<PAGE>
As filed with the Securities and Exchange Commission on July 12, 1999
Registration No. 5-43547
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 4 to
(Final Amendment)
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
ST. JOHN KNITS, INC.
(Name of the Issuer)
ST. JOHN KNITS, INC.
ST. JOHN KNITS INTERNATIONAL, INCORPORATED
SJKACQUISITION, INC.
PEARL ACQUISITION CORP.
ROBERT E. GRAY
MARIE GRAY
KELLY A. GRAY
VESTAR/GRAY INVESTORS LLC
VESTAR/SJK INVESTORS LLC
VESTAR CAPITAL PARTNERS III, L.P.
VESTAR ASSOCIATES III, L.P.
VESTAR ASSOCIATES CORPORATION III
(Name of Person(s) Filing Statement)
COMMON STOCK, WITHOUT PAR VALUE
(Title of Class of Securities)
790289 102
(CUSIP Number of Class of Securities)
<TABLE>
<S> <C> <C>
Robert E. Gray Roger G. Ruppert James P. Kelley
Chief Executive Officer Senior Vice President-Finance Managing Director
and Chairman of the Board and Chief Financial Officer Vestar Capital Partners III, L.P.
St. John Knits, Inc. St. John Knits International, Incorporated 1225 17th Street
17422 Derian Avenue 17422 Derian Avenue Suite 1660
Irvine, California 92614 Irvine, California 92614 Denver, Colorado 80202
(949) 863-1171 (949) 863-1171 (303) 292-6300
</TABLE>
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
--------------
Copies to:
<TABLE>
<S> <C> <C>
David A. Krinsky, Esq. Brian J. McCarthy, Esq. Philip T. Ruegger III, Esq.
O'Melveny & Myers LLP Skadden, Arps, Slate, Meagher & Flom, LLP Simpson Thacher & Bartlett
610 Newport Center Drive, 17th Floor 300 South Grand Avenue, Suite 3400 425 Lexington Avenue
Newport Beach, California 92660-6429 Los Angeles, California 90071 New York, New York 10017-3954
(949) 760-9600 (213) 687-5000 (212) 455-2000
</TABLE>
This statement is filed in connection with (check the appropriate box):
a.[X] The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b.[_] The filing of a registration statement under the Securities Act of 1933.
c.[_] A tender offer.
d.[_] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [_]
================================================================================
<PAGE>
This Amendment No. 4 (the "Statement") is the Final Amendment to the Rule
13e-3 Transaction Statement made by St. John Knits, Inc., a California
corporation (the "Company"), St. John Knits International, Incorporated, a
Delaware corporation ("SJKI"), Pearl Acquisition Corp., a Delaware corporation
and direct wholly owned subsidiary of Vestar/Gray Investors LLC ("Pearl"),
SJKAcquisition, Inc., a California corporation and direct wholly owned
subsidiary of SJKI ("SJKAcquisition"), Robert E. Gray, Marie Gray, Kelly A.
Gray, Vestar/Gray Investors LLC, Vestar/SJK Investors LLC, Vestar Capital
Partners III, L.P., Vestar Associates III, L.P. and Vestar Associates
Corporation III.
This Statement amends the Rule 13e-3 Transaction Statement filed by such
parties with the Securities and Exchange Commission on March 1, 1999, as
amended on April 28, 1999, May 17, 1999 and May 26, 1999. All information set
forth below should be read in conjunction with the information contained or
incorporated by reference in the Statement as previously amended.
This Final Amendment is filed pursuant to Rule 13e-3(d)(3) promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to
report the consummation on July 7, 1999 of (a) the merger of SJKAcquisition
with and into the Company (the "Reorganization Merger") and (b) the merger of
Pearl with and into SJKI (the "Acquisition Merger" and together with the
Reorganization Merger, the "Mergers"), as contemplated by the Agreement and
Plan of Merger, dated as of February 2, 1999 (the "Merger Agreement"), by and
among the Company, SJKI, Pearl and SJKAcquisition.
Item 3. Past Contacts, Transactions or Negotiations
The information set forth in Item 3 is hereby amended and supplemented as
follows:
(a)(2) On July 7, 1999, the Reorganization Merger became effective at 5:00
a.m., California time, as set forth in the Agreement of Merger
previously filed with the Secretary of State of California, and the
Acquisition Merger became effective by filing the Certificate of
Merger with the Secretary of State of Delaware. On July 7, 1999, the
Company issued a press release announcing the consummation of the
Mergers. A copy of the press release is set forth as Exhibit (d) and
incorporated herein by reference.
Item 6. Source and Amounts of Funds or Other Consideration
The information set forth in Item 6 is hereby amended and supplemented as
follows:
(a) On July 7, 1999, SJKI entered into a credit agreement (the "Credit
Agreement") by and among SJKI, the Lenders from time to time party
thereto and The Chase Manhattan Bank, as administrative agent. The
Credit Agreement provides for a Tranche A term loan in the aggregate
amount of $75 million, a Tranche B term loan in the aggregate amount of
$115 million and a revolving credit facility in the aggregate amount of
up to $25 million. SJKI also issued senior subordinated notes in the
aggregate principal amount of $100 million pursuant to an indenture
dated as of July 7, 1999 (the "Indenture") among SJKI, the Company, St.
John Trademarks, Inc., St. John Italy, Inc. and St. John Home, LLC and
The Bank of New York, as trustee. In addition, SJKI issued to
Vestar/SJK Investors LLC 250,000 shares of 15 1/4% Exchangeable
Preferred Stock due 2010 of SJKI (the "Preferred Stock"), having a $25
million aggregate liquidation preference. A copy of each of the Credit
Agreement, the Indenture and the Certificate of Designations for the
Preferred Stock is set forth as Exhibits (a)(1), (a)(2) and (a)(3),
respectively, and incorporated herein by reference.
Item 11. Contracts, Arrangements or Understandings With Respect to the
Issuer's Securities.
The information set forth in Item 11 is hereby amended and supplemented as
follows:
The Preferred Stock referred to in Item 6(a) above was acquired by Vestar/SJK
Investors LLC. The Preferred Stock will rank junior in right of payment to all
liabilities and obligations of SJKI (other than common stock of SJKI and any
preferred stock of SJKI which by its terms is on a parity with or junior to
the Preferred Stock).
1
<PAGE>
Vestar/SJK Investors LLC will be entitled to receive, when, as and if declared
by the board of directors of SJKI, out of funds legally available therefor,
dividends on the Preferred Stock at an annual rate equal to 15 1/4%, provided
that if dividends are not paid on a dividend payment date, dividends shall
continue to accrue on unpaid dividends. Dividends on the Preferred Stock may
only be paid in cash if permitted under the Credit Agreement, the Indenture
and other contractual arrangements of SJKI. Vestar/SJK Investors LLC will also
be entitled to five demand registrations at the expense of SJKI. Vestar/SJK
Investors LLC has agreed to waive its rights, as the holder of the Preferred
Stock, to receive any premiums in excess of the liquidation preference under
certain redemption provisions of the Certificate of Designations.
Item 16. Additional Information
The information set forth in Item 16 is hereby amended and supplemented as
follows:
Reference is made to the information set forth in Items 3(a)(2), 6(a) and 11.
Item 17. Material to Be Filed as Exhibits
The information set forth in Item 17 is hereby amended and supplemented as
follows:
(a)(1) Credit Agreement, dated July 7, 1999, by and among SJKI, the Lenders
from time to time party thereto and The Chase Manhattan Bank, as
administrative agent
(a)(2) Indenture, dated July 7, 1999, by and among SJKI, the Company, St. John
Trademarks, Inc., St. John Italy, Inc. and St. John Home, LLC and The
Bank of New York, as trustee
(a)(3) Certificate of Designations for 15 1/4% Exchangeable Preferred Stock
due 2010 of SJKI
(d) Press release dated July 7, 1999
2
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
PEARL ACQUISITION CORP.
By: *
___________________________________
ST. JOHN KNITS, INC.
By: /s/ Bob Gray
___________________________________
Name: Bob Gray
ST. JOHN KNITS INTERNATIONAL,
INCORPORATED
By: /s/ Bob Gray
___________________________________
Name: Bob Gray
SJKACQUISITION, INC.
By: *
___________________________________
BOB GRAY
By: /s/ Bob Gray
___________________________________
Name: Bob Gray
MARIE GRAY
By: /s/ Marie Gray
___________________________________
Name: Marie Gray
KELLY A. GRAY
By: /s/ Kelly A. Gray
___________________________________
Name: Kelly A. Gray
- --------
*These entities did not survive the Mergers.
3
<PAGE>
VESTAR/GRAY INVESTORS LLC
By its Managing Member:
Vestar/SJK Investors LLC
By its Managing Member:
Vestar Capital Partners III, L.P.
By its General Partner:
Vestar Associates III, L.P.
By its General Partner:
Vestar Associates Corporation III
By: /s/ James P. Kelley
___________________________________
Name: James P. Kelley
VESTAR/SJK INVESTORS LLC
By its Managing Member:
Vestar Capital Partners III, L.P.
By its General Partner:
Vestar Associates III, L.P.
By its General Partner:
Vestar Associates Corporation III
By: /s/ James P. Kelley
___________________________________
Name: James P. Kelley
VESTAR CAPITAL PARTNERS III, L.P.
By its General Partner:
Vestar Associates III, L.P.
By its General Partner:
Vestar Associates Corporation III
By: /s/ James P. Kelley
___________________________________
Name: James P. Kelley
VESTAR ASSOCIATES III, L.P.
By its General Partner:
Vestar Associates Corporation III
By: /s/ James P. Kelley
___________________________________
Name: James P. Kelley
VESTAR ASSOCIATES CORPORATION III
By: /s/ James P. Kelley
___________________________________
Name: James P. Kelley
July 12, 1999
4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
(a)(1) Credit Agreement, dated July 7, 1999, by and among SJKI, the Lenders
from time to time party thereto and The Chase Manhattan Bank, as
administrative agent
(a)(2) Indenture, dated July 7, 1999, by and among SJKI, the Company, St.
John Trademarks, Inc., St. John Italy, Inc. and St. John Home, LLC and
The Bank of New York, as trustee
(a)(3) Certificate of Designations for 15 1/4% Exchangeable Preferred Stock
due 2010 of SJKI
(d) Press release dated July 7, 1999
</TABLE>
5
<PAGE>
EXHIBIT 99.(a)(1)
EXECUTION COPY
================================================================================
CREDIT AGREEMENT
dated as of
July 7, 1999
among
ST. JOHN KNITS INTERNATIONAL, INCORPORATED
The Lenders Party Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
___________________________
CHASE SECURITIES INC.,
as Arranger
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms........................................... 1
SECTION 1.02. Classification of Loans and Borrowings.................. 23
SECTION 1.03. Terms Generally......................................... 23
SECTION 1.04. Accounting Terms; GAAP.................................. 23
ARTICLE II
The Credits
-----------
SECTION 2.01. Commitments............................................. 24
SECTION 2.02. Loans and Borrowings.................................... 24
SECTION 2.03. Requests for Borrowings................................. 25
SECTION 2.04. Swingline Loans......................................... 25
SECTION 2.05. Letters of Credit....................................... 27
SECTION 2.06. Funding of Borrowings................................... 30
SECTION 2.07. Interest Elections...................................... 31
SECTION 2.08. Termination and Reduction of Commitments................ 32
SECTION 2.09. Repayment of Loans; Evidence of Debt.................... 33
SECTION 2.10. Amortization of Term Loans.............................. 34
SECTION 2.11. Prepayment of Loans..................................... 36
SECTION 2.12. Fees.................................................... 37
SECTION 2.13. Interest................................................ 38
SECTION 2.14. Alternate Rate of Interest.............................. 39
SECTION 2.15. Increased Costs......................................... 39
SECTION 2.16. Break Funding Payments.................................. 40
SECTION 2.17. Taxes................................................... 41
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of
Set-Offs............................................... 42
SECTION 2.19. Mitigation Obligations; Replacement of Lenders.......... 43
(i)
<PAGE>
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.01. Organization; Powers.................................... 44
SECTION 3.02. Authorization; Enforceability........................... 44
SECTION 3.03. Governmental Approvals; No Conflicts.................... 45
SECTION 3.04. Financial Condition; No Material Adverse Change......... 45
SECTION 3.05. Properties.............................................. 45
SECTION 3.06. Litigation and Environmental Matters.................... 46
SECTION 3.07. Compliance with Laws and Agreements..................... 46
SECTION 3.08. Investment and Holding Company Status................... 47
SECTION 3.09. Taxes................................................... 47
SECTION 3.10. ERISA................................................... 47
SECTION 3.11. Disclosure.............................................. 47
SECTION 3.12. Subsidiaries............................................ 47
SECTION 3.13. Insurance............................................... 48
SECTION 3.14. Labor Matters........................................... 48
SECTION 3.15. Solvency................................................ 48
SECTION 3.16 Security Documents...................................... 48
SECTION 3.17. Senior Indebtedness..................................... 49
SECTION 3.18. Year 2000............................................... 49
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date.......................................... 49
SECTION 4.02. Each Credit Event....................................... 52
ARTICLE V
Affirmative Covenants
---------------------
SECTION 5.01. Financial Statements and Other Information.............. 53
SECTION 5.02. Notices of Material Events.............................. 55
SECTION 5.03. Information Regarding Collateral........................ 55
SECTION 5.04. Existence; Conduct of Business.......................... 56
SECTION 5.05. Payment of Obligations.................................. 56
SECTION 5.06. Maintenance of Properties............................... 56
SECTION 5.07. Insurance............................................... 56
SECTION 5.08. Casualty and Condemnation............................... 56
SECTION 5.09. Books and Records, Inspection Rights.................... 57
SECTION 5.10. Compliance with Laws.................................... 57
SECTION 5.11. Use of Proceeds and Letters of Credit................... 57
SECTION 5.12. Additional Subsidiaries................................. 57
SECTION 5.13 Further Assurances...................................... 57
SECTION 5.14 Interest Rate Protection................................ 58
(ii)
<PAGE>
ARTICLE VI
Negative Covenants
------------------
SECTION 6.01. Indebtedness; Certain Equity Securities................. 58
SECTION 6.02. Liens................................................... 60
SECTION 6.03. Fundamental Changes..................................... 61
SECTION 6.04. Investments, Loans, Advances,
Guarantees and Acquisitions............................ 62
SECTION 6.05 Asset Sales............................................. 64
SECTION 6.06. Sale and Leaseback Transactions......................... 64
SECTION 6.07. Hedging Agreements...................................... 65
SECTION 6.08. Restricted Payments; Certain Payments
of Indebtedness........................................ 65
SECTION 6.09. Transactions with Affiliates............................ 66
SECTION 6.10. Restrictive Agreements.................................. 66
SECTION 6.11. Amendment of Material Documents......................... 67
SECTION 6.12. Capital Expenditures.................................... 67
SECTION 6.13. Leverage Ratio.......................................... 67
SECTION 6.14. Fixed Charge Coverage Ratio............................. 68
SECTION 6.15. Interest Expense........................................ 68
ARTICLE VII
Events of Default....................................... 68
-----------------
ARTICLE VIII
The Administrative Agent................................ 71
------------------------
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Notices................................................. 73
SECTION 9.02. Waivers; Amendments..................................... 73
SECTION 9.03. Expenses; Indemnity; Damage Waiver...................... 75
SECTION 9.04. Successors and Assigns.................................. 76
SECTION 9.05. Survival................................................ 78
SECTION 9.06. Counterparts; Integration; Effectiveness................ 79
SECTION 9.07. Severability............................................ 79
SECTION 9.08. Right of Setoff......................................... 79
SECTION 9.09. Governing Law; Jurisdiction; Consent
to Service of Process.................................. 79
SECTION 9.10. WAIVER OF JURY TRIAL.................................... 80
(iii)
<PAGE>
SECTION 9.11. Headings................................................ 80
SECTION 9.12. Confidentiality......................................... 80
SECTION 9.13. Interest Rate Limitation................................ 81
SCHEDULES:
- ---------
Schedule 1.01 -- Mortgaged Property
Schedule 2.01 -- Commitments
Schedule 3.13 -- Insurance
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.04 -- Investments
Schedule 6.10 -- Existing Restrictions
EXHIBITS:
- --------
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Guarantee Agreement
Exhibit C -- Form of Indemnity, Subrogation and
Contribution Agreement
Exhibit D -- Form of Perfection Certification
Exhibit E -- Form of Pledge Agreement
Exhibit F -- Form of Security Agreement
Exhibit G-1 -- Form of Opinion of Simpson Thacher & Bartlett
Exhibit G-2 -- Form of Opinion of O'Melveny & Meyers
Exhibit G-3 -- Form of Opinion of Amster, Rothstein & Ebenstein
(iv)
<PAGE>
CREDIT AGREEMENT dated as of July 7, 1999, among
ST. JOHN KNITS INTERNATIONAL, INCORPORATED, the LENDERS party
hereto, and THE CHASE MANHATTAN BANK, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms. As used in this Agreement, the
--------------
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
---
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing
------------------
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means The Chase Manhattan Bank, in its capacity
--------------------
as administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire
----------------------------
in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person
---------
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Alternate Base Rate" means, for any day, a rate per annum equal to
-------------------
the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate
in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a
change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
"Amen Wardy" means St. John Home, LLC (formerly known as Amen Wardy
----------
Home Stores, LLC), a Delaware limited liability company.
"Applicable Percentage" means, with respect to any Revolving Lender,
---------------------
the percentage of the total Revolving Commitments represented by such Lender's
Revolving Commitment. If the Revolving Commitments have terminated or expired,
the Applicable Percentages shall be determined based upon the Revolving
Commitments most recently in effect, giving effect to any assignments.
<PAGE>
2
"Applicable Rate" means, for any day (a) with respect to any ABR Loan
---------------
or Eurodollar Loan that is a Tranche B Term Loan, the applicable rate per annum
set forth in the table below under the caption "Tranche B Term Loan" based upon
the Leverage Ratio as of the most recent determination date, and (b) with
respect to any ABR Loan or Eurodollar Loan that is a Revolving Loan or a Tranche
A Term Loan, or with respect to the commitment fees payable hereunder, as the
case may be, the applicable rate per annum set forth in the table below under
the caption "Tranche A Term Loan, Revolving Loan and Commitment Fee" based upon
the Leverage Ratio as of the most recent determination date; provided that until
--------
the date that is six months after the Effective Date, the "Applicable Rate" for
purposes of clause (a) shall be the applicable rate per annum set forth below in
Category 1 and for purposes of clause (b) shall be the applicable rate per annum
set forth below in Category 1:
Tranche B Term Loan
-------------------
<TABLE>
<CAPTION>
ABR Eurodollar
Leverage Ratio: Spread Spread
--------------- ------- -----------
<S> <C> <C>
Category 1
- ----------
Ratio is greater than 4.25 to 1.00 2.50% 3.50%
Category 2
- ----------
Ratio is less than or equal to 4.25 to 1.00 but 2.25% 3.25%
greater than 3.75 to 1.00
Category 3
- ----------
Ratio is less than or equal to 3.75 to 1.00 2.00% 3.00%
</TABLE>
Tranche A Term Loan, Revolving Loan and Commitment Fee
------------------------------------------------------
<TABLE>
<CAPTION>
ABR Eurodollar Commitment
Leverage Ratio: Spread Spread Fee Rate
--------------- ------- ----------- -----------
<S> <C> <C> <C>
Category 1
- ----------
Ratio is greater than 5.00 to 1.00 2.00% 3.00% 0.500%
Category 2
- ----------
Ratio is less than or equal to 5.00 to 1.00 1.75% 2.75% 0.500%
but greater than 4.50 to 1.00
Category 3
- ----------
Ratio is less than or equal to 4.50 to 1.00 1.50% 2.50% 0.500%
but greater than 4.00 to 1.00
Category 4
- ----------
Ratio is less than or equal to 4.00 to 1.00 1.25% 2.25% 0.500%
but greater than 3.75 to 1.00
Category 5
- ----------
Ratio is less than or equal to 3.75 to 1.00 1.00% 2.00% 0.375%
</TABLE>
<PAGE>
3
For purposes of the foregoing, (i) the Leverage Ratio shall be
determined as of the end of each fiscal quarter of the Borrower's fiscal year
based upon the Borrower's consolidated financial statements delivered pursuant
to Section 5.01(a) or (b) and (ii) each change in the Applicable Rate resulting
from a change in the Leverage Ratio shall be effective during the period
commencing on and including the date that is three Business Days after the date
of delivery to the Administrative Agent of such consolidated financial
statements indicating such change and ending on the date immediately preceding
the effective date of the next such change.
"Assessment Rate" means, for any day, the annual assessment rate in
---------------
effect on such day that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States; provided that if, as a result of
--------
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the Administrative Agent to be representative of
the cost of such insurance to the Lenders.
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate
------------
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"Board" means the Board of Governors of the Federal Reserve System of
-----
the United States of America.
"Borrower" means St. John Knits International, Incorporated, a
--------
Delaware corporation.
"Borrowing" means (a) Loans of the same Class and Type, made,
---------
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect, or (b) a Swingline Loan.
"Borrowing Request" means a request by the Borrower for a Borrowing in
-----------------
accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other
------------
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided that, when used in connection with a Eurodollar Loan,
--------
the term "Business Day" shall also exclude any day on which banks are not open
------------
for dealings in dollar deposits in the London interbank market.
"Capital Expenditures" means, for any period, (a) the additions to
--------------------
property, plant and equipment and other capital expenditures of the Borrower and
its consolidated Subsidiaries that are (or would be) set forth in a consolidated
statement of cash flows of the Borrower for such period prepared in accordance
with GAAP and (b)
<PAGE>
4
Capital Lease Obligations incurred by the Borrower and its consolidated
Subsidiaries during such period.
"Capital Lease Obligations" of any Person means the obligations of
-------------------------
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Change in Control" means, at any time, (a) the acquisition of
-----------------
ownership, directly or indirectly, beneficially or of record, by any Person,
other than the Borrower, of any Equity Interest in the Company, (b) prior to an
IPO, the failure by the Vestar Group to collectively own, directly or
indirectly, beneficially and of record, Equity Interests in the Borrower
representing at least 51% of each of the aggregate ordinary voting power and the
aggregate equity value represented by the issued and outstanding Equity
Interests in the Borrower, (c) after an IPO, (i) the failure by the Vestar Group
to collectively own, directly or indirectly, beneficially and of record, Equity
Interests in the Borrower representing at least 30% of each of the aggregate
ordinary voting power and the aggregate equity value represented by the issued
and outstanding Equity Interests in the Borrower or (ii) the acquisition of
ownership, directly or indirectly, beneficially or of record, by any Person or
group (within the meaning of the Securities Exchange Act of 1934 and the rules
of the Securities and Exchange Commission thereunder as in effect on the date
hereof) other than the Control Group, of Equity Interests representing more than
the percentage of the aggregate ordinary voting power or the aggregate equity
value represented by the issued and outstanding Equity Interests in the Borrower
owned, directly or indirectly, beneficially and of record, by the Vestar Group;
(d) occupation of a majority of the seats (other than vacant seats) on the board
of directors of the Borrower by Persons who were neither (i) nominated by
members of the Vestar Group or the board of directors of the Borrower nor (ii)
appointed by directors so nominated; or (e) the occurrence of a "Change of
Control", as defined in the Subordinated Debt Documents.
"Change in Law" means (a) the adoption of any law, rule or regulation
-------------
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or the Issuing
Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender
or by such Lender's or the Issuing Bank's holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"Class", when used in reference to any Loan or Borrowing, refers to
-----
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans,
Tranche A Term Loans, Tranche B Term Loans or Swingline Loans and, when used in
reference to any Commitment, refers to whether such Commitment is a Revolving
Commitment, Tranche A Commitment or Tranche B Commitment.
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time.
<PAGE>
5
"Collateral" means any and all "Collateral", as defined in any
----------
applicable Security Document.
"Commitment" means a Revolving Commitment, Tranche A Commitment or
----------
Tranche B Commitment, or any combination thereof (as the context requires).
"Company" means St. John Knits, Inc., a California corporation.
-------
"Consolidated EBITDA" means, for any period, Consolidated Net Income
-------------------
for such period, plus, without duplication and to the extent deducted from
revenues in determining Consolidated Net Income, the sum of (a) the aggregate
amount of consolidated interest expense for such period, (b) the aggregate
amount of letter of credit fees accrued during such period, (c) the aggregate
amount of income tax expense for such period, (d) all amounts attributable to
depreciation and amortization for such period, (e) all extraordinary charges and
non-cash, non-recurring charges during such period, including, without
limitation, non-cash charges in connection with the settlement of litigation
with Amen Wardy, the acquisition of the remaining 49% interest in Amen Wardy and
the closure of the remaining Amen Wardy stores and related costs, (f) non-cash
expenses resulting from the grant of stock and stock options and other
compensation to management personnel of the Borrower or the Subsidiaries
pursuant to a written plan or agreement or the treatment of such options under
variable plan accounting, (g) step-up in inventory valuation as a result of
purchase accounting for Permitted Acquisitions, (h) non-cash amortization of
financing costs by the Borrower and the Subsidiaries during such period, (i)
costs not reimbursable by the Company's insurance incurred in connection with
any of the litigation and other proceedings described on Schedule 3.06 (other
than in connection with the settlement of the Amen Wardy litigation) (provided
that such costs shall not exceed $1,000,000 for all periods), (j) losses related
to depreciation and interest charges derived from the Company's partnership
interest in SJA I and II, (k) cash charges not to exceed $500,000 in connection
with the settlement of litigation with Amen Wardy and the acquisition of the
remaining 49% interest in Amen Wardy and cash charges not to exceed $500,000 in
connection with the closure of the remaining Amen Wardy stores and related costs
and (l) expenses related to the Transactions and minus, without duplication and
to the extent added to revenues in determining Consolidated Net Income for such
period, all extraordinary gains during such period, all as determined on a
consolidated basis with respect to the Borrower and the Subsidiaries in
accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the sum of (a)
-----------------------------
the interest expense (including, without limitation, imputed interest expense on
account of Capital Lease Obligations, but excluding non-cash amortization of
financing costs), both expensed and capitalized, accrued or paid by the Borrower
and the Subsidiaries during such period (net of interest income), and determined
on a consolidated basis in accordance with GAAP, (b) the aggregate dividends
paid in cash with respect to any Gray Preferred Stock during such period, (c)
the aggregate dividends accrued or paid with respect to any Permitted
Acquisition Preferred Stock during such period and (d) the aggregate dividends
paid in cash with respect to any PIK Preferred Stock during such period.
"Consolidated Lease Expense" means, for any period, all rent payment
--------------------------
obligations (excluding any applicable property taxes) of the Borrower and the
Subsidiaries during such period under agreements for the lease, hire or use of
any real
<PAGE>
6
property (other than Capital Lease Obligations), as determined on a consolidated
basis for the Borrower and the Subsidiaries in accordance with GAAP.
"Consolidated Net Income" means, for any period, net income or loss of
-----------------------
the Borrower and the Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP, provided that there shall be excluded (a) the
--------
income of any Person in which any other Person (other than the Borrower or any
of the Subsidiaries or any director holding qualifying shares in compliance with
applicable law) has a joint interest, except income shall be included to the
extent of the amount of dividends or other distributions actually paid to the
Borrower or any of the Subsidiaries by such Person during such period and (b)
the income (or loss) of any Person accrued prior to the date it becomes a
Subsidiary or is merged into or consolidated with the Borrower or any of the
Subsidiaries or the date that Person's assets are acquired by the Borrower or
any of the Subsidiaries.
"Control" means the possession, directly or indirectly, of the power
-------
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
----------- ----------
"Control Group" means (a) Robert E. Gray, Marie Gray and Kelly A. Gray
-------------
and any of their respective spouses, direct descendants and their spouses,
trusts solely for the benefit of the foregoing individuals and any corporations
or partnerships owned solely by any of the foregoing individuals and (b) the
Vestar Group.
"Default" means any event or condition which constitutes an Event of
-------
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and the
-----------------
environmental matters disclosed in Schedule 3.06.
"Disqualified Stock" means, with respect to any Person, any Equity
------------------
Interest which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event:
(a) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise prior to the date that is one year after the
maturity of the Subordinated Debt;
(b) is convertible or exchangeable for Indebtedness or Disqualified
Stock (excluding Equity Interests convertible or exchangeable solely at the
option of the Borrower or any Subsidiary; provided that any such conversion
--------
or exchange shall be deemed an issuance of Disqualified Stock, as
applicable) prior to the date that is one year after the maturity of the
Subordinated Debt; or
(c) is redeemable, or subject to mandatory purchase by the Borrower or
any Subsidiary, at the option of the holder thereof, in whole or in part
prior to the date that is one year after the maturity of the Subordinated
Debt.
<PAGE>
7
"dollars" or "$" refers to lawful money of the United States of
------- -
America.
"Effective Date" means the date on which the conditions specified in
--------------
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
"Environmental Laws" means all laws, rules, regulations, codes,
------------------
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the environment, preservation or reclamation
of natural resources, or the management, release or threatened release of any
Hazardous Material.
"Environmental Liability" means any liability, contingent or otherwise
-----------------------
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"Equity Financing" means (i) the cash equity contribution by
----------------
Vestar/Gray to Pearl Acquisition in an aggregate amount of not less than
$146,500,000 in connection with the Recapitalization and (ii) the issuance by
the Borrower of the PIK Preferred Stock for gross proceeds of not less than
$25,000,000.
"Equity Interests" means shares of capital stock, partnership
----------------
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section
-----------
4043(c) of ERISA or the regulations issued thereunder with respect to a Plan
(other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by the Borrower or any of its ERISA Affiliates of any liability
with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of
any notice, or the receipt by any
<PAGE>
8
Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing, refers
----------
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Article
----------------
VII.
"Excess Cash Flow" means, for any period, the sum (without
----------------
duplication) of:
(a) the consolidated net income (or loss) of the Borrower and its
consolidated Subsidiaries for such period, adjusted to exclude any gains or
losses attributable to Prepayment Events; plus
----
(b) depreciation, amortization and other non-cash charges or losses
deducted in determining such consolidated net income (or loss) for such
period; plus
----
(c) the sum of (i) the amount, if any, by which Net Working Capital
decreased during such period plus (ii) the amount, if any, by which the
consolidated deferred revenues of the Borrower and its consolidated
Subsidiaries increased during such period plus (iii) the aggregate
principal amount of Capital Lease Obligations and other Indebtedness
incurred during such period to finance Capital Expenditures, to the extent
that mandatory principal payments in respect of such Indebtedness would not
be excluded from clause (f) below when made; minus
-----
(d) the sum of (i) any non-cash income or gains included in
determining such consolidated net income (or loss) for such period plus
(ii) the amount, if any, by which Net Working Capital increased during such
period plus (iii) the amount, if any, by which the consolidated deferred
revenues of the Borrower and its consolidated Subsidiaries decreased during
such period; minus
-----
(e) Capital Expenditures for such period; minus
-----
(f) the aggregate principal amount of Indebtedness repaid or prepaid
by the Borrower and its consolidated Subsidiaries during such period,
excluding (i) Indebtedness in respect of Revolving Loans and Letters of
Credit to the extent not accompanied by a reduction of the Revolving Credit
Commitments, (ii) Term Loans prepaid pursuant to Section 2.11(c) or (d),
(iii) repayments or prepayments of Indebtedness financed by incurring other
Indebtedness, to the extent that mandatory principal payments in respect of
such other Indebtedness would not be excluded from this clause (f) when
made and (iv) Indebtedness referred to in clauses (iv) and (viii) of
Section 6.01(a); minus
-----
(g) the aggregate amount of Restricted Payments under clauses (iv)
through (viii) of Section 6.08 made during such period.
<PAGE>
9
"Excluded Taxes" means, with respect to the Administrative Agent, any
--------------
Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.19(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender's failure to comply with Section 2.17(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 2.17(a).
"Federal Funds Effective Rate" means, for any day, the weighted
----------------------------
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding 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 (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" means the chief financial officer, principal
-----------------
accounting officer, treasurer or controller of the Borrower.
"Financing Transactions" means (a) the execution, delivery and
----------------------
performance by each Loan Party of the Loan Documents to which it is to be a
party, the borrowing of Loans, the use of the proceeds thereof and the issuance
of Letters of Credit hereunder, (b) the execution, delivery and performance by
each Loan Party of the Subordinated Debt Documents to which it is to be a party,
the issuance of the Subordinated Debt and the use of the proceeds thereof and
(c) the Equity Financing.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (a)
---------------------------
Consolidated EBITDA for such period plus Consolidated Lease Expense for such
period minus Capital Expenditures for such period to (b) Fixed Charges for such
period.
"Fixed Charges" means, for any period, the sum of (a) Consolidated
-------------
Lease Expense for such period, (b) Consolidated Interest Expense for such
period, (c) scheduled principal payments of long-term Indebtedness of the
Borrower or any Subsidiary to any person other than the Borrower or any wholly
owned Subsidiary, that became payable during such period (whether or not paid)
and (d) the aggregate liquidation preference of all Permitted Acquisition
Preferred Stock that matured or became subject to mandatory repurchase,
redemption, conversion or exchange during such period (whether or not
repurchased, redeemed, converted or exchanged).
"Foreign Lender" means any Lender that is organized under the laws of
--------------
a jurisdiction other than that in which the Borrower is located. For purposes
of this
<PAGE>
10
definition, the United States of America, each State thereof and the District of
Columbia shall be deemed to constitute a single jurisdiction.
"Foreign Subsidiary" means any Subsidiary that is organized under the
------------------
laws of a jurisdiction other than the United States of America or any State
thereof or the District of Columbia.
"Funded Indebtedness" means, as of any date of determination, an
-------------------
amount equal to (a) Total Indebtedness outstanding on such date (excluding
Indebtedness in respect of the Revolving Exposure) plus (b) the average
----
Revolving Exposure for the twelve months ended on such date (or, if such date is
not the last day of a month, then for the twelve months most recently ended)
determined based on the daily average of the Revolving Exposure; provided,
however that for purposes of clause (b), Trade LCs are deemed not to be part of
the Revolving Exposure.
"GAAP" means generally accepted accounting principles in the United
----
States of America.
"Governmental Authority" means the government of the United States of
----------------------
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Gray Common Stock" means common stock of the Borrower owned by Robert
-----------------
E. Gray, Marie Gray or Kelly A. Gray.
"Gray Preferred Stock" means preferred stock of the Borrower issued
--------------------
pursuant to Section 6.01(b), which preferred stock shall not be Disqualified
Stock; provided that Gray Preferred Stock may mature or be mandatorily
--------
redeemable after July 1, 2010.
"Guarantee" of or by any Person (the "guarantor") means any
--------- ---------
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
---------------
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
--------
endorsements for collection or deposit in the ordinary course of business.
"Guarantee Agreement" means the Guarantee Agreement among the
-------------------
Subsidiary Loan Parties and the Administrative Agent, substantially in the form
of Exhibit B.
<PAGE>
11
"Hazardous Materials" means all explosive or radioactive substances
-------------------
or wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" means any interest rate protection agreement,
-----------------
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" of any Person means, without duplication, (a) all
------------
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty, (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances, and
(k) with respect to the Borrower only, the aggregate liquidation preference of
all outstanding Permitted Acquisition Preferred Stock. The Indebtedness of any
Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor as a result of such Person's ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
-----------------
"Indemnity, Subrogation and Contribution Agreement" means the
-------------------------------------------------
Indemnity, Subrogation and Contribution Agreement among the Loan Parties and the
Administrative Agent, substantially in the form of Exhibit C.
"Information Memorandum" means the Confidential Information Memorandum
----------------------
dated March, 1999, relating to the Borrower and the Transactions.
"Interest Election Request" means a request by the Borrower to convert
-------------------------
or continue a Revolving Borrowing or Term Borrowing in accordance with Section
2.07.
"Interest Payment Date" means (a) with respect to any ABR Loan (other
---------------------
than a Swingline Loan), the last day of each March, June, September and
December, (b) with respect to any Eurodollar Loan, the last day of the Interest
Period applicable to the Borrowing of which such Loan is a part and, in the case
of a Eurodollar Borrowing with an Interest Period of more than three months'
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months' duration after the first day of
<PAGE>
12
such Interest Period and (c) with respect to any Swingline Loan, the day that
such Loan is required to be repaid.
"Interest Period" means with respect to any Eurodollar Borrowing, the
---------------
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
(or, subject to the availability to each Lender participating in such Borrowing,
nine or twelve months) thereafter, as the Borrower may elect; provided, that (i)
--------
if any Interest Period would end on a day other than a Business Day, such
Interest Period shall be extended to the next succeeding Business Day unless
such next succeeding Business Day would fall in the next calendar month, in
which case such Interest Period shall end on the next preceding Business Day and
(ii) any Interest Period that commences on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
last calendar month of such Interest Period) shall end on the last Business Day
of the last calendar month of such Interest Period. For purposes hereof, the
date of a Borrowing initially shall be the date on which such Borrowing is made
and thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
"IPO" means the issuance by the Borrower of shares of its common stock
---
to the public pursuant to a bona fide underwritten public offering, resulting in
at least 20% of the Borrower's outstanding shares of common stock being held by
the public.
"Issuing Bank" means The Chase Manhattan Bank, in its capacity as the
------------
issuer of Letters of Credit hereunder, and its successors in such capacity as
provided in Section 2.05(i). The Issuing Bank may, in its discretion, arrange
for one or more Letters of Credit to be issued by Affiliates of the Issuing
Bank, in which case the term "Issuing Bank" shall include any such Affiliate
with respect to Letters of Credit issued by such Affiliate.
"LC Disbursement" means a payment made by the Issuing Bank pursuant to
---------------
a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate undrawn
-----------
and unexpired amount of all outstanding Letters of Credit at such time plus (b)
the aggregate amount of all LC Disbursements that have not yet been reimbursed
by or on behalf of the Borrower at such time. The LC Exposure of any Revolving
Lender at any time shall be its Applicable Percentage of the total LC Exposure
at such time.
"Lenders" means the Persons listed on Schedule 2.01 and any other
-------
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance. Unless the context otherwise requires, the
term "Lenders" includes the Swingline Lender.
"Letter of Credit" means any (a) Standby LC or (b) Trade LC issued
----------------
pursuant to this Agreement.
"Leverage Ratio" means, on any date, the ratio of (a) Funded
--------------
Indebtedness as of such date to (b) Consolidated EBITDA for the period of four
consecutive fiscal quarters of the Borrower ended as of such date (or, if such
date is not the last day of a fiscal quarter, ended on the last day of the
fiscal quarter of the Borrower most recently
<PAGE>
13
ended prior to such date), all determined on a consolidated basis in accordance
with GAAP.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
---------
Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service
(or on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
---------
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
----
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means this Agreement, the promissory notes, if any,
--------------
executed and delivered pursuant to Section 2.09(e), the Guarantee Agreement, the
Indemnity, Subrogation and Contribution Agreement and the Security Documents.
"Loan Parties" means the Borrower and the Subsidiary Loan Parties.
------------
"Loans" means the loans made by the Lenders to the Borrower pursuant
-----
to this Agreement.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, assets, operations or condition, financial or otherwise, of the
Borrower and the Subsidiaries taken as a whole, (b) the ability of any Loan
Party to perform any of its obligations under any Loan Document or (c) the
rights of or benefits available to the Lenders under any Loan Document.
"Material Indebtedness" means Indebtedness (other than the Loans and
---------------------
Letters of Credit), or exposure in respect of one or more Hedging Agreements, of
any one or more of the Borrower and its Subsidiaries in an aggregate principal
amount exceeding $5,000,000. For purposes of determining Material Indebtedness,
the "principal amount" of the exposure of the Borrower or any Subsidiary in
respect of any Hedging Agreement at any time shall be the maximum aggregate
amount (giving effect to any netting agreements) that the Borrower or such
Subsidiary would be required to pay if such Hedging Agreement were terminated at
such time.
<PAGE>
14
"Merger Agreement" means the Agreement and Plan of Merger dated as of
----------------
February 3, 1999 among the Company, the Borrower, SJKAcquisition and Pearl
Acquisition.
"Moody's" means Moody's Investors Service, Inc.
-------
"Mortgage" means a mortgage, deed of trust, assignment of leases and
--------
rents, leasehold mortgage or other security document granting a Lien on any
Mortgaged Property to secure the Obligations. Each Mortgage shall be
satisfactory in form and substance to the Collateral Agent.
"Mortgaged Property" means, initially, each parcel of real property
------------------
and the improvements thereto owned by a Loan Party and identified on Schedule
1.01, and includes each other parcel of real property and improvements thereto
with respect to which a Mortgage is granted pursuant to Section 5.12 or 5.13.
"Multiemployer Plan" means a multiemployer plan as defined in Section
------------------
4001(a)(3) of ERISA.
"Net Proceeds" means, with respect to any event (a) the cash proceeds
------------
received in respect of such event including (i) any cash received in respect of
any non-cash proceeds, but only as and when received, (ii) in the case of a
casualty, insurance proceeds, and (iii) in the case of a condemnation or similar
event, condemnation awards and similar payments, net of (b) the sum of (i) all
reasonable fees and out-of-pocket expenses paid by the Borrower and the
Subsidiaries to third parties (other than Affiliates) in connection with such
event, (ii) in the case of a sale, transfer or other disposition of an asset
(including pursuant to a sale and leaseback transaction or a casualty or other
damage or condemnation or similar proceeding), the amount of all payments
required to be made by the Borrower and the Subsidiaries as a result of such
event to repay Indebtedness (other than Loans) secured by such asset or
otherwise subject to mandatory prepayment as a result of such event, and (iii)
the amount of all taxes paid (or reasonably estimated to be payable) by the
Borrower and the Subsidiaries, and the amount of any reserves established by the
Borrower and the Subsidiaries to fund contingent liabilities reasonably
estimated to be payable, in each case during the year that such event occurred
or the next succeeding year and that are directly attributable to such event (as
determined reasonably and in good faith by the chief financial officer of the
Borrower).
"Net Working Capital" means, at any date, (a) the sum of the
-------------------
consolidated current assets and non-current deferred income tax assets of the
Borrower and its consolidated Subsidiaries as of such date (excluding cash and
Permitted Investments) minus (b) the sum of the consolidated current liabilities
and non-current deferred income tax liabilities of the Borrower and its
consolidated Subsidiaries as of such date (excluding current liabilities in
respect of Indebtedness). Net Working Capital at any date may be a positive or
negative number. Net Working Capital increases when it becomes more positive or
less negative and decreases when it becomes less positive or more negative.
"Obligations" has the meaning assigned to such term in the Security
-----------
Agreement.
"Other Taxes" means any and all current or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any
<PAGE>
15
payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
----
defined in ERISA and any successor entity performing similar functions.
"Pearl Acquisition" means Pearl Acquisition Corp., a Delaware
-----------------
corporation.
"Perfection Certificate" means a certificate in the form of Exhibit D
----------------------
or any other form approved by the Administrative Agent.
"Permitted Acquisition" means any acquisition by a Subsidiary of all
---------------------
or substantially all the assets of, or all the Equity Interests in, a Person or
division or line of business of a Person or by the Borrower of all the Equity
Interests in a Person if, immediately after giving effect thereto, (a) no
Default has occurred and is continuing or would result therefrom, (b) all
transactions related thereto are consummated in accordance with applicable laws,
(c) all the Equity Interests in each Subsidiary formed for the purpose of or
resulting from such acquisition shall be owned directly by the Borrower or a
Subsidiary of the Borrower and all actions required to be taken with respect to
such acquired or newly formed Subsidiary under Sections 5.11 and 5.12 have been
taken, (d) the Borrower and its Subsidiaries are in compliance, on a pro forma
basis after giving effect to such acquisition, with the covenants contained in
Sections 6.13, 6.14 and 6.15 recomputed as at the last day of the most recently
ended fiscal quarter of the Borrower for which financial statements are
available, as if such acquisition (and any related incurrence or repayment of
Indebtedness, with any new Indebtedness being deemed to be amortized over the
applicable testing period in accordance with its terms, and assuming that any
Revolving Loans borrowed in connection with such acquisition are repaid with
excess cash balances when available) had occurred on the first day of each
relevant period for testing such compliance and (e) the Borrower has delivered
to the Administrative Agent an officers' certificate to the effect set forth in
clauses (a), (b), (c) and (d) above, together with all relevant financial
information for the Person or assets to be acquired.
"Permitted Acquisition Preferred Stock" means preferred stock of the
-------------------------------------
Borrower which is Disqualified Stock and which is issued as non-cash
consideration in connection with a Permitted Acquisition.
"Permitted Encumbrances" means:
----------------------
(a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 5.05;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens imposed by law, arising in the ordinary course of
business and securing obligations that are not overdue by more than 30 days
or are being contested in compliance with Section 5.05;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
<PAGE>
16
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary course
of business;
(e) judgment liens in respect of judgments that do not constitute an
Event of Default under clause (k) of Article VII; and
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere
with the ordinary conduct of business of the Borrower or any Subsidiary;
provided that the term "Permitted Encumbrances" shall not include any Lien
- --------
securing Indebtedness.
"Permitted Investments" means:
---------------------
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 360 days from the
date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which
has a combined capital and surplus and undivided profits of not less than
$500,000,000;
(d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered into
with a financial institution satisfying the criteria described in clause
(c) above; and
(e) investments in money market or mutual funds substantially all the
assets of which are comprised of securities of the types described in any
of clauses (a) through (d) above.
"Person" means any natural person, corporation, limited liability
------
company, trust, investment fund, joint venture, association, company,
partnership, Governmental Authority or other entity.
"PIK Preferred Stock" means the preferred stock to be issued by the
-------------------
Borrower on or prior to the Effective Date with an initial aggregate liquidation
preference of $25,000,000, which liquidation preference may be increased by the
amount of unpaid dividends on such preferred stock in lieu of the payment of
such dividends.
<PAGE>
17
"Plan" means any employee pension benefit plan (other than a
----
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement" means the Pledge Agreement among the Loan Parties
----------------
and the Administrative Agent, substantially in the form of Exhibit E.
"Prepayment Event" means:
----------------
(a) any sale, transfer or other disposition (including pursuant to a
sale and leaseback transaction) of any property or asset of the Borrower or
any Subsidiary, other than dispositions described in clauses (a), (b) and
(d) of Section 6.05; or
(b) any casualty or other insured damage to, or any taking under power
of eminent domain or by condemnation or similar proceeding of, any property
or asset of the Borrower or any Subsidiary, but only to the extent that the
Net Proceeds therefrom have not been applied to repair, restore or replace
such property or asset within 360 days after such event; or
(c) the issuance by the Borrower or any Subsidiary of any Equity
Interests, or the receipt by the Borrower or any Subsidiary of any capital
contribution, other than (i) the Equity Financing and (ii) any such
issuance of Equity Interests to, or receipt of any such capital
contribution from, the Borrower or a Subsidiary; or
(d) the incurrence by the Borrower or any Subsidiary of any
Indebtedness, other than Indebtedness permitted under Section 6.01.
