------------------------------------------
<S> <C> <C>
PRINCIPAL AMOUNT
CERTIFICATE OF ORIGINAL NOTES
NUMBER(S)* TENDERED**
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
TOTAL AMOUNT
TENDERED:
- - -------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** All Original Notes held shall be deemed tendered unless a lesser number
is specified in this column.
-2-
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[_] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING;
Name of Tendering Institution: ______________________________________________
DTC Account Number __________________________________________________________
Transaction Code Number _____________________________________________________
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s): ____________________________________________
Window Ticket Number (if any) _______________________________________________
Date of Execution of Notice of Guaranteed Delivery __________________________
Name of Institution which Guaranteed Delivery _______________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution __________________________________________
DTC Account Number _____________________________________________________
Transaction Code Number ________________________________________________
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED ORIGINAL
NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH
ABOVE.
[_] 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: ____________________________________________________________________
_____________________________________________________________________________
-3-
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Iron Age Holdings Corporation, a Delaware
corporation (the "Company"), the above described principal amount of the
Company's outstanding 12 1/8% Senior Discount Notes due May 1, 2009 (the
"Original Notes") in exchange for a like principal amount of the Company's 12
1/8% Senior Discount Notes due May 1, 2009 (the "Exchange Notes") which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), upon the terms and subject to the conditions set forth in the
Prospectus dated June , 1998 (as the same may be amended or supplemented
from time to time, the "Prospectus"), receipt of which is acknowledged, and in
this Letter of Transmittal (which, together with the Prospectus, constitutes
the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Original Notes tendered herewith in accordance with the terms
and conditions of the Exchange Offer (including, if the Exchange Offer is
extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfer to or upon the
order of the Company all right, title and interest in and to such Original
Notes as are being tendered herewith. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent and attorney-in-fact
(with full knowledge that the Exchange Agent is also acting as agent of the
Company in connection with the Exchange Offer) with respect to the tendered
Original Notes, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), subject only to
the right of withdrawal described in the Prospectus, to (i) deliver
Certificates for Original Notes to the Company together with all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company,
upon receipt by the Exchange Agent, as the undersigned's agent, of the
Exchange Notes to be issued in exchange for such Original Notes, (ii) present
Certificates for such Original Notes for transfer, and to transfer the
Original Notes on the books of the Company, and (iii) receive for the account
of the Company all benefits and otherwise exercise all rights of beneficial
ownership of such Original Notes, all in accordance with the terms and
conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL
POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE
ORIGINAL NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR
EXCHANGE, THE COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE
THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES,
AND THAT THE ORIGINAL NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE
CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY
ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE
NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF
THE ORIGINAL NOTES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS
OBLIGATIONS UNDER THE REGISTRATION AGREEMENT. THE UNDERSIGNED HAS READ AND
AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Original
Notes tendered hereby should be printed above, if they are not already set
forth above, as they appear on the Certificates representing such Original
Notes. The Certificate number(s) and the Original Notes that the undersigned
wishes to tender should be indicated in the appropriate boxes above.
If any tendered Original Notes are not exchanged pursuant to the Exchange
Offer for any reason, or if Certificates are submitted for more Original Notes
than are tendered or accepted for exchange, Certificates for such nonexchanged
or nontendered Original Notes will be returned (or, in the case of Original
Notes tendered by book-entry transfer, such Original Notes will be credited to
an account
-4-
<PAGE>
maintained at DTC), without expense to the tendering holder, promptly
following the expiration or termination of the Exchange Offer.
If the undersigned is a broker-dealer holding Original Notes acquired for
its own account as a result of market-making activities or other trading
activities, it agrees to deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of Exchange Notes received in
respect of such Original Notes pursuant to the Exchange Offer.
The undersigned understands that tenders of Original Notes pursuant to any
one of the procedures described in "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions will, upon the Company's
acceptance for exchange of such tendered Original Notes, constitute a binding
agreement between the undersigned and the Company upon the terms and subject
to the conditions of the Exchange Offer. The undersigned recognizes that,
under certain circumstances set forth in the Prospectus, the Company may not
be required to accept for exchange any of the Original Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange Notes be
issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Original Notes, that such Exchange Notes be credited to the
account indicated above maintained at DTC. If applicable, substitute
Certificates representing Original Notes not exchanged or not accepted for
exchange will be issued to the undersigned or, in the case of a book-entry
transfer of Original Notes, will be credited to the account indicated above
maintained at DTC. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please deliver Exchange Notes to the undersigned at
the address shown below the undersigned's signature.
BY TENDERING ORIGINAL NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN
"AFFILIATE" OF THE COMPANY, (II) ANY EXCHANGE NOTES TO BE RECEIVED BY THE
UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, FOR THE
UNDERSIGNED'S OWN ACCOUNT, FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE
IN CONNECTION WITH ANY DISTRIBUTION OF THE EXCHANGE NOTES, (III) THE
UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE
IN THE DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF EXCHANGE
NOTES TO BE RECEIVED IN THE EXCHANGE OFFER, (IV) IF THE UNDERSIGNED IS NOT A
BROKER-DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO
ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH
EXCHANGE NOTES, AND (V) THE UNDERSIGNED WILL PROVIDE THE COMPANY WITH ANY
ADDITIONAL REPRESENTATIONS SO REQUESTED IN ORDER FOR THE COMPANY TO ENSURE
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. ANY HOLDER OF
ORIGINAL NOTES WHICH IS NOT A BROKER-DEALER, AND WHICH IS USING THE EXCHANGE
OFFER TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES
ACT) OF EXCHANGE NOTES, IS HEREBY NOTIFIED (1) THAT IT WILL NOT BE ABLE TO
RELY ON THE POSITION OF THE STAFF OF THE DIVISION OF CORPORATE FINANCE OF THE
SECURITIES AND EXCHANGE COMMISSION (THE "STAFF") SET FORTH IN EXXON CAPITAL
HOLDINGS CORPORATION (AVAIL. APRIL 13, 1989) AND SIMILAR LETTERS AND (2) THAT
IT MUST COMPLY WITH THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF EXCHANGE NOTES.
IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED REPRESENTS THAT
IT IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF
EXCHANGE NOTES. ANY HOLDER OF ORIGINAL NOTES WHICH IS A BROKER-DEALER BY
TENDERING ORIGINAL NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS
-5-
<PAGE>
LETTER OF TRANSMITTAL, REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN
INTERPRETIVE LETTERS ISSUED BY THE STAFF TO THIRD PARTIES, THAT (A) SUCH
ORIGINAL NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR (B)
SUCH ORIGINAL NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS
A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL
DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING
THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH
EXCHANGE NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A
PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN
"UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
ALL RESALES MUST BE MADE IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR
"BLUE SKY" LAWS. SUCH COMPLIANCE MAY REQUIRE THAT THE EXCHANGE NOTES BE
REGISTERED OR QUALIFIED IN A PARTICULAR STATE OR THAT THE RESALE BE MADE BY OR
THROUGH A LICENSED BROKER-DEALER, UNLESS EXEMPTIONS FROM THESE REQUIREMENTS
ARE AVAILABLE. THE COMPANY ASSUMES NO RESPONSIBILITY WITH REGARD TO COMPLIANCE
WITH SUCH REQUIREMENTS.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF ORIGINAL NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
ORIGINAL NOTES MAY ONLY BE TENDERED BY HOLDERS IN NEW MEXICO AND
PENNSYLVANIA WHO ARE HOLDERS OF THE KIND DESCRIBED IN APPENDIX A HERETO. BY
SIGNING THIS LETTER OF TRANSMITTAL, SUCH HOLDERS WILL BE DEEMED TO REPRESENT
THAT THEY ARE HOLDERS OF THE KIND DESCRIBED IN APPENDIX A HERETO.
The Company has agreed that, subject to the provisions of the Registration
Agreement, the Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Original Notes, where such Original Notes were
acquired by such broker-dealer for its own account as a result of market-
making activities or other trading activities, for a period ending 90 days
after the Expiration Date (subject to extension under certain limited
circumstances described in the Prospectus) or, if earlier, when all such
Exchange Notes have been disposed of by such broker-dealer. In that regard,
each broker-dealer who acquired Original Notes for its own account and as a
result or market-making or other trading activities, by tendering such
Original Notes and executing this letter of transmittal, agrees that, upon
receipt of notice from the Company of the occurrence of any event or the
discovery of any fact which makes any statement contained or incorporated by
reference therein, in light of the circumstances under which they were made,
not misleading or of the occurrence of certain other events specified in the
Registration Agreement, such broker-dealer will suspend the sale of Exchange
Notes pursuant to the Prospectus until the Company has amended or supplemented
the Prospectus to correct such misstatement or omission and has furnished
copies of the amended or supplemented Prospectus to the broker-dealer or the
Company given notice that the sale of the Exchange Notes may be resumed, as
the case may be. If the Company gives such notice to suspend the sale of the
Exchange Notes, it shall extend the 90-day period referred to above during
which broker-dealers are entitled to use the Prospectus in connection with the
resale of Exchange Notes by the number of days during the period from and
including the date of the giving of such notice to and including the date when
broker-dealers shall have received copies of the supplemented or amended
Prospectus necessary to permit resales of the Exchange Notes or to and
including the date on which the Company has given notice that the sale of
Exchange Notes may be resumed, as the case may be.
-6-
<PAGE>
As a result, a broker-dealer who intends to use the Prospectus in connection
with resales of Exchange Notes received in exchange for Original Notes
pursuant to the Exchange Offer must notify the Company, or cause the Company
to be notified, on or prior to the Expiration Date, that it is a broker-
dealer. Such notice may be given in the space provided above or may be
delivered to the Exchange Agent at the address set forth in the Prospectus
under "The Exchange Offer--Exchange Agent."
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
-7-
<PAGE>
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Original Notes hereby tendered or on a security
position listing, or by any person(s) authorized to become the registered
holder(s) by endorsements and documents transmitted herewith (including
such opinions of counsel, certificates and other information as may be
required by the Company for the Original Notes to comply with any
restrictions on transfer applicable to the Original Notes). If signature
is by an attorney-in-fact, executor, administrator, trustee, guardian,
officer of a corporation or another acting in a fiduciary capacity or
representative capacity, please set forth the signer's full title. See
Instruction 5.
___________________________________________________________________________
___________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
Date: ______________________ , 1998
Name(s) ___________________________________________________________________
(PLEASE PRINT)
___________________________________________________________________________
Capacity or Title _________________________________________________________
Address ___________________________________________________________________
(INCLUDE ZIP CODE)
Area Code(s) and Telephone Number _________________________________________
___________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
Authorized Signature ______________________________________________________
Name ______________________________________________________________________
(PLEASE PRINT)
Date _______________________ , 1998
Capacity or Title _________________________________________________________
Name of Firm ______________________________________________________________
Address ___________________________________________________________________
(INCLUDE ZIP CODE)
Area Code(s) and Telephone Number _________________________________________
-8-
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6) (SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if Exchange To be completed ONLY if Exchange
Notes or any Original Notes that Notes or any Original Notes that
are not tendered are to be issued are not tendered are to be sent to
in the name of someone other than someone other than the registered
the registered holder of the holder of the Original Notes whose
Original Notes whose name(s) name(s) appear(s) above, or to the
appear(s) above. registered holder(s) at an address
other than that shown above.