"Prime Rate" means the rate of interest per annum publicly announced
----------
from time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Recapitalization" means (a) the merger of Pearl Acquisition with and
----------------
into the Borrower after the Reorganization, with the Borrower being the
surviving corporation, and (b) the recapitalization of the Borrower, in each
case pursuant to, and in accordance with the terms of, the Merger Agreement.
"Recapitalization Documents" means the Merger Agreement, the Voting
--------------------------
Agreement, the Stockholders' Agreement, the Vestar Management Agreement and all
other material documents and agreements relating to the Recapitalization.
"Register" has the meaning set forth in Section 9.04.
--------
"Related Fund" means, with respect to any Lender that is a fund that
------------
invests in bank loans in the ordinary course of business, any other fund that
invests in bank loans in the ordinary course of business and is advised or
managed by the same investment advisor as such Lender or by an Affiliate of such
investment advisor.
<PAGE>
18
"Related Parties" means, with respect to any specified Person, such
---------------
Person's Affiliates and the respective directors, trustees, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Reorganization" means (a) the merger of SJKAcquisition with and into
--------------
the Company, with the Company being the surviving corporation and (b) the
related exchange of common stock of the Company for common stock of the
Borrower, resulting in the Company becoming a direct, wholly owned subsidiary of
the Borrower, in each case as contemplated by and in accordance with the Merger
Agreement.
"Required Lenders" means, at any time, Lenders having Revolving
----------------
Exposures, Term Loans and unused Commitments representing more than 50% of the
sum of the total Revolving Exposures, outstanding Term Loans and unused
Commitments at such time.
"Restricted Payment" means any dividend or other distribution (whether
------------------
in cash, securities or other property) with respect to any Equity Interests in
the Borrower or any Subsidiary, or any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancelation or termination of
any Equity Interests in the Borrower or any Subsidiary or any option, warrant or
other right to acquire any such Equity Interests in the Borrower or any
Subsidiary.
"Revolving Availability Period" means the period from and including
-----------------------------
the Effective Date to but excluding the earlier of the Revolving Maturity Date
and the date of termination of the Revolving Commitments.
"Revolving Commitment" means, with respect to each Lender, the
--------------------
commitment, if any, of such Lender to make Revolving Loans and to acquire
participations in Letters of Credit and Swingline Loans hereunder, expressed as
an amount representing the maximum aggregate amount of such Lender's Revolving
Exposure hereunder, as such commitment may be (a) reduced from time to time
pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant
to assignments by or to such Lender pursuant to Section 9.04. The initial
amount of each Lender's Revolving Commitment is set forth on Schedule 2.01, or
in the Assignment and Acceptance pursuant to which such Lender shall have
assumed its Revolving Commitment, as applicable. The initial aggregate amount
of the Lenders' Revolving Commitments is $25,000,000.
"Revolving Exposure" means, with respect to any Lender at any time,
------------------
the sum of the outstanding principal amount of such Lender's Revolving Loans and
its LC Exposure and Swingline Exposure at such time.
"Revolving Lender" means a Lender with a Revolving Commitment or, if
----------------
the Revolving Commitments have terminated or expired, a Lender with Revolving
Exposure.
"Revolving Loan" means a Loan made pursuant to clause (c) of Section
--------------
2.01.
"Revolving Maturity Date" means July 31, 2005.
-----------------------
<PAGE>
19
"S&P" means Standard & Poor's.
---
"Secured Parties" shall have the meaning assigned to such term in the
---------------
Security Agreement.
"Security Agreement" means the Security Agreement among the Loan
------------------
Parties and the Administrative Agent, substantially in the form of Exhibit F.
"Security Documents" means the Security Agreement, the Pledge
------------------
Agreement, the Mortgages and each other security agreement or other instrument
or document executed and delivered pursuant to Section 5.12 or 5.13 to secure
any of the Obligations.
"SJKAcquisition" means SJKAcquisition, Inc., a California corporation
--------------
and, immediately prior to the Reorganization, a direct, wholly owned subsidiary
of the Borrower.
"St. John Company Interests" means the Equity Interests in St. John
--------------------------
Company, Ltd. not owned by the Borrower or its Subsidiaries on the date hereof.
"Standby LC" means any irrevocable standby letter of credit in support
----------
of certain obligations of the Borrower available against sight drafts and
payable at sight, issued by the Issuing Bank for the account of the Borrower
pursuant to Section 2.05 hereof.
"Standby LC Disbursement" means a payment made by the Issuing Bank
-----------------------
pursuant to a Standby LC.
"Standby LC Exposure" means, at any time, the sum of (a) the aggregate
-------------------
undrawn and unexpired amount of all outstanding Standby LCs at such time plus
(b) the aggregate amount of all Standby LC Disbursements that have not yet been
reimbursed by or on behalf of the Borrower at such time. The Standby LC
Exposure of any Revolving Lender at any time shall be its Applicable Percentage
of the total Standby LC Exposure at such time.
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
----------------------
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars of over $100,000 with maturities approximately equal to three months and
(b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.
<PAGE>
20
"Stockholders' Agreement" means the Stockholders' Agreement dated as
-----------------------
of the Effective Date among the Company, the Borrower, Vestar/Gray, Vestar/SJK,
Robert E. Gray, Marie Gray, Kelly A. Gray, the Gray Family Trust and the Kelly
Ann Gray Trust.
"Subordinated Debt" means the Senior Subordinated Notes Due 2009 to be
-----------------
issued by the Borrower on or prior to the Effective Date in the aggregate
principal amount of $100,000,000 and the Indebtedness represented thereby.
"Subordinated Debt Documents" means the indenture under which the
---------------------------
Subordinated Debt is issued and all other instruments, agreements and other
documents evidencing or governing the Subordinated Debt or providing for any
Guarantee or other right in respect thereof.
"subsidiary" means, with respect to any Person (the "parent") at any
---------- ------
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Borrower. For purposes of
----------
the representations and warranties made herein on the Effective Date, the term
"Subsidiary" shall be construed after giving effect to the Reorganization and,
accordingly, shall include the Company and its subsidiaries.
"Subsidiary Loan Party" means any Subsidiary (including the Company)
---------------------
other than any Foreign Subsidiary that, if such Foreign Subsidiary were to
Guarantee the Obligations, would result in adverse tax consequences to the
Borrower or such Foreign Subsidiary.
"Swingline Exposure" means, at any time, the aggregate principal
------------------
amount of all Swingline Loans outstanding at such time. The Swingline Exposure
of any Lender at any time shall be its Applicable Percentage of the total
Swingline Exposure at such time.
"Swingline Lender" means The Chase Manhattan Bank, in its capacity as
----------------
lender of Swingline Loans hereunder.
"Swingline Loan" means a Loan made pursuant to Section 2.04.
--------------
"Taxes" means any and all present or future taxes, levies, imposts,
-----
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Term Loans" means Tranche A Term Loans and Tranche B Term Loans.
----------
<PAGE>
21
"Test Period" means a period of twelve consecutive months beginning on
-----------
the Closing Date or an anniversary thereof and ending on the day prior to the
immediately succeeding anniversary of the Closing Date.
"Three-Month Secondary CD Rate" means, for any day, the secondary
-----------------------------
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such
next preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 a.m., New York City time, on such day (or, if
such day is not a Business Day, on the next preceding Business Day) by the
Administrative Agent from three negotiable certificate of deposit dealers of
recognized standing selected by it.
"Total Indebtedness" means, as of any date of determination, without
------------------
duplication, the aggregate principal amount of Indebtedness of the Borrower and
the Subsidiaries outstanding as of such date, determined on a consolidated basis
in accordance with GAAP.
"Trade LC" means any irrevocable trade letter of credit available
--------
against sight or time drafts and payable at sight, issued by the Issuing Bank
for the account of the Borrower pursuant to Section 2.05 hereof.
"Trade LC Disbursement" means a payment made by the Issuing Bank
---------------------
pursuant to a Trade LC.
"Trade LC Exposure" means, at any time, the sum of (a) the aggregate
-----------------
undrawn and unexpired amount of all outstanding Trade LCs at such time plus (b)
the aggregate amount of all Trade LC Disbursements that have not yet been
reimbursed by or on behalf of the Borrower at such time. The Trade LC Exposure
of any Revolving Lender at any time shall be its Applicable Percentage of the
total Trade LC Exposure at such time.
"Tranche A Commitment" means, with respect to each Lender, the
--------------------
commitment, if any, of such Lender to make a Tranche A Term Loan hereunder on
the Effective Date, expressed as an amount representing the maximum principal
amount of the Tranche A Term Loan to be made by such Lender hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b)
reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.04. The initial amount of each Lender's Tranche A
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Tranche A Commitment, as
applicable. The initial aggregate amount of the Lenders' Tranche A Commitments
is $75,000,000.
"Tranche A Lender" means a Lender with a Tranche A Commitment or an
----------------
outstanding Tranche A Term Loan.
"Tranche A Maturity Date" means July 31, 2005.
-----------------------
<PAGE>
22
"Tranche A Term Loan" means a Loan made pursuant to clause (a) of
-------------------
Section 2.01.
"Tranche B Commitment" means, with respect to each Lender, the
--------------------
commitment, if any, of such Lender to make a Tranche B Term Loan hereunder on
the Effective Date, expressed as an amount representing the maximum principal
amount of the Tranche B Term Loan to be made by such Lender hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b)
reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.04. The initial amount of each Lender's Tranche B
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Tranche B Commitment, as
applicable. The initial aggregate amount of the Lenders' Tranche B Commitments
is $115,000,000.
"Tranche B Lender" means a Lender with a Tranche B Commitment or an
----------------
outstanding Tranche B Term Loan.
"Tranche B Maturity Date" means July 31, 2007.
-----------------------
"Tranche B Term Loan" means a Loan made pursuant to clause (b) of
-------------------
Section 2.01.
"Transactions" means the Reorganization, the Recapitalization and the
------------
Financing Transactions.
"Type", when used in reference to any Loan or Borrowing, refers to
----
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
"Vestar" means Vestar Capital Partners III, L.P.
------
"Vestar/Gray" means Vestar/Gray Investors LLC, a Delaware limited
-----------
liability company.
"Vestar/SJK" means Vestar/SJK Investors LLC, a Delaware limited
----------
liability company.
"Vestar Group" means Vestar and its Affiliates.
------------
"Vestar Management Agreement" means the Management Agreement dated as
---------------------------
of the Effective Date among Vestar, the Borrower and the Company.
"Voting Agreement" means the Voting Agreement dated as of February 3,
----------------
1999, among Vestar, Vestar/Gray and certain members of management of the
Company.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
--------------------
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For purposes
---------------------------------------
of this Agreement, Loans may be classified and referred to by Class (e.g., a
----
"Revolving
<PAGE>
23
Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., a
---- ----
"Eurodollar Revolving Loan"). Borrowings also may be classified and referred
to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar
---- ----
Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving Borrowing").
----
SECTION 1.03. Terms Generally. The definitions of terms herein shall
----------------
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The word
"will" shall be construed to have the same meaning and effect as the word
"shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
-----------------------
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
--------
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
The Credits
-----------
SECTION 2.01. Commitments. Subject to the terms and conditions set
------------
forth herein, each Lender agrees (a) to make a Tranche A Term Loan to the
Borrower on the Effective Date in a principal amount not exceeding its Tranche A
Commitment, (b) to make a Tranche B Term Loan to the Borrower on the Effective
Date in a principal amount not exceeding its Tranche B Commitment and (c) to
make Revolving Loans to the Borrower from time to time during the Revolving
Availability Period in an aggregate principal amount that will not result in
such Lender's Revolving Exposure exceeding such Lender's Revolving Commitment.
Within the foregoing limits and subject to the terms
<PAGE>
24
and conditions set forth herein, the Borrower may borrow, prepay and reborrow
Revolving Loans. Amounts repaid in respect of Term Loans may not be reborrowed.
SECTION 2.02. Loans and Borrowings. (a) Each Loan (other than a
---------------------
Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the
same Class and Type made by the Lenders ratably in accordance with their
respective Commitments of the applicable Class. The failure of any Lender to
make any Loan required to be made by it shall not relieve any other Lender of
its obligations hereunder; provided that the Commitments of the Lenders are
--------
several and no Lender shall be responsible for any other Lender's failure to
make Loans as required.
(b) Subject to Section 2.14, each Revolving Borrowing and Term
Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the
Borrower may request in accordance herewith. Notwithstanding anything to the
contrary contained herein, all Borrowings made on the Effective Date shall be
ABR Borrowings. Each Swingline Loan shall be an ABR Loan. Each Lender at its
option may make any Eurodollar Loan by causing any domestic or foreign branch or
Affiliate of such Lender to make such Loan; provided that any exercise of such
--------
option shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement and shall not result in any
increased costs under Section 2.15 or any obligation by the Borrower to make any
payment under Section 2.17 in excess of the amounts, if any, that such Lender
would be entitled to claim under Section 2.15 or 2.17, as applicable, without
giving effect to such change in lending office.
(c) At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $100,000 and not less than $2,500,000. At the time that each ABR
Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that
is an integral multiple of $100,000 and not less than $1,000,000; provided that
--------
an ABR Revolving Borrowing may be in an aggregate amount that is equal to the
entire unused balance of the total Revolving Commitments or that is required to
finance the reimbursement of an LC Disbursement as contemplated by Section
2.05(e). Each Swingline Loan shall be in an amount that is an integral multiple
of $100,000 and not less than $250,000. Borrowings of more than one Type and
Class may be outstanding at the same time; provided that there shall not at any
--------
time be more than a total of ten Eurodollar Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Revolving Maturity Date, Tranche A Maturity Date or Tranche B Maturity
Date, as applicable.
SECTION 2.03. Requests for Borrowings. To request a Revolving
------------------------
Borrowing or Term Borrowing, the Borrower shall notify the Administrative Agent
of such request by telephone (a) in the case of a Eurodollar Borrowing, not
later than 2:00 p.m., New York City time, three Business Days before the date of
the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than
2:00 p.m., New York City time, one Business Day before the date of the proposed
Borrowing; provided that any such notice of an ABR Revolving Borrowing to
--------
finance the reimbursement of an LC Disbursement as contemplated by Section
2.05(e) may be given not later than 1:00 p.m., New York City time, on the date
of the proposed Borrowing. Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by
<PAGE>
25
hand delivery or telecopy to the Administrative Agent of a written Borrowing
Request in a form approved by the Administrative Agent and signed by the
Borrower. Each such telephonic and written Borrowing Request shall specify the
following information in compliance with Section 2.02:
(i) whether the requested Borrowing is to be a Revolving Borrowing,
Tranche A Term Borrowing or Tranche B Term Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) the date of such Borrowing, which shall be a Business Day;
(iv) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;
(v) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(vi) the location and number of the Borrower's account to which funds
are to be disbursed, which shall comply with the requirements of Section
2.06.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Revolving Borrowing, then the Borrower shall
be deemed to have selected an Interest Period of one month's duration. Promptly
following receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.04. Swingline Loans. (a) Subject to the terms and
----------------
conditions set forth herein, the Swingline Lender agrees to make Swingline
Loans to the Borrower from time to time during the Revolving Availability
Period, in an aggregate principal amount at any time outstanding that will not
result in (i) the aggregate principal amount of outstanding Swingline Loans
exceeding $5,000,000 or (ii) the sum of the total Revolving Exposures exceeding
the total Revolving Commitments; provided that the Swingline Lender shall not be
--------
required to make a Swingline Loan to refinance an outstanding Swingline Loan.
Within the foregoing limits and subject to the terms and conditions set forth
herein, the Borrower may borrow, prepay and reborrow Swingline Loans.
(b) To request a Swingline Loan, the Borrower shall notify the
Administrative Agent of such request by telephone (confirmed by telecopy), not
later than 2:00 p.m., New York City time, on the day of a proposed Swingline
Loan. Each such notice shall be irrevocable and shall specify the requested
date (which shall be a Business Day) and amount of the requested Swingline Loan.
The Administrative Agent will promptly advise the Swingline Lender of any such
notice received from the Borrower. The Swingline Lender shall make each
Swingline Loan available to the Borrower by means of a credit to the general
deposit account of the Borrower with the Swingline Lender (or, in the case of a
Swingline Loan made to finance the reimbursement of an LC
<PAGE>
26
Disbursement as provided in Section 2.06(e), by remittance to the Issuing Bank)
by 4:00 p.m., New York City time, on the requested date of such Swingline Loan.
(c) The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Revolving Lenders to acquire participations on such
Business Day in all or a portion of the Swingline Loans outstanding. Such
notice shall specify the aggregate amount of Swingline Loans in which Revolving
Lenders will participate. Promptly upon receipt of such notice, the
Administrative Agent will give notice thereof to each Revolving Lender,
specifying in such notice such Lender's Applicable Percentage of such Swingline
Loan or Loans. Each Revolving Lender hereby absolutely and unconditionally
agrees, upon receipt of notice as provided above, to pay to the Administrative
Agent, for the account of the Swingline Lender, such Lender's Applicable
Percentage of such Swingline Loan or Loans. Each Revolving Lender acknowledges
and agrees that its obligation to acquire participations in Swingline Loans
pursuant to this paragraph is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the occurrence and
continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever. Each Revolving Lender shall comply with its obligation
under this paragraph by wire transfer of immediately available funds, in the
same manner as provided in Section 2.06 with respect to Loans made by such
Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment
------- --------
obligations of the Revolving Lenders), and the Administrative Agent shall
promptly pay to the Swingline Lender the amounts so received by it from the
Revolving Lenders. The Administrative Agent shall notify the Borrower of any
participations in any Swingline Loan acquired pursuant to this paragraph, and
thereafter payments in respect of such Swingline Loan shall be made to the
Administrative Agent and not to the Swingline Lender. Any amounts received by
the Swingline Lender from the Borrower (or other party on behalf of the
Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender
of the proceeds of a sale of participations therein shall be promptly remitted
to the Administrative Agent; any such amounts received by the Administrative
Agent shall be promptly remitted by the Administrative Agent to the Revolving
Lenders that shall have made their payments pursuant to this paragraph and to
the Swingline Lender, as their interests may appear. The purchase of
participations in a Swingline Loan pursuant to this paragraph shall not relieve
the Borrower of any default in the payment thereof.
SECTION 2.05. Letters of Credit. (a) General. Subject to the terms
------------------ --------
and conditions set forth herein, the Borrower may request the issuance of
Letters of Credit for its own account, in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the Revolving Availability Period. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and conditions
of any form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the Issuing Bank relating to
any Letter of Credit, the terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
----------------------------------------------------------
Conditions. To request the issuance of a Letter of Credit (or the amendment,
- -----------
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent (reasonably in advance of the requested date
of issuance, amendment, renewal or
<PAGE>
27
extension) a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, and
specifying the date of issuance, amendment, renewal or extension (which shall be
a Business Day), the date on which such Letter of Credit is to expire (which
shall comply with paragraph (c) of this Section), the amount of such Letter of
Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit. If requested by the Issuing Bank, the Borrower also shall submit a
letter of credit application on the Issuing Bank's standard form in connection
with any request for a Letter of Credit. A Letter of Credit shall be issued,
amended, renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed $10,000,000 and (ii) the total
Revolving Exposures shall not exceed the total Revolving Commitments.
(c) Expiration Date. Each Letter of Credit shall expire at or prior
----------------
to the close of business on the earlier of (i) the date one year after the date
of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Revolving Maturity Date.
(d) Participations. By the issuance of a Letter of Credit (or an
---------------
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Revolving Lender, and each Revolving Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal
to such Lender's Applicable Percentage of the aggregate amount available to be
drawn under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to
pay to the Administrative Agent, for the account of the Issuing Bank, such
Lender's Applicable Percentage of each LC Disbursement made by the Issuing Bank
and not reimbursed by the Borrower on the date due as provided in paragraph (e)
of this Section, or of any reimbursement payment required to be refunded to the
Borrower for any reason. Each Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of
Letters of Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC
--------------
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such
LC Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than 2:00 p.m., New York City time, on (i) the Business
Day that the Borrower receives such notice, if such notice is received prior to
12:00 noon, New York City time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt; provided that
--------
the Borrower may, subject to the conditions to borrowing set forth herein,
request in accordance with Section 2.03 or 2.04 that such payment be financed
with an ABR Revolving Borrowing or Swingline Loan in an equivalent amount and,
to the extent so financed, the Borrower's obligation to make such payment shall
be
<PAGE>
28
discharged and replaced by the resulting ABR Revolving Borrowing or Swingline
Loan. If the Borrower fails to make such payment when due and such payment has
not been refinanced with such an ABR Revolving Borrowing or Swingline Loan, the
Administrative Agent shall notify each Revolving Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof and such
Lender's Applicable Percentage thereof. Promptly following receipt of such
notice, each Revolving Lender shall pay to the Administrative Agent its
Applicable Percentage of the payment then due from the Borrower, in the same
manner as provided in Section 2.06 with respect to Loans made by such Lender
(and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of
------- --------
the Revolving Lenders), and the Administrative Agent shall promptly pay to the
Issuing Bank the amounts so received by it from the Revolving Lenders. Promptly
following receipt by the Administrative Agent of any payment from the Borrower
pursuant to this paragraph, the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that Revolving Lenders have made
payments pursuant to this paragraph to reimburse the Issuing Bank, then to such
Lenders and the Issuing Bank as their interests may appear. Any payment made by
a Revolving Lender pursuant to this paragraph to reimburse the Issuing Bank for
any LC Disbursement (other than the funding of ABR Revolving Loans or a
Swingline Loan as contemplated above) shall not constitute a Loan and shall not
relieve the Borrower of its obligation to reimburse such LC Disbursement.
(f) Obligations Absolute. The Borrower's obligation to reimburse LC
---------------------
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower's obligations hereunder.
Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of
their Related Parties, shall have any liability or responsibility by reason of
or in connection with the issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank. Notwithstanding the foregoing provisions of this paragraph (f) the
Issuing Bank shall not be excused from liability to the Borrower to the extent
of any direct damages (as opposed to consequential damages, claims in respect of
which are hereby waived by the Borrower to the extent permitted by applicable
law) suffered by the Borrower that are caused by the Issuing Bank's failure to
exercise care when determining whether drafts and other documents presented
under a Letter of Credit comply with the terms thereof. The parties hereto
expressly agree that, in the absence of gross negligence or wilful misconduct on
the part of the Issuing Bank, the Issuing Bank shall be deemed to have exercised
care in each such determination. In furtherance of the foregoing and without
limiting the generality thereof,
<PAGE>
29
the parties agree that, with respect to documents presented which appear on
their face to be in substantial compliance with the terms of a Letter of Credit,
the Issuing Bank may, in its sole discretion, either accept and make payment
upon such documents without responsibility for further investigation, regardless
of any notice or information to the contrary, or refuse to accept and make
payment upon such documents if such documents are not in strict compliance with
the terms of such Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
------------------------
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any failure to give or
--------
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Revolving Lenders with respect to any such LC
Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
-----------------
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans;
provided that, if the Borrower fails to reimburse such LC Disbursement when due
- --------
pursuant to paragraph (e) of this Section, then Section 2.13 shall apply.
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Bank, except that interest accrued on and after the date of payment by
any Revolving Lender pursuant to paragraph (e) of this Section to reimburse the
Issuing Bank shall be for the account of such Lender to the extent of such
payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may be
--------------------------------
replaced at any time by written agreement among the Borrower, the Administrative
Agent, the replaced Issuing Bank and the successor Issuing Bank. The
Administrative Agent shall notify the Lenders of any such replacement of the
Issuing Bank. At the time any such replacement shall become effective, the
Borrower shall pay all unpaid fees accrued for the account of the replaced
Issuing Bank pursuant to Section 2.12(b). From and after the effective date of
any such replacement, (i) the successor Issuing Bank shall have all the rights
and obligations of the Issuing Bank under this Agreement with respect to Letters
of Credit to be issued thereafter and (ii) references herein to the term
"Issuing Bank" shall be deemed to refer to such successor or to any previous
Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require. After the replacement of an Issuing Bank hereunder, the
replaced Issuing Bank shall remain a party hereto and shall continue to have all
the rights and obligations of an Issuing Bank under this Agreement with respect
to Letters of Credit issued by it prior to such replacement, but shall not be
required to issue additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and
-----------------------
be continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Revolving Lenders with LC Exposure representing greater
than 50% of the total LC Exposure) demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders, an amount in cash equal to
<PAGE>
30
100% of the LC Exposure as of such date plus any accrued and unpaid interest
thereon; provided that the obligation to deposit such cash collateral shall
--------
become effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Borrower described in clause (h) or (i) of
Article VII. The Borrower also shall deposit cash collateral pursuant to this
paragraph as and to the extent required by Section 2.11(b). Each such deposit
shall be held by the Administrative Agent as collateral for the payment and
performance of the obligations of the Borrower under this Agreement. The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest earned
on the investment of such deposits, which investments shall be made at the
option and sole discretion of the Administrative Agent and at the Borrower's
risk and expense, such deposits shall not bear interest; provided that, unless
--------
the Borrower and the Administrative Agent otherwise agree, such investments
shall be made only in cash equivalents. Interest or profits, if any, on such
investments shall accumulate in such account. Moneys in such account shall be
applied by the Administrative Agent to reimburse the Issuing Bank for LC
Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrower for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated (but subject to the consent of Revolving Lenders with LC
Exposure representing greater than 50% of the total LC Exposure), be applied to
satisfy other obligations of the Borrower under this Agreement. If the Borrower
is required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived. If the Borrower is required to
provide an amount of cash collateral hereunder pursuant to Section 2.11(b), such
amount (to the extent not applied as aforesaid) shall be returned to the
Borrower as and to the extent that, after giving effect to such return, the
Borrower would remain in compliance with Section 2.11(b) and no Default shall
have occurred and be continuing.
SECTION 2.06. Funding of Borrowings. (a) Each Lender shall make
----------------------
each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 12:00 noon, New York City time, to
the account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders; provided that Swingline Loans shall be made as
--------
provided in Section 2.04. The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in like
funds, to an account of the Borrower maintained with the Administrative Agent in
New York City and designated by the Borrower in the applicable Borrowing
Request; provided that ABR Revolving Loans made to finance the reimbursement of
--------
an LC Disbursement as provided in Section 2.05(e) shall be remitted by the
Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay
<PAGE>
31
to the Administrative Agent forthwith on demand such corresponding amount with
interest thereon, for each day from and including the date such amount is made
available to the Borrower to but excluding the date of payment to the
Administrative Agent, at (i) in the case of such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation or (ii) in
the case of the Borrower, the interest rate applicable to ABR Loans. If such
Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender's Loan included in such Borrowing.
SECTION 2.07. Interest Elections. (a) Each Revolving Borrowing and
-------------------
Term Borrowing initially shall be of the Type specified in the applicable
Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an
initial Interest Period as specified in such Borrowing Request. Thereafter, the
Borrower may elect to convert such Borrowing to a different Type or to continue
such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest
Periods therefor, all as provided in this Section. The Borrower may elect
different options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Borrowing. This Section shall not apply
to Swingline Borrowings, which may not be converted or continued.
(b) To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Revolving Borrowing of the Type resulting from such election to be
made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
Borrower.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02 and paragraph
(f) of this Section:
(i) the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to different
portions thereof, the portions thereof to be allocated to each resulting
Borrowing (in which case the information to be specified pursuant to
clauses (iii) and (iv) below shall be specified for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
<PAGE>
32
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the
request of the Required Lenders, so notifies the Borrower, then, so long as an
Event of Default is continuing (i) no outstanding Borrowing may be converted to
or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
(f) A Borrowing of any Class may not be converted to or continued as
a Eurodollar Borrowing if after giving effect thereto (i) the Interest Period
therefor would commence before and end after a date on which any principal of
the Loans of such Class is scheduled to be repaid and (ii) the sum of the
aggregate principal amount of outstanding Eurodollar Borrowings of such Class
with Interest Periods ending on or prior to such scheduled repayment date plus
the aggregate principal amount of outstanding ABR Borrowings of such Class would
be less than the aggregate principal amount of Loans of such Class required to
be repaid on such scheduled repayment date.
SECTION 2.08. Termination and Reduction of Commitments. (a) Unless
-----------------------------------------
previously terminated, (i) the Tranche A Commitments and Tranche B Commitments
shall terminate at 5:00 p.m., New York City time, on the Effective Date and (ii)
the Revolving Commitments shall terminate on the Revolving Maturity Date.
(b) The Borrower may at any time terminate, or from time to time
reduce, the Commitments of any Class; provided that (i) each reduction of the
--------
Commitments of any Class shall be in an amount that is an integral multiple of
$100,000 and not less than $2,500,000 and (ii) the Borrower shall not terminate
or reduce the Revolving Commitments if, after giving effect to any concurrent
prepayment of the Revolving Loans in accordance with Section 2.11, the sum of
the Revolving Exposures would exceed the total Revolving Commitments.
(c) In the event that, on the date on which any prepayment would be
required pursuant to Section 2.11(c) or 2.11(d), no Term Borrowings remain
outstanding or the amount of the prepayment required by Section 2.11(c) or
2.11(d), as the case may be, exceeds the aggregate principal amount of Term
Borrowings then outstanding, the Revolving Commitments shall be reduced by an
amount equal to the excess of the required prepayment over the principal amount,
if any, of Term Borrowings actually prepaid.
(d) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three
<PAGE>
33
Business Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof. Promptly following
receipt of any notice, the Administrative Agent shall advise the Lenders of the
contents thereof. Each notice delivered by the Borrower pursuant to this Section
shall be irrevocable; provided that a notice of termination of the Revolving
--------
Commitments delivered by the Borrower may state that such notice is conditioned
upon the effectiveness of other credit facilities, in which case such notice may
be revoked by the Borrower (by notice to the Administrative Agent on or prior to
the specified effective date) if such condition is not satisfied. Any
termination or reduction of the Commitments of any Class shall be permanent.
Each reduction of the Commitments of any Class shall be made ratably among the
Lenders in accordance with their respective Commitments of such Class.
SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) The Borrower
-------------------------------------
hereby unconditionally promises to pay (i) to the Administrative Agent for the
account of each Lender the then unpaid principal amount of each Revolving Loan
of such Lender on the Revolving Maturity Date, (ii) to the Administrative Agent
for the account of each Lender the then unpaid principal amount of each Term
Loan of such Lender as provided in Section 2.10 and (iii) to the Swingline
Lender the then unpaid principal amount of each Swingline Loan on the earlier of
the Revolving Maturity Date and the first date after such Swingline Loan is made
that is the 15th or last day of a calendar month and is at least two Business
Days after such Swingline Loan is made; provided that on each date that a
--------
Revolving Borrowing is made, the Borrower shall repay all Swingline Loans then
outstanding.
(b) 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 Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
----- -----
amounts of the obligations recorded therein; provided that the failure of any
--------
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans of any Class made by it be
evidenced by a promissory note. In such event, the Borrower shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent. Thereafter, the
Loans evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 9.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a
<PAGE>
34
registered note, to such payee and its registered assigns), unless the Borrower
and the payee of any such promissory note (or, if applicable, the registered
assignee thereof) agree to cancel such promissory note.
SECTION 2.10. Amortization of Term Loans. (a) Subject to adjustment
---------------------------
pursuant to paragraph (d) of this Section, the Borrower shall repay Tranche A
Term Borrowings on each date set forth below in the aggregate principal amount
set forth opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
October 31, 1999 $ 750,000
January 31, 2000 750,000
April 30, 2000 750,000
July 31, 2000 750,000
October 31, 2000 1,250,000
January 31, 2001 1,250,000
April 30, 2001 1,250,000
July 31, 2001 1,250,000
October 31, 2001 1,750,000
January 31, 2002 1,750,000
April 30, 2002 1,750,000
July 31, 2002 1,750,000
October 31, 2002 2,750,000
January 31, 2003 2,750,000
April 30, 2003 2,750,000
July 31, 2003 2,750,000
October 31, 2003 5,500,000
January 31, 2004 5,500,000
April 30, 2004 5,500,000
July 31, 2004 5,500,000
October 31, 2004 6,750,000
January 31, 2005 6,750,000
April 30, 2005 6,750,000
July 31, 2005 6,750,000
</TABLE>
(b) Subject to adjustment pursuant to paragraph (d) of this Section,
the Borrower shall repay Tranche B Term Borrowings on each date set forth below
in the aggregate principal amount set forth opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
October 31, 2000 $ 250,000
January 31, 2001 250,000
April 30, 2001 250,000
July 31, 2001 250,000
October 31, 2001 250,000
January 31, 2002 250,000
April 30, 2002 250,000
July 31, 2002 250,000
</TABLE>
<PAGE>
35
<TABLE>
<S> <C>
October 31, 2002 250,000
January 31, 2003 250,000
April 30, 2003 250,000
July 31, 2003 250,000
October 31, 2003 250,000
January 31, 2004 250,000
April 30, 2004 250,000
July 31, 2004 250,000
October 31, 2004 2,750,000
January 31, 2005 2,750,000
April 30, 2005 2,750,000
July 31, 2005 2,750,000
October 31, 2005 10,000,000
January 31, 2006 10,000,000
April 30, 2006 10,000,000
July 31, 2006 10,000,000
October 31, 2006 15,000,000
January 31, 2007 15,000,000
April 30, 2007 15,000,000
July 31, 2007 15,000,000
</TABLE>
(c) To the extent not previously paid, (i) all Tranche A Term Loans
shall be due and payable on the Tranche A Maturity Date and (ii) all Tranche B
Term Loans shall be due and payable on the Tranche B Maturity Date.
(d) If the initial aggregate amount of the Lenders' Term Commitments
of either Class exceeds the aggregate principal amount of Term Loans of such
Class that are made on the Effective Date, then the scheduled repayments of Term
Borrowings of such Class to be made pursuant to this Section shall be reduced
ratably by an aggregate amount equal to such excess. Any prepayment of a Term
Borrowing of either Class shall be applied to reduce the subsequent scheduled
repayments of the Term Borrowings of such Class to be made pursuant to this
Section ratably.
(e) Prior to any repayment of any Term Borrowings of either Class
under this Section 2.10, the Borrower shall select the Borrowing or Borrowings
of the applicable Class to be repaid and shall notify the Administrative Agent
by telephone (confirmed by telecopy) of such selection not later than 12:00
noon, New York City time, three Business Days before the scheduled date of such
repayment. Each repayment of a Borrowing shall be applied ratably to the Loans
included in the repaid Borrowing. Repayments of Term Borrowings shall be
accompanied by accrued interest on the amount repaid.
SECTION 2.11. Prepayment of Loans. (a) The Borrower shall have the
--------------------
right at any time and from time to time to prepay any Borrowing in whole or in
part, subject to the requirements of this Section.
(b) In the event and on such occasion that the sum of the Revolving
Exposures exceeds the total Revolving Commitments, the Borrower shall prepay
Revolving Borrowings or Swingline Borrowings (or, if no such Borrowings are
outstanding, deposit cash collateral in an account with the Administrative Agent
pursuant to Section 2.05(j)) in an aggregate amount equal to such excess.
<PAGE>
36
(c) In the event and on each occasion that any Net Proceeds are
received by or on behalf of the Borrower or any Subsidiary in respect of any
Prepayment Event, the Borrower shall, immediately after such Net Proceeds are
received, prepay Term Borrowings in an aggregate amount equal to such Net
Proceeds; provided that, in the case of any event described in clause (a) of the
--------
definition of the term Prepayment Event, if the Borrower shall deliver to the
Administrative Agent a certificate of a Financial Officer to the effect that the
Borrower and the Subsidiaries intend to apply the Net Proceeds from such event,
within 360 days after receipt of such Net Proceeds, (i) to acquire real
property, equipment or other tangible assets to be used in the business of the
Borrower and the Subsidiaries or (ii) to purchase Equity Interests of a Person
in the same or a similar line of business in connection with a Permitted
Acquisition, and certifying that no Default has occurred and is continuing, then
no prepayment shall be required pursuant to this paragraph in respect of such
event except to the extent of any Net Proceeds therefrom that have not been so
applied by the end of such 360-day period, at which time a prepayment shall be
required in an amount equal to the Net Proceeds that have not been so applied.
(d) Following the end of each fiscal year of the Borrower, commencing
with the fiscal year ending October 29, 2000, the Borrower shall prepay Term
Borrowings in an aggregate amount equal to 75% of Excess Cash Flow for such
fiscal year; provided that (i) if the Leverage Ratio as of the end of such
--------
fiscal year is less than 3.50 to 1.00, the Borrower shall prepay Term Borrowings
in an aggregate amount equal to 60% of Excess Cash Flow for such fiscal year and
(ii) if the Leverage Ratio as of the end of such fiscal year is less than 3.00
to 1.00, the Borrower shall prepay Term Borrowings in an aggregate amount equal
to 50% of Excess Cash Flow for such fiscal year. Each prepayment pursuant to
this paragraph shall be made on or before the date on which financial statements
are delivered pursuant to Section 5.01 with respect to the fiscal year for which
Excess Cash Flow is being calculated (and in any event within 90 days after the
end of such fiscal year).
(e) Prior to any optional or mandatory prepayment of Borrowings
hereunder, the Borrower shall select the Borrowing or Borrowings to be prepaid
and shall specify such selection in the notice of such prepayment pursuant to
paragraph (f) of this Section. In the event of any optional or mandatory
prepayment of Term Borrowings made at a time when Term Borrowings of both
Classes remain outstanding, the Borrower shall select Term Borrowings to be
prepaid so that the aggregate amount of such prepayment is allocated between the
Tranche A Term Borrowings and Tranche B Term Borrowings pro rata based on the
aggregate principal amount of outstanding Borrowings of each such Class;
provided that any Tranche B Lender may elect, by notice to the Administrative
- --------
Agent by telephone (confirmed by telecopy) at least one Business Day prior to
the prepayment date, to decline all or any portion of any prepayment of its
Tranche B Term Loans pursuant to this Section, in which case the aggregate
amount of the prepayment that would have been applied to prepay Tranche B Term
Loans but was so declined shall be applied to prepay Tranche A Term Borrowings.
(f) The Borrower shall notify the Administrative Agent (and, in the case
of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed
by telecopy) of any prepayment hereunder (i) in the case of prepayment of a
Eurodollar Borrowing, not later than 2:00 p.m. New York City time, three
Business Days before the date of prepayment, (ii) in the case of prepayment of
an ABR Borrowing, not later than 2:00 p.m., New York City time, one Business Day
before the date of prepayment or
<PAGE>
37
(iii) in the case of prepayment of a Swingline Loan, not later than 2:00 p.m.,
New York City time, on the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date, the principal amount of each
Borrowing or portion thereof to be prepaid and, in the case of a mandatory
prepayment, a reasonably detailed calculation of the amount of such prepayment;
provided that, if a notice of optional prepayment is given in connection with
- --------
a conditional notice of termination of the Revolving Commitments as contemplated
by Section 2.08, then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.08. Promptly following
receipt of any such notice (other than a notice relating solely to Swingline
Loans), the Administrative Agent shall advise the Lenders of the contents
thereof. Each partial prepayment of any Borrowing shall be in an amount that
would be permitted in the case of an advance of a Borrowing of the same Type as
provided in Section 2.02, except as necessary to apply fully the required amount
of a mandatory prepayment. Each prepayment of a Borrowing shall be applied
ratably to the Loans included in the prepaid Borrowing. Prepayments shall be
accompanied by accrued interest to the extent required by Section 2.13.
SECTION 2.12. Fees. (a) The Borrower agrees to pay to the
-----
Administrative Agent for the account of each Revolving Lender a commitment fee,
which shall accrue at the Applicable Rate on the average daily unused amount of
each Revolving Commitment of such Lender during the period from and including
the Effective Date to but excluding the date on which such Commitment
terminates. Accrued commitment fees shall be payable in arrears on the last day
of March, June, September and December of each year and on the date on which the
Revolving Commitments terminate, commencing on the first such date to occur
after the date hereof. All commitment fees shall be computed on the basis of a
year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). For purposes of computing
commitment fees, a Revolving Commitment of a Lender shall be deemed to be used
to the extent of the outstanding Revolving Loans and LC Exposure of such Lender
(and the Swingline Exposure of such Lender shall be disregarded for such
purpose).
(b) The Borrower agrees to pay (i) to the Administrative Agent for
the account of each Revolving Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue (A) with respect to
Standby LCs, at the same Applicable Rate as interest on Eurodollar Revolving
Loans on the average daily amount of such Lender's Standby LC Exposure
(excluding any portion thereof attributable to unreimbursed Standby LC
Disbursements) and (B) with respect to Trade LCs, at the rate of 1.25% per annum
on the average daily amount of such Lender's Trade LC Exposure (excluding any
portion thereof attributable to unreimbursed Trade LC Disbursements), in the
case of each of clause (A) and (B) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender's
Revolving Commitment terminates and the date on which such Lender ceases to have
any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue
at the rate of 0.25% per annum on the average daily amount of the LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the Effective Date to but excluding the
later of the date of termination of the Revolving Commitments and the date on
which there ceases to be any LC Exposure, as well as the Issuing Bank's standard
fees with respect to the issuance, amendment, renewal or extension of any Letter
of Credit or processing of drawings thereunder. Participation fees and fronting
fees accrued through and including the last day of March, June,
<PAGE>
38
September and December of each year shall be payable on the third Business Day
following such last day, commencing on the first such date to occur after the
Effective Date; provided that all such fees shall be payable on the date on
--------
which the Revolving Commitments terminate and any such fees accruing after the
date on which the Revolving Commitments terminate shall be payable on demand.
Any other fees payable to the Issuing Bank pursuant to this paragraph shall be
payable within 10 days after demand. All participation fees and fronting fees
shall be computed on the basis of a year of 360 days and shall be payable for
the actual number of days elapsed (including the first day but excluding the
last day).
(c) The Borrower agrees to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
commitment fees and participation fees, to the Lenders entitled thereto. Fees
paid shall not be refundable under any circumstances.
SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing
---------
(including each Swingline Loan) shall bear interest at the Alternate Base Rate
plus the Applicable Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount, 2% plus the rate
applicable to ABR Revolving Loans as provided in paragraph (a) of this Section.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and, in the case of Revolving Loans, upon
termination of the Revolving Commitments; provided that (i) interest accrued
--------
pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in
the event of any repayment or prepayment of any Loan (other than a prepayment of
an ABR Revolving Loan or Swingline Loan prior to the end of the Revolving
Availability Period), accrued interest on the principal amount repaid or prepaid
shall be payable on the date of such repayment or prepayment and (iii) in the
event of any conversion of any Eurodollar Loan prior to the end of the current
Interest Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of a year
of 360 days, except that interest computed by reference to the Alternate Base
Rate at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a
<PAGE>
39
year of 365 days (or 366 days in a leap year), and in each case shall be payable
for the actual number of days elapsed (including the first day but excluding the
last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be
determined by the Administrative Agent in accordance with the terms hereof, and
such determination shall be conclusive absent manifest error.
SECTION 2.14. Alternate Rate of Interest. If prior to the
---------------------------
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that
the Adjusted LIBO Rate for such Interest Period will not adequately and
fairly reflect the cost to such Lenders (or Lender) of making or
maintaining their Loans (or its Loan) included in such Borrowing for such
Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
SECTION 2.15. Increased Costs. (a) If any Change in Law shall:
----------------
(i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Lender (except any such reserve requirement
reflected in the Adjusted LIBO Rate) or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London interbank
market any other condition affecting this Agreement or Eurodollar Loans
made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's or the Issuing Bank's capital or on the capital
of such Lender's or the Issuing Bank's holding company, if any, as a consequence
of this Agreement or the Loans made by, or participations in Letters of Credit
held by, such Lender, or the Letters of
<PAGE>
40
Credit issued by the Issuing Bank, to a level below that which such Lender or
the Issuing Bank or such Lender's or the Issuing Bank's holding company could
have achieved but for such Change in Law (taking into consideration such
Lender's or the Issuing Bank's policies and the policies of such Lender's or the
Issuing Bank's holding company with respect to capital adequacy), then from time
to time the Borrower will pay to such Lender or the Issuing Bank, as the case
may be, such additional amount or amounts as will compensate such Lender or the
Issuing Bank or such Lender's or the Issuing Bank's holding company for any such
reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section, together with a brief explanation for the increased costs and the
basis for the calculation thereof, shall be delivered to the Borrower and shall
be conclusive absent manifest error. The Borrower shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; provided
--------
that the Borrower shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased costs or reductions incurred
more than 180 days prior to the date that such Lender or the Issuing Bank, as
the case may be, notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; provided further that, if the Change
-------- -------
in Law giving rise to such increased costs or reductions is retroactive, then
the 180-day period referred to above shall be extended to include the period of
retroactive effect thereof.
SECTION 2.16. Break Funding Payments. In the event of (a) the
-----------------------
payment of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Eurodollar Revolving Loan or Eurodollar Term Loan on the
date specified in any notice delivered pursuant hereto (regardless of whether
such notice may be revoked under Section 2.11(f) and is revoked in accordance
therewith), or (d) the assignment of any Eurodollar Loan other than on the last
day of the Interest Period applicable thereto as a result of a request by the
Borrower pursuant to Section 2.19, then, in any such event, the Borrower shall
compensate each Lender for the loss (other than lost profit) attributable to
such event. In the case of a Eurodollar Loan, such loss to any Lender shall be
deemed to be the amount determined by such Lender to be the excess, if any, of
(i) the amount of interest which would have accrued on the principal amount of
such Loan had such event not occurred, at the Adjusted LIBO Rate that would have
been applicable to such Loan, for the period from the date of such event to the
last day of the then current Interest Period therefor (or, in the case of a
failure to borrow, convert or continue, for the period that would have been the
Interest Period for such Loan), over (ii) the amount of interest which would
accrue on such principal amount for such period at the interest rate which such
Lender would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the eurodollar
market. A certificate of any Lender setting forth any amount or amounts that
such Lender is entitled to receive pursuant to
<PAGE>
41
this Section, showing a calculation of the amounts payable in reasonable detail
to the extent reasonably practicable, shall be delivered to the Borrower and
shall be conclusive absent manifest error. The Borrower shall pay such Lender
the amount shown as due on any such certificate within 10 days after receipt
thereof.
SECTION 2.17. Taxes. (a) Any and all payments by or on account of
------
any obligation of the Borrower hereunder or under any other Loan Document shall
be made free and clear of and without deduction for any Indemnified Taxes or
Other Taxes; provided that if the Borrower shall be required to deduct any
--------
Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
the Administrative Agent, Lender or Issuing Bank (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 such deductions and (iii) the Borrower shall
pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each
Lender and the Issuing Bank, within 10 days after written demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or
with respect to any payment by or on account of any obligation of the Borrower
hereunder or under any other Loan Document (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this
Section) and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate as to the amount of such payment or liability
delivered to the Borrower by a Lender or the Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing
Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the Code, the law of the jurisdiction in
which the Borrower is located, or any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, such properly completed and executed documentation
prescribed by applicable law or reasonably requested by the Borrower as will
permit such payments to be made without withholding or at a reduced rate.
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-
------------------------------------------------------
offs. (a) The Borrower shall make each payment required to be made by it
- -----
hereunder or
<PAGE>
42
under any other Loan Document (whether of principal, interest, fees or
reimbursement of LC Disbursements, or of amounts payable under Section 2.15,
2.16 or 2.17, or otherwise) prior to the time expressly required hereunder or
under such other Loan Document for such payment (or, if no such time is
expressly required, prior to 12:00 noon, New York City time), on the date when
due, in immediately available funds, without set-off or counterclaim. Any
amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 270 Park Avenue, New
York, New York, except payments to be made directly to the Issuing Bank or
Swingline Lender as expressly provided herein and except that payments pursuant
to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons
entitled thereto and payments pursuant to other Loan Documents shall be made to
the Persons specified therein. The Administrative Agent shall distribute any
such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof. If any payment under
any Loan Document shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension. All payments under each Loan Document shall be made in
dollars.
(b) If at any time insufficient funds are received by and available
to the Administrative Agent to pay fully all amounts of principal, unreimbursed
LC Disbursements, interest and fees then due hereunder, such funds shall be
applied (i) first, towards payment of interest and fees then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, towards payment of
principal and unreimbursed LC Disbursements then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal and
unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans, Term Loans or participations in LC
Disbursements or Swingline Loans resulting in such Lender receiving payment of a
greater proportion of the aggregate amount of its Revolving Loans, Term Loans
and participations in LC Disbursements and Swingline Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Revolving Loans, Term Loans and participations in LC
Disbursements and Swingline Loans of other Lenders to the extent necessary so
that the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Revolving Loans, Term Loans and participations in LC
Disbursements and Swingline Loans; provided that (i) if any such participations
--------
are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in LC Disbursements to any assignee or participant, other than to the Borrower
or any Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph shall apply). The Borrower consents to the foregoing and
<PAGE>
43
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of set-off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Bank hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing Bank,
as the case may be, the amount due. In such event, if the Borrower has not in
fact made such payment, then each of the Lenders or the Issuing Bank, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.
(e) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b), 2.18(d) or 9.03(c),
then the Administrative Agent may, in its discretion (notwithstanding any
contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender's
obligations under such Sections until all such unsatisfied obligations are fully
paid.
SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a)
-----------------------------------------------
If any Lender requests compensation under Section 2.15, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.17, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the
reasonable judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as the
case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender. The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.15, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
--------
shall have received the prior written consent of the Administrative Agent (and,
if a Revolving Commitment is being assigned, the Issuing Bank and Swingline
Lender), which consent shall not unreasonably be withheld, (ii) such Lender
shall have received payment of an
<PAGE>
44
amount equal to the outstanding principal of its Loans and participations in LC
Disbursements and Swingline Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Borrower (in
the case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.15 or payments required
to be made pursuant to Section 2.17, such assignment will result in a reduction
in such compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.
ARTICLE III
Representations and Warranties
------------------------------
The Borrower represents and warrants to the Lenders that:
SECTION 3.01. Organization; Powers. Each of the Borrower and its
---------------------
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.
SECTION 3.02. Authorization; Enforceability. The Transactions to be
------------------------------
entered into by each Loan Party are within such Loan Party's corporate powers
and have been duly authorized by all necessary corporate and, if required,
stockholder action. This Agreement has been duly executed and delivered by the
Borrower and constitutes, and each other Loan Document to which any Loan Party
is to be a party, when executed and delivered by such Loan Party, will
constitute, a legal, valid and binding obligation of the Borrower or such Loan
Party (as the case may be), enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other laws affecting creditors' rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law, and an implied covenant of good faith and fair dealing.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions
-------------------------------------
(a) do not require any material consent or approval of, registration or filing
with, or any other action by, any Governmental Authority, except such as have
been obtained or made and are in full force and effect and except filings
necessary to perfect Liens created under the Loan Documents, (b) will not
violate any applicable law or regulation in any material respect or the charter,
by-laws or other organizational documents of the Borrower or any of its
Subsidiaries or any order of any Governmental Authority, (c) except as set forth
on Schedule 3.03, will not violate or result in a default under any indenture,
agreement or other instrument binding upon the Borrower or any of its
Subsidiaries or its assets, or give rise to a right thereunder to require any
payment to be made by the Borrower or any of its Subsidiaries, and (d) will not
result in the creation or imposition of any Lien on any asset of the Borrower or
any of its Subsidiaries, except Liens created under the Loan Documents.
<PAGE>
45
SECTION 3.04. Financial Condition; No Material Adverse Change. (a)
------------------------------------------------
The Company has heretofore furnished to the Lenders its consolidated balance
sheet and statements of income, stockholders equity and cash flows (i) as of and
for the fiscal year ended November 2, 1998, reported on by Arthur Andersen LLP,
independent public accountants, and (ii) as of and for the fiscal quarter and
the portion of the fiscal year ended May 2, 1999, certified by its chief
financial officer. Such financial statements present fairly, in all material
respects, the financial position and results of operations and cash flows of the
Company and its consolidated subsidiaries as of such dates and for such periods
in accordance with GAAP, subject to year-end audit adjustments and the absence
of footnotes in the case of the statements referred to in clause (ii) above.
(b) The Company has heretofore furnished to the Lenders the pro forma
consolidated balance sheet of the Borrower and its Subsidiaries as of May 2,
1999, prepared giving effect to the Transactions as if the Transactions had
occurred on such date. Such pro forma consolidated balance sheet (i) has been
prepared in good faith based on assumptions which are the same in all material
respects as those previously provided to the Administrative Agent prior to the
date of execution of this Agreement (which assumptions are believed by the
Borrower to be reasonable) and (ii) represents the best estimate by the Borrower
of the pro forma financial position of the Borrower and its Subsidiaries as of
May 2, 1999, as if the Transactions had occurred on such date.
(c) Except as disclosed in the financial statements referred to above
or the notes thereto, after giving effect to the Transactions, neither the
Borrower nor any of its Subsidiaries has, as of the Effective Date, any material
contingent liabilities, unusual long-term commitments or unrealized losses.
(d) Since November 2, 1998, there has been no material adverse change
in the business, assets, operations, or condition, financial or otherwise, of
the Borrower and its Subsidiaries, taken as a whole.
SECTION 3.05. Properties. (a) Each of the Borrower and its
-----------
Subsidiaries ies has good title to, or valid leasehold interests in, all its
real and personal property material to its business (including its Mortgaged
Properties), except for minor defects in title that do not interfere with its
ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes.
(b) Each of the Borrower and its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
property material to its business, and the use thereof by the Borrower and its
Subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
(c) Schedule 3.05 sets forth the address of each real property that
is owned or leased by the Borrower or any of its Subsidiaries as of the
Effective Date after giving effect to the Transactions.
(d) As of the Effective Date, neither the Borrower nor any of its
Subsidiaries has received notice of, or has knowledge of, any pending or
contemplated condemnation proceeding affecting any Mortgaged Property or any
sale or disposition thereof in lieu of condemnation. Neither any Mortgaged
Property nor any interest therein
<PAGE>
46
is subject to any right of first refusal, option or other contractual right to
purchase such Mortgaged Property or interest therein.
SECTION 3.06. Litigation and Environmental Matters. (a) There are
-------------------------------------
no actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters), (ii) that involve any of the Transactions that are not frivolous and,
if adversely determined, would reasonably be expected to be adverse to the
interests of the Lenders (other than the Disclosed Matters) or (iii) that
involve any of the Loan Documents.
(b) Except with respect to any matters that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to
comply with any Environmental Law or to obtain, maintain or comply with any
permit, license or other approval required under any Environmental Law, (ii) has
become obligated to redress any Environmental Liability, (iii) has received
notice of any claim asserting that the Borrower or any of its Subsidiaries may
be obligated to redress any Environmental Liability or (iv) knows of any basis
for any Environmental Liability that the Borrower or any of its Subsidiaries may
become obligated to redress.
(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
SECTION 3.07. Compliance with Laws and Agreements. Each of the
------------------------------------
Borrower and its Subsidiaries is in compliance with (a) all laws, regulations
and orders of any Governmental Authority applicable to it or its property and
(b) all indentures, agreements and other instruments binding upon it or its
property, except (in the case of clauses (a) and (b)) where the failure to do
so, individually or in the aggregate, could not reasonably be expected to result
in a Material Adverse Effect. No Default has occurred and is continuing.
SECTION 3.08. Investment and Holding Company Status. Neither the
--------------------------------------
Borrower nor any of its Subsidiaries is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has
------
timely filed or caused to be filed all Tax returns and reports required to have
been filed and has paid or caused to be paid all Taxes required to have been
paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
<PAGE>
47
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
------
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed the fair
market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Statement of Financial Accounting Standards No.
87) did not, as of the date of the most recent financial statements reflecting
such amounts, exceed the fair market value of the assets of all such underfunded
Plans.
SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders
-----------
all agreements, instruments and corporate or other restrictions as of the
Effective Date to which the Borrower or any of its Subsidiaries is subject, and
all other matters known to any of them as of the Effective Date, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. Neither the Information Memorandum nor any of the
other reports, financial statements, certificates or other information furnished
by or on behalf of any Loan Party to the Administrative Agent or any Lender in
connection with the negotiation of this Agreement or any other Loan Document or
delivered hereunder or thereunder (when taken as a whole and as modified or
supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
--------
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.
SECTION 3.12. Subsidiaries. Schedule 3.12 sets forth the name of,
-------------
and the ownership interest of the Borrower in, each Subsidiary of the Borrower
and identifies each Subsidiary that is a Subsidiary Loan Party, in each case as
of the Effective Date.
SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of
----------
all insurance maintained by or on behalf of the Borrower and its Subsidiaries as
of the Effective Date. As of the Effective Date, all premiums in respect of
such insurance have been paid.
SECTION 3.14. Labor Matters. As of the Effective Date, there are no
--------------
strikes, lockouts or slowdowns against the Borrower or any Subsidiary pending
or, to the knowledge of the Borrower, threatened. The hours worked by and
payments made to employees of the Borrower and the Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other applicable Federal,
state, local or foreign law dealing with such matters. All material payments
due from the Borrower or any Subsidiary, or for which any claim may be made
against the Borrower or any Subsidiary, on account of wages and employee health
and welfare insurance and other benefits, have been paid or accrued as a
liability on the books of the Borrower or such Subsidiary. The consummation of
the Transactions will not give rise to any right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement
to which the Borrower or any Subsidiary is bound.
<PAGE>
48
SECTION 3.15. Solvency. Immediately after the consummation of the
---------
Transactions to occur on the Effective Date and immediately following the making
of each Loan made on the Effective Date and after giving effect to the
application of the proceeds of such Loans, (a) the fair value of the assets of
each Loan Party, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of each Loan Party will be greater than the amount that will be
required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (c) each Loan Party will be able to pay its debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) each Loan Party will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted
following the Effective Date.
SECTION 3.16. Security Documents. (a) The Pledge Agreement is
-------------------
effective to create in favor of the Administrative Agent, for the ratable
benefit of the Secured Parties, a legal, valid and enforceable security interest
in the Collateral (as defined in the Pledge Agreement) and, when the portion of
the Collateral constituting certificated securities (as defined in the Uniform
Commercial Code) is delivered to the Administrative Agent, the Pledge Agreement
shall constitute a fully perfected first priority Lien on, and security interest
in, all right, title and interest of each pledgor thereunder in such Collateral,
in each case prior and superior in right to any other Person.
(b) The Security Agreement is effective to create in favor of the
Administrative Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral (as defined in the
Security Agreement) and, when financing statements in appropriate form are filed
in the offices specified on Schedule 6 to the Perfection Certificate, the
Security Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the grantors thereunder in such
Collateral (to the extent perfection can be obtained by filing Uniform
Commercial Code financing statements) other than the Intellectual Property (as
defined in the Security Agreement), in each case prior and superior in right to
any other Person, other than with respect to Liens expressly permitted by
Section 6.02.
(c) When the Security Agreement is filed in the United States Patent
and Trademark Office and the United States Copyright Office, the Security
Agreement shall constitute a fully perfected Lien on, and security interest in,
all right, title and interest of the Loan Parties in the Intellectual Property
(as defined in the Security Agreement) in which a security interest may be
perfected by filing, recording or registering a security agreement, financing
statement or analogous document in the United States Patent and Trademark Office
or the United States Copyright Office, as applicable, in each case prior and
superior in right to any other Person other than Liens expressly permitted by
Section 6.02 (it being understood that subsequent recordings in the United
States Patent and Trademark Office and the United States Copyright Office may be
necessary to perfect a Lien on registered trademarks, trademark applications and
copyrights acquired by the Loan Parties after the date hereof).
SECTION 3.17. Senior Indebtedness. The Obligations constitute
--------------------
"Senior Indebtedness" under and as defined in the Subordinated Debt Documents.
<PAGE>
49
SECTION 3.18. Year 2000. Any reprogramming reasonably believed by
----------
the Borrower to be required to permit the proper functioning, in and following
the year 2000, of (a) the computer systems of the Borrower and its Subsidiaries
and (b) equipment containing embedded microchips and the testing of all such
systems and equipment, as so reprogrammed, will be completed in all material
aspects by August 31, 1999. The cost to the Borrower and its Subsidiaries of
such reprogramming and testing and of the reasonably foreseeable consequences of
year 2000 to the Borrower and its Subsidiaries (including reprogramming errors
and the failure of others' systems or equipment) will not result in a Default or
a Material Adverse Effect.
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date. The obligations of the Lenders to make
---------------
Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have received
from each party hereto either (i) a counterpart of this Agreement signed on
behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart
of this Agreement.
(b) The Administrative Agent shall have received a favorable written
opinion (addressed to the Administrative Agent and the Lenders and dated
the Effective Date) of each of (i) Simpson Thacher & Bartlett, counsel for
the Borrower, substantially in the form of Exhibit G-1, (ii) O'Melveny &
Myers, California counsel for the Borrower and its Subsidiaries,
substantially in the form of Exhibit G-2 and (iii) Amster, Rothstein &
Ebenstein, special trademark and patent counsel for the Borrower,
substantially in the form of Exhibit G-3, and, in the case of each such
opinion required by this paragraph, covering such other matters relating to
the Loan Parties, the Loan Documents or the Transactions as the Required
Lenders shall reasonably request. The Borrower hereby requests such
counsel to deliver such opinions.
(c) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing of each
Loan Party, the authorization of the Transactions and any other legal
matters relating to the Loan Parties, the Loan Documents or the
Transactions, all in form and substance reasonably satisfactory to the
Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a certificate, dated
the Effective Date and signed by the President, a Vice President or a
Financial Officer of the Borrower, confirming compliance with the
conditions set forth in paragraphs (a) and (b) of Section 4.02.
<PAGE>
50
(e) The Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the Effective Date, including, to
the extent invoiced, reimbursement or payment of all reasonable out-of-
pocket expenses (including reasonable fees, charges and disbursements of
counsel) required to be reimbursed or paid by any Loan Party hereunder or
under any other Loan Document.
(f) The Administrative Agent shall have received counterparts of the
Pledge Agreement signed on behalf of the Borrower and each Subsidiary Loan
Party, together with certificates representing all outstanding Equity
Interests of the Company and each other Subsidiary owned by or on behalf of
any Loan Party as of the Effective Date after giving effect to the
Transactions (except that stock certificates representing shares of voting
capital stock of a Foreign Subsidiary shall be limited to 65% of the
outstanding shares of voting capital stock of such Foreign Subsidiary),
promissory notes evidencing all intercompany Indebtedness owed to any Loan
Party by the Borrower or any Subsidiary as of the Effective Date after
giving effect to the Transactions and stock powers and instruments of
transfer, endorsed in blank, with respect to such certificates and
promissory notes.
(g) The Administrative Agent shall have received counterparts of the
Security Agreement signed on behalf of the Borrower and each Subsidiary
Loan Party, together with the following:
(i) all documents and instruments, including Uniform Commercial
Code financing statements, required by law or reasonably requested by
the Administrative Agent to be filed, registered or recorded to create
or perfect the Liens intended to be created under the Security
Agreement;
(ii) a completed Perfection Certificate dated the Effective Date
and signed by an executive officer or Financial Officer of the
Borrower, together with all attachments contemplated thereby; and
(iii) the results of a search of the Uniform Commercial Code (or
equivalent) filings made with respect to the Loan Parties in the
jurisdictions contemplated by the Perfection Certificate and copies of
the financing statements (or similar documents) disclosed by such
search and evidence reasonably satisfactory to the Administrative
Agent that the Liens indicated by such financing statements (or
similar documents) are permitted by Section 6.02 or have been
released.
(h) The Administrative Agent shall have received (i) counterparts of
a Mortgage with respect to each Mortgaged Property signed on behalf of the
record owner of such Mortgaged Property, (ii) a policy or policies of title
insurance issued by a nationally recognized title insurance company,
insuring the Lien of each such Mortgage as a valid first Lien on the
Mortgaged Property described therein, free of any other Liens except as
permitted by Section 6.02, together with such endorsements, coinsurance and
reinsurance as the Collateral Agent or the Required Lenders may reasonably
request, and (iii) such surveys, abstracts and appraisals as the
Administrative Agent or the Required Lenders may reasonably request.
<PAGE>
51
(i) The Administrative Agent shall have received (i) counterparts of
the Guarantee Agreement signed on behalf of each Subsidiary Loan Party and
(ii) counterparts of the Indemnity, Subrogation and Contribution Agreement
signed on behalf of each Loan Party.
(j) The Administrative Agent shall have received evidence reasonably
satisfactory to it that the insurance required by Section 5.07 and the
Security Documents is in effect.
(k) The Lenders shall have received, and shall be reasonably
satisfied with the results of, an environmental report prepared by Environ
Corporation regarding environmental matters relating to the Borrower and
its Subsidiaries.
(l) The Borrower shall have received gross cash proceeds of not less
than $98,600,000 from the issuance of the Subordinated Debt. The terms and
conditions of the Subordinated Debt and the provisions of the Subordinated
Debt Documents shall be reasonably satisfactory to the Lenders. The
Administrative Agent shall have received copies of the Subordinated Debt
Documents, certified by a Financial Officer as complete and correct.
(m) All material consents and approvals required to be obtained from
any Governmental Authority or other Person in connection with the
Transactions shall have been obtained, and all applicable waiting periods
and appeal periods shall have expired, in each case without the imposition
of any burdensome conditions. The Merger Agreement and the Voting Agreement
shall not have been amended or modified in any material respect and all
other Recapitalization Documents shall be on terms and conditions
reasonably satisfactory to the Lenders. The Reorganization and the
Recapitalization (including the Equity Financing) shall have been, or
substantially simultaneously with the initial funding of Loans on the
Effective Date shall be, consummated in accordance with the
Recapitalization Documents and applicable law, without any amendment to or
waiver of any material terms or conditions of the Recapitalization
Documents not approved by the Required Lenders. The Administrative Agent
shall have received copies of the Recapitalization Documents and all
certificates, opinions and other documents delivered thereunder, certified
by a Financial Officer as complete and correct. The terms and conditions of
the PIK Preferred Stock and the provisions of the certificate of
incorporation of the Borrower relating thereto and any other documentation
relating to the PIK Preferred Stock shall be reasonably satisfactory to the
Lenders.
(n) The Lenders shall have received a pro forma consolidated balance
sheet of the Borrower as of May 2, 1999, reflecting all pro forma
adjustments as if the Transactions had been consummated on such date, and
such pro forma consolidated balance sheet shall be consistent in all
material respects with the forecasts and other information previously
provided to the Lenders. After giving effect to the Transactions, neither
the Borrower nor any of its Subsidiaries shall have outstanding any shares
of preferred stock or any Indebtedness, other than (i) Indebtedness
incurred under the Loan Documents, (ii) the Subordinated Debt, (iii) the
PIK Preferred Stock and (iv) the Indebtedness described on Schedule 6.01.
The aggregate amount of fees and expenses (including underwriting discounts
and commissions) payable or otherwise borne by the
<PAGE>
52
Borrower and its Subsidiaries in connection with the Transactions shall not
exceed $25,000,000.
(o) The Administrative Agent shall have received a solvency letter,
in form and substance reasonably satisfactory to the Lenders, from Murray,
Devine & Co., with respect to the solvency of the Loan Parties after giving
effect to the Transactions.
(p) The pro forma Leverage Ratio of the Company and its subsidiaries
for the latest 12 months ending immediately prior to the Effective Date
shall be no greater than 5.25 to 1.00 (calculated in a manner reasonably
satisfactory to the Administrative Agent and in a manner consistent with
the financial models previously furnished by the Company to the
Administrative Agent).
(q) The Lenders shall have received a reasonably satisfactory audit
prepared by The Chase Manhattan Bank's asset-based evaluating group with
respect to the accounts receivable and inventory and related systems of the
Borrower and the Subsidiaries.
(r) The Lenders shall have received a reasonably satisfactory
appraisal from Murray, Devine & Co. of the material trademarks owned by the
Borrower and the Subsidiaries.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on July
23, 1999 (and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).
SECTION 4.02. Each Credit Event. The obligation of each Lender to
------------------
make a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue,
amend, renew or extend any Letter of Credit, is subject to receipt of the
request therefor in accordance herewith and to the satisfaction of the following
conditions:
(a) The representations and warranties of each Loan Party set forth
in the Loan Documents shall be true and correct (or, in the case of any
representation or warranty that is not qualified as to materiality, true
and correct in all material respects) on and as of the date of such
Borrowing or the date of issuance, amendment, renewal or extension of such
Letter of Credit, as applicable.
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter
of Credit, as applicable, no Default shall have occurred and be continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
<PAGE>
53
ARTICLE V
Affirmative Covenants
---------------------
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements shall have been reimbursed, the Borrower covenants and
agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. The
-------------------------------------------
Borrower will furnish to the Administrative Agent (who shall thereafter
distribute to the Lenders):
(a) within 90 days after the end of each fiscal year of the Borrower,
its audited consolidated balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end of and for
such year, setting forth in each case in comparative form the figures for
the previous fiscal year, all reported on by Arthur Andersen LLP or other
independent public accountants of recognized national standing (without a
"going concern" or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect
that such consolidated financial statements present fairly in all material
respects the financial condition and results of operations of the Borrower
and its consolidated Subsidiaries on a consolidated and consolidating basis
in accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower, its consolidated balance
sheet and related statements of operations, stockholders' equity and cash
flows as of the end of and for such fiscal quarter and the then elapsed
portion of the fiscal year, setting forth in each case in comparative form
the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all
certified by one of its Financial Officers as presenting fairly in all
material respects the financial condition and results of operations of the
Borrower and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes;
(c) within 30 days after the end of each of the first two fiscal
months of each fiscal quarter of the Borrower, its consolidated balance
sheet and income statement as of the end of and for such fiscal month and
the then elapsed portion of the fiscal year, all certified by one of its
Financial Officers as presenting in all material respects the financial
condition and results of operations of the Borrower and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and the absence of
footnotes;
(d) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of the
Borrower (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, (ii) setting forth reasonably
detailed calculations demonstrating compliance with
<PAGE>
54
Sections 6.12, 6.13, 6.14 and 6.15 and (iii) stating whether any change in
GAAP or in the application thereof has occurred since the date of the
Borrower's audited financial statements referred to in Section 3.04 and, if
any such change has occurred, specifying the effect of such change on the
financial statements accompanying such certificate;
(e) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during
the course of their examination of such financial statements of any Default
(which certificate may be limited to the extent required by accounting
rules or guidelines);
(f) not later than 30 days after the commencement of each fiscal year
of the Borrower, a detailed consolidated budget for such fiscal year
(including a projected consolidated balance sheet, related statements of
projected operations and cash flow as of the end of and for such fiscal
year) stating the assumptions used therein and, promptly when available,
any significant revisions of such budget;
(g) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
the Borrower or any Subsidiary with the Securities and Exchange Commission,
or any Governmental Authority succeeding to any or all of the functions of
said Commission, or with any national securities exchange, or distributed
by the Borrower to its shareholders generally, as the case may be; and
(h) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Borrower or any Subsidiary, or compliance with the terms of any Loan
Document, as the Administrative Agent or any Lender may reasonably request.
SECTION 5.02. Notices of Material Events. The Borrower will furnish
---------------------------
to the Administrative Agent prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting the
Borrower or any Affiliate thereof that, if adversely determined, would
reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and its Subsidiaries in an aggregate
amount exceeding $1,000,000; and
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the
<PAGE>
55
event or development requiring such notice and any action taken or proposed to
be taken with respect thereto.
SECTION 5.03. Information Regarding Collateral. (a) Concurrently
---------------------------------
with the delivery of information under Section 5.01(a) or (b), the Borrower will
furnish to the Administrative Agent prompt written notice of any change (i) in
any Loan Party's corporate name or in any trade name used to identify it in the
conduct of its business or in the ownership of its properties, (ii) in the
location of any Loan Party's chief executive office, its principal place of
business, any office in which it maintains books or records relating to
Collateral owned by it or, to the extent that such Collateral on an aggregate
basis has a fair market value in excess of $200,000, any office or facility at
which Collateral owned by it is located (including the establishment of any such
new office or facility), (iii) in any Loan Party's identity or corporate
structure or (iv) in any Loan Party's Federal Taxpayer Identification Number.
The Borrower agrees not to effect or permit any change referred to in the
preceding sentence unless all filings have been made under the Uniform
Commercial Code or otherwise that are required in order for the Administrative
Agent to continue at all times following such change to have a valid, legal and
perfected security interest in all the Collateral. The Borrower also agrees
promptly to notify the Administrative Agent if any material portion of the
Collateral is damaged or destroyed.
(b) Each year, at the time of delivery of annual financial statements
with respect to the preceding fiscal year pursuant to clause (a) of Section
5.01, the Borrower shall deliver to the Administrative Agent a certificate of a
Financial Officer of the Borrower (i) setting forth the information required
pursuant to Section 2 of the Perfection Certificate or confirming that there has
been no change in such information since the date of the Perfection Certificate
delivered on the Effective Date or the date of the most recent certificate
delivered pursuant to this Section and (ii) certifying that all Uniform
Commercial Code financing statements (including fixture filings, as applicable)
or other appropriate filings, recordings or registrations, including all
refilings, rerecordings and reregistrations, containing a description of the
Collateral have been filed of record or have been delivered to the
Administrative Agent for filing in each governmental, municipal or other
appropriate office in each jurisdiction identified pursuant to clause (i) above
to the extent necessary to protect and perfect the security interests under the
Security Agreement for a period of not less than 18 months after the date of
such certificate (except as noted therein with respect to any continuation
statements to be filed within such period).
SECTION 5.04. Existence; Conduct of Business. The Borrower will, and
-------------------------------
will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges, franchises, patents,
copyrights, trademarks and trade names material to the conduct of its business;
provided that the foregoing shall not prohibit any merger, consolidation,
- --------
liquidation or dissolution permitted under Section 6.03.
SECTION 5.05. Payment of Obligations. The Borrower will, and will
-----------------------
cause each of its Subsidiaries to, pay its Material Indebtedness and other
obligations, including Tax liabilities, before the same shall become delinquent
or in default, except where (a) the validity or amount thereof is being
contested in good faith by appropriate proceedings, (b) the Borrower or such
Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (c) the failure to make payment pending such contest
could not reasonably be expected to result in a Material Adverse Effect.
<PAGE>
56
SECTION 5.06. Maintenance of Properties. The Borrower will, and will
--------------------------
cause each of the Subsidiaries to, keep and maintain all property material to
the conduct of its business in good working order and condition, ordinary wear
and tear excepted.
SECTION 5.07. Insurance. The Borrower will, and will cause each of
----------
the Subsidiaries to, maintain, with financially sound and reputable insurance
companies (a) adequate insurance for its insurable properties, all to such
extent and against such risks, including fire, casualty and other risks insured
against by extended coverage, as is customary with companies in the same or
similar businesses operating in the same or similar locations, (b) such other
insurance as is required pursuant to the terms of any Security Document and (c)
business interruption insurance, insuring against loss of gross earnings for a
period of not less than 6 months arising from any risks or occurrences required
to be covered by insurance pursuant to this Section 5.07. The Borrower will
furnish to the Lenders, upon request of the Administrative Agent, information in
reasonable detail as to the insurance so maintained.
SECTION 5.08. Casualty and Condemnation. (a) The Borrower (a) will
--------------------------
furnish to the Administrative Agent and the Lenders prompt written notice of any
casualty or other insured damage to any material portion of any Collateral or
the commencement of any action or proceeding for the taking of any material
portion of the Collateral or any part thereof or interest therein under power of
eminent domain or by condemnation or similar proceeding and (b) will ensure that
the Net Proceeds of any such event (whether in the form of insurance proceeds,
condemnation awards or otherwise) are collected and applied in accordance with
the applicable provisions of the Loan Documents; provided that in the event of a
--------
conflict between the collection and application provisions of this Agreement and
any other Loan Document, the provisions of this Agreement shall govern.
SECTION 5.09. Books and Records; Inspection Rights. The Borrower
-------------------------------------
will, and will cause each of its Subsidiaries to, keep proper books of record
and account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Borrower will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender (after notice to, and coordination with,
the Administrative Agent), upon reasonable prior notice, to visit and inspect
its properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested.
SECTION 5.10. Compliance with Laws. The Borrower will, and will
---------------------
cause each of its Subsidiaries to, comply with all laws, rules, regulations and
orders of any Governmental Authority applicable to it or its property, except
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.11. Use of Proceeds and Letters of Credit. The proceeds of
--------------------------------------
the Term Loans, together with the proceeds of the Equity Financing and the
Subordinated Debt, will be used only for the payment of (a) the cash
consideration to be paid in connection with the Recapitalization and (b) fees
and expenses payable in connection with the Transactions. The proceeds of the
Revolving Loans and Swingline Loans will be used only for working capital
requirements and, in an amount not to exceed $2,000,000, to consummate the
Transactions. No part of the proceeds of any Loan will be used,
<PAGE>
57
whether directly or indirectly, for any purpose that entails a violation of any
of the Regulations of the Board, including Regulations U and X. Letters of
Credit will be issued only for general corporate purposes.
SECTION 5.12. Additional Subsidiaries. If any additional Subsidiary
------------------------
is formed or acquired after the Effective Date, the Borrower will notify the
Administrative Agent and the Lenders thereof and (a) if such Subsidiary is a
Subsidiary Loan Party, the Borrower will cause such Subsidiary to become a party
to the Guarantee Agreement, the Indemnity, Subrogation and Contribution
Agreement, the Pledge Agreement and the Security Agreement within 15 Business
Days after such Subsidiary is formed or acquired and promptly take such actions
to create and perfect Liens on such Subsidiary's assets to secure the
Obligations as the Administrative Agent or the Required Lenders shall reasonably
request and (b) if any Equity Interest in or Indebtedness of such Subsidiary is
owned by or on behalf of any Loan Party, the Borrower will cause such Equity
Interests and promissory notes evidencing such Indebtedness to be pledged
pursuant to the Pledge Agreement within 10 Business Days after such Subsidiary
is formed or acquired (except that, if such Subsidiary is a Foreign Subsidiary,
shares of voting capital stock of such Subsidiary to be pledged pursuant to the
Pledge Agreement may be limited to 65% of the outstanding shares of voting
capital stock of such Subsidiary).
SECTION 5.13. Further Assurances. (a) The Borrower will, and will
-------------------
cause each Subsidiary Loan Party to, execute any and all further documents,
financing statements, agreements and instruments, and take all such further
actions (including the filing and recording of financing statements, fixture
filings, mortgages, deeds of trust and other documents), which may be required
under any applicable law, or which the Administrative Agent or the Required
Lenders may reasonably request, to effectuate the transactions contemplated by
the Loan Documents or to grant, preserve, protect or perfect the Liens created
or intended to be created by the Security Documents or the validity or priority
of any such Lien, all at the expense of the Loan Parties. The Borrower also
agrees to provide to the Administrative Agent, from time to time upon request,
evidence reasonably satisfactory to the Administrative Agent as to the
perfection and priority of the Liens created or intended to be created by the
Security Documents.
(b) If any material assets (including any real property or
improvements thereto or any interest therein) are acquired by the Borrower or
any Subsidiary Loan Party after the Effective Date (other than assets
constituting Collateral under the Security Agreement that become subject to the
Lien of the Security Agreement upon acquisition thereof), the Borrower will
notify the Administrative Agent and the Lenders thereof, and, if requested by
the Administrative Agent or the Required Lenders, the Borrower will cause such
assets to be subjected to a Lien securing the Obligations and will take, and
cause the Subsidiary Loan Parties to take, such actions as shall be necessary or
reasonably requested by the Administrative Agent to grant and perfect such
Liens, including actions described in paragraph (a) of this Section, all at the
expense of the Loan Parties.
SECTION 5.14. Interest Rate Protection. As promptly as practicable,
-------------------------
and in any event within 90 days after the Effective Date, the Borrower will
enter into, and thereafter for a period of not less than three years will
maintain in effect, one or more Hedging Agreements on such terms and with such
parties as shall be reasonably satisfactory to the Administrative Agent, the
effect of which shall be to fix or limit the interest cost to the Borrower with
respect to at least 50% of the outstanding Indebtedness of the Borrower.
<PAGE>
58
ARTICLE VI
Negative Covenants
------------------
Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in
full and all Letters of Credit have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees with
the Lenders that:
SECTION 6.01. Indebtedness; Certain Equity Securities. (a) The
----------------------------------------
Borrower will not, and will not permit any Subsidiary to, create, incur, assume
or permit to exist any Indebtedness, except:
(i) Indebtedness created under the Loan Documents;
(ii) the Subordinated Debt;
(iii) Indebtedness existing on the date hereof and set forth in
Schedule 6.01 and extensions, renewals and replacements of any such
Indebtedness that do not (A) increase the outstanding principal amount
thereof, or (B) result in an earlier maturity date or decreased weighted
average life thereof; provided that the Indebtedness of St. John Company,
--------
Ltd. reflected on Schedule 6.01 may be increased to a principal amount not
to exceed $2,000,000 at any one time;
(iv) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary; provided that
--------
Indebtedness of any Subsidiary that is not a Loan Party to the Borrower or
any Subsidiary Loan Party shall be subject to Section 6.04;
(v) Guarantees by the Borrower of Indebtedness of any Subsidiary and
by any Subsidiary of Indebtedness of the Borrower or any other Subsidiary;
provided that (A) the Indebtedness so guaranteed is permitted by this
--------
Section and (B) Guarantees by the Borrower or any Subsidiary Loan Party of
Indebtedness of any Subsidiary that is not a Loan Party shall be subject to
Section 6.04;
(vi) Indebtedness of the Borrower or any Subsidiary incurred to
finance the acquisition, construction or improvement of any fixed or
capital assets, including Capital Lease Obligations and any Indebtedness
assumed in connection with the acquisition of any such assets or secured by
a Lien on any such assets prior to the acquisition thereof, and extensions,
renewals and replacements of any such Indebtedness that do not increase the
outstanding principal amount thereof or result in an earlier maturity date
or decreased weighted average life thereof; provided that (A) such
--------
Indebtedness is incurred prior to or within 90 days after such acquisition
or the completion of such construction or improvement and (B) the aggregate
principal amount of Indebtedness permitted by this clause (vi) shall not
exceed $5,000,000 at any time outstanding;
(vii) unsecured Indebtedness incurred and secured or unsecured
Indebtedness assumed, in each case in connection with, or resulting from,
Permitted Acquisitions; provided that the aggregate principal amount of
--------
<PAGE>
59
Indebtedness permitted by this clause (vii) shall be subject to the
limitations of clause (h) of Section 6.04;
(viii) Indebtedness representing deferred compensation to employees of
the Borrower or the Subsidiaries, provided that the aggregate principal
amount of Indebtedness permitted by this clause (viii) shall not exceed
$1,000,000 at any time outstanding;
(ix) other Indebtedness of the Borrower incurred in connection with
the repurchase by the Borrower of its outstanding capital stock in
accordance with clause (iv) of Section 6.08 which by its terms is
subordinated to the Obligations in a manner and to the extent reasonably
acceptable to the Administrative Agent, in an aggregate principal amount
not exceeding $500,000 at any time outstanding;
(x) unsecured subordinated Indebtedness of the Borrower ("Permitted
---------
Subordinated Indebtedness") and subordinated Guarantees thereof by
------------------------
Subsidiaries that have also Guaranteed the Obligations in an aggregate
principal amount not to exceed the liquidation preference of the PIK
Preferred Stock, provided that (A) such Permitted Subordinated Indebtedness
shall not have any principal payments due on a date that is earlier than
six months after the Tranche B Maturity Date, (B) such Permitted
Subordinated Indebtedness shall have terms (including covenants, events of
default and redemption provisions, but excluding price, maturity, interest
rate and redemption premiums), when taken as a whole, no less favorable to
the Borrower or the Lenders than the terms of the Subordinated Debt
Documents as reasonably determined by the Administrative Agent or such
terms shall be reasonably satisfactory to the Required Lenders, (C) such
Permitted Subordinated Indebtedness bears interest at a fixed rate, which
rate shall be, in the good faith judgment of the Borrower's board of
directors, consistent with the market at the time of issuance for similar
Indebtedness, (D) the subordination provisions of such Permitted
Subordinated Indebtedness shall be on terms no less favorable to the
Lenders than the subordination provisions of the Subordinated Debt
Documents, (E) (1) the Borrower shall be in compliance, on a pro forma
--- -----
basis, with Sections 6.13, 6.14 and 6.15 of this Agreement, which shall be
recomputed as of the last day of the most recently ended fiscal quarter
(for which financial information has been delivered pursuant to Section
5.01 of this Agreement) of the Borrower as if all such incurrences made or
to be made in reliance on this clause (x) had occurred on the first day of
each relevant period for testing such compliance and (2) on or prior to the
date of each such incurrence, the Borrower shall deliver a certificate
signed by a Financial Officer confirming compliance with subclause (E)(1),
(F) the proceeds of such Permitted Subordinated Indebtedness shall be used
for the substantially concurrent redemption of all of the PIK Preferred
Stock and (G) on the date that such Permitted Subordinated Indebtedness is
incurred and immediately after giving effect thereto, no Default shall have
occurred and be continuing; and
(xi) other unsecured Indebtedness in an aggregate principal amount
not exceeding $5,000,000 at any time outstanding.
(b) The Borrower will not, nor will it permit any Subsidiary to,
issue any preferred stock or other preferred Equity Interests; provided that the
--------
Borrower may issue (i) Gray Preferred Stock for the purpose of repurchasing Gray
Common Stock as required
<PAGE>
60
by the provisions of the Stockholders' Agreement, as in effect as of the date
hereof, to the extent that such repurchase requirements exceed the payments
permitted by Section 6.08(a)(v), (ii) Permitted Acquisition Preferred Stock,
(iii) PIK Preferred Stock and (iv) any other preferred stock that is not
Disqualified Stock.
SECTION 6.02. Liens. The Borrower will not, and will not permit any
------
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
(a) Liens created under the Loan Documents;
(b) Permitted Encumbrances;
(c) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 6.02;
provided that (i) such Lien shall not apply to any other property or asset
--------
of the Borrower or any Subsidiary and (ii) such Lien shall secure only
those obligations which it secures on the date hereof and extensions,
renewals and replacements thereof to the extent that they do not increase
the outstanding principal amount thereof;
(d) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the date
hereof prior to the time such Person becomes a Subsidiary; provided that
--------
(i) such Lien is not created in contemplation of or in connection with such
acquisition or such Person becoming a Subsidiary, as the case may be, (ii)
such Lien shall not apply to any other property or assets of the Borrower
or any Subsidiary and (iii) such Lien shall secure only those obligations
which it secures on the date of such acquisition or the date such Person
becomes a Subsidiary, as the case may be and extensions, renewals and
replacements thereof to the extent that they do not increase the
outstanding principal amount thereof;
(e) Liens on fixed or capital assets acquired, constructed or improved
by the Borrower or any Subsidiary; provided that (i) such security
--------
interests secure Indebtedness permitted by clause (vi) of Section 6.01(a),
(ii) such security interests and the Indebtedness secured thereby are
incurred prior to or within 90 days after such acquisition or the
completion of such construction or improvement, (iii) the Indebtedness
secured thereby does not exceed 100% of the cost of acquiring, constructing
or improving such fixed or capital assets and (iv) such security interests
shall not apply to any other property or assets of the Borrower or any
Subsidiary;
(f) Liens arising by operation of law that secure obligations in an
aggregate amount not to exceed $5,000,000 at any time outstanding,
including Liens imposed pursuant to Environmental Laws or ERISA securing
obligations not reasonably expected to exceed such amount;
(g) "Permitted Encumbrances" on the Mortgaged Properties as defined in
the applicable Mortgages;
<PAGE>
61
(h) leases or subleases granted to others not interfering in any
material respect with the business of the Borrower or its Subsidiaries;
provided that each such lease or sublease (i) is entered into in compliance
--------
with this Agreement and the other Loan Documents and (ii) is expressly
subject to the Liens of the applicable Security Documents;
(i) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(j) normal and customary rights of set-off upon deposits of cash in
favor of banks or other depository institutions;
(k) Liens with respect to investments consisting of fully
collateralized repurchase agreements constituting Permitted Investments
permitted under Section 6.04;
(l) other Liens securing obligations not exceeding $1,500,000 at any
time outstanding; and
(m) the Borrower may sell or assign overdue accounts receivable in
connection with the collection thereof in the ordinary course of business.
SECTION 6.03. Fundamental Changes. (a) The Borrower will not, and
--------------------
will not permit any Subsidiary to, merge into or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it, or
liquidate or dissolve, except that, if at the time thereof and immediately after
giving effect thereto no Default shall have occurred and be continuing (i) any
Subsidiary may merge into the Borrower in a transaction in which the Borrower is
the surviving corporation, (ii) any Subsidiary may merge into any Subsidiary in
a transaction in which the surviving entity is a Subsidiary and, if either
Subsidiary is a Subsidiary Loan Party, the surviving entity is a Subsidiary Loan
Party and (iii) any Subsidiary may liquidate or dissolve if the Borrower
determines in good faith that such liquidation or dissolution is in the best
interests of the Borrower and is not materially disadvantageous to the Lenders;
provided that (A) the foregoing shall not be construed to prohibit the
- --------
Reorganization and the Recapitalization and (B) any such merger involving a
Person that is not a wholly owned Subsidiary immediately prior to such merger
shall not be permitted unless also permitted by Section 6.04.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Company and its subsidiaries on the date
of execution of this Agreement and businesses reasonably related thereto.
SECTION 6.04. Investments, Loans, Advances, Guarantees and
--------------------------------------------
Acquisitions. The Borrower will not, and will not permit any of its
- -------------
Subsidiaries to, purchase, hold or acquire (including pursuant to any merger
with any Person that was not a wholly owned Subsidiary prior to such merger) any
Equity Interests in or evidences of indebtedness or other securities (including
any option, warrant or other right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, Guarantee any
<PAGE>
62
obligations of, or make or permit to exist any investment or any other interest
in, any other Person, or purchase or otherwise acquire (in one transaction or a
series of transactions) any assets of any other Person constituting a business
unit, except:
(a) Permitted Investments;
(b) investments existing on the date hereof and set forth on Schedule
6.04;
(c) the acquisition of the St. John Company Interests for an aggregate
amount not to exceed $1,500,000 and investments by the Borrower and its
Subsidiaries in Equity Interests in their respective Subsidiaries; provided
--------
that (i) any such Equity Interests held by a Loan Party shall be pledged
pursuant to the Pledge Agreement (subject to the limitations applicable to
common stock of a Foreign Subsidiary referred to in Section 5.12) and (ii)
the aggregate amount of investments by Loan Parties in, and loans and
advances by Loan Parties to, and Guarantees by Loan Parties of Indebtedness
of, Subsidiaries that are not Loan Parties (excluding (A) all such
investments, loans, advances and Guarantees existing on the Effective Date
and set forth on Schedule 6.04 and (B) the investment by or on behalf of
the Borrower to acquire the St. John Company Interests, to the extent such
investment does not exceed $1,500,000) shall not exceed $12,500,000 at any
time outstanding; provided further, that any investments in joint ventures
----------------
permitted by clause (l) below shall reduce the amount available for
investments, loans, advances and Guarantees pursuant to clause (ii) of the
immediately preceding proviso;
(d) loans or advances made by the Borrower to any Subsidiary and made
by any Subsidiary to the Borrower or any other Subsidiary; provided that
--------
(i) any such loans and advances made by a Loan Party shall be evidenced by
a promissory note pledged pursuant to the Pledge Agreement and (ii) the
amount of such loans and advances made by Loan Parties to Subsidiaries that
are not Loan Parties shall be subject to the limitation set forth in clause
(c)(ii) above;
(e) Guarantees constituting Indebtedness permitted by Section 6.01;
provided that (i) a Subsidiary shall not Guarantee the Subordinated Debt
--------
unless (A) such Subsidiary also has Guaranteed the Obligations pursuant to
the Guarantee Agreement, (B) such Guarantee of the Subordinated Debt is
subordinated to such Guarantee of the Obligations on terms no less
favorable to the Lenders than the subordination provisions of the
Subordinated Debt and (C) such Guarantee of the Subordinated Debt provides
for the release and termination thereof, without action by any party, upon
any release and termination of such Guarantee of the Obligations, and (ii)
the aggregate principal amount of Indebtedness of Subsidiaries that are not
Loan Parties that is Guaranteed by any Loan Party shall be subject to the
limitation set forth in clause (c)(ii) above;
(f) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;
(g) loans or advances made by the Borrower and its Subsidiaries to
their respective directors, officers and employees on an arm's length basis
in the ordinary course of business; provided that the aggregate amount of
--------
all loans and
<PAGE>
63
advances permitted by this clause (g) shall not exceed $500,000 at any time
outstanding;
(h) Permitted Acquisitions; provided that the sum of all consideration
paid or otherwise delivered in connection with Permitted Acquisitions
(including the principal amount of any Indebtedness and the aggregate
liquidation preference of any Permitted Acquisition Preferred Stock issued
as deferred purchase price and the fair market value of any other non-cash
consideration, but excluding common stock issued by the Borrower), plus the
aggregate principal amount of all unsecured Indebtedness otherwise incurred
and all secured or unsecured Indebtedness otherwise assumed, in each case
in connection with, or resulting from, Permitted Acquisitions (including
Indebtedness of any acquired Persons outstanding at the time of Permitted
Acquisitions), shall not exceed, on a cumulative basis (i) $7,500,000
during any fiscal year and (ii) $20,000,000 during the term of this
Agreement;
(i) receivables owing to the Borrower or a Subsidiary if created in
the ordinary course of business and payable or dischargeable in accordance
with customary trade terms (including the dating of receivables and
extensions of payment in the ordinary course of business consistent with
past practices) of the Borrower or such Subsidiary;
(j) acquisitions of property, plant and equipment that constitute a
business unit and are Capital Expenditures otherwise permitted by Section
6.12;
(k) investments of any Person existing at the time such Person becomes
a Subsidiary or at the time such Person merges or consolidates with the
Borrower or any of its Subsidiaries, in either case, as a result of a
Permitted Acquisition in compliance with the terms of this Agreement,
provided that such investments were not made by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a
Subsidiary or such merger or consolidation;
(l) investments in joint ventures in an aggregate amount not to exceed
$5,000,000;
(m) investments consisting of loans by the Borrower or its
Subsidiaries to employees of the Borrower or its Subsidiaries made solely
for the purpose of funding purchases by such employees from the Borrower of
the Borrower's capital stock in an amount not exceeding $2,000,000 at any
time outstanding; and
(n) Hedging Agreements entered into in compliance with Section 6.07.