ISSUE:
MAIL:
[_] Exchange Notes to:
[_] Original Notes not tendered [_] Exchange Notes to:
to: [_] Original Notes not tendered
to:
Name(s): __________________________
Name(s): __________________________
___________________________________
(PLEASE PRINT) ___________________________________
(PLEASE PRINT)
Address: __________________________
Address: __________________________
___________________________________
(ZIP CODE) ___________________________________
(ZIP CODE)
___________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL
SECURITY NUMBER)
(SEE ENCLOSED SUBSTITUTE FORM W-9)
-9-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be completed either if (a)
tenders are to be made pursuant to the procedures for tender by book-entry
transfer set forth in "The Exchange Offer--Procedures for Tendering" in the
Prospectus and an Agent's Message is not delivered or (b) Certificates are to
be forwarded herewith. Timely confirmation of a book-entry transfer of such
Original Notes into the Exchange Agent's account at DTC, or Certificates as
well as this Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its addresses set forth herein on or prior to the Expiration
Date. Tenders by book-entry transfer may also be made by delivering an Agent's
Message in lieu of this Letter of Transmittal. The term "Agent's Message"
means a message, transmitted by DTC to and received by the Exchange Agent and
forming a part of a book-entry confirmation, which states that DTC has
received an express acknowledgment from the tendering Participant, which
acknowledgment states that such Participant has received and agrees to be
bound by the Letter of Transmittal and that the Company may enforce the Letter
of Transmittal against such Participant. The term "book-entry confirmation"
means a timely confirmation of book-entry transfer of Original Notes into the
Exchange Agent's account at DTC.
Holders who wish to tender their Original Notes and (i) who cannot deliver
their Original Notes, this Letter of Transmittal and all other required
documents to the Exchange Agent on or prior to the Expiration Date or (ii)
whose Original Notes are not immediately available may tender their Original
Notes by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. Pursuant to
such procedures: (a) such tender must be made through an Eligible Institution
(as defined below); (b) on or prior to the applicable Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by mail, hand
delivery or facsimile transmission) setting forth the name and address of the
holder, the certificate number(s) of such Original Notes and the principal
amount of the Original Notes being tendered, stating that the tender is being
made thereby and guaranteeing that, within five business days after the
applicable Expiration Date, the applicable Letter of Transmittal together with
the certificate(s) representing the Original Notes (or Book-Entry
Confirmation) and any other documents required by the applicable Letter of
Transmittal will be delivered by the Eligible Institution to the Exchange
Agent; and (c) such properly completed and executed Letter of Transmittal, as
well as the Certificate(s) representing the tendered Original Notes in proper
form for transfer (or Book-Entry Confirmation) and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
within five business days after the applicable Expiration Date, all as
provided in "The Exchange Offer--Guaranteed Delivery Procedures" in the
Prospectus.
The Notice of Guaranteed Delivery may be delivered by mail, hand delivery or
facsimile transmission to the Exchange Agent, and must include a guarantee by
an Eligible Institution in the form set forth in such Notice. For Original
Notes to be properly tendered pursuant to the guaranteed delivery procedure,
the Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to
the Expiration Date. As used herein and in the Prospectus, "Eligible
Institution" means a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as "an eligible guarantor institution," including (as such terms
are defined therein) (i) a bank; (ii) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association
or clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER AND THE DELIVERY WILL BE DEEMED
-10-
<PAGE>
MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR
OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
THE COMPANY WILL NOT ACCEPT ANY ALTERNATIVE, CONDITIONAL OR CONTINGENT
TENDERS. EACH TENDERING HOLDER, BY EXECUTION OF A LETTER OF TRANSMITTAL (OR
FACSIMILE THEREOF OR AGENT'S MESSAGE IN LIEU THEREOF), WAIVES ANY RIGHT TO
RECEIVE ANY NOTICE OF THE ACCEPTANCE OF SUCH TENDER.
2. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required if:
a. this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in DTC
whose name appears on a security position listing as the owner of the
Original Notes) of Original Notes tendered herewith, unless such holder(s)
has completed either the box entitled "Special Issuance Instructions" or
the box entitled "Special Delivery Instructions" above, or
b. such Original Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. Inadequate Space. If the space provided in the box captioned "Description
of Original Notes Tendered" is inadequate, the Certificate number(s) and/or
the principal amount of Original Notes and any other required information
should be listed on a separate signed schedule which is attached to this
Letter of Transmittal.
4. Partial Tenders and Withdrawal Rights. If less than all the Original
Notes evidenced by any Certificate submitted are to be tendered, fill in the
principal amount of Original Notes which are to be tendered in the box
entitled "Principal Amount of Original Notes Tendered." In such case, new
Certificate(s) for the remainder of the Original Notes that were evidenced by
your old Certificate(s) will be sent to the holder of the Original Notes,
promptly after the Expiration Date. All Original Notes represented by
Certificates delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Original Notes pursuant to
an Exchange Offer may be withdrawn, unless theretofore accepted for exchange
as provided in the applicable Exchange Offer, at any time prior to the
Expiration Date of that Exchange Offer.
To be effective, a written or facsimile transmission notice of withdrawal
must be received by the Exchange Agent at its address set forth herein prior
to the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Original Notes to be withdrawn (the
"Depositor"), (ii) identify the Original Notes to be withdrawn (including the
Certificate number or numbers and aggregate principal amount of such Original
Notes), and (iii) be signed by the holder in the same manner as the original
signature on the applicable Letter of Transmittal (including any required
signature guarantees). All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company
in its sole respective discretion, which determination shall be final and
binding on all parties. Any Original Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Original Notes so
withdrawn are retendered. Properly withdrawn Original Notes may be retendered
by following one of the procedures described in the Prospectus under "The
Exchange Offer--Procedures for Tendering" at any time prior to the applicable
Expiration Date.
Any Original Notes which have been tendered but which are not accepted for
exchange due to the rejection of the tender due to uncured defects or the
prior termination of the applicable Exchange
-11-
<PAGE>
Offer, or which have been validly withdrawn, will be returned to the holder
thereof (unless otherwise provided in the Letter of Transmittal), as soon as
practicable following the applicable Expiration Date or, if so requested in
the notice of withdrawal, promptly after receipt by the issuer of the Original
Notes of notice of withdrawal without cost to such holder.
5. Signatures on Letter of Transmittal, Assignments and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the
Original Notes tendered hereby, the signature(s) must correspond exactly with
the name(s) as written on the face of the Certificate(s) or on a security
position listing without alteration, enlargement or any change whatsoever.