SECTION 6.05. Asset Sales. The Borrower will not, and will not
------------
permit any of its Subsidiaries to, sell, transfer, lease or otherwise dispose of
any asset, including any Equity Interest owned by it, nor will the Borrower
permit any of its Subsidiaries to issue any additional Equity Interest in such
Subsidiary, except:
(a) sales of inventory, fixtures, used or surplus equipment and
Permitted Investments in the ordinary course of business;
<PAGE>
64
(b) sales, transfers and dispositions to the Borrower or a Subsidiary;
provided that any such sales, transfers or dispositions involving a
--------
Subsidiary that is not a Loan Party shall be made in compliance with
Section 6.09;
(c) sales, transfers and other dispositions of assets (other than
Equity Interests in a Subsidiary) that are not permitted by any other
clause of this Section; provided that the aggregate fair market value of
--------
all assets sold, transferred or otherwise disposed of in reliance upon this
clause (c) shall not exceed $2,500,000 during any fiscal year of the
Borrower; and
(d) the Borrower may sell or assign overdue accounts receivable in
connection with the collection thereof in the ordinary course of business;
(e) pursuant to a transaction permitted by 6.03(a); and
(f) sales of assets in connection with a sale- leaseback transaction
permitted by Section 6.06;
provided that all sales, transfers, leases and other dispositions permitted
- --------
hereby (other than those permitted by clause (b) above) shall be made for fair
value.
SECTION 6.06. Sale and Leaseback Transactions. The Borrower will
--------------------------------
not, and will not permit any of its Subsidiaries to, enter into any arrangement,
directly or indirectly, with any Person whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned or
hereinafter acquired, and thereafter rent or lease such property or other
property that it intends to use for substantially the same purpose or purposes
as the property sold or transferred; provided that the Borrower and its
--------
Subsidiaries may enter into such transactions with respect to assets having a
fair market value not in excess of $1,000,000 in the aggregate during the term
of this Agreement.
SECTION 6.07. Hedging Agreements. The Borrower will not, and will
-------------------
not permit any of its Subsidiaries to, enter into any Hedging Agreement, other
than (a) Hedging Agreements required by Section 5.14 and (b) Hedging Agreements
entered into in the ordinary course of business to hedge or mitigate risks to
which the Borrower or any Subsidiary is exposed in the conduct of its business
or the management of its liabilities.
SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness.
------------------------------------------------------
(a) The Borrower will not, and will not permit any Subsidiary to, declare or
make, or agree to pay or make, directly or indirectly, any Restricted Payment,
or incur any obligation (contingent or otherwise) to do so, except (i) the
Borrower may declare and pay dividends with respect to any class of its capital
stock payable solely in additional shares of such class of stock, (ii)
Subsidiaries may declare and pay dividends ratably with respect to their capital
stock, (iii) the Borrower may make Restricted Payments on the Effective Date in
connection with the Recapitalization in accordance with and as contemplated by
the Merger Agreement, (iv) the Borrower may repurchase stock or stock options
purchased by or granted to members of senior management (other than the Grays)
and other key employees pursuant to a Borrower stock purchase and option plan in
the event any such employee is terminated for any reason, but in no event shall
the aggregate amount of all such repurchases exceed $500,000 in any fiscal year;
provided that the
- --------
<PAGE>
65
amount of Restricted Payments permitted under this clause (iv) in any fiscal
year shall be increased on a cumulative basis by an amount equal to the total
unused amount of Restricted Payments permitted by this clause (iv) for the
preceding year; (v) the Borrower shall accrue the ability to repurchase Gray
Common Stock and Gray Preferred Stock and may repurchase Gray Common Stock and
Gray Preferred Stock as follows: (A) the Borrower shall accrue the ability to
repurchase Gray Common Stock and Gray Preferred Stock in an aggregate amount not
to exceed $2,500,000 during any Test Period; provided that any amount of
--------
Gray Common Stock and Gray Preferred Stock which the Borrower accrues the
ability to but does not repurchase in any Test Period may be carried forward to
subsequent Test Periods; provided further, that notwithstanding such accrual,
-------- -------
the Borrower (1) shall only repurchase Gray Common Stock to the extent required
by the provisions of the Stockholders' Agreement, as in effect as of the date
hereof, and (2) shall only repurchase Gray Common Stock and/or Gray Preferred
Stock so long as no Default shall have occurred and be continuing on the date of
any such repurchase or would result from such repurchase; and (B) on the last
day of any Test Period, the Borrower may repurchase Gray Common Stock and Gray
Preferred Stock in an additional aggregate amount of up to $2,500,000; provided
--------
that (1) no Default shall have occurred and be continuing on such day or would
result from such repurchase and (2) on the date of and after giving effect to
such repurchase (and the incurrence of any Indebtedness to be incurred on such
date), the Leverage Ratio shall be less than 3.5 to 1.0, (for purposes of
determining the Leverage Ratio for this clause, Consolidated EBITDA shall be
calculated for the period of four consecutive fiscal quarters of the Borrower
ended on the last day of the most recent fiscal quarter for which financial
statements have been delivered to the Administrative Agent under Section 5.01(a)
or (b)); provided further, that the Borrower shall only repurchase Gray Common
-------- -------
Stock to the extent required by the provisions of the Stockholders' Agreement,
as in effect as of the date hereof; (vi) on the last day of any Test Period, the
Borrower may pay accrued dividends with respect to the Gray Preferred Stock in
cash in an aggregate amount not to exceed $250,000; provided that (1) no Default
--------
shall have occurred and be continuing on such day or would result from such
payment and (2) on the date of and after giving effect to such payment (along
with (A) any payment pursuant to clause (v)(B) above on such date and (B) the
incurrence of any Indebtedness to be incurred on such date), the Leverage Ratio
(determined as set forth in clause (v)(B)(2) above) shall be less than 3.5 to
1.0; (vii) the Borrower may pay cash dividends with respect to any Permitted
Acquisition Preferred Stock; (viii) the Borrower may redeem or repurchase
Permitted Acquisition Preferred Stock in accordance with the terms thereof;
(ix) on the last day of any Test Period following the fifth anniversary of the
Effective Date, the Borrower may pay dividends with respect to the PIK Preferred
Stock in cash; provided that (1) no Default shall have occurred and be
--------
continuing on such day or would result from such payment and (2) on the date of
and after giving effect to such payment (and the incurrence of any Indebtedness
to be incurred on such date), the Borrower and its Subsidiaries shall be in
compliance with the covenant contained in Section 6.13 (with the Leverage Ratio
determined as set forth in clause (v)(B)(2) above); (x) the Borrower may redeem
the PIK Preferred Stock in full with the proceeds of the issuance of Permitted
Subordinated Indebtedness in compliance with Section 6.01(a)(x); provided that
--------
no Default shall have occurred and be continuing on such day or would result
from such redemption; and (xi) the Borrower may, and may permit any Subsidiary
to, make payments to the Vestar Group pursuant to and to the extent expressly
contemplated by the Vestar Management Agreement.
(b) The Borrower will not, and will not permit any Subsidiary to,
make or agree to pay or make, directly or indirectly, any payment or other
distribution (whether in
<PAGE>
66
cash securities or other property) of or in respect of principal of or interest
on the Subordinated Debt, or any payment or other distribution (whether in cash,
securities or other property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition, cancelation or
termination of any of the Subordinated Debt, except payment of regularly
scheduled interest payments as and when due, other than payments prohibited by
the subordination provisions thereof.
SECTION 6.09. Transactions with Affiliates. The Borrower will not,
-----------------------------
and will not permit any Subsidiary to, sell, lease or otherwise transfer any
property or assets to, or purchase, lease or otherwise acquire any property or
assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) transactions in the ordinary course of business that are
at prices and on terms and conditions not less favorable to the Borrower or such
Subsidiary than could be obtained on an arm's-length basis from unrelated third
parties, (b) transactions between or among the Borrower and the Subsidiary Loan
Parties not involving any other Affiliate, (c) any Restricted Payment permitted
by Section 6.08, (d) customary fees paid to members of the Board of Directors of
the Borrower and its Subsidiaries for their services as directors not in excess
of fees paid to directors who are not Affiliates of the Borrower or a Subsidiary
and (e) leasing by the Borrower or any Subsidiary of real property owned or
purchased in the future by Robert E. Gray, provided that each such lease is on
terms and conditions not less favorable to the Borrower or such Subsidiary than
could be obtained on an arm's-length basis from unrelated third parties.
SECTION 6.10. Restrictive Agreements. The Borrower will not, and
-----------------------
will not permit any Subsidiary to, directly or indirectly, enter into, incur or
permit to exist any agreement or other arrangement that prohibits, restricts or
imposes any condition upon (a) the ability of the Borrower or any Subsidiary to
create, incur or permit to exist any Lien upon any of its property or assets, or
(b) the ability of any Subsidiary to pay dividends or other distributions with
respect to any shares of its capital stock or to make or repay loans or advances
to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the
Borrower or any other Subsidiary; provided that (i) the foregoing shall not
--------
apply to restrictions and conditions imposed by law or by any Loan Document or
Subordinated Debt Document, (ii) the foregoing shall not apply to restrictions
and conditions existing on the date hereof identified on Schedule 6.10 (but
shall apply to any amendment or modification expanding the scope of any such
restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted hereunder,
(iv) clause (a) of the foregoing shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness and (v) clause (a) of the foregoing shall not
apply to customary provisions in leases and other contractual agreements
restricting the assignment thereof.
SECTION 6.11. Amendment of Material Documents. The Borrower will
--------------------------------
not, and will not permit any Subsidiary to, amend, modify or waive any of its
rights under (a) any Subordinated Debt Document, (b) its certificate of
incorporation, by-laws or other organizational documents (other than to change
its name), or (c) the Vestar Management Agreement, except to the extent that
such amendment, modification or waiver would not reasonably be expected to have
a Material Adverse Effect or be materially adverse to the
<PAGE>
67
interests of the Lenders; provided that the fees under the Vestar Management
--------
Agreement will not be increased.
SECTION 6.12. Capital Expenditures. The Borrower will not permit the
---------------------
aggregate amount of Capital Expenditures made by the Borrower and the
Subsidiaries (a) in the period from the Closing Date through and including
October 31, 1999, to exceed $13,000,000 and (b) in any fiscal year thereafter to
exceed $20,000,000; provided, however, that the amount of permitted Capital
-------- -------
Expenditures in any fiscal year shall be increased by an amount equal to the
total amount of unused permitted Capital Expenditures for the immediately
preceding year or (in the case of the carry forward into the fiscal year ending
October 29, 2000) for the period from the Closing Date through and including
October 31, 1999 (minus the amount of any unused Capital Expenditures carried
forward to such succeeding year pursuant to this proviso).
SECTION 6.13. Leverage Ratio. The Borrower will not permit the
---------------
Leverage Ratio as of the end of any fiscal quarter ending on or about any date
set forth below to exceed the ratio set forth below opposite such period:
Period Ratio
------ -----
November 1, 1999 6.00 to 1.0
February 1, 2000, May 1, 2000, August 1, 2000 5.50 to 1.0
November 1, 2000 5.25 to 1.0
February 1, 2001, May 1, 2001 5.00 to 1.0
August 1, 2001, November 1, 2001 4.75 to 1.0
February 1, 2002, May 1, 2002 4.50 to 1.0
August 1, 2002, November 1, 2002 4.25 to 1.0
February 1, 2003, May 1, 2003, August 1, 2003 4.00 to 1.0
November 1, 2003 and
thereafter 3.75 to 1.0
SECTION 6.14. Fixed Charge Coverage Ratio. The Borrower will not
----------------------------
permit the Consolidated Fixed Charge Coverage Ratio for any four-fiscal-quarter
period ending on or about any date set forth below to be less than the ratio set
forth below opposite such period:
Period Ratio
------ -----
November 1, 1999,
February 1, 2000, May 1, 2000, August 1, 2000,
November 1, 2000 1.00 to 1.0
February 1, 2001 and
thereafter 1.10 to 1.0
SECTION 6.15. Interest Expense Coverage Ratio. The Borrower will not
--------------------------------
permit the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense
for any period of four consecutive fiscal quarters ending on or about any date
set forth below to be less than the ratio set forth below opposite such period:
<PAGE>
68
Period Ratio
------ -----
November 1, 1999 1.75 to 1.0
February 1, 2000, May 1, 2000 1.85 to 1.0
August 1, 2000,
November 1, 2000,
February 1, 2001, May 2001 2.00 to 1.0
August 1, 2001 2.10 to 1.0
November 1, 2001 2.15 to 1.0
February 1, 2002, May 1, 2002 2.25 to 1.0
August 1, 2002 2.30 to 1.0
November 1, 2002 2.40 to 1.0
February 1, 2003 2.45 to 1.0
May 1, 2003, August 1, 2003 2.50 to 1.0
November 1, 2003 and
thereafter 2.75 to 1.0
ARTICLE VII
Events of Default
-----------------
If any of the following events ("Events of Default") shall occur:
-----------------
(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement or any other Loan Document, when and
as the same shall become due and payable, and such failure shall continue
unremedied for a period of three Business Days;
(c) any representation or warranty made or deemed made by or on behalf
of the Borrower or any Subsidiary in or in connection with any Loan
Document or any amendment or modification thereof or waiver thereunder, or
in any report, certificate, financial statement or other document furnished
pursuant to or in connection with any Loan Document or any amendment or
modification thereof or waiver thereunder, shall prove to have been
incorrect in any material respect when made or deemed made;
(d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Section 5.02(a), 5.04 (with respect to
the existence of the Borrower or the Company) or 5.11 or in Article VI;
(e) any Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in any Loan Document (other than those
specified in clause (a), (b) or (d) of this Article), and such failure
shall continue unremedied
<PAGE>
69
for a period of 30 days after notice thereof from the Administrative Agent
to the Borrower (which notice will be given at the request of any Lender);
(f) the Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of
any Material Indebtedness, when and as the same shall become due and
payable after giving effect to any applicable grace period;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables
or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee or
agent on its or their behalf to cause any Material Indebtedness to become
due, or to require the prepayment, repurchase, redemption or defeasance
thereof, prior to its scheduled maturity; provided that this clause (g)
--------
shall not apply to secured Indebtedness that becomes due as a result of the
voluntary sale or transfer of the property or assets securing such
Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of the Borrower or any Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any
Subsidiary or for a substantial part of its assets, and, in any such case,
such proceeding or petition shall continue undismissed for 60 days or an
order or decree approving or ordering any of the foregoing shall be
entered;
(i) the Borrower or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or
other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Article, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any
Subsidiary or for a substantial part of its assets, (iv) file an answer
admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of creditors
or (vi) take any action for the purpose of effecting any of the foregoing;
(j) the Borrower or any Subsidiary shall become unable, admit in
writing its inability or fail generally to pay its debts as they become
due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 shall be rendered against the Borrower, any
Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 45 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any assets of the Borrower or any
Subsidiary to enforce any such judgment;
<PAGE>
70
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of the
Borrower and its Subsidiaries in an aggregate amount that could have a
Material Adverse Effect;
(m) any Lien purported to be created under any Security Document shall
cease to be, or shall be asserted by any Loan Party not to be, a valid and
perfected Lien on any Collateral, with the priority required by the
applicable Security Document, except (i) as a result of the sale or other
disposition of the applicable Collateral in a transaction permitted under
the Loan Documents or (ii) as a result of the Administrative Agent's
failure to maintain possession of any stock certificates, promissory notes
or other instruments delivered to it under the Pledge Agreement or to
properly file UCC financing statements delivered to it for filing under the
Security Agreement; or
(n) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate
the Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower; and
in case of any event with respect to the Borrower described in clause (h) or (i)
of this Article, the Commitments shall automatically terminate and the principal
of the Loans then outstanding, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
ARTICLE VIII
The Administrative Agent
------------------------
Each of the Lenders and the Issuing Bank hereby irrevocably appoints
the Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms of the Loan Documents, together with such
actions and powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business
<PAGE>
71
with the Borrower or any Subsidiary or other Affiliate thereof as if it were not
the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations
except those expressly set forth in the Loan Documents. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by the Loan Documents
that the Administrative Agent is required to exercise in writing by the Required
Lenders (or such other number or percentage of the Lenders as shall be necessary
under the circumstances as provided in Section 9.02), and (c) except as
expressly set forth in the Loan Documents, the Administrative Agent shall not
have any duty to disclose, and shall not be liable for the failure to disclose,
any information relating to the Borrower or any of its Subsidiaries that is
communicated to or obtained by the bank serving as Administrative Agent or any
of its Affiliates in any capacity. The Administrative Agent shall not be liable
for any action taken or not taken by it with the consent or at the request of
the Required Lenders (or such other number or percentage of the Lenders as shall
be necessary under the circumstances as provided in Section 9.02) or in the
absence of its own gross negligence or wilful misconduct. The Administrative
Agent shall not be deemed to have knowledge of any Default unless and until
written notice thereof is given to the Administrative Agent by the Borrower or a
Lender, and the Administrative Agent shall not be responsible for or have any
duty to ascertain or inquire into (i) any statement, warranty or representation
made in or in connection with any Loan Document, (ii) the contents of any
certificate, report or other document delivered thereunder or in connection
therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth in any Loan Document, (iv) the
validity, enforceability, effectiveness or genuineness of any Loan Document or
any other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article IV or elsewhere in any Loan Document, other than
to confirm receipt of items expressly required to be delivered to the
Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of each Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
<PAGE>
72
Subject to the appointment and acceptance of a successor to the
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders, the Issuing Bank and the Borrower.
Upon any such resignation, the Required Lenders shall have the right, subject to
the approval by the Borrower which approval shall not be unreasonably withheld,
to appoint a successor. If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after
the retiring Administrative Agent gives notice of its resignation, then the
retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank
and in consultation with the Borrower, appoint a successor Administrative Agent
which shall be a bank with an office in New York, New York, or an Affiliate of
any such bank. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder. The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the
Administrative Agent's resignation hereunder, the provisions of this Article and
Section 9.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document or related agreement or any document furnished hereunder
or thereunder.
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Notices. Except in the case of notices and other
--------
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at 17422 Derian Avenue, Irvine,
California 92614, Attention of Roger Ruppert (Telecopy No. (949) 399-3976);
with a copy to (other than with respect to administrative matters): Vestar
Capital Partners, Inc., at 245 Park Avenue, 40th Floor, New York, New York
10067 (Telecopy No. (212) 808-4922);
(b) if to the Administrative Agent, to The Chase Manhattan Bank, Loan
and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York,
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73
New York 10081, Attention of Janet Belden (Telecopy No. (212) 552-5658);
with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York, New
York 10017, Attention of Kathryn Duncan (Telecopy No. (212) 972-0009);
(c) if to the Issuing Bank, to it at The Chase Manhattan Bank, One
Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of
Standby LC Department (Telecopy No. (212) 363-5656);
(d) if to the Swingline Lender, to it at The Chase Manhattan Bank,
Loan and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New
York, New York 10081, Attention of Janet Belden (Telecopy No. (212) 552-
5658); and
(e) if to any other Lender, to it at its address (or telecopy number)
set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the
--------------------
Administrative Agent, the Issuing Bank or any Lender in exercising any right or
power hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent, the
Issuing Bank and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of any Loan Document or consent to
any departure by any Loan Party therefrom shall in any event be effective unless
the same shall be permitted by paragraph (b) of this Section, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. Without limiting the generality of the foregoing, the
making of a Loan or issuance of a Letter of Credit shall not be construed as a
waiver of any Default, regardless of whether the Administrative Agent, any
Lender or the Issuing Bank may have had notice or knowledge of such Default at
the time.
(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or, in the case of any
other Loan Document, pursuant to an agreement or agreements in writing entered
into by the Administrative Agent and the Loan Party or Loan Parties that are
parties thereto, in each case with the consent of the Required Lenders; provided
--------
that no such agreement shall (i) increase the Commitment of any Lender without
the written consent of such Lender, (ii) reduce the principal amount of any Loan
or LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender directly affected
thereby, (iii) postpone the maturity of any Loan, or any scheduled date of
payment of the principal amount of any Term Loan or under Section 2.10, or the
required date of reimbursement of any LC Disbursement, or date for the payment
of any interest or any fees payable hereunder, or reduce the amount of, waive or
excuse any such scheduled payment, or
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74
postpone the scheduled date of expiration of any Commitment, without the written
consent of each Lender directly affected thereby, (iv) change Section 2.18(b) or
(c) in a manner that would alter the pro rata sharing of payments required
thereby, without the written consent of each Lender, (v) change any of the
provisions of this Section or the definition of "Required Lenders" or any other
provision of any Loan Document specifying the number or percentage of Lenders
(or Lenders of any Class) required to waive, amend or modify any rights
thereunder or make any determination or grant any consent thereunder, without
the written consent of each Lender (or each Lender of such Class, as the case
may be), (vi) release any Subsidiary Loan Party from its Guarantee under the
Guarantee Agreement (except as expressly provided in the Guarantee Agreement),
or limit its liability in respect of such Guarantee without the written consent
of each Lender, (vii) except in strict accordance with the express provisions
thereof, release all or any substantial part of the Collateral from the Liens of
the Security Documents, without the written consent of each Lender, (viii)
change any provisions of any Loan Document in a manner that by its terms
adversely affects the rights in respect of payments due to Lenders holding Loans
of any Class differently than those holding Loans of any other Class, without
the written consent of Lenders holding a majority in interest of the outstanding
Loans and unused Commitments of each affected Class or (ix) change the rights of
the Tranche B Lenders to decline mandatory prepayments as provided in Section
2.11, without the written consent of Tranche B Lenders holding a majority of the
outstanding Tranche B Loans; provided further that (A) no such agreement shall
----------------
amend, modify or otherwise affect the rights or duties of the Administrative
Agent, the Issuing Bank or the Swingline Lender without the prior written
consent of the Administrative Agent, the Issuing Bank or the Swingline Lender,
as the case may be, and (B) any waiver, amendment or modification of this
Agreement that by its terms affects the rights or duties under this Agreement of
the Revolving Lenders (but not the Tranche A Lenders and Tranche B Lenders), the
Tranche A Lenders (but not the Revolving Lenders and Tranche B Lenders) or the
Tranche B Lenders (but not the Revolving Lenders and Tranche A Lenders) may be
effected by an agreement or agreements in writing entered into by the Borrower
and requisite percentage in interest of the affected Class of Lenders that would
be required to consent thereto under this Section 9.02 if such Class of Lenders
were the only Class of Lenders hereunder at the time.
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower
-----------------------------------
shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent, in connection with
the syndication of the credit facilities provided for herein, the preparation
and administration of the Loan Documents or any amendments, modifications or
waivers of the provisions thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket
expenses incurred by the Issuing Bank in connection with the issuance,
amendment, renewal or extension of any Letter of Credit or any demand for
payment thereunder and (iii) all reasonable out-of-pocket expenses incurred by
the Administrative Agent, the Issuing Bank or any Lender, including the
reasonable fees, charges and disbursements of any counsel for the Administrative
Agent, the Issuing Bank or any Lender, in connection with the enforcement or
protection of its rights in connection with the Loan Documents, including its
rights under this Section, or in connection with the Loans made or Letters of
Credit issued hereunder, including all such reasonable out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans or Letters of Credit.
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75
(b) The Borrower shall indemnify the Administrative Agent, the
Issuing Bank and each Lender, and each Related Party of any of the foregoing
Persons (each such Person being called an "Indemnitee") against, and hold each
----------
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the reasonable fees, charges and disbursements of
any counsel for any Indemnitee, incurred by or asserted against any Indemnitee
arising out of, in connection with, or as a result of (i) the execution or
delivery of any Loan Document or any other agreement or instrument contemplated
hereby, the performance by the parties to the Loan Documents of their respective
obligations thereunder or the consummation of the Transactions or any other
transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use
of the proceeds therefrom (including any refusal by the Issuing Bank to honor a
demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter
of Credit), (iii) any actual or alleged presence or release of Hazardous
Materials on or from any Mortgaged Property or any other property currently or
formerly owned or operated by the Borrower or any of its Subsidiaries, or any
Environmental Liability related in any way to the Borrower or any of its
Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation
or proceeding relating to any of the foregoing, whether based on contract, tort
or any other theory and regardless of whether any Indemnitee is a party thereto;
provided that (x) such indemnity shall not, as to any Indemnitee, be available
- --------
to the extent that such losses, claims, damages, liabilities or related expenses
resulted from the gross negligence or wilful misconduct of such Indemnitee and
(y) this Section 9.03(b) shall not apply to expenses referred to in Section
9.03(a).
(c) To the extent that the Borrower fails to pay any amount required
to be paid by it to the Administrative Agent, the Issuing Bank or the Swingline
Lender under paragraph (a) or (b) of this Section, each Lender severally agrees
to pay to the Administrative Agent, the Issuing Bank or the Swingline Lender, as
the case may be, such Lender's pro rata share (determined as of the time that
the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount; provided that the unreimbursed expense or indemnified loss,
--------
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Administrative Agent, the Issuing Bank or the Swingline
Lender in its capacity as such. For purposes hereof, a Lender's "pro rata
share" shall be determined based upon its share of the sum of the total
Revolving Exposures, outstanding Term Loans and unused Commitments at the time.
(d) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby, the
Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable promptly
after written demand therefor.
SECTION 9.04. Successors and Assigns. (a) The provisions of this
-----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit), except that the
Borrower may not assign or otherwise transfer any of its rights or obligations
hereunder without the prior written
<PAGE>
76
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void). Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
(including any Affiliate of the Issuing Bank that issues any Letter of Credit)
and, to the extent expressly contemplated hereby, the Related Parties of each of
the Administrative Agent, the Issuing Bank and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion
of its rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans at the time owing to it); provided that (i)
--------
except in the case of an assignment to a Lender or an Affiliate of a Lender or a
Related Fund of a Lender which would not result in payment by the Borrower of
any increased costs under Section 2.15 at the time of such assignment, each of
the Borrower and the Administrative Agent (and, in the case of an assignment of
all or a portion of a Revolving Commitment or any Lender's obligations in
respect of its LC Exposure or Swingline Exposure, the Issuing Bank and the
Swingline Lender) must give their prior written consent to such assignment
(which consent shall not be unreasonably withheld), (ii) except in the case of
an assignment to a Lender or an Affiliate of a Lender or a Related Fund of a
Lender or an assignment of the entire remaining amount of the assigning Lender's
Commitment or Loans, the amount of the Commitment or Loans of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, (iii) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender's rights and obligations under this Agreement, except that this
clause (iii) shall not be construed to prohibit the assignment of a
proportionate part of all the assigning Lender's rights and obligations in
respect of one Class of Commitments or Loans, (iv) the parties to each
assignment shall execute and deliver to the Administrative Agent an Assignment
and Acceptance, together with a processing and recordation fee of $3,500, and
(v) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire; and provided further that
----------------
any consent of the Borrower otherwise required under this paragraph shall not be
required if an Event of Default under clause (h) or (i) of Article VII has
occurred and is continuing. Subject to acceptance and recording thereof pursuant
to paragraph (d) of this Section, from and after the effective date specified in
each Assignment and Acceptance the assignee thereunder shall be a party hereto
and, to the extent of the interest assigned by such Assignment and Acceptance,
have the rights and obligations of a Lender under this Agreement, and the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of the
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by
a Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices in The City of New York a
copy of each
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77
Assignment and Acceptance delivered to it and a register for the recordation
of the names and addresses of the Lenders, and the Commitment of,and
principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
--------
the Register shall be conclusive, and the Borrower, the Administrative Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall
be available for inspection by the Borrower, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent, the Issuing Bank or the Swingline Lender, sell
participations to one or more banks or other entities (a "Participant") in all
-----------
or a portion of such Lender's rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it);
provided that (i) such Lender's obligations under this Agreement shall remain
- --------
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrower, the
Administrative Agent, the Issuing Bank and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement. Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce the Loan Documents and to approve
any amendment, modification or waiver of any provision of the Loan Documents;
provided that such agreement or instrument may provide that such Lender will
- --------
not, without the consent of the Participant, agree to any amendment,
modification or waiver described in the first proviso to Section 9.02(b) that
affects such Participant. Subject to paragraph (f) of this Section, the
Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this Section.
To the extent permitted by law, each Participant also shall be entitled to the
benefits of Section 9.08 as though it were a Lender, provided such Participant
agrees to be subject to Section 2.18(c) as though it were a Lender.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.15 or 2.17 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrower's prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.17 unless
the Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
2.17(e) as though it were a Lender.
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78
(g) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
--------
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.
SECTION 9.05. Survival. All covenants, agreements, representations
---------
and warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Administrative Agent, the Issuing
Bank or any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid or any Letter of Credit is outstanding and
so long as the Commitments have not expired or terminated. The provisions of
Sections 2.15, 2.16, 2.17 and 9.03 and Article VIII shall survive and remain in
full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination
of the Letters of Credit and the Commitments or the termination of this
Agreement or any provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This
-----------------------------------------
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement,
the other Loan Document and any separate letter agreements with respect to fees
payable to the Administrative Agent constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Except as provided in Section 4.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement held to
-------------
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.08. Right of Setoff. If an Event of Default shall have
----------------
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at
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79
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of the Borrower
against any of and all the obligations of the Borrower now or hereafter existing
under this Agreement held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement, to the extent such
obligations are then due and payable (by acceleration or otherwise). The rights
of each Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
--------------------------------------------------
Process. (a) This Agreement shall be construed in accordance with and governed
- --------
by the law of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to any
Loan Document, 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 such
New York State 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 or any other Loan Document shall affect any right that the
Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring
any action or proceeding relating to this Agreement or any other Loan Document
against the Borrower or its properties in the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which 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 other Loan
Document in any court referred to in paragraph (b) of this Section. 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.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
---------------------
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS
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80
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
SECTION 9.11. Headings. Article and Section headings and the Table
---------
of Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Administrative Agent,
----------------
the Issuing Bank and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' and its Related Funds' directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process; provided that the Borrower should be
--------
given advance notice (to the extent practicable) and an opportunity to contest
such disclosure, (d) to any other party to this Agreement, (e) in connection
with the exercise of any remedies hereunder or any suit, action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of
rights hereunder or thereunder; provided that the Borrower should be given
--------
advance notice (to the extent practicable) and an opportunity to contest such
disclosure, (f) subject to an agreement containing provisions substantially the
same as those of this Section, to any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement, (g) with the consent of the Borrower or (h) to the extent
such Information (i) becomes publicly available other than as a result of a
breach of this Section or (ii) becomes available to the Administrative Agent,
the Issuing Bank or any Lender on a nonconfidential basis from a source other
than the Borrower. For the purposes of this Section, "Information" means all
-----------
information received from the Borrower relating to the Borrower or its business,
other than any such information that is available to the Administrative Agent,
the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by
the Borrower; provided that, in the case of information received from the
--------
Borrower after the date hereof, such information is clearly identified at the
time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
SECTION 9.13. Interest Rate Limitation. Notwithstanding anything
-------------------------
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
-------
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
------------
taken, received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and
<PAGE>
81
Charges that would have been payable in respect of such Loan but were not
payable as a result of the operation of this Section shall be cumulated and the
interest and Charges payable to such Lender in respect of other Loans or periods
shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by such Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
ST. JOHN KNITS INTERNATIONAL,
INCORPORATED,
by /s/ Roger Ruppert
___________________________________________
Name: Roger Ruppert
Title: Senior Vice President-Finance and CFO
THE CHASE MANHATTAN BANK,
individually and as Administrative Agent,
by /s/ Deborah Davey
____________________________________________
Name: Deborah Davey
Title: Vice President
BANKBOSTON, N.A.
by /s/ Nancy E. Fuller
____________________________________________
Name: Nancy E. Fuller
Title: Director
BANK LEUMI USA
by /s/ Del Lorimer
____________________________________________
Name: Del Lorimer
Title: Vice President/Manager
Corporate Finance
CYPRESSTREE INSTITUTIONAL FUND, LLC
BY: CYPRESSTREE INVESTMENT MANAGEMENT
COMPANY, INC. ITS MANAGING MEMBER
by /s/ Catherine C. McDermott
____________________________________________
Name: Catherine C. McDermott
Title: Principal
CYPRESSTREE INVESTMENT MANAGEMENT
COMPANY, INC.
AS: ATTORNEY-IN-FACT AND ON BEHALF OF FIRST
ALLMERICA FINANCIAL LIFE INSURANCE
COMPANY AS PORTFOLIO MANAGER
by /s/ Catherine C. McDermott
____________________________________________
Name: Catherine C. McDermott
Title: Principal
CYPRESSTREE SENIOR FLOATING RATE FUND
BY: CYPRESSTREE INVESTMENT MANAGEMENT
COMPANY, INC. AS PORTFOLIO MANAGER
by /s/ Catherine C. McDermott
____________________________________________
Name: Catherine C. McDermott
Title: Principal
NORTH AMERICAN SENIOR FLOATING RATE FUND
BY: CYPRESSTREE INVESTMENT MANAGEMENT
COMPANY, INC. AS PORTFOLIO MANAGER
by /s/ Catherine C. McDermott
____________________________________________
Name: Catherine C. McDermott
Title: Principal
FIRST UNION NATIONAL BANK
by /s/ Michael P. Doherty
____________________________________________
Name: Michael P. Doherty
Title: Sr. Vice President
FOOTHILL INCOME TRUST, L.P.
BY: FIT GP, LLC
by /s/ Jeff Nikora
____________________________________________
Name: Jeff Nikora
Title: Senior Vice President
FRANKLIN FLOATING RATE TRUST
by /s/ Chauncey Lufkin
____________________________________________
Name: Chauncey Lufkin
Title: Vice President
ISRAEL DISCOUNT BANK OF NEW YORK
by /s/ Howard Weinberg
____________________________________________
Name: Howard Weinberg
Title: First Vice President
by /s/ Andrew Finkle
____________________________________________
Name: Andrew Finkle
Title: Assistant Manager
KZH CYPRESSTREE-1 LLC
by /s/ Peter Chin
____________________________________________
Name: Peter Chin
Title: Authorized Agent
KZH STERLING LLC
by /s/ Peter Chin
____________________________________________
Name: Peter Chin
Title: Authorized Agent
BANKBOSTON, N.A., AS TRUST ADMINISTRATOR FOR
LONGLANE MASTER TRUST IV
by /s/ Kevin Kearns
____________________________________________
Name: Kevin Kearns
Title: Managing Director
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
by /s/ Sheila Finnerty
____________________________________________
Name: Sheila Finnerty
Title: Vice President
SUMMIT BANK
by /s/ Seiji P. Nakamura
____________________________________________
Name: Seiji P. Nakamura
Title: Assistant Vice President
TORONTO DOMINION (NEW YORK), INC.
by /s/ Jorge A. Garcia
____________________________________________
Name: Jorge A. Garcia
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
by /s/ Stephen W. Dunne
____________________________________________
Name: Stephen W. Dunne
Title: Vice President
SUNTRUST BANK, ATLANTA
by /s/ Laura Kahn
____________________________________________
Name: Laura Kahn
Title: Director, Senior Relationship Manager
<PAGE>
EXHIBIT 99(a)(2)
================================================================================
INDENTURE
Dated as of July 7, 1999
Among
ST. JOHN KNITS INTERNATIONAL, INCORPORATED, as Issuer,
The GUARANTORS Named herein
and
The Bank of New York, as Trustee
__________________
$100,000,000
12 1/2% Senior Subordinated Notes due 2009, Series A
12 1/2% Senior Subordinated Notes due 2009, Series B
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
(S) 310(a)(1)............................................. 7.10
(a)(2)............................................. 7.10
(a)(3)............................................. N.A.
(a)(4)............................................. N.A.
(a)(5)............................................. 7.08, 7.10.
(b)................................................ 7.08; 7.10; 13.02
(c)................................................ N.A.
(S) 311(a)................................................ 7.11
(b)................................................ 7.11
(c)................................................ N.A.
(S) 312(a)................................................ 2.05
(b)................................................ 13.03
(c)................................................ 13.03
(S) 313(a)................................................ 7.06
(b)(1)............................................. 7.06
(b)(2)............................................. 7.06
(c)................................................ 7.06; 13.02
(d)................................................ 7.06
(S) 314(a)................................................ 4.11; 13.02
(b)................................................ N.A.
(c)(1)............................................. 13.04
(c)(2)............................................. 13.04
(c)(3)............................................. N.A.
(d)................................................ N.A.
(e)................................................ 13.05
(f)................................................ N.A.
(S) 315(a)................................................ 7.01(b)
(b)................................................ 7.05; 13.02
(c)................................................ 7.01(a)
(d)................................................ 7.01(c)
(e)................................................ 6.11
(S) 316(a)(last sentence)................................. 2.09
(a)(1)(A).......................................... 6.05
(a)(1)(B).......................................... 6.04
(a)(2)............................................. N.A.
(b)................................................ 6.07
(c)................................................ 10.04
(S) 317(a)(1)............................................. 6.08
(a)(2)............................................. 6.09
(b)................................................ 2.04
(S) 318(a)................................................ 13.01
</TABLE>
________________
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.............................................. 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act........ 21
SECTION 1.03. Rules of Construction.................................... 22
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.......................................... 22
SECTION 2.02. Execution and Authentication............................. 23
SECTION 2.03. Registrar and Paying Agent............................... 24
SECTION 2.04. Paying Agent To Hold Assets in Trust..................... 24
SECTION 2.05. Holder Lists............................................. 24
SECTION 2.06. Transfer and Exchange.................................... 25
SECTION 2.07. Replacement Securities................................... 25
SECTION 2.08. Outstanding Securities................................... 26
SECTION 2.09. Treasury Securities...................................... 26
SECTION 2.10. Temporary Securities..................................... 26
SECTION 2.11. Cancellation............................................. 26
SECTION 2.12. Defaulted Interest....................................... 27
SECTION 2.13. CUSIP Number............................................. 27
SECTION 2.14. Deposit of Moneys........................................ 27
SECTION 2.15. Book-Entry Provisions for Global Securities.............. 27
SECTION 2.16. Registration of Transfers and Exchanges.................. 28
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee....................................... 32
SECTION 3.02. Selection of Securities To Be Redeemed................... 32
SECTION 3.03. Notice of Redemption..................................... 33
SECTION 3.04. Effect of Notice of Redemption........................... 34
SECTION 3.05. Deposit of Redemption Price.............................. 34
SECTION 3.06. Securities Redeemed in Part.............................. 34
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.................................... 34
SECTION 4.02. Maintenance of Office or Agency.......................... 35
-i-
<PAGE>
Page
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SECTION 4.03. Transactions with Affiliates............................. 35
SECTION 4.04. Limitation on Indebtedness............................... 36
SECTION 4.05. Disposition of Proceeds of Asset Sales................... 38
SECTION 4.06. Limitation on Restricted Payments........................ 40
SECTION 4.07. Corporate Existence...................................... 43
SECTION 4.08. Notice of Defaults....................................... 43
SECTION 4.09. Business Activities...................................... 43
SECTION 4.10. Compliance Certificate................................... 43
SECTION 4.11. Provision of Financial Information....................... 44
SECTION 4.12. Change of Control........................................ 44
SECTION 4.13. Limitation on Senior Subordinated Indebtedness........... 45
SECTION 4.14. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries....................... 45
SECTION 4.15. Designation of Unrestricted Subsidiaries................. 46
SECTION 4.16. Limitation on Liens...................................... 47
SECTION 4.17. Limitation on Guarantees by Restricted Subsidiaries...... 47
SECTION 4.18. Limitation on the Sale or Issuance of Equity Interests
of Restricted Subsidiaries.............................. 48
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc............................. 48
SECTION 5.02. Successor Corporation Substituted........................ 49
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default........................................ 50
SECTION 6.02. Acceleration............................................. 51
SECTION 6.03. Other Remedies........................................... 52
SECTION 6.04. Waiver of Past Default................................... 52
SECTION 6.05. Control by Majority...................................... 52
SECTION 6.06. Limitation on Suits...................................... 53
SECTION 6.07. Rights of Holders To Receive Payment..................... 53
SECTION 6.08. Collection Suit by Trustee............................... 53
SECTION 6.09. Trustee May File Proofs of Claim......................... 53
SECTION 6.10. Priorities............................................... 54
SECTION 6.11. Undertaking for Costs.................................... 54
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee........................................ 55
SECTION 7.02. Rights of Trustee........................................ 56
SECTION 7.03. Individual Rights of Trustee............................. 57
SECTION 7.04. Trustee's Disclaimer..................................... 57
-ii-
<PAGE>
Page
----
SECTION 7.05. Notice of Defaults....................................... 57
SECTION 7.06. Reports by Trustee to Holders............................ 57
SECTION 7.07. Compensation and Indemnity............................... 58
SECTION 7.08. Replacement of Trustee................................... 59
SECTION 7.09. Successor Trustee by Merger, etc......................... 59
SECTION 7.10. Eligibility; Disqualification............................ 60
SECTION 7.11. Preferential Collection of Claims Against Company........ 60
ARTICLE EIGHT
SUBORDINATION OF SECURITIES
SECTION 8.01. Securities Subordinated to Senior Indebtedness........... 60
SECTION 8.02. No Payment on Securities in Certain Circumstances........ 60
SECTION 8.03. Payment Over of Proceeds upon Dissolution, etc........... 61
SECTION 8.04. Subrogation.............................................. 62
SECTION 8.05. Obligations of Company Unconditional..................... 63
SECTION 8.06. Notice to Trustee........................................ 63
SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating
Agent................................................... 64
SECTION 8.08. Trustee's Relation to Senior Indebtedness................ 64
SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions
of the Company or Holders of Senior Indebtedness........ 64
SECTION 8.10. Holders Authorize Trustee To Effectuate Subordination of
Securities.............................................. 65
SECTION 8.11. This Article Not To Prevent Events of Default............ 65
SECTION 8.12. Trustee's Compensation Not Prejudiced.................... 65
SECTION 8.13. No Waiver of Subordination Provisions.................... 65
SECTION 8.14. Subordination Provisions Not Applicable to Money Held
in Trust for Holders; Payments May Be Paid Prior to
Dissolution............................................. 65
SECTION 8.15. Acceleration of Securities............................... 66
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of Company's Obligations..................... 66
SECTION 9.02. Application of Trust Money............................... 67
SECTION 9.03. Repayment to Company..................................... 67
SECTION 9.04. Reinstatement............................................ 68
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders............................... 68
SECTION 10.02. With Consent of Holders.................................. 69
SECTION 10.03. Compliance with Trust Indenture Act...................... 70
SECTION 10.04. Record Date for Consents and Effect of Consents.......... 70
SECTION 10.05. Notation on or Exchange of Securities.................... 71
SECTION 10.06. Trustee To Sign Amendments, etc.......................... 71
SECTION 10.07. Reliance by Holders of Senior Indebtedness on
Subordination Provisions................................ 71
-iii-
<PAGE>
ARTICLE ELEVEN
GUARANTEE
Page
----
SECTION 11.01. Unconditional Guarantee................................. 71
SECTION 11.02. Severability............................................ 72
SECTION 11.03. Release of a Guarantor.................................. 72
SECTION 11.04. Limitation of Guarantor's Liability..................... 73
SECTION 11.05. Contribution............................................ 73
SECTION 11.06. Execution of Security Guarantee......................... 73
SECTION 11.07. Subordination of Subrogation and Other Rights........... 74
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated to Guarantor
Senior Indebtedness.................................... 74
SECTION 12.02. No Payment on Guarantees in Certain Circumstances....... 74
SECTION 12.03. Payment Over of Proceeds upon Dissolution, etc.......... 75
SECTION 12.04. Subrogation............................................. 76
SECTION 12.05. Obligations of Guarantors Unconditional................. 77
SECTION 12.06. Notice to Trustee....................................... 77
SECTION 12.07. Reliance on Judicial Order or Certificate of
Liquidating Agent...................................... 78
SECTION 12.08. Trustee's Relation to Guarantor Senior Indebtedness..... 78
SECTION 12.09. Subordination Rights Not Impaired by Acts or
Omissions of the Guarantors or Holders of Guarantor
Senior Indebtedness.................................... 78
SECTION 12.10. Holders Authorize Trustee To Effectuate Subordination
of Guarantee........................................... 79
SECTION 12.11. This Article Not To Prevent Events of Default........... 79
SECTION 12.12. Trustee's Compensation Not Prejudiced................... 79
SECTION 12.13. No Waiver of Guarantee Subordination Provisions......... 79
SECTION 12.14. Payments May Be Paid Prior to Dissolution............... 79
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls............................ 80
SECTION 13.02. Notices................................................. 80
SECTION 13.03. Communications by Holders with Other Holders............ 81
SECTION 13.04. Certificate and Opinion as to Conditions Precedent...... 81
SECTION 13.05. Statements Required in Certificate...................... 82
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar............... 82
SECTION 13.07. Governing Law........................................... 82
SECTION 13.08. No Recourse Against Others.............................. 82
SECTION 13.09. Successors.............................................. 82
SECTION 13.10. Counterpart Originals................................... 82
SECTION 13.11. Severability............................................ 83
SECTION 13.12. No Adverse Interpretation of Other Agreements........... 83
SECTION 13.13. Legal Holidays.......................................... 83
-iv-
<PAGE>
Page
----
SIGNATURES....................................................... S-1
EXHIBIT A Form of Series A Security........................ A-1
EXHIBIT B Form of Series B Security........................ B-1
EXHIBIT C Form of Legend for Global Securities............. C-1
EXHIBIT D Form of Transfer Certificate..................... D-1
EXHIBIT E Form of Transfer Certificate for Institutional
Accredited Investors............................ E-1
EXHIBIT F Form of Transfer Certificate for Regulation S
Transfers........................................ F-1
- -----------------
NOTE: This Table of Contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-v-
<PAGE>
INDENTURE dated as of July 7, 1999, among ST. JOHN KNITS
INTERNATIONAL, INCORPORATED, a Delaware corporation (the "Company"), the
-------
GUARANTORS named herein and THE BANK OF NEW YORK, a New York banking
corporation, as trustee (the "Trustee").
-------
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
---------------------
connection with an Acquisition from such Person or (b) existing at the time such
Person becomes a Restricted Subsidiary or is merged or consolidated with or into
the Company or any Restricted Subsidiary.
"Acquired Person" means, with respect to any specified Person, any
---------------
other Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any capital contribution (by means of
-----------
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) by the Company or any
Restricted Subsidiary to any other Person, or any acquisition or purchase of
Equity Interests of any other Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated with or merged into the Company
or any Restricted Subsidiary or (ii) any acquisition by the Company or any
Restricted Subsidiary of the assets of any Person which constitute substantially
all of an operating unit or line of business of such Person or which is
otherwise outside of the ordinary course of 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 and shall also mean any beneficial owner of
shares representing 5% or more of the total voting power of the Voting Equity
Interests (on a fully diluted basis) of the Company or of rights or warrants to
purchase such Voting Equity Interests (whether or not currently exercisable) and
any Person who would be an Affiliate of any such beneficial owner pursuant to
this definition; provided, however, that for purposes of Section 4.03, the term
"Affiliate" shall not include the Initial Purchasers or their affiliates. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise.
"Affiliate Transaction" has the meaning provided in Section 4.03.
---------------------
"Agent" means any Registrar, Paying Agent or co-Registrar.
----
<PAGE>
-2-
"Asset Sale" means any direct or indirect sale, conveyance, transfer,
----------
lease (that has the effect of a disposition) or other disposition (including,
without limitation, any merger, consolidation or sale-leaseback transaction) to
any Person other than the Company or a Restricted Subsidiary, in one transaction
or a series of related transactions, of (i) any Equity Interest of any
Restricted Subsidiary (other than directors' qualifying shares, to the extent
mandated by applicable law); (ii) any assets of the Company or any Restricted
Subsidiary which constitute substantially all of an operating unit or line of
business of the Company or any Restricted Subsidiary; or (iii) any other
property or asset of the Company or any Restricted Subsidiary outside of the
ordinary course of business (including the receipt of proceeds paid on account
of the loss of or damage to any property or asset and awards of compensation for
any asset taken by condemnation, eminent domain or similar proceedings). For
the purposes of this definition, the term "Asset Sale" shall not include (a) the
creation of any Lien not prohibited by Section 4.16; (b) sales of property or
equipment that has become worn out, obsolete or damaged or otherwise unsuitable
for use in connection with the business of the Company or any Restricted
Subsidiary, as the case may be; (c) any transaction consummated in compliance
with Section 4.06; (d) any transfers of properties and assets between Restricted
Subsidiaries or the Company and a Restricted Subsidiary; (e) the sale of Cash
Equivalents in the ordinary course of business; (f) a disposition of inventory
in the ordinary course of business; (g) transactions permitted under Section
5.01; (h) the sale or other disposition of assets owned by Amen Wardy Home
Stores, LLC; and (i) the sale of accounts receivable, or participation therein,
in connection with any Qualified Receivables Transactions. In addition, solely
for purposes of Section 4.05, any sale, conveyance, transfer, lease or other
disposition of any property or asset, whether in one transaction or a series of
related transactions, involving assets with a Fair Market Value not in excess of
$2.5 million in any fiscal year shall be deemed not to be an Asset Sale.
"Attributable Indebtedness" in respect of a sale/leaseback transaction
-------------------------
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded semi-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).
"Bankruptcy Law" has the meaning provided in Section 6.01.
--------------
"Board of Directors" means the board of directors of the Company or
------------------
any Guarantor, as the case may be, or any authorized committee of such board of
directors.
"Board Resolution" means, with respect to any Person, a duly adopted
----------------
resolution of the Board of Directors of such Person.
"Capital Lease Obligation" means at the time any determination thereof
------------------------
is to be made, the amount of the liability in respect of a capital lease that
would at such time be properly capitalized on the balance sheet in accordance
with GAAP.
"Cash Equivalents" means: (a) U.S. dollars; (b) securities issued or
----------------
directly and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of not more than one year from the
date of acquisition; (c) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million; (d) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(b) and (c) entered into with any financial institution meeting the
qualifications specified in clause (c) above; (e) commercial paper rated P-1, A-
1 or the equivalent thereof by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, and in each case
<PAGE>
-3-
maturing within six months after the date of acquisition; and (f) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (a) through (e) of this definition.
"Change of Control" means the occurrence of any of the following
-----------------
events (whether or not approved by the Board of Directors of the Company): (i)
any Person (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act, including any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than one or more Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of
an event or otherwise), directly or indirectly, of greater than 35% of the total
voting power of the then outstanding Voting Equity Interests of the Company and
such Person beneficially owns a greater percentage of the total voting power of
the then outstanding Voting Equity Interests of the Company than the Permitted
Holders; (ii) the Company or any of its Subsidiaries sells, assigns, conveys,
transfers, leases or otherwise disposes (other than by way of merger or
consolidation) of all or substantially all of the assets of the Company and its
Subsidiaries (determined on a consolidated basis) to any Person (other than the
Company or any Wholly Owned Restricted Subsidiary), (iii) during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Company was approved by a vote of a majority
of the directors of the Company then still in office who were either directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; or (iv) the Company is
liquidated or dissolved or adopts a plan of liquidation or dissolution.
"Change of Control Date" has the meaning provided in Section 4.12.
----------------------
"Company" means the Person named as the "Company" in the first
-------
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Company Request" or "Company Order" means a written request or order
--------------- -------------
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President, a Vice President or its Treasurer, and by
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Consolidated Coverage Ratio" as of any date of determination means
---------------------------
the ratio of (i) the aggregate amount of Consolidated EBITDA for the four
quarter period of the most recent four consecutive fiscal quarters for which
financial statements are available ending prior to the date of such
determination (the "Four Quarter Period") to (ii) Consolidated Fixed Charges for
such Four Quarter Period; provided, however, that (1) if the Company or any
Restricted Subsidiary has incurred any Indebtedness since the beginning of such
Four Quarter 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, Consolidated EBITDA and Consolidated
Fixed Charges for such Four Quarter 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 Four Quarter Period and the discharge of
any other Indebtedness repaid, repurchased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the first
day of such Four Quarter Period, (2) if since the beginning of such Four Quarter
Period the Company or any Restricted Subsidiary shall have made any Asset Sale,
the Consolidated EBITDA for such Four Quarter Period shall be reduced by an
<PAGE>
-4-
amount equal to the Consolidated EBITDA (if positive) directly attributable to
the assets that are the subject of such Asset Sale for such Four Quarter Period
or increased by an amount equal to the Consolidated EBITDA (if negative)
directly attributable thereto for such Four Quarter Period and Consolidated
Fixed Charges for such Four Quarter Period shall be reduced by an amount equal
to the Consolidated Fixed Charges directly attributable to any Indebtedness of
the Company or any Restricted Subsidiary repaid, repurchased or otherwise
discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Sale for such Four Quarter Period
(or, if the Equity Interests of any Restricted Subsidiary are sold, the
Consolidated Fixed Charges for such Four Quarter Period directly attributable to
the Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (3) if since the beginning of such Four Quarter Period the
Company or any Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person that becomes a Restricted
Subsidiary) or an acquisition of assets, including any acquisition of assets
occurring in connection with a transaction causing a calculation to be made
hereunder, which constitutes all or substantially all of an operating unit or a
line of a business or which constitutes Replacement Assets, Consolidated EBITDA
and Consolidated Fixed Charges for such Four Quarter Period shall be calculated
after giving pro forma effect to (x) such Investment or acquisition of assets
(including the Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such Four Quarter Period and (y) net
expense and cost reductions attributable to the assets acquired calculated on a
basis consistent with the standards set forth in Regulation S-X under the
Securities Act as in effect on the Issue Date and (4) if since the beginning of
such Four Quarter Period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any Restricted Subsidiary
since the beginning of such Four Quarter Period) shall have made any Asset Sale
or any Investment or acquisition of assets that would have required an
adjustment pursuant to clause (2) or (3) above if made by the Company or a
Restricted Subsidiary during such Four Quarter Period, Consolidated EBITDA and
Consolidated Fixed Charges for such Four Quarter Period shall be calculated
after giving pro forma effect thereto as if such Asset Sale, Investment or
acquisition of assets occurred on, with respect to any Investment or
acquisition, the first day of such Four Quarter Period and, with respect to any
Asset Sale, the day prior to the first day of such Four Quarter Period. 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 Fixed Charges associated with any Indebtedness Incurred
in connection therewith, the pro forma calculations shall be determined in
accordance with GAAP. If any Indebtedness bears a floating rate of interest and
is being given pro forma effect, the interest expense on 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 agreement under
which Interest Rate Protection Obligations are outstanding applicable to such
Indebtedness if such agreement under which such Hedging Obligations are
outstanding has a remaining term as at the date of determination in excess of 12
months); provided, however, that the Consolidated Fixed Charges of the Company
attributable to interest on any Indebtedness Incurred under a revolving credit
facility computed on a pro forma basis shall be computed based upon the average
daily balance of such Indebtedness during the Four Quarter Period.
"Consolidated EBITDA" means, for any period, the Consolidated Net
-------------------
Income for such period, plus, without duplication, the following to the extent
deducted in calculating such Consolidated Net Income: (i) Consolidated Income
Tax Expense for such period; (ii) Consolidated Interest Expense for such period;
(iii) Consolidated Non-cash Charges for such period; (iv) step-ups in inventory
valuation as a result of purchase accounting in connection with the acquisition
of assets or Equity Interests; (v) costs not reimbursable by the Company's or
any Subsidiary's insurance incurred in connection with any litigation and other
legal proceedings to which the Company or such Subsidiary is currently a party
(other than in connection with the settlement of the litigation concerning Amen
Wardy Home Stores, LLC), provided that such costs included in this clause (v)
shall not exceed $1.0 million for all periods; (vi) cash Charges not to exceed
$1.0 million in con-
<PAGE>
-5-
nection with the settlement of the litigation concerning Amen Wardy Home Stores,
LLC, the acquisition of the remaining 49% interest in Amen Wardy Home Stores,
LLC and the closure of certain Amen Wardy stores and related costs; and (vii)
expenses related to the Transactions; less (A) all non-cash items increasing
Consolidated Net Income for such period and (B) all cash payments during such
period relating to non-cash charges that were added back in determining
Consolidated EBITDA in any prior period.
"Consolidated Fixed Charges" means, with respect to any Person for any
--------------------------
period, the sum, without duplication, of (i) Consolidated Interest Expense and
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Equity Interest of the Company and its Restricted Subsidiaries (other
than dividends paid solely in Qualified Equity Interests and other than unpaid
dividends on the Preferred Stock) paid, accrued or scheduled to be paid or
accrued during such period times (y) a fraction, the numerator of which is one
and the denominator of which is one minus the then current effective
consolidated Federal, state and local tax rate of such Person, expressed as a
decimal.
"Consolidated Income Tax Expense" means, with respect to the Company
-------------------------------
for any period, the provision for Federal, state, local and foreign income taxes
payable by the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to the Company for
-----------------------------
any period, without duplication, the sum of (i) the interest expense of the
Company and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount, (b) the net cost under Hedging Obligations,
(c) the interest portion of any deferred payment obligation, (d) all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (e) all capitalized interest and
all accrued interest and (f) 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 the
Company) in connection with Indebtedness Incurred by such plan or trust;
provided, however, that there will be excluded therefrom any such interest
expense of any Unrestricted Subsidiary to the extent the related Indebtedness is
not guaranteed or paid by the Company or any Restricted Subsidiary and (ii)
interest expense attributable to Capitalized Lease Obligations and the interest
portion of rent expense associated with Attributable Indebtedness in respect of
the relevant lease giving rise thereto, determined as if such lease were a
capitalized lease in accordance with GAAP, as determined for the Company and the
Restricted Subsidiaries on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the consolidated net
-----------------------
income (loss) of the Company and the Restricted Subsidiaries determined in
accordance with GAAP and before any reduction in respect of dividends paid
solely in Qualified Equity Interests and before any reduction in respect of
unpaid dividends on the Preferred Stock; provided, however, that there shall not
be included in such Consolidated Net Income: (i) any net income (loss) of any
Person if such Person is not a Restricted Subsidiary, except (A) to the extent
of cash actually distributed by such Person during such period to the Company or
a Restricted Subsidiary as a dividend or other distribution, (B) with respect to
foreign joint ventures, to the extent that cash is available for distribution
(without restriction and not committed for other purposes) during such period to
the Company or a Restricted Subsidiary as a dividend or other distribution, but
is not distributed due to adverse tax or other business reasons, such cash shall
be included and (C) the Company's 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; (ii) any net income (loss) of any
person acquired by the Company or a Restricted Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition;
(iii) any net income (but not loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, di-
<PAGE>
-6-
rectly or indirectly, on the payment of dividends or the making of distributions
by such Restricted Subsidiary, directly or indirectly, to the Company to the
extent of such restrictions; (iv) any gain or loss, together with any related
provision for taxes on such gain or loss, realized upon the sale or other
disposition of any asset of the Company or the Restricted Subsidiaries
(including pursuant to any sale/leaseback transaction) outside of the ordinary
course of business; (v) any extraordinary gain or loss, together with any
related provision for taxes or such extraordinary gain or loss; (vi) the
cumulative effect of a change in accounting principles; (vii) any restoration to
income of any contingency reserve of an extraordinary, non-recurring or unusual
nature, except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date; (viii)
gains and losses resulting from foreign currency transaction adjustments; (ix)
gains and losses on assets that are marked to market; (x) any costs and expenses
related to the Transactions incurred on or immediately after the Issue Date,
including the settlement of all outstanding options; and (xi) non-cash expenses
resulting from the grant of Equity Interests and other compensation to
management personnel of the Company and its Subsidiaries pursuant to a written
plan or agreement or the treatment of options under variable plan accounting.
"Consolidated Net Worth" of any Person means the consolidated
----------------------
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Equity Interests of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person, for
-----------------------------
any period the sum of (i) depreciation, (ii) amortization and (iii) all non-cash
extraordinary charges and other non-cash expenses of such Person and its
Restricted Subsidiaries reducing Consolidated Net Income of such Person and its
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (excluding, for purposes of clause (iii) only, such charges
which require an accrual of or a reserve for cash charges for any future period)
including, without limitation, non-cash charges in connection with the
settlement of the litigation concerning Amen Wardy Home Stores, LLC, the
acquisition of the remaining 49% interest in Amen Wardy Home Stores, LLC and the
closure of certain Amen Wardy stores and related costs.
"Corporate Trust Office of the Trustee" shall be at the address of the
-------------------------------------
Trustee specified in Section 13.02 or such other address as the Trustee may give
notice to the Company.
"Credit Facility" means the Credit Agreement, dated as of the Issue
---------------
Date, among the Company, the lenders named therein, and The Chase Manhattan
Bank, as Administrative Agent, and any and all guarantee agreements, security
agreements and other agreements and instruments relating thereto, in each case
as the same may be amended, modified, supplemented or replaced from time to
time, and including any deferrals, renewals, extensions, replacements,
refinancings or refundings thereof, or amendments, modifications or supplements
thereto and any agreement providing therefor (including any restatements thereof
and any increases in the amount of the commitments or Indebtedness thereunder),
whether by or with the same or any other lender, creditor, group of lenders or
group of creditors, and including related notes, guarantee and note agreements
and other instruments and agreements executed in connection therewith.
"Custodian" has the meaning provided in Section 6.01.
---------
"Default" means any event that is or with the passage of time or the
------
giving of notice or both would be an Event of Default.
"Defeasance Trust Payment" has the meaning provided in Section 8.02.
------------------------
<PAGE>
-7-
"Depository" means, with respect to the Securities issued in the form
----------
of one or more Global Securities, The Depository Trust Company or another Person
designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"Designated Senior Indebtedness" means (a) any Indebtedness of the
------------------------------
Company outstanding under the Credit Facility and (b) after the Credit Facility
has been terminated and all Indebtedness thereunder has been repaid in full, any
other Senior Indebtedness which, at the time of determination, has an aggregate
principal amount outstanding, together with any commitments to lend additional
amounts, of at least $10.0 million, if the instrument governing such Senior
Indebtedness expressly states that such Indebtedness is "Designated Senior
Indebtedness" for purposes of this Indenture and a Board Resolution setting
forth such designation by the Company has been filed with the Trustee.
"Designation" has the meaning provided in Section 4.15.
-----------
"Designation Amount" see Section 4.15.
------------------
"Disposition" means, with respect to any Person, any merger,
-----------
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"Disqualified Equity Interest" means any Equity Interest which, by its
----------------------------
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable at the option of the holder thereof), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable, at the option of the holder thereof
(except, in each case, upon the occurrence of a Change of Control or Asset
Sale), in whole or in part, or exchangeable into Indebtedness on or prior to the
earlier of the maturity date of the Securities or the date on which no
Securities remain outstanding.
"Domestic Restricted Subsidiary" means a Restricted Subsidiary of the
------------------------------
Company organized under the laws of the United States or any political
subdivision thereof or the operations of which are located substantially inside
the United States.
"Equity Interest" in any Person means any and all shares, interests,
---------------
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Equity Interests.
"Event of Default" has the meaning provided in Section 6.01.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated by the SEC thereunder.
"Exchange Securities" means the 12 1/2% Senior Subordinated Notes due
-------------------
2009, Series B, to be issued in exchange for the Initial Securities pursuant to
the Registration Rights Agreement.
"Expiration Date" has the meaning set forth in the definition of
---------------
"Offer to Purchase" below.
"Fair Market Value" means, with respect to any asset, the price (after
-----------------
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for
<PAGE>
-8-
cash, between a willing seller and a willing and able buyer, neither of which is
under any compulsion to complete the transaction; provided, however, that the
Fair Market Value of any such asset or assets shall be determined conclusively
by the Board of Directors of the Company acting in good faith, and shall be
evidenced by a Board Resolution delivered to the Trustee.
"Final Maturity Date" means July 1, 2009.
-------------------
"Foreign Restricted Subsidiary" means a Restricted Subsidiary of the
-----------------------------
Company not organized under the laws of the United States or any political
subdivision thereof and the operations of which are located and conducted
substantially outside of the United States.
"Four Quarter Period" has the meaning set forth in the definition of
-------------------
"Consolidated Coverage Ratio" above.
"Funding Guarantor" has the meaning provided in Section 11.05.
-----------------
"GAAP" means generally accepted accounting principles in effect in the
----
United States on the date hereof and which are consistently applied for all
applicable periods.
"Global Securities" means one or more 144A Global Securities,
-----------------
Regulation S Global Securities or IAI Global Securities.
"Gray Common Stock" means common stock of the Company owned by Robert
-----------------
E. Gray, Marie Gray or Kelly A. Gray.
"guarantee" means, as applied to any obligation, (i) a guarantee
---------
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantee" has the meaning provided in Section 11.01.
---------
"Guarantor" means (i) each Domestic Restricted Subsidiary (other than
---------
a Receivables Entity) in existence on the Issue Date, and (ii) each other
Restricted Subsidiary, formed, created or acquired before or after the Issue
Date, required to become a Guarantor after the Issue Date pursuant to Section
4.17.
"Guarantor Blockage Period" has the meaning provided in Section
-------------------------
12.02(a).
"Guarantor Payment Blockage Notice" has the meaning provided in
---------------------------------
Section 12.02(a).
"Guarantor Senior Indebtedness" means, with respect to any Guarantor,
-----------------------------
at any date, (a) all Obligations of such Guarantor under or in respect of the
Credit Facility; (b) all Hedging Obligations of such Guarantor; (c) all
Obligations of such Guarantor under stand-by letters of credit; and (d) all
other Indebtedness of such Guarantor for borrowed money, including principal,
premium, if any, and interest (including Post-Petition Interest) on such
Indebtedness unless the instrument under which such Indebtedness of such
Guarantor for money borrowed is Incurred expressly provides that such
Indebtedness for money borrowed is
<PAGE>
-9-
not senior or superior in right of payment to such Guarantor's Guarantee of the
Notes, and all renewals, extensions, modifications, amendments or refinancings
thereof. Notwithstanding the foregoing, Guarantor Senior Indebtedness shall not
include (a) to the extent that it may constitute Indebtedness, any Obligation
for Federal, state, local or other taxes; (b) any Indebtedness among or between
such Guarantor and any Subsidiary of such Guarantor or any Affiliate of such
Guarantor or any of such Affiliate's Subsidiaries; unless, and for so long as
such Indebtedness has been pledged to secure obligations under or in respect of
Guarantor Senior Indebtedness; (c) to the extent that it may constitute
Indebtedness, any Obligation in respect of any trade payable Incurred for the
purchase of goods or materials, or for services obtained, in the ordinary course
of business; (d) that portion of any Indebtedness that is Incurred in violation
of the Indenture; (e) Indebtedness evidenced by such Guarantor's Guarantee of
the Notes; (f) Indebtedness of such Guarantor that is expressly subordinate or
junior in right of payment to any other Indebtedness of such Guarantor; (g) to
the extent that it may constitute Indebtedness, any obligation owing under
leases (other than Capitalized Lease Obligations) or management agreements; (h)
any obligation that by operation of law is subordinate to any general unsecured
obligations of such Guarantor; and (i) Indebtedness of a Guarantor to the extent
such Indebtedness is owed to and held by any Federal, state, local or other
governmental authority.
"Guarantor Senior Subordinated Indebtedness" means the Guarantees and
------------------------------------------
any other Indebtedness of a Guarantor that specifically provides that such
Indebtedness is to rank pari passu in right of payment with the Guarantees and
is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of the Guarantor other than Guarantor Senior Indebtedness.
"Hedging Agreement" means, with respect to any Person, all interest
-----------------
rate swap or similar agreements or foreign currency or commodity hedge, exchange
or similar agreements of such Person.
"Hedging Obligations" means, with respect to any Person, the
-------------------
Obligations of such Person under Hedging Agreements.
"Holders" means the registered holders of the Securities.
-------
"IAI Global Security" means a permanent global security in registered
-------------------
form representing the aggregate principal amount of Securities transferred after
the Issue Date to Institutional Accredited Investors.
"Incur" means, with respect to any Indebtedness or other obligation of
-----
any Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
---------- -------- ---------
correlative to the foregoing). Indebtedness of any Acquired Person or any of
its Subsidiaries existing at the time such Acquired Person becomes a Restricted
Subsidiary (or is merged into or consolidated with the Company or any Restricted
Subsidiary), whether or not such Indebtedness was Incurred in connection with,
as a result of, or in contemplation of, such Acquired Person becoming a
Restricted Subsidiary (or being merged into or consolidated with the Company or
any Restricted Subsidiary), shall be deemed Incurred at the time any such
Acquired Person becomes a Restricted Subsidiary or merges into or consolidates
with the Company or any Restricted Subsidiary.
"Indebtedness" means (without duplication), with respect to any
------------
Person, whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (a) every obligation of such Person for money
borrowed; (b) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or
<PAGE>
-10-
businesses; (c) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such Person; (d) every obligation of such Person issued or assumed as
the deferred purchase price of property or services (but excluding trade
accounts payable Incurred in the ordinary course of business and payable in
accordance with industry practices, or other accrued liabilities arising in the
ordinary course of business which are not overdue or which are being contested
in good faith); (e) every Capital Lease Obligation of such Person; (f) every net
obligation under Hedging Agreements of such Person; (g) every obligation of the
type referred to in clauses (a) through (f) of another Person and all dividends
of another Person the payment of which, in either case, such Person has
guaranteed or is responsible or liable for, directly or indirectly, as obligor,
guarantor or otherwise; and (h) any and all deferrals, renewals, extensions and
refundings of, or amendments, modifications or supplements to, any liability of
the kind described in any of the preceding clauses (a) through (g) above.
Indebtedness (a) shall never be calculated taking into account any cash and cash
equivalents held by such Person; (b) shall not include obligations of any Person
(x) arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument inadvertently drawn against insufficient
funds in the ordinary course of business, provided that such obligations are
extinguished within two Business Days of their incurrence, (y) resulting from
the endorsement of negotiable instruments for collection in the ordinary course
of business and consistent with past business practices and (z) under stand-by
letters of credit to the extent collateralized by cash or Cash Equivalents; (c)
which provides that an amount less than the principal amount thereof shall be
due upon any declaration of acceleration thereof shall be deemed to be Incurred
or outstanding in an amount equal to the accreted value thereof at the date of
determination; and (d) shall include the liquidation preference and any
mandatory redemption payment obligations in respect of any Disqualified Equity
Interests of the Company or any Restricted Subsidiary.
"Indenture" means this Indenture, as amended or supplemented from time
---------
to time.
"Independent Financial Advisor" means a nationally recognized,
-----------------------------
accounting, appraisal, investment banking firm or consultant which, in the
judgment of the Board of Directors of the Company, is independent and qualified
to perform the task for which it is to be engaged.
"Initial Purchasers" means Chase Securities Inc., Bear, Stearns & Co.
------------------
Inc. and PaineWebber Incorporated.
"Initial Securities" means the 12 1/2% Senior Subordinated Notes due
------------------
2009, Series A, of the Company.
"Insolvency or Liquidation Proceeding" means, with respect to any
------------------------------------
Person, any liquidation, dissolution or winding up of such Person, or any
bankruptcy, reorganization, insolvency, receivership or similar proceeding with
respect to such Person, whether voluntary or involuntary.
"Institutional Accredited Investor" means an institution that is an
---------------------------------
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"interest" means, with respect to the Securities, the sum of any cash
--------
interest and any Liquidated Damages (as defined in the Registration Rights
Agreement) on the Securities.
"Interest Payment Date" means each semiannual interest payment date on
---------------------
January 1 and July 1 of each year, commencing January 1, 2000.
<PAGE>
-11-
"Interest Record Date" for the interest payable on any Interest
--------------------
Payment Date (except a date for payment of defaulted interest) means the
December 15 or June 15 (whether or not a Business Day), as the case may be,
immediately preceding such Interest Payment Date.
"Investment" means, with respect to any Person, any direct or indirect
----------
loan, advance, guarantee or other extension of credit or capital contribution to
(by means of transfers of cash or other property or assets to others or payments
for property or services for the account or use of others, or otherwise), or
purchase or acquisition of capital stock, bonds, notes, debentures or other
securities or evidences of Indebtedness issued by, any other Person: provided
that (i) endorsements of negotiable instruments and documents in the ordinary
course of business and (ii) an acquisition of assets, Equity Interests or other
securities by the Company for consideration consisting exclusively of Equity
Interests (other than Disqualified Equity Interests) of the Company shall in
each case not be deemed to be an Investment. For purposes of Section 4.06, (i)
"Investment" shall include the applicable Designation Amount at the time of the
Designation of any Restricted Subsidiary as an Unrestricted Subsidiary and (ii)
the amount of any Investment shall be the original cost of such Investment, plus
the cost of all additions thereto, but without any other adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment; reduced by the payment of dividends or distributions
in connection with such Investment or any other amounts received in respect of
such Investment; provided, however, that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. If the Company or any
Restricted Subsidiary sells or otherwise disposes of any Voting Equity Interests
of any direct or indirect Restricted Subsidiary such that, after giving effect
to any such sale or disposition, the Company no longer owns, directly or
indirectly, greater than 50% of the outstanding Voting Equity Interests of such
Restricted Subsidiary, the Company shall be deemed to have made an Investment on
the date of any such sale or disposition.
"Issue Date" means the original issue date of the Securities, July 7,
----------
1999.
"Lien" means any lien, mortgage, charge, security interest,
----
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof and any agreement to give any security interest).
"Liquidated Damages" has the meaning provided in Section 4(a) of the
------------------
Registration Rights Agreement.
"Management Agreement" means the management agreement dated as of the
--------------------
Issue Date between the Company and Vestar.
"Maturity Date" means the date, which is set forth on the face of the
-------------
Securities, on which the Securities will mature.
"Net Cash Proceeds" means the aggregate proceeds in the form of cash
-----------------
or Cash Equivalents received by the Company or any Restricted Subsidiary in
respect of any Asset Sale, including all cash or Cash Equivalents received upon
any sale, liquidation or other exchange of proceeds of Asset Sales received in a
form other than cash or Cash Equivalents, net of (a) the direct costs relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof; (b) taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements); (c) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale;
<PAGE>
-12-
(d) amounts deemed, in good faith, appropriate by the Board of Directors of the
Company to be provided as a reserve, in accordance with GAAP, against any
liabilities associated with such assets which are the subject of such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an officer's certificate delivered to the Trustee (provided that
the amount of any such reserves shall be deemed to constitute Net Cash Proceeds
at the time such reserves shall have been reversed or are not otherwise required
to be retained as a reserve); and (e) with respect to Asset Sales by Restricted
Subsidiaries, the portion of such cash payments attributable to Persons holding
a minority interest in such Restricted Subsidiary.
"Obligations" means any principal, interest (including, without
-----------
limitation, Post-Petition Interest), penalties, fees, indemnification
obligations, reimbursement obligations, obligations to provide cash collateral,
damages and other liabilities payable under the documentation governing any
Indebtedness.
"Offer" has the meaning set forth in the definition of "Offer to
-----
Purchase" below.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
----------------- -----
behalf of the Company by first-class mail, postage prepaid, to each Holder at
his address appearing in the register for the Securities on the date of the
Offer offering to purchase up to the principal amount of Securities specified in
such Offer at the purchase price specified in such Offer (as determined pursuant
to this Indenture if so required). Unless otherwise required by applicable law,
the Offer shall specify an expiration date (the "Expiration Date") of the Offer
---------------
to Purchase, which shall be not less than 20 Business Days nor more than 60 days
after the date of such Offer, and a settlement date (the "Purchase Date") for
-------------
purchase of Securities to occur no later than five Business Days after the
Expiration Date. The Company shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing of
the Offer of the Company's obligation to make an Offer to Purchase, and the
Offer shall be mailed by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. The Offer shall contain
all the information required by applicable law to be included therein. The
Offer shall contain all instructions and materials necessary to enable such
Holders to tender Securities pursuant to the Offer to Purchase. The Offer shall
also state: (1) the Section of this Indenture pursuant to which the Offer to
Purchase is being made; (2) the Expiration Date and the Purchase Date; (3) the
aggregate principal amount of the outstanding Securities offered to be purchased
by the Company pursuant to the Offer to Purchase (including, if less than 100%,
the manner by which such amount has been determined pursuant to the Section of
this Indenture requiring the Offer to Purchase) (the "Purchase Amount"); (4) the
---------------
purchase price to be paid by the Company for each $1,000 aggregate principal
amount of Securities accepted for payment (as specified pursuant to this
Indenture) (the "Purchase Price"); (5) that the Holder may tender all or any
--------------
portion of the Securities registered in the name of such Holder and that any
portion of a Security tendered must be tendered in an integral multiple of
$1,000 principal amount; (6) the place or places where Securities are to be
surrendered for tender pursuant to the Offer to Purchase; (7) that interest on
any Security not tendered or tendered but not purchased by the Company pursuant
to the Offer to Purchase will continue to accrue; (8) that on the Purchase Date
the Purchase Price will become due and payable upon each Security being accepted
for payment pursuant to the Offer to Purchase and that interest thereon shall
cease to accrue on and after the Purchase Date; (9) that each Holder electing to
tender all or any portion of a Security pursuant to the Offer to Purchase will
be required to surrender such Security at the place or places specified in the
Offer prior to the close of business on the Expiration Date (such Security
being, if the Company or the Trustee so requires, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing); (10) that (a) if Securities in an aggregate
principal amount less than or equal to the Purchase Amount are duly tendered and
not withdrawn pursuant to the Offer to Purchase, the Company shall pur-
<PAGE>
-13-
chase all such Securities and (b) if Securities in an aggregate principal amount
in excess of the Purchase Amount are tendered and not withdrawn pursuant to the
Offer to Purchase, the Company shall purchase Securities having an aggregate
principal amount equal to the Purchase Amount on a pro rata basis (with such
adjustments as may be deemed appropriate so that only Securities in
denominations of $1,000 principal amount or integral multiples thereof shall be
purchased); and (11) that in the case of any Holder whose Security is purchased
only in part, the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, in an
aggregate principal amount equal to and in exchange for the unpurchased portion
of the Security so tendered.
An Offer to Purchase shall be governed by and effected in accordance
with the provisions above pertaining to any Offer.
"Officer" means the Chairman, any Vice Chairman, the President, any
-------
Vice President, the Chief Financial Officer, the Treasurer, or the Secretary of
the Company.
"Officers' Certificate" means a certificate signed by two Officers or
---------------------
by an Officer and an Assistant Treasurer or Assistant Secretary of the Company
complying with Sections 13.04 and 13.05.
"144A Global Security" means a permanent global security in registered
--------------------
form representing the aggregate principal amount of Securities sold in reliance
on Rule 144A.
"Opinion of Counsel" means a written opinion delivered to the Trustee
------------------
from legal counsel who is reasonably acceptable to the Trustee. The counsel may
be an employee of or counsel to the Company, Vestar or the Trustee.
"Participant" has the meaning provided in Section 2.15.
-----------
"Paying Agent" has the meaning provided in Section 2.03.
------------
"Payment Blockage Notice" has the meaning provided in Section 8.02(a).
-----------------------
"Payment Blockage Period" has the meaning provided in Section 8.02(a).
-----------------------
"Permitted Business" means the business of the Company and its
------------------
Restricted Subsidiaries conducted on the Issue Date and businesses ancillary or
reasonably related thereto, including businesses whose principal strategy is to
capitalize on the image of the Company and its products.
"Permitted Holder" means Vestar and its Affiliates.
----------------
"Permitted Indebtedness" has the meaning provided in Section 4.04.
----------------------
"Permitted Investments" means (a) Cash and Cash Equivalents; (b)
---------------------
Investments in prepaid expenses, negotiable instruments held for collection and
lease, utility and workers' compensation, performance and other similar
deposits; (c) Hedging Obligations; (d) bonds, notes, debentures, stock or other
securities received as a result of Asset Sales permitted under Section 4.05; (e)
Investments in the Company and Investments in a Guarantor or a Person that, as a
result of or in connection with such Investment, becomes a Guarantor or is
merged with or into or consolidated with the Company or another Guarantor or
that transfers or
<PAGE>
-14-
conveys all or substantially all its assets to the Company or a Guarantor, (f)
Investments existing as of the Issue Date; (g) any Investment consisting of a
guarantee by a Restricted Subsidiary of Senior Indebtedness or any guarantee of
Indebtedness otherwise permitted by the Indenture: (h) receivables owing to the
Company or any Restricted Subsidiary created or acquired in the ordinary course
of business and payable or dischargeable in accordance with customary trade
terms, provided, however, that such trade terms may include such concessionary
trade terms as the Company or any such Restricted Subsidiary deems reasonable
under the circumstances; (i) 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; (j) Investments in joint ventures in an aggregate amount not to exceed
$5.0 million; (k) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary or in satisfaction of judgments or pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of a
debtor; (1) Investments by the Company or a Restricted Subsidiary in a
Receivables Entity or any Investment by a Receivables Entity in any other
Person, in each case, in connection with a Qualified Receivables Transaction;
(m) Indebtedness permitted pursuant to clause (m) of Section 4.04; (n)
Investments by the Company or a Restricted Subsidiary in St. John Company, Ltd.
for the purpose of purchasing minority interests therein in an aggregate amount
not to exceed $1.5 million and (o) Investments in Foreign Restricted
Subsidiaries which are not Guarantors in an aggregate amount not to exceed $10.0
million.
"Permitted Junior Securities" means any securities of the Company or
---------------------------
any other Person that are (i) equity securities without special covenants or
(ii) debt securities expressly subordinated in right of payment to all Senior
Indebtedness that may at the time be outstanding, to substantially the same
extent as, or to a greater extent than, the Securities are subordinated as
provided in this Indenture, in any event pursuant to a court order so providing
and as to which (a) the rate of interest on such securities shall not exceed the
effective rate of interest on the Securities on the date of this Indenture, (b)
such securities shall not be entitled to the benefits of covenants or defaults
materially more beneficial to the holders of such securities than those in
effect with respect to the Securities on the date of this Indenture and (c) such
securities shall not provide for amortization (including sinking fund and
mandatory prepayment provisions) commencing prior to the date six months
following the final scheduled maturity date of the Senior Indebtedness (as
modified by the plan of reorganization pursuant to which such securities are
issued).
"Permitted Liens" means (a) Liens on property of a Person existing at
---------------
the time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not secure any
property or assets of the Company or any Restricted Subsidiary other than the
property or assets subject to the Liens prior to such merger or consolidation;
(b) Liens imposed by law such as carriers', warehousemen's and mechanics' Liens
and other similar Liens arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due or which are being
contested in good faith and by appropriate proceedings; (c) Liens existing on
the Issue Date; (d) Liens securing only the Securities or the Guarantees; (e)
Liens in favor of the Company or any Restricted Subsidiary (including any such
Liens securing Indebtedness to the extent and for so long as such Indebtedness
is pledged to secure Senior Indebtedness or Guarantor Senior Indebtedness, as
the case may be); (f) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted; provided,
however, that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (g) easements, reservation
of rights of way, restrictions and other similar easements, licenses,
restrictions on the use of properties, or minor imperfections of title that in
the aggregate do not in any case materially detract from the properties subject
thereto or interfere with the ordinary conduct of the business of the Company
and the Restricted Subsidiaries; (h) Liens re
<PAGE>
-15-
sulting from the deposit of cash or notes in connection with contracts, tenders
or expropriation proceedings, or to secure workers' compensation, surety or
appeal bonds, costs of litigation when required by law and public and statutory
obligations or obligations under franchise arrangements entered into in the
ordinary course of business; (i) Liens securing Indebtedness consisting of
Capital Lease Obligations, Purchase Money Indebtedness, mortgage financings,
industrial revenue bonds or other monetary obligations, in each case incurred
solely for the purpose of financing all or any part of the purchase price or
cost of construction or installation of assets used in the business of the
Company or the Restricted Subsidiaries, or repairs, additions or improvements to
such assets; provided, however, that (I) such Liens secure Indebtedness in an
amount not in excess of the original purchase price or the original cost of any
such assets or repair, addition or improvement thereto (plus an amount equal to
the reasonable fees and expenses in connection with the incurrence of such
Indebtedness), (II) such Liens do not extend to any other assets of the Company
or the Restricted Subsidiaries (and, in the case of repair, addition or
improvements to any such assets, such Lien extends only to the assets (and
improvements thereto or thereon) repaired, added to or improved), (III) the
Incurrence of such Indebtedness is permitted by Section 4.04, and (IV) such
Liens attach within 90 days of such purchase, construction, installation,
repair, addition or improvement; (j) Liens in favor of issuers of surety or
performance bonds or letters of credit or bankers' acceptances issued pursuant
to the request of and for the account of such Person in the ordinary course of
its business; provided, however, that such letters of credit do not constitute
Indebtedness; (k) Liens securing Hedging Obligations so long as the related
Indebtedness is, and is permitted to be under the Indenture, secured by a Lien
on the same property securing such Hedging Obligation; (1) leases and subleases
of real property which do not materially interfere with the ordinary conduct of
the business of the Company or any of its Restricted Subsidiaries; (m) 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 have not been finally terminated or the period
within which such proceedings may be initiated has not expired; (n) Liens
arising solely by virtue of any statutory or common law provisions relating to
banker's Liens, rights of set-off or similar rights and remedies as to deposit
accounts or other funds maintained with a depositary institution; provided that
(1) such deposit account is not a dedicated cash collateral account and is not
subject to restrictions against access by the Company in excess of those set
forth by regulations promulgated by the Federal Reserve Board, and (2) such
deposit account is not intended by the Company or any Restricted Subsidiary to
provide collateral to the depositary institution; (o) Liens arising from Uniform
Commercial Code financing statement filings regarding operating leases entered
into by the Company and its Restricted Subsidiaries in the ordinary course of
business; (p) Liens on property at the time the Company or a Restricted
Subsidiary acquired the property, including any acquisition by means of a merger
or consolidation with or into the Company or any Restricted Subsidiary;
provided, however, that such Liens are not created, incurred or assumed in
connection with or in contemplation of, such acquisition; provided, further,
however, that such Liens may not extend to any other property owned by the
Company or any Restricted Subsidiary; (q) Liens securing Indebtedness or other
obligations of a Restricted Subsidiary owing to the Company or a Restricted
Subsidiary; (r) Liens on assets transferred to a Receivables Entity or on assets
of a Receivables Entity, in either case incurred in connection with a Qualified
Receivables Transaction; (s) Liens arising out of consignment or similar
arrangements for the sale of goods entered into by the Company or any Restricted
Subsidiary in the ordinary course of business; (t) Liens incurred in the
ordinary course of business of the Company or any Restricted Subsidiary with
respect to obligations that do not exceed $5.0 million at any one time
outstanding and that (1) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (2) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Restricted Subsidiary; and (u)
Liens to secure any refinancings, renewals, extensions, modifications or
replacements (collectively, "refinancing") (or successive refinancings), in
whole or in part, of any Indebtedness secured by Liens referred to in the
clauses above so long as such Lien does not extend to any other property (other
than improvements thereto).
<PAGE>
-16-
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, limited liability company, limited
liability limited partnership, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Physical Securities" means one or more certificated Securities in
-------------------
registered form.
"Post-Petition Interest" means, with respect to any Indebtedness of
----------------------
any Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding with respect to such
Person in accordance with and at the contract rate (including, without
limitation, any rate applicable upon default) specified in the agreement or
instrument creating, evidencing or governing such Indebtedness, whether or not,
pursuant to applicable law or otherwise, the claim for such interest is allowed
or allowable as a claim in such Insolvency or Liquidation Proceeding.
"Preferred Equity Interest", in any Person, means an Equity Interest
-------------------------
of any class or classes (however designated) which is preferred as to the
payment of dividends or distributions, or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of such Person, over
Equity Interests of any other class in such Person.
"Preferred Stock" means the 15 1/2% preferred stock of the Company
---------------
issued on the Issue Date and any Qualified Equity Interest of the Company or a
Guarantor issued in exchange for or the net proceeds of which are used to redeem
the Preferred Stock.
"principal" of a debt security means the principal of the security
--------
plus, when appropriate, the premium, if any, on the security.
"Private Exchange Securities" have the meaning provided in Section
---------------------------
2(b) of the Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
------------------------
Initial Securities in the form set forth on Exhibit A hereto.
---------
"Public Equity Offering" means, with respect to the Company, an
----------------------
underwritten public offering of Qualified Equity Interests of the Company
pursuant to an effective registration statement filed under the Securities Act
(excluding registration statements filed on Form S-8).
"Purchase Agreement" means the Purchase Agreement dated June 30, 1999
------------------
by and among the Company, the Guarantors and the Initial Purchasers.
"Purchase Amount" has the meaning set forth in the definition of
---------------
"Offer to Purchase" above.
"Purchase Date" has the meaning set forth in the definition of "Offer
-------------
to Purchase" above.
"Purchase Money Indebtedness" means Indebtedness of the Company or any
---------------------------
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price, or the cost of construction or improvement of any property;
provided, however, that the aggregate principal amount of such Indebtedness does
not exceed the lesser of the Fair Market Value of such property or such purchase
price or cost, including any refinancing of such Indebtedness that does not
increase the aggregate principal amount (or accreted amount, if less) thereof as
of the date of refinancing.
<PAGE>
-17-
"Purchase Money Note" means a promissory note of a Receivables Entity
-------------------
evidencing a line of credit, which may be irrevocable, from the Company or any
Restricted Subsidiary of the Company in connection with a Qualified Receivables
Transaction to a Receivables Entity, which note is repayable from cash available
to the Receivables Entity, other than amounts required to be established as
reserves pursuant to agreements, amounts paid to investors in respect of
interest, principal and other amounts owing to such investors and amounts owing
to such investors and amounts paid in connection with the purchase of newly
generated accounts receivable.
"Purchase Price" has the meaning set forth in the definition of "Offer
--------------
to Purchase" above.
"Qualified Equity Interest" in any Person means any Equity Interest in
-------------------------
such Person other than any Disqualified Equity Interest.
"Qualified Institutional Buyer" or "QIB" means a "qualified
----------------------------- ---
institutional buyer" as that term is defined in Rule 144A under the Securities
Act.
"Qualified Receivables Transaction" means any transaction or series of
---------------------------------
transactions that may be entered into by the Company or any of its Restricted
Subsidiaries pursuant to which the Company or any of its Restricted Subsidiaries
may sell, convey or otherwise transfer to (1) a Receivables Entity (in the case
of a transfer by the Company or any of its Restricted Subsidiaries) and (2) any
other Person (in the case of a transfer by a Receivables Entity), or may grant a
security interest in, any accounts receivable (whether now existing or arising
in the future) of the Company or any of its Restricted Subsidiaries, and any
assets related thereto including, without limitation, all collateral securing
such accounts receivable, all contracts and all guarantees or other obligations
in respect of such accounts receivable, the proceeds of such receivables and
other assets which are customarily transferred, or in respect of which security
interests are customarily granted in connection with asset securitization
involving accounts receivable.
"Receivables Entity" means a Wholly Owned Restricted Subsidiary of the
------------------
Company (other than a Guarantor) which engages in no activities other than in
connection with the financing of accounts receivable and which is designated by
the Board of Directors of the Company (as provided below) as a Receivables
Entity:
(1) no portion of the Indebtedness or any other obligations
(contingent or otherwise) of which:
(a) is guaranteed by the Company or any Restricted Subsidiary of
the Company (excluding guarantees of Obligations (other than the
principal of, and interest on, Indebtedness) pursuant to Standard
Securitization Undertakings);
(b) is recourse to or obligates the Company or any Restricted
Subsidiary of the Company in any way other than pursuant to Standard
Securitization Undertakings; or
(c) subjects any property or asset of the Company or any
Restricted Subsidiary of the Company, directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than
pursuant to Standard Securitization Undertakings;
(2) with which neither the Company nor any Restricted Subsidiary of
the Company has any material contract, agreement, arrangement or
understanding (except in connection with a Pur-
<PAGE>
-18-
chase Money Note or Qualified Receivables Transaction) other than on terms
no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons that are not Affiliates of
the Company, other than fees payable in the ordinary course of business in
connection with servicing accounts receivable; and
(3) to which neither the Company nor any Restricted Subsidiary of the
Company has any obligation to maintain or preserve such entity's financial
condition or cause such entity to achieve certain levels of operating
results.
Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
resolution of the Board of Directors of the Company giving effect to such
designation and an officers' certificate certifying that such designation
complied with the foregoing conditions.
"Redemption Date," when used with respect to any Security to be
---------------
redeemed, means the date fixed for such redemption pursuant to this Indenture.
"redemption price," when used with respect to any Security to be
----------------
redeemed, means the price fixed for such redemption pursuant to this Indenture
as set forth in the form of Security annexed hereto as Exhibit A.
---------
"Registrar" has the meaning provided in Section 2.03.
---------
"Registration" means a registered exchange offer for the Securities by
------------
the Company or other registration of the Securities under the Securities Act
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement dated as of July 7, 1999 by and among the Company, the Guarantors and
the Initial Purchasers.
"Regulation S" means Regulation S under the Securities Act.
------------
"Regulation S Global Security" means a permanent global security in
----------------------------
registered form representing the aggregate principal amount of Securities sold
in reliance on Regulation S under the Securities Act.
"Replacement Assets" has the meaning provided in Section 4.05.
------------------
"Required Filing Dates" has the meaning provided in Section 4.11.
---------------------
"Restricted Investment" means any Investment other than a Permitted
---------------------
Investment.
"Restricted Payments" has the meaning provided in Section 4.06.