If any of the Original Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Original Notes are registered in different name(s) on
several Certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles thereof or Agent's Message
in lieu thereof) as there are different registrations of Certificates.
If this Letter of Transmittal or any Certificates 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 must submit proper evidence
satisfactory to the Company, in its sole discretion, of such persons'
authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Original Notes listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required unless Exchange Notes
are to be issued in the name of a person other than the registered holder(s).
Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Original Notes listed, the Certificates must be
endorsed or accompanied by appropriate bond powers, signed exactly as the name
or names of the registered owner(s) appear(s) on the Certificates, and also
must be accompanied by such opinions of counsel, certifications and other
information as the Company may require in accordance with the restrictions on
transfer applicable to the Original Notes. Signatures on such Certificates or
bond powers must be guaranteed by an Eligible Institution.
6. Special Issuance and Delivery Instructions. If Exchange Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if Exchange Notes are to be sent to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be
completed. Certificates for Original Notes not exchanged will be returned by
mail or, if tendered by book-entry transfer, by crediting the account
indicated above maintained at DTC. See Instruction 4.
7. Irregularities. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of Original Notes which
determination shall be final and binding on all parties. The Company reserves
the absolute right, in its sole and absolute discretion, to reject any and all
tenders determined by it not to be in proper form or the acceptance of which,
or exchange for, may, in the view of counsel to the Company, be unlawful. The
Company also reserves the absolute right, subject to applicable law, to waive
any of the conditions of the Exchange Offer set forth in the Prospectus under
"The Exchange Offer--Conditions of the Exchange Offer" or any conditions or
irregularity in any tender of Original Notes of any particular holder whether
or not similar conditions or irregularities are waived in the case of other
holders. The Company's interpretation of the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and the instructions
hereto) will be final and binding. No tender of Original Notes will be deemed
to have been validly made until all irregularities with respect to such
-12-
<PAGE>
tender have been cured or waived. Neither the Company, any affiliates or
assigns of the Company, the Exchange Agent, or any other person shall be under
any duty to give notification of any irregularities in tenders or incur any
liability for failure to give such notification.
8. Questions, Requests for Assistance and Additional Copies. Questions and
requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, this Letter of Transmittal and the Notice
of Guaranteed Delivery may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
9. 31% Backup Withholding; Substitute Form W-9. Under U.S. Federal income
tax law, a holder whose tendered Original Notes are accepted for exchange is
required to provide the Exchange Agent with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service (the
"IRS") may subject the holder or other payee to a $50 penalty. In addition,
payments to such holders or other payees with respect to Original Notes
exchanged pursuant to the Exchange Offer may be subject to 31% backup
withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the tendering
holder has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If the box in Part 2 is checked, the holder or
other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN
is provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-
9. If the holder furnishes the Exchange Agent with its TIN within 60 days
after the date of the Substitute Form W-9, the amounts retained during the 60
day period will be remitted to the holder and no further amounts shall be
retained or withheld from payments made to the holder thereafter. If, however,
the holder has not provided the Exchange Agent with its TIN within such 60 day
period, amounts withheld will be remitted to the IRS as backup withholding. In
addition, 31% of all payments made thereafter will be withheld and remitted to
the IRS until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Original Notes or of the last transferee appearing on the transfers
attached to, or endorsed on, the Original Notes. If the Original Notes are
registered in more than one name or are not in the name of the actual owner,
consult the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional guidance on which number to
report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the
face thereof, to avoid possible erroneous backup withholding. A foreign person
may qualify as an exempt recipient by submitting a properly completed IRS Form
W-8, signed under penalties of perjury, attesting to that holder's exempt
status. Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather, the
U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
-13-
<PAGE>
10. Lost, Destroyed or Stolen Certificates. If any Certificate(s)
representing Original Notes have been lost, destroyed or stolen, the holder
should promptly notify the Exchange Agent. The holder will then be instructed
as to the steps that must be taken in order to replace the Certificate(s).
This Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost, destroyed or stolen Certificate(s) have been
followed.
11. Security Transfer Taxes. Holders who tender their Original Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, Exchange Notes are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the
Original Notes tendered, or if a transfer tax is imposed for any reason other
than the exchange of Original Notes in connection with the Exchange Offer,
then the amount of any such transfer tax (whether imposed on the registered
holder or any other persons) 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.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
-14-
<PAGE>
PAYOR'S NAME: THE CHASE MANHATTAN BANK, AS EXCHANGE AGENT
- - -------------------------------------------------------------------------------
PART I--PLEASE PROVIDE YOUR SOCIAL SECURITY OR
TIN IN THE BOX AT RIGHT AND EMPLOYER
CERTIFY BY SIGNING AND IDENTIFICATION NUMBER
DATING BELOW.
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE ______________________
TREASURY INTERNAL (If awaiting TIN
REVENUE SERVICE write "Applied For")
-----------------------------------------------------
NAME (PLEASE PRINT)
PAYOR'S REQUEST FOR -----------------------------------------------------
TAXPAYER IDENTIFICATION ADDRESS
NUMBER ("TIN") AND -----------------------------------------------------
CERTIFICATION CITY STATE ZIP CODE
-----------------------------------------------------
PART II--For Payees NOT subject to backup
withholding, see the enclosed Guidelines for
Certification of Taxpayer Identification Number on
Substitute Form W-9 and complete as instructed
therein.
-----------------------------------------------------
CERTIFICATION--UNDER PENALTIES OF PERJURY, I
CERTIFY THAT:
1. The number shown on this form is my correct
Taxpayer Identification Number (or I am
waiting for a number to be issued to me),
AND
2. I am not subject to backup withholding
because: (a) I am exempt from backup
withholding, or (b) I have not been notified
by the Internal Revenue Service ("IRS") that
I am subject to backup withholding as a
result of a failure to report all interest
or dividends, or (c) the IRS has notified me
that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item
(2) above if you have been notified by the IRS that
you are subject to backup withholding because of
under reporting interest or dividends on your tax
return. However, if after being notified by the IRS
that you were subject to backup withholding you
received another notification from the IRS that you
are no longer subject to backup withholding, do not
cross out item (2).