-------------------
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
-------------------
under the Securities Act; provided, however, that the Trustee shall be entitled
to request and conclusively rely upon an Opinion of Counsel with respect to
whether any Security is a Restricted Security.
<PAGE>
-19-
"Restricted Subsidiary" means any Subsidiary of the Company that has
---------------------
not been designated by the Board of Directors of the Company, by a Board
Resolution of the Company delivered to the Trustee, as an Unrestricted
Subsidiary pursuant to Section 4.15. Any such designation may be revoked by a
Board Resolution of the Company delivered to the Trustee, subject to the
provisions of Section 4.15.
"Revocation" has the meaning provided in Section 4.15.
----------
"Rule 144A" means Rule 144A under the Securities Act.
---------
"SEC" or "Commission" means the Securities and Exchange Commission.
--- ----------
"Securities" means, collectively, the Initial Securities, the Private
----------
Exchange Securities and the Unrestricted Securities treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated by the SEC thereunder.
"Securities Amount" has the meaning provided in Section 4.05.
-----------------
"Security Guarantee" means the Form of Security Guarantee of each
------------------
Guarantor to be endorsed on each of the Securities substantially in the form of
Exhibit A (in the case of an Initial Security) or Exhibit B (in the case of an
- --------- ---------
Exchange Security) hereto.
"Senior Indebtedness" means, at any date, (a) all Obligations of the
-------------------
Company under or in respect of the Credit Facility; (b) all Hedging Obligations
of the Company; (c) all Obligations of the Company under stand-by letters of
credit; and (d) all other Indebtedness of the Company for borrowed money,
including principal, premium, if any, and interest (including Post-Petition
Interest) on such Indebtedness, unless the instrument under which such
Indebtedness of the Company for money borrowed is Incurred expressly provides
that such Indebtedness for money borrowed is not senior or superior in right of
payment to the Securities, and all renewals, extensions, modifications,
amendments or refinancings thereof. Notwithstanding the foregoing, Senior
Indebtedness shall not include (a) to the extent that it may constitute
Indebtedness, any Obligation for Federal, state, local or other taxes; (b) any
Indebtedness among or between the Company and any Subsidiary of the Company or
any Affiliate of the Company or any of such Affiliate's Subsidiaries, unless and
for so long as such Indebtedness has been pledged to secure obligations under or
in respect of Senior Indebtedness; (c) to the extent that it may constitute
Indebtedness, any Obligation in respect of any trade payable Incurred for the
purchase of goods or materials, or for services obtained, in the ordinary course
of business; (d) that portion of any Indebtedness that is Incurred in violation
of the Indenture; (e) Indebtedness evidenced by the Securities; (f) Indebtedness
of the Company that is expressly subordinate or junior in right of payment to
any other Indebtedness of the Company; (g) to the extent that it may constitute
Indebtedness, any obligation owing under leases (other than Capitalized Lease
Obligations) or management agreements; (h) any obligation that by operation of
law is subordinate to any general unsecured obligations of the Company; and (i)
Indebtedness of the Company to the extent such Indebtedness is owed to and held
by any Federal, state, local or other governmental authority.
"Senior Subordinated Indebtedness" means the Securities and any other
--------------------------------
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu in right of payment with the
<PAGE>
-20-
Securities and is not subordinated by its terms in right of payment to any
Indebtedness or other obligation of the Company which is not Senior
Indebtedness.
"Shelf Registration Statement" has the meaning provided in Section
----------------------------
2(a) of the Registration Rights Agreement.
"Significant Restricted Subsidiary" means any Restricted Subsidiary
---------------------------------
that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X promulgated pursuant to the Securities Act, as such regulation is
in effect on the date hereof.
"Standard Securitization Undertakings" means representations,
------------------------------------
warranties, covenants and indemnities entered into by the Company or any
Restricted Subsidiary of the Company which are reasonably customary in
securitization of accounts receivable transactions.
"Stated Maturity" means, when used with respect to any Security or any
---------------
installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Stockholders' Agreement" means the Stockholders' Agreement among St.
-----------------------
John Knits, Inc., the Company, Vestar/Gray Investors LLC, Vestar/SJK Investors
LLC and the members of Vestor/Gray Investors LLC party thereto dated as of, and
as in effect on, the Issue Date.
"Subordinated Indebtedness" means, with respect to the Company or any
-------------------------
Guarantor, any Indebtedness of the Company or such Guarantor, as the case may
be, which is expressly subordinated in right of payment to the Securities.
"Subsidiary" means, with respect to any Person, (a) any corporation of
----------
which the outstanding Voting Equity Interests having at least a majority of the
votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, through one or more Persons by such Person, or
(b) any other Person of which at least a majority of Voting Equity Interests are
at the time, directly or indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in or
----------------
that makes any Disposition, the Person formed by or surviving such Disposition
or the Person to which such Disposition is made.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
---
77aaa-77bbbb), as amended, as in effect on the date of this Indenture (except as
provided in Section 10.03) until such time as this Indenture is qualified under
the TIA, and thereafter as in effect on the date on which this Indenture is
qualified under the TIA.
"Transactions" means the mergers to be consummated on or about the
------------
Issue Date relating to the purchase of the equity of St. John Knits, Inc. and
the financings related thereto.
"Trust Officer" means any officer within the corporate trust
-------------
department (or any successor group of the Trustee) including any vice president,
assistant vice president, assistant secretary, assistant treasurer, trust
officer or any other officer of the Trustee customarily performing functions
similar to those performed by the persons who at that time shall be such
officers, and also means, with respect to a particular cor-
<PAGE>
-21-
porate trust matter, any other officer to whom such trust matter is referred
because of his knowledge of and familiarity with the particular subject.
"Trustee" means the party named as such in the first paragraph of this
-------
Indenture until a successor replaces it in accordance with the provisions of
this Indenture and thereafter means such successor.
"United States Government Obligations" means direct non-callable
------------------------------------
obligations of the United States of America for the payment of which the full
faith and credit of the United States is pledged.
"Unrestricted Securities" means one or more Securities that do not and
-----------------------
are not required to bear the Private Placement Legend in the form set forth in
Exhibit A hereto, including, without limitation, the Exchange Securities and any
- ---------
Securities registered under the Securities Act pursuant to and in accordance
with the Registration Rights Agreement.
"Unrestricted Subsidiary" means any Subsidiary of the Company
-----------------------
designated as such pursuant to Section 4.15. Any such designation may be
revoked by a Board Resolution of the Company delivered to the Trustee, subject
to the provisions of Section 4.15.
"Unutilized Net Cash Proceeds" has the meaning provided in Section
----------------------------
4.05(a).
"Vestar" means Vestar Capital Partners III, L.P.
------
"Vestar/Gray LLC Agreement" means the Amended and Restated Limited
-------------------------
Liability Company Agreement of Vestar/Gray Investors LLC, by and among
Vestar/SJK Investors LLC, Robert Gray, Marie Gray, Kelly A. Gray, the Kelly Ann
Gray Trust and the Gray Family Trust dated as of, and as in effect on, the Issue
Date.
"Voting Equity Interests" means Equity Interests in a corporation or
-----------------------
other Person with voting power under ordinary circumstances entitling the
holders thereof to elect the Board of Directors or other governing body of such
corporation or Person.
"Weighted Average Life to Maturity" means, when applied to any
---------------------------------
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
----------------------------------
all of the outstanding Voting Equity Interests (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company and/or one or
more Wholly Owned Restricted Subsidiaries.
SECTION 1.02. 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:
<PAGE>
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"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the 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 and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in effect
from time to time, and any other reference in this Indenture to "generally
accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Initial Securities and the Trustee's certificate of authentication
thereof shall be substantially in the form of Exhibit A hereto, which is hereby
---------
incorporated in and expressly made a part of this Indenture. The Exchange
Securities and the Trustee's certificate of authentication thereof shall be
substantially
<PAGE>
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in the form of Exhibit B hereto, which is hereby incorporated in and expressly
---------
made a part of this Indenture. The Securities may have notations, legends or
endorsements (including the Security Guarantee) required by law, stock exchange
rule or usage. The Company and the Trustee shall approve the form of the
Securities and any notation, legend or endorsement (including the Security
Guarantee) on them. Each Security shall be dated the date of its issuance and
shall show the date of its authentication.
Securities offered and sold in reliance on Rule 144A and Securities
offered and sold in reliance on Regulation S shall be issued initially in the
form of one or more Global Securities, substantially in the form set forth in
Exhibit A hereto, deposited with the Trustee, as custodian for the Depository,
- ---------
duly executed by the Company and authenticated by the Trustee as hereinafter
provided with the Guarantees of the Guarantors endorsed thereon and shall bear
the legend set forth in Exhibit C hereto. The aggregate principal amount of the
---------
Global Securities may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depository, as
hereinafter provided. Securities issued in exchange for interests in a
Global Security pursuant to Section 2.16 may be issued in the form of Physical
Securities in substantially the form set forth in Exhibit A.
---------
SECTION 2.02. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by manual or facsimile
signature.
If an Officer or an Assistant Secretary whose signature is on a
Security was an Officer or an Assistant Secretary, as the case may be, at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Securities for original
issue in an aggregate principal amount not to exceed $100,000,000, (ii) Private
Exchange Securities from time to time only in exchange for a like principal
amount of Initial Securities and (iii) Unrestricted Securities from time to time
only in exchange for (A) a like principal amount of Initial Securities or (B) a
like principal amount of Private Exchange Securities, in each case upon a
written order of the Company to be signed by an Officer of the Company. Each
such written order shall specify the amount of Securities to be authenticated
and the date on which the Securities are to be authenticated, whether the
Securities are to be Initial Securities, Private Exchange Securities or
Unrestricted Securities and whether the Securities are to be issued as Physical
Securities or Global Securities and such other information as the Trustee may
reasonably request. The aggregate principal amount of Securities outstanding at
any time may not exceed $100,000,000, except as provided in Sections 2.07 and
2.08.
Notwithstanding the foregoing, all Securities issued under this
Indenture shall vote and consent together on all matters (as to which any of
such Securities may vote or consent) as one class and no series of Securities
will have the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
<PAGE>
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Trustee includes authentication by such agent. An authenticating agent shall
have the same rights as an Agent to deal with the Company and Affiliates of the
Company.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency, which shall be in the
Borough of Manhattan, The City of New York, where (a) Securities may be
presented or surrendered for registration of transfer or for exchange (the
"Registrar"), (b) Securities may be presented or surrendered for payment (the
- ----------
"Paying Agent") and (c) notices and demands in respect of the Securities and
- -------------
this Indenture may be served. The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company, upon notice to the
Trustee, may appoint one or more co-Registrars and one or more additional Paying
Agents. The term "Paying Agent" includes any additional Paying Agent. Except as
provided herein, the Company or any Guarantor may act as Paying Agent, Registrar
or co-Registrar.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.
The Company initially appoints the Trustee as Registrar and Paying
Agent until such time as the Trustee has resigned or a successor has been
appointed.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, or interest on, the Securities, and shall notify the Trustee of
any Default by the Company in making any such payment. The Company at any time
may require a Paying Agent to distribute all assets held by it to the Trustee
and account for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Company to the Paying Agent (if
other than the Company), the Paying Agent shall have no further liability for
such assets. If the Company, any Guarantor or any of their respective
Affiliates acts as Paying Agent, it shall, on or before each due date of the
principal of or interest on the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee of
its action or failure so to act.
SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company
<PAGE>
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shall furnish to the Trustee before each Interest Record Date and at such other
times as the Trustee may request in writing a list as of such date and in such
form as the Trustee may reasonably require of the names and addresses of
Holders, which list may be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when Securities
are presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations of the same
series, the Registrar or co-Registrar shall register the transfer or make the
exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's or co-Registrar's
written request. No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or other governmental charge
payable upon exchanges or transfers pursuant to Section 2.02, 2.10, 3.06, 4.05,
4.12, or 10.05). The Registrar or co-Registrar shall not be required to register
the transfer or exchange of any Security (i) during a period beginning at the
opening of business 15 days before the mailing of a notice of redemption of
Securities and ending at the close of business on the day of such mailing and
(ii) selected for redemption in whole or in part pursuant to Article Three
hereof, except the unredeemed portion of any Security being redeemed in part.
Prior to the registration of any transfer by a Holder as provided
herein, the Company, the Trustee and any Agent of the Company shall treat the
person in whose name the Security is registered as the owner thereof for all
purposes whether or not the Security shall be overdue, and neither the Company,
the Trustee nor any such Agent shall be affected by notice to the contrary. Any
Holder of a beneficial interest in a Global Security shall, by acceptance of
such beneficial interest in a Global Security, agree that transfers of
beneficial interests in such Global Security may be effected only through a
book-entry system maintained by the Depository (or its agent), and that
ownership of a beneficial interest in a Global Security shall be required to be
reflected in a book entry.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements for replacement of Securities are met.
Such Holder must provide an indemnity bond or other indemnity, sufficient in the
judgment of both the Company and the Trustee, to protect the Company, the
Trustee and any Agent from any loss which any of them may suffer if a Security
is replaced. The Company may charge such Holder for its reasonable out-of-
pocket expenses in replacing a Security, including reasonable fees and expenses
of counsel.
Every replacement Security is an additional obligation of the Company.
<PAGE>
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SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those canceled by it, those delivered
to it for cancellation and those described in this Section 2.08 as not
outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless a Trust Officer of the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser. A mutilated Security ceases
to be outstanding upon surrender of such Security and replacement thereof
pursuant to Section 2.07.
If on a Redemption Date, Purchase Date or the Final Maturity Date the
Paying Agent holds money sufficient to pay all of the principal and interest due
on the Securities payable on that date, and is not prohibited from paying such
money to the Holders pursuant to the terms of this Indenture, then on and after
that date such Securities cease to be outstanding and interest on them ceases to
accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, the Guarantors or any of their respective Affiliates shall be
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities that a Trust Officer of the Trustee actually knows are so owned shall
be disregarded.
The Company shall notify the Trustee, in writing, when it, any
Guarantor or any of its Affiliates repurchases or otherwise acquires Securities,
of the aggregate principal amount of such Securities so repurchased or otherwise
acquired.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon receipt of
a written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Securities to be
authenticated and the date on which the temporary Securities are to be
authenticated.
Temporary Securities shall be substantially in the form of definitive
Securities but may have variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate upon receipt of a written order of the Company
pursuant to Section 2.02 definitive Securities in exchange for temporary
Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel, and at the written direction of the Company,
dispose of and deliver evidence of such disposal of the Securities in accordance
with its customary procedures. Subject to Section 2.07, the Company
<PAGE>
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may not issue new Securities to replace Securities that it has paid or delivered
to the Trustee for cancellation. If the Company or any Guarantor shall acquire
any of the Securities, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Securities unless and until
the same are surrendered to the Trustee for cancellation pursuant to this
Section 2.11.
SECTION 2.12. Defaulted Interest.
The Company shall pay interest on overdue principal from time to time
on demand at the rate of interest then borne by the Securities. The Company
shall, to the extent lawful, pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the rate of interest then borne by the Securities.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which date shall be the fifteenth day preceding the date
fixed by the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At least 15 days
before the subsequent special record date, the Company shall mail to each
Holder, with a copy to the Trustee, a notice that states the subsequent special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.
Notwithstanding the foregoing, any interest which is paid prior to the
expiration of the 30-day period set forth in Section 6.01(b) shall be paid to
Holders as of the Interest Record Date for the Interest Payment Date for which
interest has not been paid.
SECTION 2.13. CUSIP Number.
The Company in issuing the Securities will use a "CUSIP" number and
the Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided , however, that any such notice may state that
no representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities. The Company
shall promptly notify the Trustee of any changes in CUSIP numbers.
SECTION 2.14. Deposit of Moneys.
Prior to 10:00 a.m. New York City time on each Interest Payment Date,
Redemption Date, Purchase Date and the Final Maturity Date, the Company shall
deposit with the Paying Agent in immediately available funds money sufficient to
make cash payments, if any, due on such Interest Payment Date, Redemption Date,
Purchase Date or Final Maturity Date, as the case may be, in a timely manner
which permits the Paying Agent to remit payment to the Holders on such Interest
Payment Date, Redemption Date, Purchase Date or Final Maturity Date, as the case
may be.
SECTION 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in Exhibit C.
---------
<PAGE>
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Members of, or participants in, the Depository ("Participants") shall
------------
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Security, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and Participants, the operation of customary practices governing the exercise of
the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depository and the provisions of Section 2.16; provided,
however, that Physical Securities shall be transferred to all beneficial owners
in exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for any Global Security and a successor Depository is not appointed
by the Company within 90 days of such notice, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Securities as Physical Securities or (iii) an Event of Default has occurred and
is continuing and the Registrar has received a request from the Depository to
issue Physical Securities.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Security to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Securities are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of such Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall upon written
instructions from the Company authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Securities, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(e) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to paragraph
(c) of this Section 2.15 shall, except as otherwise provided by Section 2.16,
bear the Private Placement Legend.
(f) The Holder of any Global Security may grant proxies and otherwise
authorize any Person, including Participants and Persons that may hold interests
through Participants, to take any action which a Holder is entitled to take
under this Indenture or the Securities and the Trustee is entitled to rely upon
any electronic instructions from beneficial owners to the Holder of any Global
Security.
SECTION 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When Physical
Securities are presented to the Registrar or co-Registrar with a request:
<PAGE>
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(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal principal
amount of Physical Securities of other authorized denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.16 for such transactions are met; provided, however, that the Physical
Securities presented or surrendered for registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing;
and
(II) in the case of Physical Securities the offer and sale of which
have not been registered under the Securities Act, such Physical Securities
shall be accompanied, in the sole discretion of the Company, by the
following additional information and documents, as applicable:
(A) if such Physical Security is being delivered to the Registrar or
co-Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to
that effect (substantially in the form of Exhibit D hereto); or
---------
(B) if such Physical Security is being transferred to a QIB in
accordance with Rule 144A, a certification to that effect
(substantially in the form of Exhibit D hereto); or
---------
(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a certification to
that effect (substantially in the form of Exhibit D hereto) and a
---------
transferee letter of representation (substantially in the form of
Exhibit E) hereto and, at the option of the Company, an Opinion
---------
of Counsel reasonably satisfactory to the Company to the effect
that such transfer is in compliance with the Securities Act; or
(D) if such Physical Security is being transferred in reliance on
Regulation S, delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and a transferor
---------
certificate for Regulation S transfers substantially in the form
of Exhibit F hereto and, at the option of the Company, an Opinion
---------
of Counsel reasonably satisfactory to the Company to the effect
that such transfer is in compliance with the Securities Act; or
(E) if such Physical Security is being transferred in reliance on
Rule 144 under the Securities Act, delivery of a certification to
that effect (substantially in the form of Exhibit D hereto) and,
-------
at the option of the Company, an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer is
in compliance with the Securities Act; or
(F) if such Physical Security is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect (substantially in
the form of Exhibit D hereto) and, at the option of the Company,
---------
an
<PAGE>
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Opinion of Counsel reasonably acceptable to the Company to the
effect that such transfer is in compliance with the Securities
Act.
(b) Restrictions on Transfer of a Physical Security for a Beneficial
Interest in a Global Security. A Physical Security the offer and sale of which
has not been registered under the Securities Act may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar or co-Registrar of
a Physical Security, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Registrar or co-Registrar, together with:
(A) certification, substantially in the form of Exhibit D hereto,
---------
that such Physical Security is being transferred (I) to a QIB,
(II) to an Accredited Investor or (III) in an offshore
transaction in reliance on Regulation S and, with respect to (II)
or (III), at the option of the Company, an Opinion of Counsel
reasonably acceptable to the Company to the effect that such
transfer is in compliance with the Securities Act; and
(B) written instructions directing the Registrar or co-Registrar to
make, or to direct the Depository to make, an endorsement on the
applicable Global Security to reflect an increase in the
aggregate amount of the Securities represented by the Global
Security,
then the Registrar or co-Registrar shall cancel such Physical Security and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
co-Registrar, the principal amount of Securities represented by the applicable
Global Security to be increased accordingly. If no 144A Global Security, IAI
Global Security or Regulation S Global Security, as the case may be, is then
outstanding, the Company shall, unless either of the events in the proviso to
Section 2.15(b) have occurred and are continuing, issue and the Trustee shall,
upon written instructions from the Company in accordance with Section 2.02,
authenticate such a Global Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor. Upon receipt by the Registrar or Co-Registrar of written
instructions, or such other instruction as is customary for the Depository, from
the Depository or its nominee, requesting the registration of transfer of an
interest in a 144A Global Security, an IAI Global Security or Regulation S
Global Security, as the case may be, to another type of Global Security,
together with the applicable Global Securities (or, if the applicable type of
Global Security required to represent the interest as requested to be obtained
is not then outstanding, only the Global Security representing the interest
being transferred), the Registrar or Co-Registrar shall reflect on its books and
records (and the applicable Global Security) the applicable increase and
decrease of the principal amount of Securities represented by such types of
Global Securities, giving effect to such transfer. If the applicable type of
Global Security required to represent the interest as requested to be obtained
is not outstanding at the time of such request, the Company shall issue and the
Trustee shall, upon written instructions from the Company in accordance with
Section 2.02, authenticate a new Global Security of such type in principal
amount equal to the principal amount of the interest requested to be
transferred.
<PAGE>
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(d) Transfer of a Beneficial Interest in a Global Security for a
Physical Security.
(i) Any Person having a beneficial interest in a Global Security may
upon request exchange such beneficial interest for a Physical Security;
provided, however, that prior to the Registration, a transferee that is a
QIB or Institutional Accredited Investor may not exchange a beneficial
interest in a Global Security for a Physical Security. Upon receipt by the
Registrar or co-Registrar 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 (subject to the previous sentence) having a
beneficial interest in a Global Security 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 containing registration instructions and, in the case
of any such transfer or exchange of a beneficial interest in Securities the
offer and sale of which have not been registered under the Securities Act,
the following additional information and documents:
(A) if such beneficial interest is being transferred in reliance on
Rule 144 under the Securities Act, delivery of a certification to
that effect (substantially in the form of Exhibit D hereto) and,
---------
at the option of the Company, an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer is
in compliance with the Securities Act; or
(B) if such beneficial interest is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect (substantially in
the form of Exhibit D hereto) and, at the option of the Company,
---------
(except in the case of a transfer to a QIB) an Opinion of Counsel
reasonably satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act,
then the Registrar or co-Registrar will cause, in accordance with the
standing instructions and procedures existing between the Depository and
the Registrar or co-Registrar, the aggregate principal amount of the
applicable Global Security to be reduced and, following such reduction, the
Company will execute and, upon receipt of an authentication order in the
form of an Officers' Certificate in accordance with Section 2.02, the
Trustee will authenticate and deliver to the transferee a Physical Security
in the appropriate principal amount.
(ii) Securities issued in exchange for a beneficial interest in a
Global Security pursuant to this Section 2.16(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 Registrar or co-Registrar in writing. The Registrar or
co-Registrar shall deliver such Physical Securities to the Persons in
whose names such Physical Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture, a Global Security may
not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar or co-Registrar shall deliver Securities that do not bear
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the Private Placement Legend. Upon the transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Registrar or co-Registrar
shall deliver only Securities that bear the Private Placement Legend unless, and
the Trustee is hereby authorized to deliver Securities without the Private
Placement Legend if, (i) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act;(ii) such
Security has been sold pursuant to an effective registration statement under the
Securities Act (including pursuant to a Registration); or (iii) the date of such
transfer, exchange or replacement is two years after the later of (x) the Issue
Date and (y) the last date that the Company or any affiliate (as defined in Rule
144 under the Securities Act) of the Company was the owner of such Securities
(or any predecessor thereto).
(g) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The 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 Security (including any transfers between or among Participants or
beneficial owners of interest in any Global Security) 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.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company wants to redeem Securities pursuant to paragraph 5 or 6
of the Securities at the applicable redemption price set forth thereon, it shall
notify the Trustee in writing of the Redemption Date and the principal amount of
Securities to be redeemed. The Company shall give such notice to the Trustee at
least 45 days before the Redemption Date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate
stating that such redemption will comply with the conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed pursuant to
paragraph 5 of the Securities, the Trustee shall select the Securities to be
redeemed in compliance with the requirements of the principal na
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tional securities exchange, if any, on which the Securities are listed or, if
the Securities are not then listed on a national securities exchange, on a pro
rata basis, by lot or in such other manner as the Trustee shall deem fair and
appropriate (and in such manner as complies with applicable legal requirements).
Selection of the Securities to be redeemed pursuant to paragraph 6 of the
Securities shall be made by the Trustee only on a pro rata basis or on as nearly
a pro rata basis as is practicable (subject to the procedures of the Depository)
based on the aggregate principal amount of Securities held by each Holder unless
such method is otherwise prohibited. The Trustee shall make the selection from
the Securities then outstanding, subject to redemption and not previously called
for redemption.
The Trustee may select for redemption pursuant to paragraph 5 or 6 of
the Securities portions of the principal amount of Securities that have
denominations larger than $1,000 principal amount. Securities and portions of
them the Trustee so selects shall be in amounts of $1,000 principal amount or
integral multiples thereof. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first-class mail to each Holder
whose Securities are to be redeemed at such Holder's registered address;
provided, however, that notice of a redemption pursuant to paragraph 6 of the
Securities shall be mailed to each Holder whose Securities are to be redeemed no
later than 60 days after the date of the Closing of the relevant Public Equity
Offering of the Company.
Each notice of redemption shall identify the Securities to be redeemed
(including the CUSIP number thereon) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date and the only remaining right of the Holders
is to receive payment of the redemption price upon surrender to the Paying
Agent; and
(6) in the case of any redemption pursuant to paragraph 5 or 6 of
the Securities, if any Security is being redeemed in part, the portion of
the principal amount of such Security to be redeemed and that, after the
Redemption Date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof will
be issued.
At the Company's request, the Trustee shall give the notice of
redemption on behalf of the Company, in the Company's name and at the Company's
expense.
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SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date and at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price, plus accrued interest thereon, if any, to the Redemption Date,
but interest installments whose maturity is on or prior to such Redemption Date
shall be payable to the Holders of record at the close of business on the
relevant Interest Record Date.
SECTION 3.05. Deposit of Redemption Price.
At least one Business Day before the Redemption Date, the Company
shall deposit with the Paying Agent (or if the Company is its own Paying Agent,
shall, on or before the Redemption Date, segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest, if any, on all
Securities to be redeemed on that date other than Securities or portions thereof
called for redemption on that date which have been delivered by the Company to
the Trustee for cancellation.
If any Security surrendered for redemption in the manner provided in
the Securities shall not be so paid on the Redemption Date due to the failure of
the Company to deposit with the Paying Agent money sufficient to pay the
redemption price thereof, the principal and accrued and unpaid interest, if any,
thereon shall, until paid or duly provided for, bear interest as provided in
Sections 2.12 and 4.01 with respect to any payment default.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in principal amount to
the unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the Securities
in the manner provided in the Securities and the Registration Rights Agreement.
An installment of principal or interest shall be considered paid on the date due
if the Trustee or Paying Agent (other than the Company, a Guarantor or any of
their respective Affiliates) holds on that date money designated for and
sufficient to pay the installment in full and is not prohibited from paying such
money to the Holders of the Securities pursuant to the terms of this Indenture.
The Company shall pay cash interest on overdue principal at the same
rate per annum borne by the Securities. The Company shall pay cash interest on
overdue installments of interest at the same rate per annum borne by the
Securities, to the extent lawful, as provided in Section 2.12.
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SECTION 4.02. Maintenance of Office or Agency.
The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 13.02. The Company hereby initially designates the
Trustee at its address set forth in Section 13.02 as its office or agency in The
Borough of Manhattan, The City of New York, for such purposes.
SECTION 4.03. Transactions with Affiliates.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, conduct any business or enter into any
transaction (or series of related transactions) with or for the benefit of any
of their respective Affiliates or any officer, director or employee of the
Company or any Restricted Subsidiary (each an "Affiliate Transaction"), unless
---------------------
(i) such Affiliate Transaction is on terms which are no less favorable to the
Company or such Restricted Subsidiary, as the case may be, than would be
available in a comparable transaction with an unaffiliated third party and (ii)
(A) if such Affiliate Transaction (or series of related Affiliate Transactions)
involves aggregate payments or the transfer of other consideration between the
Company and an Affiliate of the Company having a Fair Market Value in excess of
$5.0 million, such Affiliate Transaction is in writing and the Company delivers
an officer's certificate to the Trustee certifying that such Affiliate
Transaction (or series of Affiliate Transactions) complies with the foregoing
provisions or (B) if such Affiliate Transaction (or series of related Affiliate
Transactions) involves aggregate payments or the transfer of other consideration
between the Company and an Affiliate of the Company having a Fair Market Value
in excess of $10.0 million, such Affiliate Transaction is in writing and the
Company delivers a written opinion from an Independent Financial Advisor (filed
with the Trustee) stating that the terms of such Affiliate Transaction are
fair, from a financial point of view, to the Company or the Restricted
Subsidiary involved in such Affiliate Transaction, as the case may be.
Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to (i) transactions with or among the Company and any
Restricted Subsidiary or between or among Restricted Subsidiaries; (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 and other reasonable fees and compensation
paid to and indemnity provided on behalf of, officers, directors, employees,
consultants or agents of the Company or any Restricted Subsidiary of the Company
as determined in good faith by the Company's Board of Directors; (iii) the
payment of fees and expenses to Vestar or any of its Affiliates (A) pursuant to
the Management Agreement, as in effect on the Issue Date, or (B) pursuant to any
amended, supplemented or replacement management agreement in an aggregate amount
not to exceed 1.25% of Consolidated EBITDA for the last four full fiscal
quarters completed prior to the date of such payment; (iv) any Restricted
Payments made in compliance with Section 4.06; (v) loans and advances to
officers, directors and employees of the Company or any Restricted Subsidiary
made in the ordinary course of business; (vi) the entering into by the Company
and any of its Restricted Subsidiaries of a tax sharing or similar arrangement;
(vii) any employment agreement entered into by the Company or any Restricted
Subsidiary in the ordinary course of business; (viii) payment of reasonable
Directors' fees to Persons who are not otherwise Affiliates of the Company; (ix)
any sale or other issuance of Equity Interests (other than Disqualified Equity
Interests) of the Company; (x) payments by the Company or any Restricted
Subsidiary to Vestar and its Affiliates made for any financial advisory,
financing, underwriting or placement services in connection with acquisitions or
other corporate transactions, in amounts which are (a) usual and customary for
transactions of such type, in an amount not to exceed 1% of the value of any
such transaction or (b) approved by a majority of the disinter-
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ested members of the Board of Directors of the Company as comparable to that
which would be charged by an unaffiliated third party for such services; (xi)
transactions permitted by the Vestar/Gray LLC Agreement; (xii) sales or other
transfers or dispositions of accounts receivable and other related assets
customarily transferred in an asset securitization transaction involving
accounts receivable to a Receivables Entity in a Qualified Receivables
Transaction, and acquisitions of Permitted Investments in connection with a
Qualified Receivables Transaction; (xiii) leases in effect on the Issue Date and
any renewals thereof which include substantially similar terms; (xiv) the
Transactions and the payment of all fees and expenses related thereto; (xv) any
agreement as in effect on the Issue Date (including, without limitation, each of
the agreements entered into in connection with the Transactions) or any
transaction contemplated thereby; and (xvi) the sale of Preferred Stock to
Vestar or any of its affiliates and any transaction contemplated by the terms of
the Preferred Stock.
SECTION 4.04. Limitation on Indebtedness.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, Incur any Indebtedness (including
Acquired Indebtedness), except for Permitted Indebtedness; provided, however,
that the Company and any Restricted Subsidiary may Incur Indebtedness if, at the
time of and immediately after giving pro forma effect to such Incurrence of
Indebtedness and the application of the proceeds therefrom, the Consolidated
Coverage Ratio would be at least 2.0 to 1.0 prior to the second anniversary of
the Issue Date; 2.25 to 1.0 on or after the second anniversary of the Issue Date
but prior to the fourth anniversary of the Issue Date; and 2.5 to 1.0 on or
after the fourth anniversary of the Issue Date.
The foregoing limitations will not apply to the Incurrence by the
Company or any Restricted Subsidiary of any of the following (collectively,
"Permitted Indebtedness"), each of which shall be given independent effect:
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(a) Indebtedness under the Securities, the Exchange Securities, and
other Indebtedness outstanding on the Issue Date;
(b) Indebtedness of the Company and any Guarantor Incurred pursuant
to (i) the Credit Facility if at the time of and immediately after giving
effect thereto, the aggregate consolidated Indebtedness Incurred under the
Credit Facility would not exceed $215.0 million at any one time
outstanding; provided, however, that such $215.0 million shall be reduced
by the sum of (i) the amount of any repayments or prepayments of
Indebtedness (that are accompanied by a corresponding permanent commitment
reduction) under the Credit Facility and (ii) the outstanding principal
amount of Indebtedness and preferred stock of a Receivables Entity
(excluding the net proceeds of such Indebtedness and preferred stock that
are applied to the repayment or prepayment of Indebtedness described in
clause (i));
(c) Indebtedness of any Guarantor owed to and held by the Company or
any Guarantor and other Indebtedness of the Company owed to and held by any
Guarantor which is unsecured and subordinated in right of payment to the
payment and performance of the Company's obligations under any Senior
Indebtedness, this Indenture and the Securities and Indebtedness of a
Foreign Restricted Subsidiary that is not a Guarantor owed to and held by
any other Foreign Restricted Subsidiary that is not a Guarantor; provided,
however, that an Incurrence of Indebtedness that is not permitted by this
clause (c) shall be deemed to have occurred upon (i) any sale or other
disposition of any Indebtedness of the Company or any Restricted Subsidiary
referred to in this clause (c) to a Person (other than the Company or a
Guarantor), (ii) any sale or other disposition of Equity Interests of any
Guarantor which holds Indebtedness of the Company or another Restricted
Subsidiary such that such Guarantor
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ceases to be a Guarantor and (iii) the designation of a Restricted
Subsidiary that is a Guarantor and which holds Indebtedness of the Company
or any other Restricted Subsidiary as an Unrestricted Subsidiary;
(d) the Guarantees and guarantees by any Guarantor of Indebtedness of
the Company; provided, however, that if such guarantee is of Subordinated
Indebtedness, then the Guarantee of such Guarantor shall be senior to such
Guarantor's guarantee of Subordinated Indebtedness;
(e) Hedging Obligations of the Company or any Restricted Subsidiary
entered into in the ordinary course of business and not for speculative
purposes;
(f) Purchase Money Indebtedness (and refinancings thereof) and
Capitalized Lease Obligations (and refinancings thereof) which do not
exceed $7.0 million in the aggregate at any one time outstanding;
(g) Indebtedness to the extent representing a replacement, renewal,
refinancing or extension (collectively, a "refinancing") of outstanding
-----------
Indebtedness Incurred in compliance with the Consolidated Coverage Ratio of
the first paragraph of this covenant or clause (a) of this paragraph of
this covenant; provided, however, that (i) any such refinancing shall not
exceed the sum of the principal amount (or accreted amount (determined in
accordance with GAAP), if less) of the Indebtedness being refinanced, plus
the amount of accrued interest thereon, plus the amount of any reasonably
determined prepayment premium necessary to accomplish such refinancing and
such reasonable fees and expenses incurred in connection therewith, (ii)
Indebtedness representing a refinancing of Indebtedness other than Senior
Indebtedness shall have a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of the Indebtedness
being refinanced, (iii) Indebtedness that is pari passu with the Securities
may only be refinanced with Indebtedness that is made pari passu with or
subordinate in right of payment to the Securities and Subordinated
Indebtedness may only be refinanced with Subordinated Indebtedness, (iv) no
Restricted Subsidiary that is not a Guarantor may Incur Indebtedness to
refinance Indebtedness of the Company or any Guarantor and (v) Indebtedness
of the Company may only be refinanced by Indebtedness of the Company and
Indebtedness of a Restricted Subsidiary may only be refinanced by
Indebtedness of such Restricted Subsidiary or by the Company;
(h) Indebtedness incurred in respect of workers' compensation claims,
self-insurance obligations, performance, surety and similar bonds and
completion guarantees provided by the Company or a Restricted Subsidiary in
the ordinary course of business;
(i) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or Equity Interests
of a Restricted Subsidiary, provided that the maximum aggregate liability
in respect of all such Indebtedness shall at no time exceed the gross
proceeds actually received by the Company and its Restricted Subsidiaries
in connection with such disposition;
(j) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument (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;
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(k) Indebtedness representing deferred compensation to employees of
the Company and its Subsidiaries in an aggregate amount not to exceed $1.0
million at any one time outstanding;
(l) Indebtedness of Foreign Restricted Subsidiaries which are not
Guarantors in an aggregate amount not to exceed $7.5 million at any one
time outstanding;
(m) Indebtedness of Foreign Restricted Subsidiaries which are not
Guarantors owed to and held by the Company or any Guarantor in an aggregate
amount not to exceed $12.5 million at any one time outstanding;
(n) Indebtedness of a Receivables Entity that is non-recourse to the
Company or any other Restricted Subsidiary of the Company Incurred in
connection with a Qualified Receivables Transaction, provided that the
proceeds of such Indebtedness are used to reduce Indebtedness under the
Credit Facility; and
(o) in addition to the items referred to in clauses (a) through (n)
above, Indebtedness of the Company (including any Indebtedness under the
Credit Facility that utilizes this subparagraph (o)) having an aggregate
principal amount not to exceed $10.0 million at any one time outstanding.
For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness incurred pursuant to and in
compliance with, this covenant:
(1) in the event that Indebtedness meets the criteria of more than
one of the types of indebtedness described in the first and second
paragraphs of this covenant, the Company, in its sole discretion, will
classify such item of Indebtedness on the date of Incurrence and only be
required to include the amount and type of such Indebtedness in one of such
clauses; and
(2) the amount of Indebtedness issued at a price that is less than
the principal amount thereof will be equal to the amount of the liability
in respect thereof determined in accordance with GAAP.
Accrual of interest, accrual of dividends, the accretion of accreted
value, the payment of interest in the form of additional Indebtedness and the
payment of dividends in the form of additional shares of preferred stock will
not be deemed to be an Incurrence of Indebtedness for purposes of this covenant
provided, in each such case, that the amount thereof is included in the
Consolidated Fixed Charges of such Person.
SECTION 4.05. Disposition of Proceeds of Asset Sales.
(a) The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, make any Asset Sale, unless
(i) the Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets sold or otherwise disposed of and (ii) at least 75% of such
consideration consists of (A) cash or Cash Equivalents, or (B) properties and
capital assets that will be used in the business of the Company and its
Restricted Subsidiaries as existing at such time or in businesses reasonably
related thereto (as determined in good faith by the Company's Board of
Directors) ("Replacement Assets") or the Equity Interests of any Person engaged
------------------
in a Permitted Business if, in connection with the receipt by the Company or any
Restricted Subsidiary of such Equity Interests, (1) such Person becomes a
Restricted Subsidiary and a Guarantor or (2) such Person is merged, consolidated
or amalgamated with or into, or transfers or conveys substantially all of its
assets to,
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or is liquidated into, the Company or any Restricted Subsidiary that is a
Guarantor. The amount of any Indebtedness (other than any Subordinated
Indebtedness) of the Company or any Restricted Subsidiary that is actually
assumed by the transferee in such Asset Sale and from which the Company and the
Restricted Subsidiaries are fully and unconditionally released shall be deemed
to be cash for purposes of determining the percentage of cash consideration
received by the Company or the Restricted Subsidiaries within such period.
The Company or such Restricted Subsidiary, as the case may be, may (i)
apply the Net Cash Proceeds of any Asset Sale within 360 days of receipt thereof
to repay Senior Indebtedness and permanently reduce any related commitment, or
(ii) make an Investment in Replacement Assets within such period.
To the extent all or part of the Net Cash Proceeds of any Asset Sale
are not applied within 360 days of such Asset Sale as described in clause (i) or
(ii) of the immediately preceding paragraph (such Net Cash Proceeds, the
"Unutilized Net Cash Proceeds"), the Company shall, within 45 days after such
- -----------------------------
360th day, make an Offer to Purchase all outstanding Securities and other Senior
Subordinated Indebtedness, pro rata, up to a maximum principal amount (expressed
as a multiple of $1,000) of Securities and other Senior Subordinated
Indebtedness equal to such Unutilized Net Cash Proceeds, at a purchase price in
cash equal to 100% of the principal amount thereof (or the accreted value of
such other Senior Subordinated Indebtedness, if such other Senior Subordinated
Indebtedness is issued at a discount), plus accrued and unpaid interest thereon,
if any, to the Purchase Date; provided, however, that the Offer to Purchase may
be deferred until there are aggregate Unutilized Net Cash Proceeds equal to or
in excess of $10.0 million, at which time the entire amount of such Unutilized
Net Cash Proceeds, and not just the amount in excess of $10.0 million, shall be
applied as required pursuant to this paragraph.
(b) With respect to any Offer to Purchase effected pursuant to this
covenant, among the Securities, to the extent the aggregate principal amount of
Securities and other Senior Subordinated Indebtedness tendered pursuant to such
Offer to Purchase exceeds the Unutilized Net Cash Proceeds to be applied to the
repurchase thereof, such Securities and other Senior Subordinated Indebtedness
shall be purchased pro rata based on the aggregate principal amount of such
Securities and other Senior Subordinated Indebtedness tendered (or the accreted
value of such other Senior Subordinated Indebtedness, if such other Senior
Subordinated Indebtedness is issued at a discount) by each holder of Securities
and such other Senior Subordinated Indebtedness. To the extent the Unutilized
Net Cash Proceeds exceed the aggregate amount of Securities and other Senior
Subordinated Indebtedness tendered pursuant to such Offer to Purchase, the
Company may retain and utilize any portion of the Unutilized Net Cash Proceeds
not applied to repurchase the Securities and other Senior Subordinated
Indebtedness for any purpose consistent with the other terms of this Indenture.
Upon completion of the Offer to Purchase, Unutilized Net Cash Proceeds will be
reset at zero.
(c) On or prior to the Purchase Date specified in the Offer to
Purchase, the Company shall (i) subject to paragraph (b) of this Section 4.05,
accept for payment all Securities validly tendered pursuant to the Offer, (ii)
deposit with the Paying Agent or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 2.04, money sufficient
to pay the Purchase Price of all Securities or portions thereof so accepted and
(iii) deliver or cause to be delivered to the Trustee for cancellation all
Securities so accepted together with an Officers' Certificate stating the
Securities or portions thereof accepted for payment by the Company. The Paying
Agent (or the Company, if so acting) shall promptly mail or deliver to Holders
of Securities so accepted, payment in an amount equal to the Purchase Price for
such Securities, and the Trustee shall promptly authenticate and mail or deliver
to each Holder of Securities a new Security or Securities equal in principal
amount to any unpurchased portion of the Security surrendered as requested by
the Holder. Any Security not accepted for payment shall be promptly mailed or
delivered by the Company to the
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Holder thereof. The Company shall publicly announce the results of the Offer on
or as soon as practicable after the Purchase Date.
(d) In the event that the Company makes an Offer to Purchase the
Securities and other Senior Subordinated Indebtedness, the Company shall comply
with any applicable securities laws and regulations, and any violation of the
provisions of this Indenture relating to such Offer to Purchase occurring as a
result of such compliance shall not be deemed a Default or an Event of Default.
(e) Each Holder shall be entitled to tender all or any portion of the
Securities owned by such Holder pursuant to the Offer to Purchase, subject to
the requirement that any portion of a Security tendered must be tendered in an
integral multiple of $1,000 principal amount and subject to any proration among
tendering Holders and holders of other Senior Subordinated Indebtedness as
described above.
SECTION 4.06. Limitation on Restricted Payments.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or any other distribution on any
Equity Interests of the Company or any Restricted Subsidiary or make any
payment or distribution to the direct or indirect holders (in their
capacities as such) of Equity Interests of the Company or any Restricted
Subsidiary (other than any dividends, distributions and payments made to
the Company or any Restricted Subsidiary and dividends or distributions
payable to any Person solely in Qualified Equity Interests of the Company
or any Restricted Subsidiary or in options, warrants or other rights to
purchase Qualified Equity Interests of the Company or any Restricted
Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Restricted Subsidiary (other than
any such Equity Interests owned by the Company or any Restricted
Subsidiary);
(iii) purchase, redeem, defease or retire for value, or make any
principal payment on, prior to any scheduled maturity, scheduled repayment
or scheduled sinking fund payment, any Subordinated Indebtedness (other
than any Subordinated Indebtedness held by the Company); or
(iv) make any Investment in any Person (other than Permitted
Investments)
(any such payment or any other action (other than any exception thereto)
described in (i), (ii), (iii) or (iv) each, a "Restricted Payment"), unless
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(a) no Default or Event of Default shall have occurred and be
continuing at the time or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the
Company would be able to Incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the Consolidated Coverage Ratio of the first
paragraph of Section 4.04; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made on or after
the Issue Date does not exceed an amount equal to
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the sum of (1) 50% of cumulative Consolidated Net Income determined for the
period (taken as one period) from the Issue Date and ending on the last day
of the most recent fiscal quarter immediately preceding the date of such
Restricted Payment for which consolidated financial information of the
Company is available (or if such cumulative Consolidated Net Income shall
be a loss, minus 100% of such loss), plus (2) the aggregate net cash
proceeds received by the Company either (x) as capital contributions to the
Company after the Issue Date or (y) from the issue and sale (other than to
a Restricted Subsidiary) of its Qualified Equity Interests after the Issue
Date (excluding the net proceeds from any issuance and sale of Qualified
Equity Interests financed, directly or indirectly, using funds borrowed
from the Company or any Restricted Subsidiary until and to the extent such
borrowing is repaid), plus (3) the principal amount (or accreted amount
(determined in accordance with GAAP), if less) of any Indebtedness of the
Company or any Restricted Subsidiary Incurred after the Issue Date which
has been converted into or exchanged for Qualified Equity Interests of the
Company, plus (4) without duplication of any amounts included in clause (1)
above, in the case of the disposition or repayment of, or the receipt by
the Company or any Restricted Subsidiary of any dividends or distributions
from, any Investment constituting a Restricted Payment made after the Issue
Date (including by way of a Revocation), an amount equal, in the aggregate,
to the lesser of the amount of such Investment, other than pursuant to a
Revocation, in which case such amount will be the lesser of the Fair Market
Value of such Investment at the date of Revocation, and the amount received
by the Company or any Restricted Subsidiary upon such disposition,
repayment, dividend or distribution or Revocation.
The foregoing provisions will not prevent (i) the payment of any
dividend or distribution on, or redemption of, Equity Interests within 60 days
after the date of declaration of such dividend or distribution or the giving of
formal notice of such redemption, if at the date of such declaration or giving
of such formal notice such payment or redemption would comply with the
provisions of the Indenture; provided, however, that the payment of the $0.025
per share dividend on St. John Common Stock declared on June 8, 1999 and payable
on July 22, 1999 shall not constitute a Restricted Payment; (ii) the purchase,
redemption, retirement or other acquisition of any Equity Interests of the
Company in exchange for, or out of the net cash proceeds of the substantially
concurrent issue and sale (other than to a Restricted Subsidiary) of, Qualified
Equity Interests of the Company; provided, however, that any such net cash
proceeds and the value of any Qualified Equity Interests issued in exchange for
such retired Equity Interests are excluded from clause (c)(2) of the preceding
paragraph (and were not included therein at any time) and are not used to redeem
the Securities pursuant to paragraphs 5 or 6 of the Securities; (iii) the
purchase, redemption, retirement, defeasance or other acquisition of
Subordinated Indebtedness, or any other payment thereon, made in exchange for,
or out of the net cash proceeds of, a substantially concurrent issue and sale
(other than to a Restricted Subsidiary) of (x) Qualified Equity Interests of the
Company; provided, however, that any such net cash proceeds and the value of any
Qualified Equity Interests issued in exchange for Subordinated Indebtedness are
excluded from clauses (c)(2) and (c)(3) of the preceding paragraph (and were not
included therein at any time) and are not used to redeem the Securities pursuant
to paragraphs 5 or 6 of the Securities or (y) Subordinated Indebtedness
permitted to be Incurred pursuant to clause (g) of the second paragraph of
Section 4.04; (iv) the making of loans or advances to officers, employees and
directors of the Company or any Restricted Subsidiary entered into in the
ordinary course of business or to fund purchases by such employees from the
Company of Equity Interests of the Company, in an amount not to exceed $5.0
million at any one time outstanding; (v) the repurchase, redemption, defeasance,
retirement, refinancing or acquisition for value or payment of principal of
Subordinated Indebtedness at a purchase price not greater than 101% of the
principal amount of such Subordinated Indebtedness in the event of a Change of
Control pursuant to a provision similar to Section 4.12; provided, however, that
prior to any such repurchase, the Company has made an Offer to Purchase as
provided in Section 4.12 with respect to the Securities and has repurchased all
Securities validly tendered for payment in connection with such Offer
<PAGE>
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to Purchase; (vi) the purchase, redemption or other acquisition, cancellation or
retirement for value of Equity Interests of the Company or any Restricted
Subsidiary of the Company or any parent of the Company held by any existing or
former employees or management of the Company or any Restricted Subsidiary of
the Company (other than Robert Gray, Marie Gray and Kelly Gray) 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; provided that such redemptions or
repurchases pursuant to this clause will not exceed $500,000 in the aggregate
during any calendar year; provided, further, that any amounts not used for
redemptions or repurchases pursuant to this clause (vi) may be used in any
subsequent calendar year; (vii) repurchases of Equity Interests deemed to occur
upon the exercise of stock options if such Equity Interests represent a portion
of the exercise price thereof; (viii) the defeasance, redemption or repurchase
of any Disqualified Equity Interest of the Company or any Restricted Subsidiary
in exchange for, or out of the net cash proceeds of, a substantially concurrent
issue and sale (other than to the Company or a Subsidiary of the Company) of
Disqualified Equity Interests of the Company or such Restricted Subsidiary,
respectively; provided that: (A) the aggregate liquidation preference of such
Disqualified Equity Interest does not exceed the aggregate liquidation
preference of the Disqualified Equity Interest so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (B) such Disqualified Equity Interest has a final
maturity date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of the Notes; and (C) such Disqualified Equity Interest is incurred either by
the Company or by the Restricted Subsidiary who is the obligor on the
Disqualified Equity Interest being extended, refinanced, renewed, replaced,
defeased or refunded;(ix) the defeasance, redemption or repurchase of any
Preferred Equity Interest or Disqualified Equity Interest issued in connection
with the acquisition of assets or a Permitted Business, provided, that the
aggregate amount of such defeasance, redemption or repurchase payments shall not
exceed at any time $5.0 million; (x) the payment of any dividend by a Restricted
Subsidiary to the holders of its common Equity Interests on a pro rata basis;
(xi) the purchase by the Company of Gray Common Stock pursuant to the terms of
the Stockholders' Agreement in an amount not to exceed $5.0 million, provided,
however, that such amounts do not exceed $2.5 million for the first twelve month
period following the Issue Date; (xii) cash payments to Robert Gray, Marie Gray
or Kelly A. Gray on Preferred Equity Interests of the Company that are Qualified
Equity Interests in an amount not to exceed $250,000 for each fiscal year;
(xiii) Restricted Payments in an amount not to exceed $10.0 million; (xiv)
Restricted Payments made on the Issue Date in connection with the Transactions;
and (xv) the redemption of up to $5.0 million of Preferred Stock (which $5.0
million amount may include the amount of any accrued but unpaid dividends) after
the first anniversary of the Issue Date; provided the Consolidated Coverage
Ratio, pro forma for such transaction, for the two most recently completed
fiscal quarters of the Company, is at least 2.25 to 1.0; and provided, further,
that the Company and its Restricted Subsidiaries may only redeem Preferred Stock
pursuant to this clause (xv) once; provided, however, that in the case of each
of clauses (v), (vi), (ix), (x) and (xv), no Default or Event of Default shall
have occurred and be continuing or would arise therefrom.
In determining the amount of Restricted Payments permissible under
this Section, amounts expended pursuant to clauses (iv), (vi), (ix), (xi),
(xii), (xiii) and (xv) of the immediately preceding paragraph shall be included
as Restricted Payments. Amounts paid pursuant to clause (i) of the immediately
preceding paragraph shall be included, when paid, as Restricted Payments only to
the extent not already included as Restricted Payments upon declaration.
Amounts expended pursuant to all other clauses of the immediately preceding
paragraph shall not be included as Restricted Payments. The amount of any non-
cash Restricted Payment shall be deemed to be equal to the Fair Market Value
thereof at the date of the making of such Restricted Payment.
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SECTION 4.07. Corporate Existence.
Subject to Article Five, the Company shall do or shall cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence and the corporate, partnership or other existence of each
Restricted Subsidiary in accordance with the respective organizational documents
of each such Restricted Subsidiary and the rights (charter and statutory) and
material franchises of the Company and the Restricted Subsidiaries; provided,
however, that the Company shall not be required to preserve any such right or
franchise, or the corporate existence of any Restricted Subsidiary, if the Board
of Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and the
Restricted Subsidiaries, taken as a whole; provided, further, however, that a
determination of the Board of Directors of the Company shall not be required in
the event of a merger of one or more Wholly Owned Restricted Subsidiaries of the
Company with or into another Wholly Owned Restricted Subsidiary of the Company
or another Person, if the surviving Person is a Wholly Owned Restricted
Subsidiary of the Company organized under the laws of the United States or a
State thereof or of the District of Columbia or, in the case of a Foreign
Restricted Subsidiary, the jurisdiction of incorporation or organization of such
Foreign Restricted Subsidiary. This Section 4.07 shall not prohibit the Company
from taking any other action otherwise permitted by, and made in accordance
with, the provisions of this Indenture.
SECTION 4.08. Notice of Defaults.
(a) In the event that any Indebtedness of the Company or any of its
Subsidiaries is declared due and payable before its maturity because of the
occurrence of any default (or any event which, with notice or lapse of time, or
both, would constitute such a default) under such Indebtedness, the Company
shall promptly give written notice to the Trustee of such declaration, the
status of such default or event and what action the Company is taking or
proposes to take with respect thereto.
(b) Upon becoming aware of any Default or Event of Default, the
Company shall promptly deliver an Officers' Certificate to the Trustee
specifying the Default or Event of Default.
SECTION 4.09. Business Activities.
The Company will not, and will not permit any Restricted Subsidiary to
engage in any business other than the Permitted Business.
SECTION 4.10. Compliance Certificate.
The Company shall deliver to the Trustee within 120 days after the
close of each fiscal year a certificate signed by the principal executive
officer, principal financial officer or principal accounting officer stating
that a review of the activities of the Company has been made under the
supervision of the signing officers with a view to determining whether a Default
or Event of Default has occurred and whether or not the signers know of any
Default or Event of Default by the Company that occurred during such fiscal
year. If they do know of such a Default or Event of Default, the certificate
shall describe all such Defaults or Events of Default, their status and the
action the Company is taking or proposes to take with respect thereto. The
first certificate to be delivered by the Company pursuant to this Section 4.10
shall be for the fiscal year ending November 1, 1999.
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SECTION 4.11. Provision of Financial Information.
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, the Company shall file with
the SEC (if permitted by SEC practice and applicable law and regulations) the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the SEC pursuant to such Section 13(a) or 15(d)
or any successor provision thereto if the Company were so subject, such
documents to be filed with the SEC on or prior to the respective dates (the
"Required Filing Dates") by which the Company would have been required so to
- ----------------------
file such documents if the Company were so subject. The Company shall also in
any event (a) within 15 days of each Required Filing Date (whether or not
permitted or required to be filed with the SEC) (i) transmit (or cause to be
transmitted) by mail to all Holders, as their names and addresses appear in the
Security register, without cost to such Holders upon their request, and (ii)
file with the Trustee, copies of the annual reports, quarterly reports and proxy
statements which the Company is required to file with the SEC pursuant to the
preceding sentence, or, if such filing is not so permitted, information and data
of a similar nature, and (b) if, notwithstanding the preceding sentence, filing
such documents by the Company with the SEC is not permitted by SEC practice or
applicable law or regulations, promptly upon written request supply copies of
such documents to any Holder. In addition, for so long as any Securities remain
outstanding and prior to the later of the consummation of the Exchange Offer and
the filing of the Shelf Registration Statement, if required, the Company will
furnish to the Holders, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.12. Change of Control.
(a) Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall notify the
----------------------
Holders of the Securities of such occurrence in the manner prescribed by this
Indenture and shall, within 45 days after the Change of Control Date, make an
Offer to Purchase all Securities then outstanding at a purchase price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Purchase Date (subject to the right of Holders
of record on the relevant Interest Record Date to receive interest due on the
relevant Interest Payment Date). The Company's obligations will be satisfied if
a third party makes the Offer to Purchase in the manner, at the times and
otherwise in compliance with the requirements of this Indenture applicable to an
Offer to Purchase made by the Company and purchases all Securities validly
tendered and not withdrawn under such Offer to Purchase. Each Holder shall be
entitled to tender all or any portion of the Securities owned by such Holder
pursuant to the Offer to Purchase, subject to the requirement that any portion
of a Security tendered must be tendered in an integral multiple of $1,000
principal amount.
(b) On or prior to the Purchase Date specified in the Offer to
Purchase, the Company shall (i) accept for payment all Securities or portions
thereof validly tendered pursuant to the Offer, (ii) deposit with the Paying
Agent or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 2.04, money sufficient to pay the Purchase Price
of all Securities or portions thereof so accepted and (iii) deliver or cause to
be delivered to the Trustee for cancellation all Securities so accepted together
with an Officers' Certificate stating the Securities or portions thereof
accepted for payment by the Company. The Paying Agent (or the Company, if so
acting) shall promptly mail or deliver to Holders of Securities so ac
<PAGE>
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cepted, payment in an amount equal to the Purchase Price for such Securities,
and the Trustee shall promptly authenticate and mail or deliver to each Holder
of Securities a new Security or Securities equal in principal amount to any
unpurchased portion of the Security surrendered as requested by the Holder. Any
Security not accepted for payment shall be promptly mailed or delivered by the
Company to the Holder thereof. The Company shall publicly announce the results
of the Offer on or as soon as practicable after the Purchase Date.
(c) If the Company makes an Offer to Purchase, the Company shall
comply with all applicable securities laws and regulations and any violation of
the provisions of this Indenture relating to such Offer to Purchase occurring as
a result of such compliance shall not be deemed a Default or an Event of
Default.
SECTION 4.13. Limitation on Senior Subordinated Indebtedness.
(a) The Company shall not, directly or indirectly, Incur any
Indebtedness that by its terms would expressly rank senior in right of payment
to the Securities and subordinate in right of payment to any other Indebtedness
of the Company.
(b) The Company shall not permit any Guarantor to, and no Guarantor
shall, directly or indirectly, Incur any Indebtedness that by its terms would
expressly rank senior in right of payment to the Guarantee of such Guarantor and
subordinate in right of payment to any other Indebtedness of such Guarantor.
SECTION 4.14. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions to
the Company or any other Restricted Subsidiary on its Equity Interests or with
respect to any other interest or participation in, or measured by, its profits,
or pay any Indebtedness owed to the Company or any other Restricted Subsidiary,
(b) make loans or advances to, or guarantee any Indebtedness or other
obligations of, or make any Investment in, the Company or any other Restricted
Subsidiary, or (c) transfer any of its properties or assets to the Company or
any other Restricted Subsidiary, except for such encumbrances or restrictions
------
existing under or by reason of (i) the Credit Facility, or any other agreement
of the Company or the Restricted Subsidiaries outstanding on the Issue Date, in
each case as in effect on the Issue Date, and any amendments, restatements,
renewals, replacements or refinancings thereof; provided, however, that any such
amendment, restatement, renewal, replacement or refinancing is no more
restrictive in the aggregate with respect to such encumbrances or restrictions
than those contained in the agreement being amended, restated, reviewed,
replaced or refinanced; (ii) applicable law; (iii) any instrument governing
Indebtedness or Equity Interests of an Acquired Person acquired by the Company
or any Restricted Subsidiary as in effect at the time of such acquisition
(except to the extent such Indebtedness was Incurred by such Acquired Person in
connection with, as a result of or in contemplation of such acquisition);
provided, however, that such encumbrances and restrictions are not applicable to
the Company or any Restricted Subsidiary, or the properties or assets of the
Company or any Restricted Subsidiary, other than the Acquired Person; (iv)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices; (v) Purchase Money
Indebtedness for property acquired in the ordinary course of business that only
imposes encumbrances and restrictions on the property so acquired; (vi) any
agreement for the sale or disposition of the Equity Interests or assets of any
Restricted Subsidiary; provided, however, that such encumbrances and
restrictions described in this clause (vi) are only applicable to such
Restricted Subsidiary or assets, as applicable, and any such sale or disposition
is made in compliance with Section 4.05 to the extent applicable thereto; (vii)
refinancing Indebted
<PAGE>
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ness permitted under clause (g) of the second paragraph of Section 4.04;
provided, however, that such encumbrances and restrictions contained in the
agreements governing such Indebtedness are no more restrictive in the aggregate
than those contained in the agreements governing the Indebtedness being
refinanced immediately prior to such refinancing; (viii) this Indenture; (ix)
mortgages, pledges or other security agreements permitted under this Indenture
securing Indebtedness of the Company or a Restricted Subsidiary to the extent
such encumbrances or restrictions restrict the transfer of the property subject
to such mortgages, pledges or other security agreements; (x) Liens securing
Indebtedness otherwise permitted to be Incurred pursuant to Section 4.16 that
limit the right of the Company or any Restricted Subsidiary to dispose of the
assets subject to such Liens; (xi) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business; (xii) any other
security agreement, instrument or document relating to Senior Indebtedness
hereafter in effect, provided that such encumbrances or restrictions are
customary in connection with such documents and that the terms and conditions of
such encumbrances or restrictions are no more restrictive than those
encumbrances or restrictions imposed in connection with the Credit Facility as
in effect on the Issue Date; (xiii) any agreement relating to a sale and
leaseback transaction or capital lease, but only on the property subject to such
transaction or lease and only to the extent that such restrictions or
encumbrances are customary with respect to a sale and leaseback transaction or
capital lease; (xiv) Indebtedness Incurred by Foreign Restricted Subsidiaries;
or (xv) customary restrictions imposed on the payment of dividends by a
Receivables Entity in connection with a Qualified Receivables Transaction.
SECTION 4.15. Designation of Unrestricted Subsidiaries.
(a) The Company may designate after the Issue Date any Subsidiary of
the Company as an "Unrestricted Subsidiary" under this Indenture (a
"Designation") only if:
-----------
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation;
(ii) at the time of and after giving effect to such Designation, the
Company could Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the Consolidated Coverage Ratio of the first paragraph
of Section 4.04; and
(iii) the Company would be permitted to make an Investment (other
than a Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
Section 4.06 in an amount (the "Designation Amount") equal to the Fair
------------------
Market Value of the net assets of the Company's Investment in such
Subsidiary on such date.
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section
4.06 for all purposes of this Indenture in the Designation Amount.
Neither the Company nor any Restricted Subsidiary shall at any time
(x) provide credit support for, subject any of its property or assets (other
than the Equity Interests of any Unrestricted Subsidiary) to the satisfaction
of, or guarantee, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary, or (z) be directly or indirectly liable for any Indebtedness which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a default
with
<PAGE>
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respect to any Indebtedness of any Unrestricted Subsidiary, except for any
non-recourse guarantee given solely to support the pledge by the Company or any
Restricted Subsidiary of the capital stock of any Unrestricted Subsidiary. For
purposes of the foregoing, the Designation of a Subsidiary of the Company as an
Unrestricted Subsidiary shall be deemed to include the Designation of all of the
Subsidiaries of such Subsidiary.
(b) The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") only if:
----------
(i) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of this
Indenture.
All Designations and Revocations must be evidenced by resolutions of
the Board of Directors of the Company, delivered to the Trustee certifying
compliance with the foregoing provisions.
SECTION 4.16. Limitation on Liens.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, Incur any Liens of any kind against or
upon any of their respective properties or assets now owned or hereafter
acquired, or any proceeds therefrom or any income or profits therefrom, to
secure any Indebtedness unless contemporaneously therewith effective provision
is made, (x) in the case of the Company, to secure the Securities and all other
amounts due under this Indenture and any other class of Senior Subordinated
Indebtedness, and (y) in the case of a Restricted Subsidiary which is a
Guarantor, to secure such Restricted Subsidiary's Guarantee of the Securities
and all other amounts due under this Indenture, in each case, equally and
ratably with such Indebtedness (or, in the event that such Indebtedness is
subordinated in right of payment to the Securities or such Restricted
Subsidiary's Guarantee, prior to such Indebtedness) with a Lien on the same
properties and assets securing such Indebtedness for so long as such
Indebtedness is secured by such Lien, except for (i) Liens securing Senior
Indebtedness (including, without limitation, Indebtedness Incurred under the
Credit Facility) and (ii) Permitted Liens.
SECTION 4.17. Limitation on Guarantees by Restricted Subsidiaries.
In the event the Company (i) organizes or acquires any Domestic
Restricted Subsidiary (other than a Receivables Entity) after the Issue Date
that is not a Guarantor or (ii) causes or permits any Foreign Restricted
Subsidiary that is not a Guarantor to, directly or indirectly, guarantee the
payment of any Indebtedness of the Company or any Domestic Restricted Subsidiary
("Other Indebtedness") then, in each case the Company shall cause such
------------------
Restricted Subsidiary to simultaneously execute and deliver a supplemental
indenture to this Indenture pursuant to which it will become a Guarantor under
this Indenture; provided, however, that in the event a Domestic Restricted
Subsidiary is acquired in a transaction in which a merger agreement is entered
into, such Domestic Restricted Subsidiary shall not be required to execute and
deliver such supplemental indenture until the consummation of the merger
contemplated by any such merger agreement; provided, further, that if such Other
Indebtedness is (i) Indebtedness that is ranked pari passu in right of payment
with the Securities or the Guarantee of such Domestic Restricted Subsidiary, as
the case may be, the Guarantee of such Foreign Restricted Subsidiary shall be
pari passu in right of payment with the guarantee of the Other Indebtedness; or
(ii) Subordinated Indebtedness, the Guarantee of such Foreign Restricted
Subsidiary
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shall be senior in right of payment to the guarantee of the Other
Indebtedness (which guarantee of such Subordinated Indebtedness shall provide
that such guarantee is subordinated to the Guarantees of such Subsidiary to the
same extent and in substantially the same manner as the Other Indebtedness is
subordinated to the Notes or the Guarantee of such Domestic Restricted
Subsidiary, as the case may be).
SECTION 4.18. Limitation on the Sale or Issuance of Equity Interests of
Restricted Subsidiaries.
The Company shall not sell any Equity Interest of a Restricted
Subsidiary, and shall not cause or permit any Restricted Subsidiary, directly or
indirectly, to issue or sell any Equity Interests, except: (i) to the Company or
a Wholly Owned Restricted Subsidiary; or (ii) if, immediately after giving
effect to such issuance or sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary. Notwithstanding the foregoing, the Company
is permitted to sell all the Equity Interests of a Restricted Subsidiary as long
as the Company is in compliance with Section 4.05 and, if applicable, Article
Five.
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc.
(a) The Company shall not consolidate with or merge with or into
(whether or not the Company is the Surviving Person) any other entity and the
Company shall not, and shall not cause or permit any Restricted Subsidiary to,
sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all of the Company's and the Restricted Subsidiaries' properties
and assets (determined on a consolidated basis for the Company and the
Restricted Subsidiaries) to any entity in a single transaction or series of
related transactions (including by way of consolidation or merger), unless: (i)
either (x) the Company shall be the Surviving Person or (y) the Surviving Person
(if other than the Company) shall be a corporation organized and validly
existing under the laws of the United States of America or any State thereof or
the District of Columbia or, if any such transaction involves a Disposition by a
Foreign Restricted Subsidiary, under the laws of the United States of America or
any state thereof or the District of Columbia or the jurisdiction under which
such Foreign Restricted Subsidiary was organized, and shall, in any such case,
expressly assume by a supplemental indenture, the due and punctual payment of
the principal of, premium, if any, and interest on all the Securities and the
performance and observance of every covenant of this Indenture and the
Registration Rights Agreement to be performed or observed on the part of the
Company; (ii) immediately thereafter, no Default or Event of Default shall have
occurred and be continuing; and (iii) immediately after giving effect to any
such transaction involving the Incurrence by the Company or any Restricted
Subsidiary, directly or indirectly, of additional Indebtedness (and treating any
Indebtedness not previously an obligation of the Company or any Restricted
Subsidiary in connection with or as a result of such transaction as having been
Incurred at the time of such transaction), the Surviving Person could Incur, on
a pro forma basis after giving effect to such transaction as if it had occurred
at the beginning of the four quarter period immediately preceding such
transaction for which consolidated financial statements of the Company are
available, at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the Consolidated Coverage Ratio of the first paragraph of
Section 4.04.
Notwithstanding the foregoing clause (iii) of the immediately
preceding paragraph, (x) any Restricted Subsidiary may consolidate with, merge
into or transfer all or part of its properties and assets to the Company or any
Restricted Subsidiary that is a Guarantor and (y) the Company may merge with an
Affiliate
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incorporated solely for the purpose of reincorporating the Company in
another domestic United States jurisdiction to realize tax or other benefits.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Restricted
Subsidiaries the Equity Interests of which constitutes all or substantially all
the properties and assets of the Company shall be deemed to be the transfer of
all or substantially all the properties and assets of the Company.
(b) No Guarantor (other than a Guarantor whose Guarantee is to be
released in accordance with the terms of its Guarantee and this Indenture as
provided in Section 11.03) shall consolidate with or merge with or into another
Person, whether or not such Person is affiliated with such Guarantor and whether
or not such Guarantor is the Surviving Person, unless (i) the Surviving Person
(if other than such Guarantor) is a corporation organized and validly existing
under the laws of the United States, any State thereof or the District of
Columbia; (ii) the Surviving Person (if other than such Guarantor) expressly
assumes by a supplemental indenture all the obligations of such Guarantor under
its Guarantee and the performance and observance of every covenant of the
Indenture and the Registration Rights Agreement to be performed or observed by
such Guarantor; (iii) at the time of and immediately after such Disposition, no
Default or Event of Default shall have occurred and be continuing; and (iv)
immediately after giving effect to any such transaction involving the Incurrence
by such Guarantor, directly or indirectly, of additional Indebtedness (and
treating any Indebtedness not previously an obligation of such Guarantor in
connection with or as a result of such transaction as having been Incurred at
the time of such transaction), the Company could Incur, on a pro forma basis
after giving effect to such transaction as if it had occurred at the beginning
of the latest fiscal quarter for which consolidated financial statements of the
Company are available, at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the Consolidated Coverage Ratio of the first
paragraph of Section 4.04; provided, however, that this paragraph shall not be a
condition to a merger or consolidation of a Guarantor if such merger or
consolidation only involves the Company and/or one or more other Guarantors.
Notwithstanding the foregoing, nothing in this covenant shall prohibit the
consolidation or merger with or into or the sale of all or substantially all of
the assets or properties of a Guarantor to any other Restricted Subsidiary that
is a Guarantor.
SECTION 5.02. Successor Corporation Substituted.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in Section 5.01 in which the Company or a
Guarantor, as the case may be, is not the Surviving Person and the Surviving
Person is to assume all the Obligations of the Company under the Securities,
this Indenture and the Registration Rights Agreement or of such Guarantor under
its Guarantee, this Indenture and the Registration Rights Agreement, as the case
may be, pursuant to a supplemental indenture, such Surviving Person shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or such Guarantor, as the case may be, and the Company shall be
discharged from its Obligations under this Indenture and the Securities or such
Guarantor shall be discharged from its Obligations under this Indenture and its
Guarantee, as the case may be.
<PAGE>
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ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default" for purposes of
this Indenture:
(a) failure to pay principal of (or premium, if any, on) any Security
when due (whether or not prohibited by the provisions of Article Eight);
(b) failure to pay any interest on any Security when due, continued
for 30 days or more (whether or not prohibited by the provisions of Article
Eight);
(c) default in the payment of principal of or interest on any
Security required to be purchased pursuant to any Offer to Purchase
required by this Indenture when due and payable or failure to pay on the
Purchase Date the Purchase Price for any Security validly tendered pursuant
to any Offer to Purchase required by this Indenture (whether or not
prohibited by the provisions of Article Eight);
(d) failure to perform or comply with any of the provisions of
Section 5.01;
(e) failure to perform any other covenant, warranty or agreement of
the Company under this Indenture or in the Securities or of the Guarantors
under this Indenture or in the Guarantees continued for 30 days or more
after written notice to the Company by the Trustee or the Holders of at
least 25% in aggregate principal amount of the outstanding Securities;
(f) default or defaults under the terms of one or more instruments
evidencing or securing Indebtedness of the Company or any of its
Subsidiaries having an outstanding principal amount of $10.0 million or
more individually or in the aggregate that has resulted in the acceleration
of the payment of such Indebtedness or failure by the Company or any of its
Restricted Subsidiaries to pay principal of at least $10.0 million when due
at the stated maturity of any such Indebtedness and such default or
defaults shall have continued after any applicable grace period and shall
not have been cured or waived within 10 days after the occurrence thereof;
(g) the rendering of a final judgment or judgments (not subject to
appeal) against the Company or any of its Restricted Subsidiaries in an
amount of $10.0 million or more (net of any amounts covered by reputable
and creditworthy insurance companies) which remains undischarged or
unstayed for a period of 60 days after the date on which the right to
appeal has expired;
(h) the Company or any of its Significant Restricted Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law: (i) admits in
writing its inability to pay its debts generally as they become due; (ii)
commences a voluntary case or proceeding; (iii) consents to the entry of an
order for relief against it in an involuntary case or proceeding; (iv)
consents or acquiesces in the institution of a bankruptcy or insolvency
proceeding against it; (v) consents to the appointment of a Custodian of it
or for all or substantially all of its property; or (vi) makes a general
assignment for the benefit of its creditors, or any of them takes any
action to authorize or effect any of the foregoing;
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(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (i) is for relief against the Company or any
Significant Restricted Subsidiary in an involuntary case or proceeding;
(ii) appoints a Custodian of the Company or any Significant Restricted
Subsidiary for all or substantially all of its property; or (iii) orders
the liquidation of the Company or any Significant Restricted Subsidiary;
and in each case the order or decree remains unstayed and in effect for 60
days; provided, however, that if the entry of such order or decree is
appealed and dismissed on appeal, then the Event of Default hereunder by
reason of the entry of such order or decree shall be deemed to have been
cured; or
(j) other than as provided in or pursuant to any Guarantee or this
Indenture, the Guarantee of any Guarantor that constitutes a Significant
Restricted Subsidiary ceases to be in full force and effect or is declared
null and void and unenforceable or found to be invalid or any Guarantor
that is a Significant Restricted Subsidiary denies its liability under its
Guarantee (other than by reason of a release of such Guarantor from its
Guarantee in accordance with the terms of the Indenture and such
Guarantee).
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
--------------
Federal, state or foreign law for the relief of debtors. The term "Custodian"
---------
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
SECTION 6.02. Acceleration.
If an Event of Default with respect to the Securities (other than an
Event of Default specified in clause (h) or (i) of Section 6.01 with respect to
the Company) occurs and is continuing, the Trustee or the Holders of at least
25% in aggregate principal amount of the outstanding Securities by notice in
writing to the Company (and to the Trustee if given by the Holders) may declare
the unpaid principal of and accrued interest to the date of acceleration on all
outstanding Securities to be due and payable immediately and, upon any such
declaration, such principal amount and accrued interest, notwithstanding
anything contained in this Indenture or the Securities to the contrary, shall
become immediately due and payable; provided, however, that so long as the
Credit Facility shall be in full force, if an Event of Default shall have
occurred and be continuing (other than an Event of Default specified in clause
(h) or (i) of Section 6.01 with respect to the Company), the Securities shall
not become due and payable until the earlier to occur of (x) five Business Days
following delivery of a written notice by the Trustee of such acceleration of
the Securities to the agent under the Credit Facility and (y) the acceleration
(ipso facto or otherwise) of any Indebtedness under the Credit Facility.
If an Event of Default specified in clause (h) or (i) of Section 6.01
with respect to the Company occurs, all unpaid principal of and accrued interest
on all outstanding Securities shall ipso facto become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
After a declaration of acceleration, but before a judgment or decree
of the money due in respect of the Securities has been obtained, the Holders of
not less than a majority in aggregate principal amount of the Securities then
outstanding by written notice to the Trustee may rescind an acceleration and its
consequences if all existing Events of Default (other than the nonpayment of
principal of and interest on the Securities which has become due solely by
virtue of such acceleration) have been cured or waived and if the rescission
would not conflict with any judgment or decree. No such rescission shall affect
any subsequent Default or impair any right consequent thereto.
<PAGE>
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SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy maturing
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 Default.
Subject to Sections 2.09 and 6.07, prior to the declaration of
acceleration of the Securities, the Holders of not less than a majority in
aggregate principal amount of the outstanding Securities by written notice to
the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of or interest on any
Security as specified in clauses (a), (b) and (c) of Section 6.01 or a Default
in respect of any term or provision of this Indenture that may not be amended or
modified without the consent of each Holder affected as provided in Section
10.02. The Company shall deliver to the Trustee an Officers' Certificate
stating that the requisite percentage of Holders have consented to such waiver
and attaching copies of such consents. In case of any such waiver, the Company,
the Trustee and the Holders shall be restored to their former positions and
rights hereunder and under the Securities, respectively. This paragraph of this
Section 6.04 shall be in lieu of (S) 316(a)(1)(B) of the TIA and such (S)
316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the
Securities, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred for every
purpose of this Indenture and the Securities, but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereon.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in principal amount
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it. However, the Trustee may refuse to follow
any direction that conflicts with law or this Indenture that the Trustee
determines may be unduly prejudicial to the rights of another Holder, it being
understood that the Trustee shall have no duty (subject to Section 7.01) to
ascertain whether or not such actions or forebearances are unduly prejudicial to
such holders, or that may involve the Trustee in personal liability; provided,
however, that the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction. In the event the Trustee takes
any action or follows any direction pursuant to this Indenture, the Trustee
shall be entitled to indemnification satisfactory to it in its sole discretion
against any loss or expense caused by taking such action or following such
direction. This Section 6.05 shall be in lieu of (S) 316(a)(1)(A) of the TIA,
and such (S) 316(a)(1)(A) of the TIA is hereby expressly excluded from this
Indenture and the Securities, as permitted by the TIA.
<PAGE>
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SECTION 6.06. Limitation on Suits.
A Holder may not pursue any remedy with respect to this Indenture or
the Securities unless:
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of
the outstanding Securities make a written request to the Trustee to pursue
a remedy;
(iii) such Holder or Holders offer and, if requested, provide to
the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(v) during such 60-day period the Holders of a majority in principal
amount of the outstanding Securities do not give the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, but subject in
any event to the provisions of Articles Eight and Twelve, the right of any
Holder to receive payment of principal of or interest on a Security, on or after
the respective due dates expressed in the Security, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified
in Section 6.01(a), (b) or (c) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any other obligor on the Securities for the whole amount of principal and
accrued interest remaining unpaid, together with interest overdue on principal
and to the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the
Securities and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee 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 (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Securities), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings
<PAGE>
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is hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
-------- -------
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and may be a member of the creditors'
committee.
SECTION 6.10. Priorities.
Subject to Articles Eight and Twelve, if the Trustee collects any
money or property pursuant to this Article Six, 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 Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to the Holders pursuant to this
Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 shall not apply to a suit by the Trustee, a suit by
a Holder or group of Holders of more than 10% in aggregate principal amount of
the outstanding Securities, or to any suit instituted by any Holder for the
enforcement or the payment of the principal or interest on any Securities on or
after the respective due dates expressed in the Security.
<PAGE>
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a Default has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture and use
the same degree of care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of a Default:
(1) The Trustee shall not be liable except for the performance of
such duties as are specifically set forth herein; 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 conforming to
the requirements of this Indenture; however, in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall examine such
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee shall not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph 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 direction
received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive from such Holders an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense which might be incurred by it in compliance with such request or
direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
<PAGE>
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SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may conclusively rely on any document believed by it
to be genuine and to have been signed or presented by the proper person.
The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and/or an Opinion of Counsel, which shall conform
to the provisions of Section 13.05. The Trustee shall not be liable for
any action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through attorneys and agents of its selection
and shall not be responsible for the misconduct or negligence of any agent
or attorney (other than an agent who is an employee of the Trustee)
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 reasonably believes to be authorized or
within its rights or powers.
(e) Before the Trustee acts or refrains from acting, it may consult
with counsel of its selection and the advice or opinion of such counsel as
to matters of law shall be full and complete authorization and protection
from liability in respect of any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(f) Any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution.
(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 pursuant to this Indenture, unless such Holders shall
have offered to the Trustee security or indemnity reasonably satisfactory
to it against the costs, expenses and liabilities which might be incurred
by it in compliance with such request or direction.
(h) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney.
(i) The Trustee shall not be deemed to have notice of any Event of
Default unless a Trust Officer of the Trustee has actual knowledge thereof
or unless the Trustee shall have received written notice thereof at the
Corporate Trust Office of the Trustee, and such notice references the
Securities and this Indenture. As used herein, the term "actual knowledge"
------ ---------
means the actual fact or statement of knowing, without any duty to make any
investigation with regard thereto.
<PAGE>
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(j) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(k) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty and the Trustee shall not
be answerable for other than its negligence or willful misconduct.
(l) The rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in
each of its capacities hereunder, and to each agent, custodian and other
Person employed to act hereunder, except as provided in clause (c) of this
Section 7.02.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee, subject to
Section 7.10 hereof. Any Agent may do the same with like rights. However, the
Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Securities, it shall not
be accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture or
any document issued in connection with the sale of Securities or any statement
in the Securities other than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and a
Trust Officer of the Trustee has actual knowledge of such Default or Event of
Default, the Trustee shall mail to each Holder notice of the Default or Event of
Default within 90 days after the occurrence thereof. Except in the case of a
Default or an Event of Default in payment of principal of or interest on any
Security or a Default or Event of Default in complying with Section 5.01, the
Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the interest
of Holders. This Section 7.05 shall be in lieu of the proviso to (S) 315(b) of
the TIA and such proviso to (S) 315(b) of the TIA is hereby expressly excluded
from this Indenture and the Securities, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA (S) 313(a), within 60 days after each May 15
beginning with the May 15 following the date of this Indenture, the Trustee
shall mail to each Holder a report dated as of such May 15 that complies with
TIA (S) 313(a). The Trustee also shall comply with TIA (S)(S) 313(b), (c) and
(d).
A copy of each such report at the time of its mailing to Holders shall
be filed with the SEC and each stock exchange, if any, on which the Securities
are listed.
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The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time, and the
Trustee shall be entitled to, such compensation as the Company and the Trustee
shall from time to time agree in writing for its services. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable disbursements, expenses and advances, including all costs and
expenses of collection (including reasonable fees, disbursements and expenses of
its agents and outside counsel) incurred or made by it in addition to the
compensation for its services except any such disbursements, expenses and
advances as may be attributable to the Trustee's negligence or willful
misconduct. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents, accountants, experts and
outside counsel and any taxes or other expenses incurred by a trust created
pursuant to Section 9.01 hereof.
The Company shall indemnify the Trustee or any predecessor Trustee,
and their agents, for, and hold it harmless against any and all loss, damage,
claims, liability or expense, including taxes (other than franchise taxes
imposed on the Trustee and taxes based upon, measured by or determined by the
income of the Trustee), arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses of defending itself against or investigating any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent that such loss, damage, claim (whether asserted
by the Company, or any Holder or any Person), liability or expense is due to its
own negligence or willful misconduct. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity. However, the failure by the Trustee to so notify the Company shall
not relieve the Company of its obligations hereunder. The Company shall defend
the claim and the Trustee shall cooperate in the defense (and may employ its own
counsel) at the Company's expense; provided, however, that the Company's
reimbursement obligation with respect to counsel employed by the Trustee will be
limited to the reasonable fees and expenses of such additional counsel.
The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify against any loss or liability incurred by the
Trustee as a result of its own negligence or willful misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Securities against all money or property
held or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay principal of or interest on particular Securities
or the Purchase Price or redemption price of any Securities to be purchased
pursuant to an Offer to Purchase or redeemed.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) occurs, the expenses (including the
reasonable fees and expenses of its agents and counsel) and the compensation for
the services shall be preferred over the status of the Holders in a proceeding
under any Bankruptcy Law and are intended to constitute expenses of
administration under any Bankruptcy Law. The Company's obligations under this
Section 7.07 and any claim arising hereunder shall survive the resignation or
removal of any Trustee, the discharge of the Company's obligations pursuant to
Article Nine and any rejection or termination under any Bankruptcy Law.
<PAGE>
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SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee and the Company in
writing and may appoint a successor Trustee with the Company's consent. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent under any
Bankruptcy Law;
(c) a custodian or other public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties of
the Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Securities may
petition, at the expense of the Company, any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee.
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SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be eligible to
act as Trustee under TIA (S)(S) 310(a)(1) and 310(a)(2). The Trustee shall have
a combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. If the Trustee has or shall acquire
any "conflicting interest" within the meaning of TIA (S) 310(b), the Trustee and
the Company shall comply with the provisions of TIA (S) 310(b); provided,
however, that there shall be excluded from the operation of TIA (S) 310(b)(1)
any indenture or indentures under which other securities or certificates of
interest or participation in other securities of the Company are outstanding if
the requirements for such exclusion set forth in TIA (S) 310(b)(1) are met. If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 7.10, the Trustee shall resign immediately in the
manner and with the effect hereinbefore specified in this Article Seven.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE EIGHT
SUBORDINATION OF SECURITIES
SECTION 8.01. Securities Subordinated to Senior Indebtedness.
The Company covenants and agrees, and the Trustee and each Holder of
the Securities by his acceptance thereof likewise covenant and agree, that all
Securities shall be issued subject to the provisions of this Article Eight; and
each person holding any Security, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that all payments of the
principal of and interest on the Securities by the Company shall, to the extent
and in the manner set forth in this Article Eight, be subordinated in right of
payment to the prior payment in full in cash of all Senior Indebtedness.
SECTION 8.02 No Payment on Securities in Certain Circumstances.
(a) No direct or indirect payment of any kind or character (excluding
any payment or distribution of Permitted Junior Securities and excluding any
payment from funds held in trust for the benefit of Holders pursuant to Article
Nine (a "Defeasance Trust Payment")) by or non behalf of the Company in respect
------------------------
of principal of, premium, if any, or interest on the Securities or to acquire
any of the Securities, whether pursuant to the terms of the Securities, upon
acceleration, pursuant to an Offer to Purchase or otherwise, shall be made if,
at the time of such payment, there exists a default in the payment of all or any
portion of the obligations in respect of any Designated Senior Indebtedness,
whether at maturity, on account of mandatory redemption or prepayment,
acceleration or otherwise, and such default shall not have been cured or waived
or the benefits of this sentence waived by or on behalf of the requisite number
of holders of such Designated Senior Indebtedness. In addition, if any non-
payment event of default occurs with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be immediately
accelerated, then upon and after receipt by the Trustee of written notice (a
"Payment Blockage Notice") from the holder or holders of such Des-
-----------------------
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ignated Senior Indebtedness or the trustee or agent acting on behalf of such
Designated Senior Indebtedness, unless and until all such events of default have
been cured or waived or have ceased to exist or such Designated Senior
Indebtedness has been discharged or repaid in full in cash or the benefits of
these provisions have been waived by the requisite number of holders of such
Designated Senior Indebtedness, no direct or indirect payment of any kind or
character (excluding any payment or distribution of Permitted Junior Securities
and excluding any Defeasance Trust Payment) shall be made by or on behalf of the
Company in respect of principal of, premium, if any, or interest on the
Securities or to acquire any of the Securities, upon acceleration pursuant to
any Offer to Purchase or otherwise to such Holders, during a period (a "Payment
-------
Blockage Period") commencing on the date of receipt of such Payment Blockage
- ---------------
Notice by the Trustee and ending 179 days thereafter.
Notwithstanding anything herein or in the Securities to the contrary,
(x) in no event shall a Payment Blockage Period extend beyond 179 days from the
date the Payment Blockage Notice in respect thereof was given, (y) there shall
be a period of at least 181 consecutive days in each 360-day period when no
Payment Blockage Period is in effect and (z) not more than one Payment Blockage
Period may be commenced with respect to the Securities during any period of 360
consecutive days. No event of default that existed or was continuing on the
date of commencement of any Payment Blockage Period with respect to the
Designated Senior Indebtedness initiating such Payment Blockage Period (to the
extent the holder of Designated Senior Indebtedness, or trustee or agent, giving
notice commencing such Payment Blockage Period had knowledge of such existing or
continuing event of default) may be, or be made, the basis for the commencement
of any other Payment Blockage Period by the holder or holders of such Designated
Senior Indebtedness or the trustee or agent acting on behalf of such Designated
Senior Indebtedness, whether or not within a period of 360 consecutive days,
unless such event of default has been cured or waived for a period of not less
than 90 consecutive days (it being understood that a subsequent act or event
that constitutes a breach of a covenant or other provision, including breach of
a financial covenant with respect to a subsequent period, shall be considered a
separate event of default from a previous act or event that constitutes a breach
of the same covenant or other provision for this purpose).
(b) In the event that, notwithstanding the foregoing, the Company
shall have made payment to the Trustee or any Holder when such payment is
prohibited by Section 8.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered by the Trustee (if the Notice
required by Section 8.06 has been received by the Trustee) or the Holder to, the
holders of Senior Indebtedness or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Designated
Senior Indebtedness may have been issued, as their respective interests may
appear, but only to the extent that, upon notice from the Trustee to the holders
of Senior Indebtedness that such prohibited payment has been made, the holders
of Senior Indebtedness (or their representative or representatives or a trustee
or trustees) notify the Trustee in writing of the amounts then due and owing on
the Senior Indebtedness, if any, and only the amounts specified in such notice
to the Trustee shall be paid to the holders of Senior Indebtedness.
SECTION 8.03. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities and
excluding any Defeasance Trust Payment), upon any dissolution or winding-up or
total liquidation or reorganization of the Company or assignment for the benefit
of creditors of the Company or similar proceeding, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
Senior Indebtedness shall first be paid in full in cash before the Holders of
the Securities or the Trustee on behalf of such Holders shall be entitled to
receive any payment by or on behalf of the Company of, the princi-
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pal of, premium, if any, or interest on the Securities, or any payment by or on
behalf of the Company to acquire any of the Securities for cash, property or
securities, or any distribution by the Company with respect to the Securities of
any cash, property or securities (excluding any payment or distribution of
Permitted Junior Securities and excluding any Defeasance Trust Payment). Before
any such payment or distribution may be made by, or on behalf of, the Company in
respect of the principal of, premium, if any, or interest on the Securities upon
any such dissolution or winding-up or liquidation or reorganization or
assignment for the benefit of creditors of the Company or similar proceeding,
any payment or distribution of assets or securities of the company of any kind
or character, whether in cash, property or securities (excluding any payment or
distribution of Permitted Junior Securities and excluding any Defeasance Trust
Payment), to which the Holders of the Securities or the Trustee on their behalf
would be entitled, but for the subordination provisions of this Indenture, shall
be made by the Company or by any receiver, trustee in bankruptcy, liquidation
trustee, agent or other Person making such payment or distribution, directly to
the holders of the Senior Indebtedness (pro rata to such holders on the basis of
the respective amounts of Senior Indebtedness held by such holders) or their
representatives or to the trustee or trustees or agent or agents under any
agreement or indenture pursuant to which any of such Senior Indebtedness may
have been issued, as their respective interests may appear, to the extent
necessary to pay all such Senior Indebtedness in full in cash after giving
effect to any prior or concurrent payment, distribution or provision therefor
to or for the holders of such Senior Indebtedness.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Company of any kind or character, whether in cash, property
or securities (excluding any payment or distribution of Permitted Junior
Securities and excluding any Defeasance Trust Payment), shall be paid by the
Company to the Trustee or any Holder of Securities at a time when such payment
or distribution is prohibited by Section 8.03(a) and before all obligations in
respect of Senior Indebtedness are paid in full in cash, such payment or
distribution shall be received and held in trust for the benefit of, and shall
be paid over or delivered by the Trustee (if the Notice required by Section 8.06
has been received by the Trustee) or the Holder to, the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) or their respective representatives,
or to the trustee or trustees or agent or agents under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of Senior Indebtedness
remaining unpaid until all such Senior Indebtedness has been paid in full in
cash after giving effect to any prior or concurrent payment, distribution or
provision therefor to or for the holders of such Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
with or into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided in Article five shall not be deemed a dissolution, winding-
up, liquidation or reorganization for the purposes of this Section 8.03 if such
other corporation shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article Five.
SECTION 8.04. Subrogation.
Upon the payment in full in cash of all Senior Indebtedness, or
provision for payment, the Holders of the Securities shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company made on such
Senior Indebtedness until the principal of and interest on the Securities shall
be paid in full in cash; and, for the purposes of such subrogation, no payments
or distributions to the holders of the Senior Indebtedness of any cash, property
or securities to which the Holders of the Securities or the Trustee on their
behalf would be entitled except for the
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provisions of this Article Eight, and no payment over pursuant to the provisions
of this Article Eight to the holders of Senior Indebtedness by Holders of the
Securities or the Trustee on their behalf shall, as between the Company, its
creditors other than holders of Senior Indebtedness, and the Holders of the
Securities, be deemed to be a payment by the Company to or on account of the
Senior Indebtedness. It is understood that the provisions of this Article Eight
are and are intended solely for the purpose of defining the relative rights of
the Holders of the Securities, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
If any payment or distribution to which the Holders of the Securities
would otherwise have been entitled but for the provisions of this Article Eight
shall have been applied, pursuant to the provisions of this Article Eight, to
the payment of all amounts payable under Senior Indebtedness, then and in such
case, the Holders of the Securities shall be entitled to receive from the
holders of such Senior Indebtedness any payments or distributions received by
such holders of Senior Indebtedness in excess of the amount required to make
payment in full in cash of such Senior Indebtedness.