Signature: __________________ Date: ________ , 1998
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR"
IN PART I OF SUBSTITUTE FORM W-9.
PAYOR'S NAME: THE CHASE MANHATTAN BANK, AS EXCHANGE AGENT
- - -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all reportable payments made to me thereafter will
be withheld until I provide a number.
Signature: _________________________ Date: ________________________, 1998
-15-
<PAGE>
APPENDIX A
NEW MEXICO HOLDERS
Any "financial or institutional investor" (as defined below) or broker-
dealer. The term "financial or institutional investor" means any of the
following whether acting for itself or others in a fiduciary capacity other
than as an agent: depository institution (as defined), insurance company,
insurance company separate account, investment company as defined in the
Investment Company Act of 1940; an employee pension, profit-sharing or benefit
plan (i) if the plan has total assets in excess of $5,000,000, or (ii) if the
investment decisions are made by a plan fiduciary, as defined in the Employee
Retirement Income Security Act of 1974, which is either a broker-dealer
registered under the Securities Exchange Act of 1934, an investment adviser
registered or exempt from registration under the Investment Advisers Act of
1940, a depository institution or an insurance company; a business development
company as defined in the Investment Company Act of 1940, a small business
investment company licensed by the United States Small Business Administration
under Section 301(c) or 301(d) of the United States Small Business Investment
Act of 1958; or any other financial or institutional investor as the Director
of the New Mexico Securities Division by rule or order designates. The
Director has designated the following additional "financial or institutional
investors:" an entity, other than a natural person, which is directly engaged
in the business of, and derives at least eighty percent of its annual gross
income from investing, purchasing, selling or trading in securities of more
than one issuer and not of its own issue, and that has gross assets in excess
of five million dollars ($5,000,000) at the end of its latest fiscal year; an
entity organized and operated not for private profit as described in Section
501(c)(3) of the Internal Revenue Code with total assets in excess of five
million dollars ($5,000,000); a state, a political subdivision of a state or
an agency or corporate or other instrumentality of a state or a political
subdivision of a state; and an employee pension, profit-sharing or benefit
plan, if the investment decisions are made by one or more plan fiduciaries, as
defined in the Employee Retirement Income Security Act of 1974, so long as at
least one of such plan fiduciaries is either a broker-dealer registered under
the Securities Exchange Act of 1934, an investment adviser registered or
exempt from registration under the Investment Advisers Act of 1940, a
depository institution, or an insurance company.
PENNSYLVANIA HOLDERS
Any bank as defined, insurance company, pension or profit-sharing plan or
trust, investment company as defined in the Investment Company Act of 1940,
other financial institution or any person, other than an individual, which
controls any of the foregoing, the federal government, the State or any agency
or political subdivision thereof, any other person so designated by regulation
of the Pennsylvania Securities Commission, or any broker-dealer, whether the
buyer is acting for itself or in some fiduciary capacity. Entities so
designated by regulation include: (1) a corporation or business trust or a
wholly-owned subsidiary of the person which has been in existence for 18
months and which has a tangible net worth on a consolidated basis, as
reflected in its most recent audited financial statements, of $10,000,000 or
more; (ii) a college, university or other public or private institution which
has received exempt status under section 501(c)(3) of the Internal Revenue
Code of 1954 and which has total endowment or trust funds, including annuity
and life income funds, of $5,000,000 or more according to its most recent
audited financial statements; provided that the aggregate dollar amount of
securities being sold to purchasers in this category may not exceed 5% of the
endowment or trust funds; (iii) a Small Business Investment Company as that
term is defined in section 103 of the Small Business Investment Act of 1958
which either: (1) has a total capital of $1,000,000 or more; or (2) is
controlled by institutional investors as defined herein; (iv) a Seed Capital
Fund, as defined in section 2 and authorized in section 6 of the Small
Business Incubators Act; (v) a Business Development Credit Corporation, as
authorized by the Business Development Credit Corporation Law; (vi) a person
whose securityholders consist solely of institutional investors as defined
herein or broker-dealers; or (vii) a qualified institutional buyer as that
term is defined in 17 CFR 230.144A (relating to private resales of securities
to institutions), or any successor rule thereto.
-16-
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
12 1/8% SENIOR DISCOUNT NOTES
DUE MAY 1, 2009
OF
IRON AGE HOLDINGS CORPORATION
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i) the
procedures for delivery by book-entry transfer cannot be completed on a timely
basis (ii) certificates for the Company's (as defined below) 12 1/8% Senior
Discount Notes due May 1, 2009 (the "Original Notes") are not immediately
available or (iii) Original Notes, the Letter of Transmittal and all other
required documents cannot be delivered to The Chase Manhattan Bank (the
"Exchange Agent") on or prior to the Expiration Date (as defined in the
Prospectus referred to below). This Notice of Guaranteed Delivery may be
delivered by hand, overnight courier or mail, or transmitted by facsimile
transmission, to the Exchange Agent. See "The Exchange Offer--Procedures for
Tendering" in the Prospectus.
The Exchange Agent for the Exchange Offer is:
THE CHASE MANHATTAN BANK
By Registered or Certified Mail or Hand or Overnight Delivery:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Richard Lorenzen
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 946-8158
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY 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.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Iron Age Holdings Corporation, a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated June , 1998 (as the same may be amended or
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate liquidation amount of Original Notes set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering."
Aggregate Principal Amount Tendered:
_____________________________________ _____________________________________
(NAME(S) OR REGISTERED HOLDER(S)--
PLEASE PRINT)
_____________________________________
CERTIFICATE NOS. (IF AVAILABLE)
_____________________________________ _____________________________________
(ADDRESS OF REGISTERED HOLDER(S))
Check box if Original Notes will be
delivered by book-entry transfer and _____________________________________
provide account number. (ZIP CODE)
[_] The Depository Trust Company _____________________________________
(AREA CODE AND TELEPHONE NO.)
DTC Account Number: _________________
_____________________________________
Date: _______________________________ (NAME(S) OF AUTHORIZED SIGNATORY)
_____________________________________
(CAPACITY)
_____________________________________
(ADDRESS(ES) OF AUTHORIZED
SIGNATORY)
_____________________________________
(AREA CODE AND TELEPHONE NO.)
_____________________________________
_____________________________________
(SIGNATURE(S) OF RECORD HOLDER OR
AUTHORIZED SIGNATORY)
DATED: ______________________________
-2-
<PAGE>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (1) a bank; (2) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (3) a credit
union; (4) a national securities exchange, registered securities association
or clearing agency; or (5) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing
being referred to as an "Eligible Institution"), hereby guarantees to deliver
to the Exchange Agent at one of its addresses set forth above, either the
Original Notes tendered hereby in proper form for transfer, or confirmation of
the book- entry transfer of such Original Notes to the Exchange Agent's
account at The Depository Trust Company ("DTC"), pursuant to the procedures
for book-entry transfer set forth in the Prospectus, in either case together
with one or more properly completed and duly executed Letter(s) of Transmittal
(or facsimile thereof or Agent's Message in lieu thereof) and any other
required documents within three business days after the date of execution of
this Notice of Guaranteed Delivery. The undersigned acknowledges that it must
deliver the Letter(s) of Transmittal (or facsimile thereof or Agent's Message
in lieu thereof) and the Original Notes tendered hereby to the Exchange Agent
within the time period set forth above and that failure to do so could result
in a financial loss to the undersigned.
---------------------------------------------------------------------------
(NAME OF FIRM)
---------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
---------------------------------------------------------------------------
(TITLE)
---------------------------------------------------------------------------
(ADDRESS)
---------------------------------------------------------------------------
(ZIP CODE)
---------------------------------------------------------------------------
(AREA CODE AND TELEPHONE NUMBER)
DATED: ____________________________________________________________________
NOTE: DO NOT SEND ORIGINAL NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY.
ACTUAL SURRENDER OF ORIGINAL NOTES MUST BE MADE PURSUANT TO, AND BE
ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
-3-
<PAGE>
EXHIBIT 99.3
IRON AGE HOLDINGS CORPORATION
Robinson Plaza Three
Suite 400
Pittsburgh, Pennsylvania 15205
EXCHANGE AGENT AGREEMENT
June __, 1998
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Ladies and Gentlemen:
Iron Age Holdings Corporation, a Delaware corporation (the "Company"),
proposes to make an offer (the "Exchange Offer") to exchange up to $145,140,000
aggregate principal amount at maturity of its 12 1/8% Senior Discount Notes due
May 1, 2009 (the "Exchange Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), for a like principal
amount of its outstanding 12 1/8% Senior Discount Notes due May 1, 2009 which
have not been so registered (the "Original Notes"), of which $145,140,000
aggregate principal amount at maturity is outstanding. The terms and conditions
of the Exchange Offer as currently contemplated are set forth in a prospectus,
expected to be dated July __, 1998 (the "Prospectus"), a copy of which is
attached to this Agreement as Attachment A, proposed to be distributed to all
record holders of the Original Notes. Capitalized terms used herein and not
otherwise defined shall have the meaning assigned to them in the Prospectus.
The Company hereby appoints The Chase Manhattan Bank to act as exchange
agent (the "Exchange Agent") in connection with the Exchange Offer. References
hereinafter to "you" shall refer to The Chase Manhattan Bank.
The Exchange Offer is expected to be commenced by the Company on or about
June __, 1998. The Letter of Transmittal accompanying the Prospectus is to be
used by the holders of the Original Notes to accept the Exchange Offer, and
contains instructions with respect to the Exchange Offer.
The Exchange Offer shall expire at 5:00 p.m., New York City time, on July
__, 1998 unless extended (as so extended the "Expiration Date"). Subject to the
terms and conditions set forth in the Prospectus, the Company expressly reserves
the right to extend the Exchange
<PAGE>
Offer from time to time and may extend the Exchange Offer by giving oral
(promptly confirmed in writing) or written notice to you no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Original Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified in the Prospectus under the caption "The Exchange
Offer--Conditions of the Exchange Offer." The Company will give oral (promptly
confirmed in writing) or written notice of any amendment, termination or
nonacceptance to you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in accordance
with the following instructions:
1. You will perform such duties and only such duties as are specifically
set forth in the section of the Prospectus captioned "The Exchange Offer," as
specifically set forth herein and such duties which are necessarily incidental
thereto; provided, however, that in no way will your general duty to act in good
-------- -------
faith be discharged by the foregoing.
2. You will establish an account with respect to the Original Notes at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Exchange Offer within two business days after the date of the Prospectus or,
if you already have established an account with the Book-Entry Transfer Facility
suitable for the Exchange Offer, you will identify such pre-existing account to
be used in the Exchange Offer, and any financial institution that is a
participant in the Book-Entry Transfer Facility's systems may make book-entry
delivery of the Original Notes by causing the Book-Entry Transfer Facility to
transfer such Original Notes into your account in accordance with the Book-Entry
Transfer Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal, certificates for
the Original Notes and confirmations of book-entry transfers into your account
at the Book-Entry Transfer Facility and any Agent's Message or other documents
delivered or mailed to you by or for holders of the Original Notes to ascertain
whether: (i) the Letters of Transmittal and any such other documents are duly
executed and properly completed in accordance with instructions set forth
therein and (ii) the Original Notes have otherwise been properly tendered. In
each case where the Letter of Transmittal or any other document has been
improperly completed or executed or any of the certificates for Original Notes
are not in proper form for transfer or some other irregularity in connection
with the acceptance of the Exchange Offer exists, you will endeavor to inform
the presenters of the need for fulfillment of all requirements and to take any
other action as may be necessary or advisable to cause such irregularity to be
corrected.
-2-
<PAGE>
4. With the approval of the President and Chief Executive Officer or the
Vice President and Chief Financial Officer of the Company (such approval, if
given orally, to be confirmed in writing), you are authorized to waive any
irregularities in connection with any tender of Original Notes pursuant to the
Exchange Offer.
5. Tenders of Original Notes may be made only as set forth in the section
of the Prospectus captioned "The Exchange Offer--Procedures for Tendering" or in
the Letter of Transmittal, and Original Notes shall be considered properly
tendered to you only when tendered in accordance with the procedures set forth
therein.
Notwithstanding the provisions of this paragraph 5, Original Notes which
the Company or any other party designated by the Company in writing shall
approve as having been properly tendered shall be considered to be properly
tendered (such approval, if given orally, shall be confirmed in writing).
6. You shall advise the Company with respect to any Original Notes
delivered subsequent to the Expiration Date and accept its written instructions
with respect to the disposition of such Original Notes.
7. You shall accept tenders:
(a) in cases where the Original Notes are registered in two or more
names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the Letter of
Transmittal) is acting in a fiduciary or a representative capacity only when
proper evidence of his or her authority to so act is submitted; and
(c) from persons other than the registered holder of Original Notes
provided that customary transfer requirements, including any applicable transfer
taxes, are fulfilled.
You shall accept partial tenders of Original Notes where so indicated and
as permitted in the Letter of Transmittal and deliver certificates for Original
Notes to the transfer agent for split-up and return any untendered Original
Notes to the holder (or to such other person as may be designated in the Letter
of Transmittal) as promptly as practicable after expiration or termination of
the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will notify you (such notice if given orally, to be promptly
confirmed in writing) of the Company's acceptance, promptly after the Expiration
Date, of all Original Notes properly tendered and you, on behalf of the Company,
will exchange such Original Notes for Exchange Notes and cause such Original
Notes to be canceled. Delivery of Exchange Notes will be made on behalf of the
Company by you at the rate of $1,000 principal amount of Exchange
-3-
<PAGE>
Notes for each $1,000 principal amount of Original Notes tendered promptly after
notice (such notice if given orally, to be promptly confirmed in writing) of
acceptance of said Original Notes by the Company; provided, however, that in all
-------- -------
cases, Original Notes tendered pursuant to the Exchange Offer will be exchanged
only after timely receipt by you of certificates for such Original Notes (or
confirmation of book-entry transfer into you account at the Book-Entry Transfer
Facility), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees (or Agent's Message in
lieu thereof) and any other required document. You shall issue Exchange Notes
only in denominations of $1,000 or any integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except that,
subject to the terms and upon the conditions set forth in the Prospectus and the
Letter of Transmittal, Original Notes tendered pursuant to the Exchange Offer
may be withdrawn at any time on or prior to the Expiration Date.
10. The Company shall not be required to exchange any Original Notes
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Company not to exchange any Original Notes
tendered shall be given (such notice, if given orally, shall be promptly
confirmed in writing) by the Company to you.
11. If, pursuant to the Exchange Offer, the Company does not accept for
exchange all or part of the Original Notes tendered because of an invalid
tender, the occurrence of certain other events set forth in the Prospectus under
the caption "The Exchange Offer--Conditions of the Exchange Offer" or otherwise,
you shall as soon as practicable after the expiration or termination of the
Exchange Offer return those certificates for unaccepted Original Notes (or
effect the appropriate book-entry transfer of the unaccepted Original Notes),
and return any related required documents and the Letters of Transmittal
relating thereto that are in your possession, to the persons who deposited them.
12. All certificates for reissued Original Notes or for unaccepted
Original Notes shall be forwarded by (a) first-class mail, return receipt
requested, under a blanket surety bond protecting you and the Company from loss
or liability arising out of the non-receipt or non-delivery of such certificates
or (b) by registered mail insured separately for the replacement value of such
certificates.
13. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other persons or
to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of
Original Notes, and will
-4-
<PAGE>
not be required to and will make no representation as to the validity, value or
genuineness of the Exchange Offer; provided, however, that in no way will your
-------- -------
general duty to act in good faith be discharged by the foregoing;
(b) shall not be obligated to take any legal action hereunder which
might in your reasonable judgment involve any expense or liability, unless you
shall have been furnished with reasonable indemnity satisfactory to you;
(c) shall not be liable to the Company for any action taken or omitted
by you, or any action suffered by you to be taken or omitted, without gross
negligence, willful misconduct or bad faith on your part, by reason of or as a
result of the administration of your duties hereunder in accordance with the
terms and conditions of this Agreement or by reason of your compliance with the
instructions set forth herein or with any written or oral instructions delivered
to you pursuant hereto, and may conclusively rely on and shall be fully
protected in acting or refraining from acting in good faith in reliance upon any
certificate, instrument, opinion, notice, letter, facsimile or other document or
security delivered to you and reasonably believed by you to be genuine and to
have been signed by the proper party or parties;
(d) may reasonably act upon any tender, statement, request, comment,
agreement or other instrument whatsoever not only as to its due execution and
validity and the effectiveness of its provisions, but also as to the truth and
accuracy of any information contained therein (without any investigation
thereto), which you shall in good faith reasonably believe to be genuine or to
have been signed or represented by a proper person or persons;
(e) may conclusively rely on and shall be fully protected in acting
upon written or oral instructions from any officer of the Company with respect
to the Exchange Offer and shall not be liable for acting or refraining from
acting in accordance with any oral instructions which are inconsistent with the
written confirmation provided in connection therewith;
(f) shall not advise any person tendering Original Notes pursuant to
the Exchange Offer as to the wisdom of making such tender or as to the market
value or decline or appreciation in market value of any Original Notes; and
(g) may consult with your counsel with respect to any questions
relating to your duties and responsibilities and the written opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by you hereunder in good faith and in
accordance with such advice or written opinion of such counsel.
15. You shall take such action as may from time to time be requested by
the Company or its counsel (and such other action as you may reasonably deem
appropriate) to furnish, at
-5-
<PAGE>
the Company's expense, copies of the Prospectus, Letter of Transmittal and the
Notice of Guaranteed Delivery, or such other forms as may be approved from time
to time by the Company, to all persons requesting such documents and to accept
and comply with telephone requests for information relating to the Exchange
Offer, provided that such information shall relate only to the procedures for
accepting (or withdrawing from) the Exchange Offer. The Company will furnish you
with copies of such documents at your request. All other requests for
information relating to the Exchange Offer shall be directed to the Secretary of
the Company at: Robinson Plaza Three, Suite 400, Pittsburgh, Pennsylvania 15205.
16. You shall advise by facsimile transmission or telephone, and promptly
thereafter confirm in writing to the Company and Ropes & Gray, counsel for the
Company, and such other person or persons as they may request, weekly, and more
frequently, if reasonably requested, up to and including the Expiration Date, as
to the principal amount of the Original Notes which have been tendered pursuant
to the Exchange Offer and the items received by you pursuant to this Agreement,
separately reporting and giving cumulative totals of the items properly
received, items improperly received and items covered by Notices of Guaranteed
delivery. You shall also provide the Company or any such other person or
persons as the Company may request from time to time prior to the Expiration
Date with such other information as the Company or such other person may
reasonably request. In addition, you shall grant to the Company and such
persons as the Company may request, access to those persons on your staff who
are responsible for receiving tenders, in order to ensure that immediately prior
to the Expiration Date, the Company shall have received information in
sufficient detail to enable them to decide whether to extend the Exchange Offer.
You shall prepare a list of holders who failed to tender or whose tenders were
not accepted and the aggregate principal amount of Original Notes not tendered
or not accepted and deliver said list to the Company at least seven days prior
to the Expiration Date. You shall also prepare a final list of all persons
whose tenders were accepted, the aggregate principal amount of Original Notes
tendered and the aggregate principal amount of Original Notes accepted and
deliver said list to the Company.
17. Letters of Transmittal and Notices of Guaranteed Delivery shall be
stamped by you as to the date and the time of receipt thereof and shall be
preserved by you for a period of time at least equal to the period of time you
preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Company.
18. For services rendered as Exchange Agent hereunder you shall be
entitled to a fee from the Company of $5,000 and you shall be entitled to
reimbursement of your expenses (including fees and expenses of your counsel,
which fees are expected under normal circumstances to be not in excess of
$5,000) incurred in connection with the Exchange Offer. The provisions of this
section 18 shall survive the termination of this Agreement.
-6-
<PAGE>
19. You hereby acknowledge receipt of the Prospectus and the Letter of
Transmittal attached hereto and further acknowledge that you have examined each
of them to the extent necessary to perform your obligations hereunder. Any
inconsistency between this Agreement, on the one hand, and the Prospectus and
the Letter of Transmittal (as they may be amended from time to time), on the
other hand, shall be resolved in favor of the latter two documents, except with
respect to the duties, liabilities and indemnification of you as Exchange Agent,
which shall be controlled by this Agreement.
20. The Company agrees to indemnify and hold you (and your officers,
directors, employees and agents) harmless in your capacity as Exchange Agent
hereunder against any liability, cost or expense, including reasonable
attorney's fees, arising out of or in connection with the acceptance or
administration of your duties hereunder, including, without limitation, in
connection with any act, omission, delay or refusal made by you in reasonable
reliance upon any signature, enforcement, assignment, certificate, order,
request, notice, instruction or other instrument or document reasonably believed
by you to be valid, genuine and sufficient and in accepting any tender or
effecting any transfer of Original Notes reasonably believed by you in good
faith to be authorized, and in delaying or refusing in good faith to accept any
tenders or effect any transfer of Original Notes; provided, however, that the
-------- -------
Company shall not be liable for indemnification or otherwise for any loss,
liability, cost or expense to the extent arising out of your gross negligence,
willful misconduct or bad faith. You shall notify the Company by letter or
cable or by facsimile confirmed by letter, of the written assertion of a claim
against you or of any other action commenced against you, promptly after you
shall have received any such written assertion or commencement of action,
however, failure to provide such notification shall not constitute a waiver of
any rights afforded the Exchange Agent under this section. The Company shall be
entitled to participate at its own expense in the defense of any such claim or
other action. You shall not compromise or settle any such action or claim
without the consent of the Company. The provisions of this section 20 shall
survive the termination of this Agreement.
21. This Agreement and your appointment as Exchange Agent hereunder shall
be construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such state,
without regard to conflicts of law principles, and shall inure to the benefit
of, and the obligations created hereby shall be binding upon, the successors and
assigns of each of the parties hereto.
22. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which taken together
constitute one and the same agreement.
23. In case any provision of this Agreement 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.
-7-
<PAGE>
24. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged. This Agreement may not be modified orally.
25. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile)
and shall be given to such party, addressed to it, at its address or telecopy
number set forth below:
If to the Company, to:
Iron Age Corporation
Robinson Plaza Three, Suite 400
Pittsburgh, Pennsylvania 15205
Attention: Keith A. McDonough
Facsimile: (412) 787-8112
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Lauren I. Norton, Esq.
Facsimile: (617) 951-7050
If to the Exchange Agent, to:
The Chase Manhattan Bank
450 West 33rd Street, l5th Floor
New York, New York 10001
Attention: Rich Lorenzen
Facsimile: (212) 946-8158
26. Unless terminated earlier by the parties hereto, this Agreement shall
terminate 90 days following the Expiration Date. Notwithstanding the foregoing,
Paragraphs 18 and 20 shall survive the termination of this Agreement. Except as
provided in Paragraph 17, upon any termination of this Agreement, you shall
promptly deliver to the Company any funds or property (including, without
limitation, Letters of Transmittal and any other documents relating to the
Exchange Offer) then held by you as Exchange Agent under this Agreement.
27. This Agreement shall be binding and effective as of the date hereof.
-8-
<PAGE>
Please acknowledge receipt of this Agreement and confirm the arrangements
herein provided by signing and returning the enclosed copy.
IRON AGE HOLDINGS CORPORATION
By: __________________________________
Name:
Title:
Accepted as of the date
first above written:
THE CHASE MANHATTAN BANK,
as Exchange Agent
By: __________________________________
Name:
Title:
-9-