SECTION 8.05. Obligations of Company Unconditional.
Nothing contained in this Article Eight or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as among the Company and
the Holders of the Securities, the obligation of the Company, which is absolute
and unconditional, to pay to the Holders of the Securities the principal of,
premium, if any, and interest on the Securities as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Holders of the Securities and creditors
of the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Holder of any Security or the Trustee on
their behalf from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article Eight of the holders of the Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
Without limiting the generality of the foregoing, nothing contained in
this Article Eight shall restrict the right of the Trustee or the Holders of
Securities to take any action to declare the Securities to be due and payable
prior to their stated maturity pursuant to Section 6.01 or to pursue any rights
or remedies hereunder; provided, however, that all Senior Indebtedness then due
and payable shall first be paid in full in cash before the Holders of the
Securities or the Trustee are entitled to receive any direct or indirect payment
from the Company of principal of or interest on the Securities.
SECTION 8.06. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities pursuant to the provisions of this
Article Eight. The Trustee shall not be charged with knowledge of the existence
of any event of default with respect to any Senior Indebtedness or of any other
facts which would prohibit the making of any payment to or by the Trustee unless
and until the Trustee shall have received notice in writing at its Corporate
Trust Office to that effect signed by an Officer of the Company, or by a holder
of Senior Indebtedness or trustee or agent therefor; and prior to the receipt of
any such written notice, the Trustee shall, subject to Article Seven, be
entitled to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 8.06 at
least two Business Days prior to the date upon which by the terms of this
Indenture any moneys shall become payable for any purpose (including, without
limitation, the payment of the principal of or interest on any Security), then,
regardless of anything herein to the contrary, the Trustee shall have full power
and authority to receive any moneys from the Company and
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to apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such prior date. Nothing contained in this Section 8.06 shall limit the right of
the holders of Senior Indebtedness to recover payments as contemplated by
Section 8.03. The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of any
Senior Indebtedness (or a trustee on behalf of, or other representative of, such
holder) to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Eight, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article Eight, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets or securities referred to
in this Article Eight, the Trustee and the Holders of the Securities shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, delivered to the Trustee or to the Holders of the
Securities for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article Eight.
SECTION 8.08. Trustee's Relation to Senior Indebtedness.
The Trustee and any Paying Agent shall be entitled to all the rights
set forth in this Article Eight with respect to any Senior Indebtedness which
may at any time be held by it in its individual or any other capacity to the
same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall deprive the Trustee or any Paying Agent of any of its rights as
such holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Eight, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness (except as provided in
Section 8.03(b)). The Trustee shall not be liable to any such holders if the
Trustee shall in good faith mistakenly pay over or distribute to Holders of
Securities or to the Company or to any other person cash, property or securities
to which any holders of Senior Indebtedness shall be entitled by virtue of this
Article Eight or otherwise.
SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the
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part of the Company or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Company with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or
otherwise be charged with. The provisions of this Article Eight are intended to
be for the benefit of, and shall be enforceable directly by, the holders of
Senior Indebtedness.
SECTION 8.10. Holders Authorize Trustee To Effectuate Subordination of
Securities.
Each Holder of Securities by his acceptance of such Securities
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article Eight, and appoints the Trustee his attorney-in-fact for such
purposes, including, in the event of any dissolution, winding-up, total
liquidation or reorganization of the Company (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
business and assets of the Company, the filing of a claim for the unpaid balance
of its or his Securities in the form required in those proceedings.
SECTION 8.11. This Article Not To Prevent Events of Default.
The failure to make a payment on account of principal of or interest
on the Securities by reason of any provision of this Article Eight shall not be
construed as preventing the occurrence of an Event of Default specified in
clauses (a), (b) or (c) of Section 6.01.
SECTION 8.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article Eight shall apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
SECTION 8.13. No Waiver of Subordination Provisions.
Without in any way limiting the generality of Section 8.09, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Trustee or the Holders of the Securities,
without incurring responsibility to the Holders of the Securities and without
impairing or releasing the subordination provided in this Article Eight or the
obligations hereunder of the Holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (a) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding or secured; (b) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (c) release any Person liable in any manner for the collection of
Senior Indebtedness; and (d) exercise or refrain from exercising any rights
against the Company and any other Person.
SECTION 8.14. Subordination Provisions Not Applicable to Money Held in Trust
for Holders; Payments May Be Paid Prior to Dissolution.
All money and United States Government Obligations deposited in trust
with the Trustee pursuant to and in accordance with Article Nine shall be for
the sole benefit of the Holders and shall not be subject to this Article Eight.
Nothing contained in this Article Eight or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in Sections
8.02 and 8.03, from making payments of princi-
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pal of and interest on the Securities or from depositing with the Trustee any
moneys for such payments or from effecting a termination of the Company's and
the Guarantors' obligations under the Securities and this Indenture as provided
in Article Nine, or (ii) the application by the Trustee of any moneys deposited
with it for the purpose of making such payments of principal of and interest on
the Securities, to the holders entitled thereto unless at least two Business
Days prior to the date upon which such payment becomes due and payable, the
Trustee shall have received the written notice provided for in Section 8.02(b)
or in Section 8.06. The Company shall give prompt written notice to the Trustee
of any dissolution, winding-up, liquidation or reorganization of the Company.
SECTION 8.15. Acceleration of Securities.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of the Senior Indebtedness of
the acceleration.
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of Company's Obligations.
Subject to the provisions of Article Eight, the Company may terminate
its and the Guarantors' substantive obligations in respect of the Securities by
delivering all outstanding Securities to the Trustee for cancellation and paying
all sums payable by it on account of principal of and interest on all Securities
or otherwise. In addition to the foregoing, subject to the provisions of
Article Eight with respect to the creation of the defeasance trust provided for
in the following clause (i), the Company may, provided that no Default or Event
of Default has occurred and is continuing or would arise therefrom (or, with
respect to a Default or Event of Default specified in Section 6.01(h) or (i),
occurs at any time on or prior to the 91st calendar day after the date of such
deposit (it being understood that this condition shall not be deemed satisfied
until after such 91st day)) and provided that no default under any Senior
Indebtedness would result therefrom, terminate its and the Guarantors'
substantive obligations in respect of Article Four (other than Sections 4.01,
4.02, 4.07, 4.10 and 4.11) and Article Five hereof and any Event of Default
specified in Section 6.01 (d) or (e) by (i) depositing with the Trustee, under
the terms of an irrevocable trust agreement, money or United States Government
Obligations sufficient (without reinvestment) to pay all remaining Indebtedness
on the Securities, (ii) delivering to the Trustee either an Opinion of Counsel
or a ruling directed to the Trustee from the Internal Revenue Service to the
effect that the Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of such deposit and termination of obligations,
(iii) delivering to the Trustee an Opinion of Counsel to the effect that the
Company's exercise of its option under this Section 9.01 will not result in any
of the Company, the Trustee or the trust created by the Company's deposit of
funds pursuant to this provision becoming or being deemed to be an "investment
company" subject to regulation under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and (iv) delivering to the Trustee an
----------------------
Officers' Certificate and an Opinion of Counsel each stating compliance with all
conditions precedent provided for herein. In addition, subject to the
provisions of Article Eight with respect to the creation of the defeasance trust
provided for in the following clause (i), the Company may, provided that no
Default or Event of Default has occurred and is continuing or would arise
therefrom (or, with respect to a Default or Event of Default specified in
Section 6.01(h) or (i), occurs at any time on or prior to the 91st calendar day
after the date of such deposit (it being understood that this condition shall
not be deemed satisfied until after such 91st day)) and
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provided that no default under any Senior Indebtedness would arise therefrom,
terminate all of its and the Guarantors' substantive obligations in respect of
the Securities (including its obligations to pay the principal of and interest
on the Securities and the Guarantors' Guarantee thereof) by (i) depositing with
the Trustee, under the terms of an irrevocable trust agreement, money or United
States Government Obligations sufficient (without reinvestment) to pay all
remaining Indebtedness on the Securities, (ii) delivering to the Trustee either
a ruling directed to the Trustee from the Internal Revenue Service to the effect
that the Holders of the Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and termination of
obligations or an Opinion of Counsel addressed to the Trustee based upon such a
ruling or based on a change in the applicable Federal tax law since the date of
this Indenture to such effect, (iii) delivering to the Trustee an Opinion of
Counsel to the effect that the Company's exercise of its option under this
Section 9.01 will not result in any of the Company, the Trustee or the trust
created by the Company's deposit of funds pursuant to this provision becoming or
being deemed to be an "investment company" subject to regulation under the
Investment Company Act and (iv) delivering to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating compliance with all
conditions precedent provided for herein.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 2.13 and 4.01 (but not with
respect to termination of substantive obligations pursuant to the third sentence
of the foregoing paragraph), 4.02, 7.07, 7.08, 9.03 and 9.04 shall survive until
the Securities are no longer outstanding. Thereafter the Company's obligations
in Sections 7.07, 9.03 and 9.04 shall survive.
After such delivery or irrevocable deposit and delivery of an
Officers' Certificate and Opinion of Counsel, the Trustee upon request shall
acknowledge in writing the discharge of the Company's and the Guarantors'
obligations under the Securities and this Indenture except for those surviving
obligations specified above.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the United States Government
Obligations deposited pursuant to this Section 9.01 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Securities.
SECTION 9.02. Application of Trust Money.
The Trustee shall hold in trust money or United States Government
Obligations deposited with it pursuant to Section 9.01, and shall apply the
deposited money and the money from United States Government Obligations in
accordance with this Indenture solely to the payment of principal of and
interest on the Securities.
SECTION 9.03. Repayment to Company.
Subject to Sections 7.07 and 9.01, the Trustee shall promptly pay to
the Company upon written request any excess money held by it at any time. The
Trustee shall pay to the Company upon written request any money held by it for
the payment of principal or interest that remains unclaimed for two years;
provided, however, that the Trustee before being required to make any payment
may at the expense of the Company cause to be published once in a newspaper of
general circulation in The City of New York or mail to each Holder entitled to
such money notice that such money remains unclaimed and that, after a date
specified therein which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining shall
be repaid to the Company. After payment to the Company, Holders entitled
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to money must look solely to the Company for payment as general creditors unless
an applicable abandoned property law designates another person and all liability
of the Trustee or Paying Agent with respect to such money shall thereupon cease.
SECTION 9.04. Reinstatement.
If the Trustee is unable to apply any money or United States
Government Obligations in accordance with Section 9.01 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's and the Guarantors' obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 9.01 until such time as the Trustee is permitted to apply
all such money or United States Government Obligations in accordance with
Section 9.01; provided, however, that if the Company has made any payment of
interest on or principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or United States
Government Obligations held by the Trustee.
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
The Company and the Guarantors, when authorized by a resolution of
their respective Boards of Directors, and the Trustee may amend or supplement
this Indenture or the Securities without notice to or consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency; provided,
however, that such amendment or supplement does not adversely affect the
rights of any Holder;
(b) to effect the assumption by a successor Person of all obligations
of the Company under the Securities and his Indenture in connection with
any transaction complying with Article Five of this Indenture;
(c) to provide for uncertificated Securities in addition to or in
place of certificated Securities (provided that the uncertificated Notes
are issued in registered form for purposes of Section 163(f) of the
Internal Revenue Code, or in a manner such that the uncertificated Notes
are described in Section 163(f)(2)(B) of the Internal Revenue Code);
(d) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(e) to make any change that would provide any additional benefit or
rights to the Holders;
(f) to make any change that does not adversely affect the rights of
any Holder under this Indenture;
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(g) to evidence the succession of another Person to any Guarantor and
the assumption by any such successor of the covenants of such Guarantor
herein and in the Guarantee in connection with any transaction complying
with Article Five of this Indenture;
(h) to add to the covenants of the Company or the Guarantors for the
benefit of the Holders, or to surrender any right or power herein conferred
upon the Company or any Guarantor;
(i) to secure the Securities pursuant to the requirements of Section
4.16 or otherwise; or
(j) to reflect the release of a Guarantor from its obligations with
respect to its Guarantee in accordance with the provisions of Section 11.03
and to add a Guarantor pursuant to the requirements of Section 4.17;
provided, however, that the Company has delivered to the Trustee an Opinion of
Counsel stating that such amendment or supplement complies with the provisions
of this Section 10.01.
SECTION 10.02. With Consent of Holders.
Subject to Section 6.07, the Company and the Guarantors, when
authorized by a resolution of their respective Boards of Directors, and the
Trustee may amend or supplement this Indenture or the Securities with the
written consent of the Holders of at least a majority in principal amount of the
outstanding Securities. Subject to Section 6.07, the Holders of a majority in
principal amount of the outstanding Securities may waive compliance by the
Company or any Guarantor with any provision of this Indenture or the Securities.
However, without the consent of each Holder affected, an amendment, supplement
or waiver, including a waiver pursuant to Section 6.04, may not:
(a) change the Stated Maturity of the principal of or any installment
of interest on such Security or alter the optional redemption or repurchase
provisions of any Security or this Indenture in a manner adverse to the
Holders of the Securities;
(b) reduce the principal amount of (or the premium) of any Security;
(c) reduce the rate of or extend the time for payment of interest on
any Security;
(d) change the place or currency of payment of principal of (or
premium) or interest on any Security;
(e) modify any provisions of Section 6.04 (other than to add sections
of this Indenture or the Securities subject thereto) or 6.07 or this
Section 10.02 (other than to add sections of this Indenture or the
Securities which may not be amended, supplemented or waived without the
consent of each Holder affected);
(f) reduce the percentage of the principal amount of outstanding
Securities necessary for amendment to or waiver of compliance with any
provision of this Indenture or the Securities or for waiver of any Default
in respect thereof;
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(g) waive a Default in the payment of principal of, interest on, or
redemption payment with respect to, the Securities (except a rescission of
acceleration of the Securities by the Holders thereof as provided in
Section 6.02 and a waiver of the payment default that resulted from such
acceleration);
(h) modify the ranking or priority of any Security or the Guarantee
in respect thereof of any Guarantor or modify the definition of Senior
Indebtedness or Guarantor Senior Indebtedness or amend or modify any of the
provisions of Article Eight or Article Twelve in any manner adverse to the
Holders of the Securities;
(i) release any Significant Restricted Subsidiary that is a Guarantor
from any of its obligations under its Guarantee or this Indenture otherwise
than in accordance with this Indenture; or
(j) amend, change or modify in any material respect the obligation of
the Company to make and consummate an Offer to Purchase in the event of a
Change of Control or make and consummate an Offer to Purchase with respect
to any Asset Sale that has been consummated or modify in any material
respect any of the provisions or definitions with respect thereto;
An amendment under this Section 10.02 may not make any change under
Article Eight or Article Twelve hereof that adversely affects in any material
respect the rights of any holder of Senior Indebtedness or Guarantor Senior
Indebtedness, as the case may be, then outstanding unless the holders of such
Senior Indebtedness or Guarantor Senior Indebtedness, as the case may be, (or
any group or representative thereof authorized to give a consent) shall have
consented to such change.
It shall not be necessary for the consent of the Holders under this
Section 10.02 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, supplement or waiver under this Section 10.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment, supplement or
waiver.
SECTION 10.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 10.04. Record Date for Consents and Effect of Consents.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders of Securities entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then those persons
who were Holders of Securities at such record date (or their duly designated
proxies), and only those persons, shall be entitled to consent to such
amendment, supplement or waiver or to revoke any consent previously given,
whether or not such persons continue to be Holders of such Securities after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date. The Trustee is entitled to rely upon any electronic
instruction from beneficial owners to the Holders of any Global Security.
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After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (a)
through (j) of Section 10.02. In that case the amendment, supplement or waiver
shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
SECTION 10.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 10.06. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article Ten is
authorized or permitted by this Indenture and that such amendment, supplement or
waiver constitutes the legal, valid and binding obligation of the Company and
the Guarantors, enforceable in accordance with its terms (subject to customary
exceptions). The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise. In signing any amendment,
supplement or waiver, the Trustee shall be entitled to receive an indemnity
reasonably satisfactory to it.
SECTION 10.07. Reliance by Holders of Senior Indebtedness on Subordination
Provisions.
Each Holder by accepting any Securities acknowledges and agrees that
the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior Indebtedness of the
Company, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of such Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee.
Each Guarantor hereby unconditionally, jointly and severally,
guarantees (each, a "Guarantee") to each Holder of a Security authenticated by
---------
the Trustee and to the Trustee and its successors and assigns that: the
principal of and interest on the Securities will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity, by
acceleration or otherwise, and interest on the overdue principal and interest on
any overdue interest on the Securities, to the extent lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or under the
Securities will be promptly paid in full
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or performed, all in accordance with the terms hereof and thereof; subject,
however, to the limitations set forth in Section 11.04. Each Guarantor hereby
agrees that its obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Securities or this Indenture,
the absence of any action to enforce the same, any waiver or consent by any
Holder of the Securities with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a Guarantor. Each Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenants
that the Guarantee will not be discharged except by complete performance of the
obligations contained in the Securities, this Indenture, and this Guarantee. If
any Holder or the Trustee is required by any court or otherwise to return to the
Company, any Guarantor, or any custodian, trustee, liquidator or other similar
official acting in relation to the Company or any Guarantor, any amount paid by
the Company or any Guarantor to the Trustee or such Holder, this Guarantee, to
the extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor further agrees that, as between each Guarantor, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six for
the purpose of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article Six, such obligations (whether or not due and payable)
shall forth become due and payable by each Guarantor for the purpose of this
Guarantee.
SECTION 11.02. Severability.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 11.03. Release of a Guarantor.
(a) If the Securities are defeased in accordance with the terms of
this Indenture, or if Section 5.01(b) is complied with, or if, subject to the
requirements of Section 5.01(a), all or substantially all of the assets of any
Guarantor or all of the Equity Interests of any Guarantor are sold (including by
issuance or otherwise) by the Company (or pursuant to an exercise of remedies,
or transfer in lieu thereof, on behalf of any holder or holders of a Lien
securing Senior Indebtedness) and if (x) the Net Cash Proceeds from such Asset
Sale are used in accordance with Section 4.05 or (y) the Company delivers to the
Trustee an Officers' Certificate to the effect that the Net Cash Proceeds from
such Asset Sale shall be used in accordance with Section 4.05 and within the
time limits specified by Section 4.05, then each Guarantor (in the case of
defeasance) or such Guarantor (in the event of a sale or other disposition of
all of the Equity Interests of such Guarantor) or the corporation acquiring such
assets (in the event of a sale or other disposition of all or substantially all
of the assets of such Guarantor) shall be released and discharged from all
obligations under this Article Eleven without any further action required on the
part of the Trustee or any Holder provided, however that a sale of a Guarantor
(other than by way of a sale or disposition pursuant to an exercise of remedies,
or transfer in lieu thereof, on behalf of any holder or holders of a Lien
securing Senior Indebtedness) will still be subject to the Company's obligations
under the first paragraph of Section 5.01. The Trustee shall, at the sole cost
and expense of the Company and upon receipt at the reasonable request of the
Trustee of an Opinion of Counsel that the provisions of this Section 11.03 have
been complied with, deliver an appropriate instrument evidencing such release
upon receipt of a request by the Company accompanied by an Officers' Certificate
certifying as to the compliance with this Section 11.03. Any Guarantor not so
released remains liable for the full amount of
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principal of and interest on the Securities and the other obligations of the
Company hereunder as provided in this Article Eleven.
(b) Any Guarantor that is designated an Unrestricted Subsidiary
pursuant to and in accordance with Section 4.15 will upon such Designation be
released and discharged of its Guarantee obligation in respect of this Indenture
and the Securities.
SECTION 11.04. Limitation of Guarantor's Liability.
Each Guarantor, and by its acceptance hereof each Holder and the
Trustee, hereby confirms that it is the intention of all such parties that the
guarantee by such Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of title 11 of the United States
Code, as amended, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar U.S. Federal or state or other applicable law. To
effectuate the foregoing intention, the Holders and each Guarantor hereby
irrevocably agree that the obligations of each Guarantor under its Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor (including any Guarantor
Senior Indebtedness Incurred after the Issue Date) and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to Section 11.05, result in the obligations of such Guarantor under its
Guarantee not constituting such a fraudulent transfer or conveyance under
Federal or State law.
SECTION 11.05. Contribution.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under the
-----------------
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount, based on the net assets of each Guarantor
(including the Funding Guarantor), determined in accordance with GAAP, subject
to Section 11.04, for all payments, damages and expenses incurred by such
Funding Guarantor in discharging the Company's obligations with respect to the
Securities or any other Guarantor's obligations with respect to the Guarantee.
SECTION 11.06. Execution of Security Guarantee.
To further evidence their Guarantee to the Holders, each of the
Guarantors hereby agrees to execute a Security Guarantee to be endorsed on each
Security ordered to be authenticated and delivered by the Trustee. Each
Guarantor hereby agrees that its Guarantee set forth in Section 11.01 shall
remain in full force and effect notwithstanding any failure to endorse on each
Security a Security Guarantee. Each such Security Guarantee shall be signed on
behalf of each Guarantor by its Chairman of the Board, its President or its
Chief Financial Officer (as applicable) or one of its Vice Presidents prior to
the authentication of the Security on which it is endorsed, and the delivery of
such Security by the Trustee, after the authentication thereof hereunder, shall
constitute due delivery of such Security Guarantee on behalf of such Guarantor.
Such signature upon the Security Guarantee may be manual or facsimile signature
of such officer and may be imprinted or otherwise reproduced on the Security
Guarantee, and in case such officer who shall have signed the Security Guarantee
shall cease to be such officer before the Security on which such Security
Guarantee is endorsed shall have been authenticated and delivered by the Trustee
or disposed of by the Company, such Security nevertheless may be authenticated
and delivered or disposed of as though the Person who signed the Security
Guarantee had not ceased to be such officer of such Guarantor.
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SECTION 11.07. Subordination of Subrogation and Other Rights.
Each Guarantor hereby agrees that any claim against the Company that
arises from the payment, performance or enforcement of such Guarantor's
obligations under its Guarantee or this Indenture, including, without
limitation, any right of subrogation, shall be subject and subordinate to, and
no payment with respect to any such claim of such Guarantor shall be made
before, the payment in full in cash of all outstanding Securities in accordance
with the provisions provided therefor in this Indenture.
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior
Indebtedness.
Each Guarantor covenants and agrees, and the Trustee and each Holder
of the Securities by his acceptance thereof likewise covenant and agree, that
the Guarantee of such Guarantor shall be issued subject to the provisions of
this Article Twelve; and each person holding any Security, whether upon original
issue or upon transfer, assignment or exchange thereof, accepts and agrees that
all payments of the principal of and interest on the Securities pursuant to the
Guarantee made by or on behalf of any Guarantor shall, to the extent and in the
manner set forth in this Article Twelve, be subordinated and junior in right of
payment to the prior payment in full in cash of all Guarantor Senior
Indebtedness of such Guarantor.
SECTION 12.02. No Payment on Guarantees in Certain Circumstances.
(a) No direct or indirect payment of any kind or character (excluding
any payment or distribution of Permitted Junior Securities) by or on behalf of
any Guarantor in respect of principal of, premium, if any, or interest on the
Securities pursuant to such Guarantor's Guarantee or to acquire any of the
Securities, whether pursuant to the terms of the Securities, upon acceleration
or otherwise, shall be made if, at the time of such payment, there exists a
default in the payment of all or any portion of the obligations in respect of
any Designated Senior Indebtedness of such Guarantor, whether at maturity, on
account of mandatory redemption or prepayment, acceleration or otherwise, and
such default shall not have been cured or waived or the benefits of this
sentence waived by or on behalf of the requisite number of holders of such
Designated Senior Indebtedness. In addition, if any non-payment event of
default occurs with respect to any Designated Senior Indebtedness of a Guarantor
pursuant to which the maturity thereof may be immediately accelerated, then upon
and after receipt by the Trustee of written notice (a "Guarantor Payment
-----------------
Blockage Notice") from the holder or holders of such Designated Senior
- ---------------
Indebtedness or the trustee or agent acting on behalf of such Designated Senior
Indebtedness, unless and until all such events of default have been cured or
waived or have ceased to exist or such Designated Senior Indebtedness has been
discharged or paid in full in cash or the benefits of these provisions have been
waived by the requisite number of holders of such Designated Senior
Indebtedness, no direct or indirect payment of any kind or character (excluding
any payment or distribution of Permitted Junior Securities) shall be made by or
on behalf of such Guarantor of in respect of principal, premium, if any, or
interest on the Securities or to acquire any of the Securities, upon
acceleration, pursuant to any Offer to Purchase or otherwise during a period (a
"Guarantor Blockage Period") commencing on the date of receipt of such Payment
-------------------------
Blockage Notice by the Trustee and ending 179 days thereafter.
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Notwithstanding anything herein or in the Securities to the contrary,
(x) in no event shall a Guarantor Blockage Period extend beyond 179 days from
the date the Guarantor Payment Blockage Notice in respect thereof was given, (y)
there shall be a period of at least 181 consecutive days in each 360-day period
when no Guarantor Blockage Period is in effect and (z) not more than one
Guarantor Blockage Period may be commenced with respect to any Guarantor during
any period of 360 consecutive days. No event of default that existed or was
continuing on the date of commencement of any Guarantor Blockage Period with
respect to the Designated Senior Indebtedness of such Guarantor initiating such
Guarantor Blockage Period (to the extent the holder of such Designated Senior
Indebtedness, or trustee or agent, giving notice commencing such Guarantor
Blockage Period had knowledge of such existing or continuing event of default)
may be, or be made, the basis for the commencement of any other Guarantor
Blockage Period by the holder or holders of such Designated Senior Indebtedness
or the trustee or agent acting on behalf of such Designated Senior Indebtedness,
whether or not within a period of 360 consecutive days, unless such event of
default has been cured or waived for a period of not less than 90 consecutive
days (it being understood that a subsequent act or event that constitutes a
breach of a covenant or other provision, including breach of a financial
covenant with respect to a subsequent period, shall be considered a separate
event of default from a previous act or event that constitutes a breach of the
same covenant or other provision for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be made directly to the Trustee or any Holder when such payment is
prohibited by Section 12.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered by the Trustee (if the Notice
required by Section 12.06 has been received by the Trustee) or the Holder to,
the holders of Designated Senior Indebtedness of such Guarantor or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Designated Senior Indebtedness may have been
issued, as their respective interests may appear, but only to the extent that,
upon notice from the Trustee to the holders of such Designated Senior
Indebtedness that such prohibited payment has been made, the holders of such
Designated Senior Indebtedness (or their representative or representatives or a
trustee or trustees) notify the Trustee in writing of the amounts then due and
owing on such Designated Senior Indebtedness, if any, and only the amounts
specified in such notice to the Trustee shall be paid to the holders of such
Designated Senior Indebtedness.
SECTION 12.03. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities of any
Guarantor of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities), upon any
dissolution or winding-up or total liquidation or reorganization of such
Guarantor or assignment for the benefit of creditors of such Guarantor or
similar proceeding, whether voluntary or involuntary or in bankruptcy,
insolvency, receivership or other proceedings, all Guarantor Senior Indebtedness
of such Guarantor shall first be paid in full in cash before the Holders of the
Securities or the Trustee on behalf of such Holders shall be entitled to receive
any payment by or on behalf of such Guarantor of the principal of or interest
on the Securities pursuant to such Guarantor's Guarantee, or any payment by or
on behalf of such Guarantor to acquire any of the Securities for cash, property
or securities, or any distribution with respect to the Securities of any cash,
property or securities (excluding any payment or distribution of Permitted
Junior Securities). Before any such payment or distribution may be made by, or
on behalf of, any Guarantor in respect of the principal of, premium, if any, or
interest on the Securities upon any such dissolution or winding-up or
liquidation or reorganization of the Guarantor or assignment for the benefit of
creditors of such Guarantor or similar proceeding, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, any
payment or distribution of assets or securities of such Guarantor of any kind or
character, whether in cash, property or securities (excluding any payment or
distribution of Permitted Junior Securities), to which the Holders of the
Securities or the Trustee on their behalf would be entitled, but for the
subordina-
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tion provisions of this Indenture, shall be made by such Guarantor or
by any receiver, trustee in bankruptcy, liquidation trustee, agent or other
Person making such payment or distribution, directly to the holders of the
Guarantor Senior Indebtedness of such Guarantor (pro rata to such holders on the
basis of the respective amounts of such Guarantor Senior Indebtedness held by
such holders) or their representatives or to the trustee or trustees or agent or
agents under any agreement or indenture pursuant to which any of such Guarantor
Senior Indebtedness may have been issued, as their respective interests may
appear, to the extent necessary to pay all such Guarantor Senior Indebtedness in
full in cash after giving effect to any prior or concurrent payment,
distribution or provision therefor to or for the holders of such Guarantor
Senior Indebtedness.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of any Guarantor of any kind or character, whether in cash,
property or securities (excluding any payment or distribution of Permitted
Junior Securities), shall be made directly to the Trustee or any Holder of
Securities at a time when such payment or distribution is prohibited by Section
12.03(a) and before all obligations in respect of the Guarantor Senior
Indebtedness of such Guarantor are paid in full in cash, such payment or
distribution shall be received and held in trust for the benefit of, and shall
be paid over or delivered by the Trustee (if the Notice required by Section
12.06 has been received by the Trustee) or the Holder to, the holders of such
Guarantor Senior Indebtedness (pro rata to such holders on the basis of the
respective amounts of such Guarantor Senior Indebtedness held by such holders)
or their respective representatives, or to the trustee or trustees or agent or
agents under any indenture pursuant to which any of such Guarantor Senior
Indebtedness may have been issued, as their respective interests may appear, for
application to the payment of such Guarantor Senior Indebtedness remaining
unpaid until all such Guarantor Senior Indebtedness has been paid in full in
cash after giving effect to any prior or concurrent payment, distribution or
provision therefor to or for the holders of such Guarantor Senior Indebtedness.
The consolidation of any Guarantor with, or the merger of any
Guarantor with or into, another corporation or the liquidation or dissolution of
any Guarantor following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation upon the terms
and conditions provided in Article Five shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 12.03
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article Five.
SECTION 12.04. Subrogation.
Upon the payment in full in cash of all Guarantor Senior Indebtedness
of a Guarantor, or provision for payment, the Holders of the Securities shall be
subrogated to the rights of the holders of such Guarantor Senior Indebtedness to
receive payments or distributions of cash, property or securities of such
Guarantor made on such Guarantor Senior Indebtedness until the principal of and
interest on the Securities shall be paid in full in cash; and, for the purposes
of such subrogation, no payments or distributions to the holders of such
Guarantor Senior Indebtedness of any cash, property or securities to which the
Holders of the Securities or the Trustee on their behalf would be entitled
except for the provisions of this Article Twelve, and no payment over pursuant
to the provisions of this Article Twelve to the holders of such Guarantor Senior
Indebtedness by Holders of the Securities or the Trustee on their behalf shall,
as between such Guarantor, its creditors other than holders of such Guarantor
Senior Indebtedness, and the Holders of the Securities, be deemed to be a
payment by such Guarantor to or on account of such Guarantor Senior
Indebtedness. It is understood that the provisions of this Article Twelve are
and are intended solely for the purpose of defining the relative rights of the
Holders of the Securities, on the one hand, and the holders of Guarantor Senior
Indebtedness of each Guarantor, on the other hand.
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If any payment or distribution to which the Holders of the Securities
would otherwise have been entitled but for the provisions of this Article Twelve
shall have been applied, pursuant to the provisions of this Article Twelve, to
the payment of all amounts payable under Guarantor Senior Indebtedness, then and
in such case, the Holders of the Securities shall be entitled to receive from
the holders of such Guarantor Senior Indebtedness any payments or distributions
received by such holders of Guarantor Senior Indebtedness in excess of the
amount required to make payment in full in cash of such Guarantor Senior
Indebtedness.
SECTION 12.05. Obligations of Guarantors Unconditional.
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in the Securities or the Guarantees is intended to or shall impair,
as among each of the Guarantors and the Holders of the Securities, the
obligation of each Guarantor, which is absolute and unconditional, to pay to the
Holders of the Securities the principal of and interest on the Securities as and
when the same shall become due and payable in accordance with the terms of the
Guarantee of such Guarantor, or is intended to or shall affect the relative
rights of the Holders of the Securities and creditors of any Guarantor other
than the holders of Guarantor Senior Indebtedness of such Guarantor, nor shall
anything herein or therein prevent the Holder of any Security or the Trustee on
their behalf from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article Twelve of the holders of Guarantor Senior Indebtedness in respect of
cash, property or securities of any Guarantor received upon the exercise of any
such remedy.
Without limiting the generality of the foregoing, nothing contained in
this Article Twelve shall restrict the right of the Trustee or the Holders of
Securities to take any action to declare the Securities to be due and payable
prior to their stated maturity pursuant to Section 6.01 or to pursue any rights
or remedies hereunder; provided, however, that all Guarantor Senior Indebtedness
of any Guarantor then due and payable shall first be paid in full before the
Holders of the Securities or the Trustee are entitled to receive any direct or
indirect payment from such Guarantor of principal of or interest on the
Securities pursuant to such Guarantor's Guarantee.
SECTION 12.06. Notice to Trustee.
The Company and each Guarantor shall give prompt written notice to the
Trustee of any fact known to the Company or such Guarantor which would prohibit
the making of any payment to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article Twelve. The Trustee shall not be
charged with knowledge of the existence of any event of default with respect to
any Guarantor Senior Indebtedness or of any other facts which would prohibit the
making of any payment to or by the Trustee unless and until the Trustee shall
have received notice in writing at its Corporate Trust Office to that effect
signed by an Officer of the Company or such Guarantor, or by a holder of
Guarantor Senior Indebtedness or trustee or agent therefor; and prior to the
receipt of any such written notice, the Trustee shall, subject to Article Seven,
be entitled to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 12.06 at
least two Business Days prior to the date upon which by the terms of this
Indenture any moneys shall become payable for any purpose (including, without
limitation, the payment of the principal of or interest on any Security), then,
regardless of anything herein to the contrary, the Trustee shall have full power
and authority to receive any moneys from any Guarantor and to apply the same to
the purpose for which they were received, and shall not be affected by any
notice to the contrary which may be received by it on or after such prior date.
Nothing contained in this Section 12.06 shall limit the right of the holders of
Guarantor Senior Indebtedness to recover payments as contemplated by Section
12.03. The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself or itself to be
<PAGE>
-78-
a holder of any Guarantor Senior Indebtedness (or a trustee on behalf of, or
other representative of, such holder) to establish that such notice has been
given by a holder of such Guarantor Senior Indebtedness or a trustee or
representative on behalf of any such holder.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Guarantor Senior Indebtedness to participate in any payment or distribution
pursuant to this Article Twelve, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Guarantor Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article Twelve, and if
such evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 12.07. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets or securities of a
Guarantor referred to in this Article Twelve, the Trustee and the Holders of the
Securities shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which bankruptcy, dissolution, winding-up,
liquidation or reorganization proceedings are pending, or upon a certificate of
the receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
of the Securities for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of Guarantor Senior Indebtedness
of such Guarantor and other indebtedness of such Guarantor, the amount thereof
or payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article Twelve.
SECTION 12.08. Trustee's Relation to Guarantor Senior Indebtedness.
The Trustee and any Paying Agent shall be entitled to all the rights
set forth in this Article Twelve with respect to any Guarantor Senior
Indebtedness which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Guarantor Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee or any
Paying Agent of any of its rights as such holder.
With respect to the holders of Guarantor Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Twelve, and no implied
covenants or obligations with respect to the holders of Guarantor Senior
Indebtedness shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior
Indebtedness (except as provided in Section 12.03(b)). The Trustee shall not be
liable to any such holders if the Trustee shall in good faith mistakenly pay
over or distribute to Holders of Securities or to the Company or to any other
person cash, property or securities to which any holders of Guarantor Senior
Indebtedness shall be entitled by virtue of this Article Twelve or otherwise.
SECTION 12.09. Subordination Rights Not Impaired by Acts or Omissions of the
Guarantors or Holders of Guarantor Senior Indebtedness.
No right of any present or future holders of any Guarantor Senior
Indebtedness to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
any Guarantor or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by any Guarantor with the terms of this
Indenture, regardless of any knowledge thereof which
<PAGE>
-79-
any such holder may have or otherwise be charged with. The provisions of this
Article Twelve are intended to be for the benefit of, and shall be enforceable
directly by, the holders of Guarantor Senior Indebtedness.
SECTION 12.10. Holders Authorize Trustee To Effectuate Subordination of
Guarantee.
Each Holder of Securities by his acceptance of such Securities
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article Twelve, and appoints the Trustee his attorney-in-fact for such
purposes, including, in the event of any dissolution, winding-up, total
liquidation or reorganization of any Guarantor (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of such Guarantor, the filing of a claim
for the unpaid balance of its or his Securities in the form required in those
proceedings.
SECTION 12.11. This Article Not To Prevent Events of Default.
The failure to make a payment on account of principal of or interest
on the Securities by reason of any provision of this Article Twelve shall not be
construed as preventing the occurrence of an Event of Default specified in
clauses (a), (b) or (c) of Section 6.01.
SECTION 12.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article Twelve shall apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
SECTION 12.13. No Waiver of Guarantee Subordination Provisions.
Without in any way limiting the generality of Section 12.09, the
holders of Guarantor Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
Twelve or the obligations hereunder of the Holders of the Securities to the
holders of Guarantor Senior Indebtedness, do any one or more of the following:
(a) change the manner, place or terms of payment or extend the time of payment
of, or renew or alter, Guarantor Senior Indebtedness or any instrument
evidencing the same or any agreement under which Guarantor Senior Indebtedness
is outstanding or secured; (b) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Guarantor Senior
Indebtedness; (c) release any Person liable in any manner for the collection of
Guarantor Senior Indebtedness; and (d) exercise or refrain from exercising any
rights against any Guarantor and any other Person.
SECTION 12.14. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Twelve or elsewhere in this
Indenture shall prevent (i) a Guarantor, except under the conditions described
in Sections 12.02 and 12.03, from making payments of principal of and interest
on the Securities, or from depositing with the Trustee any moneys for such
payments, or (ii) the application by the Trustee of any moneys deposited with it
for the purpose of making such payments of principal of and interest on the
Securities, to the holders entitled thereto unless at least two Business Days
prior to the date upon which such payment becomes due and payable, the Trustee
shall have received the
<PAGE>
-80-
written notice provided for in Section 12.02(b) or in Section 12.06. The
Guarantors shall give prompt written notice to the Trustee of any dissolution,
winding-up, liquidation or reorganization of such Guarantor.
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that are
required to be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions. If any provision of this Indenture modifies any
TIA provision that may be so modified, such TIA provision shall be deemed to
apply to this Indenture as so modified. If any provision of this Indenture
excludes any TIA provision that may be so excluded, such TIA provision shall be
excluded from this Indenture.
The provisions of TIA (S)(S) 310 through 317 that impose duties on any
Person (including the provisions automatically deemed included unless expressly
excluded by this Indenture) are a part of and govern this Indenture, whether or
not physically contained herein.
SECTION 13.02. Notices.
Any notice or communication shall be sufficiently given if in writing
and delivered in person, by facsimile and confirmed by overnight courier, or
mailed by first-class mail addressed as follows:
if to the Company or to the Guarantors:
St. John Knits International, Incorporated
17422 Derian Avenue
Irvine, California 92714
Attention: Chief Financial Officer
Facsimile: (949) 223-3390
Telephone: (949) 863-1171
with a copy, which shall not constitute notice, to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Gary Horowitz, Esq.
Facsimile: (212) 455-2502
Telephone: (212) 455-2000
<PAGE>
-81-
if to the Trustee:
The Bank of New York
101 Barclay Street - Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
Telephone: (212) 815-5763
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed, first-class, postage prepaid, to a
Holder including any notice delivered in connection with TIA (S) 310(b), TIA (S)
313(c), TIA (S) 314(a) and TIA (S) 315(b), shall be mailed to him at his address
as set forth on the Security register and shall be sufficiently given to him if
so mailed within the time prescribed. To the extent required by the TIA, any
notice or communication shall also be mailed to any Person described in TIA (S)
313(c).
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. Except for a
notice to the Trustee, which is deemed given only when received, if a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
SECTION 13.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar and any other person shall have the
protection of TIA (S) 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance satisfactory to
the Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel in form and substance satisfactory to the
Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with; provided, however, that with respect to
matters of fact an Opinion of Counsel may rely on an Officers' Certificate
or certificates of public officials.
<PAGE>
-82-
SECTION 13.05. Statements Required in Certificate.
Each certificate with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate has read
such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements contained in such certificate
are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 13.07. Governing Law.
The laws of the State of New York shall govern this Indenture, the
Securities and the Security Guarantees without giving effect to applicable
principles of conflicts of law to the extent that the application of the law of
another jurisdiction would be required thereby.
SECTION 13.08. No Recourse Against Others.
A director, officer, employee, incorporator, stockholder, general or
limited partner or member, as such, of the Company or any of its Affiliates
shall not have any liability for any obligations of the Company or any of its
Affiliates under the Securities, the Guarantee of such Guarantor or this
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities and the Guarantees.
SECTION 13.09. Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of each Guarantor in this Indenture
and such Guarantor's Guarantee shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 13.10. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
<PAGE>
-83-
SECTION 13.11. Severability.
In case any provision in this Indenture, in the Securities or in the
Guarantee 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, and a Holder shall have no claim therefor against any party
hereto.
SECTION 13.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 13.13. Legal Holidays.
If a payment date is a not a Business Day at a place of payment,
payment may be made at that place on the next succeeding Business Day, and no
interest shall accrue for the intervening period.
[Signature Pages Follow]
<PAGE>
S-1
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
ST. JOHN KNITS INTERNATIONAL, INCORPO-
RATED
By: /s/ Roger Ruppert
--------------------------------------
Name: Roger Ruppert
Title: Chief Financial Officer
ST. JOHN KNITS, INC.,
ST. JOHN TRADEMARKS, INC.,
ST. JOHN ITALY, INC.,
as Guarantors
By: /s/ Roger Ruppert
--------------------------------------
Name: Roger Ruppert
Title: Chief Financial Officer
ST. JOHN HOME, LLC, as Guarantor
By: St. John Knits, Inc., its sole member
By: /s/ Roger Ruppert
--------------------------------------
Name: Roger Ruppert
Title: Chief Financial Officer
THE BANK OF NEW YORK, as Trustee
By: /s/ Michelle L. Russo
--------------------------------------
Name: Michelle L. Russo
Title: Assistant Treasurer
<PAGE>
EXHIBIT A
---------
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
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 THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF
THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND, IN THE CASE OF THE
FOREGOING CLAUSE (D), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS SECURITY COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
ISSUER AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
A-1
<PAGE>
ST. JOHN KNITS INTERNATIONAL, INCORPORATED
12 1/2% Senior Subordinated Note
due 2009, Series A
CUSIP No.:[ ]
No. [ ] $[ ]
ST. JOHN KNITS INTERNATIONAL, INCORPORATED, a Delaware corporation
(the "Company", which term includes any successor corporation), for value
-------
received promises to pay to [ ] or registered assigns, the principal sum
of [ ] Dollars, on July 1, 2009.
Interest Payment Dates: January 1 and July 1, commencing on January
1, 2000.
Interest Record Dates: December 15 and June 15.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officer.
ST. JOHN KNITS INTERNATIONAL, INCORPO-
RATED
By:____________________________________
Name:
Title:
By:____________________________________
Name:
Title:
Dated: [ ]
A-2
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 12 1/2% Senior Subordinated Notes due 2009, Series
A, described in the within-mentioned Indenture.
Dated: [ ]
THE BANK OF NEW YORK,
as Trustee
By:__________________________________
Authorized Signatory
A-3
<PAGE>
(REVERSE OF SECURITY)
ST. JOHN KNITS INTERNATIONAL, INCORPORATED
12 1/2% Senior Subordinated Note
due 2009, Series A
1. Interest.
--------
ST. JOHN KNITS INTERNATIONAL, INCORPORATED, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
-------
Security at the rate per annum shown above. Cash interest on the Securities
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from July 7, 1999. The Company will pay interest semi-
annually in arrears on each Interest Payment Date, commencing January 1, 2000.
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 from time to time
on demand and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful from time to time on demand, in
each case at the rate borne by the Securities.
2. Method of Payment.
-----------------
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Securities are canceled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Securities to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
-----------------
the Company may pay principal and interest by wire transfer of Federal funds
(provided that the Paying Agent shall have received wire instructions on or
prior to the relevant Interest Record Date), or interest by check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to
the Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
--------------------------
Initially, The Bank of New York (the "Trustee") will act as Paying
-------
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to the Holders. The Company or any of its Subsidiaries may,
subject to certain exceptions, act as Registrar.
4. Indenture and Guarantees.
------------------------
The Company issued the Securities under an Indenture, dated as of July
7, 1999 (the "Indenture"), by and among the Company, the Guarantors and the
---------
Trustee. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. This Security is one of a duly authorized issue of
Securities of the Company designated as its 12 1/2% Senior Subordinated Notes
due 2009, Series A (the "Initial Securities"), limited (except as otherwise
------------------
provided in the Indenture) in aggregate principal amount to
A-4
<PAGE>
$100,000,000, which may be issued under the Indenture. The Securities include
the Initial Securities, the Private Exchange Securities (as defined in the
Indenture) and the Unrestricted Securities (as defined below) issued in exchange
for the Initial Securities pursuant to the Registration Rights Agreement. The
Initial Securities, the Private Exchange Securities and the Unrestricted
Securities are treated as a single class of securities under the Indenture. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
(S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture
---
(except as otherwise indicated in the Indenture) until such time as the
Indenture is qualified under the TIA, and thereafter as in effect on the date on
which the Indenture is qualified under the TIA. Notwithstanding anything to the
contrary herein, the Securities are subject to all such terms, and holders of
Securities are referred to the Indenture and the TIA for a statement of them.
The Securities are general unsecured obligations of the Company. The Securities
are subordinated in right of payment to all Senior Indebtedness of the Company
to the extent and in the manner provided in the Indenture. Each Holder of a
Security, by accepting a Security, agrees to such subordination, authorizes the
Trustee to give effect to such subordination and appoints the Trustee as
attorney-in-fact for such purpose.
Payment on the Securities is guaranteed (each, a "Guarantee"), on a
---------
senior subordinated basis, jointly and severally, by each Domestic Restricted
Subsidiary of the Company existing on the Issue Date (each, a "Guarantor")
---------
pursuant to Article Eleven and Article Twelve of the Indenture. In addition, in
certain circumstances subject to certain exceptions, the Indenture requires the
Company to cause each Restricted Subsidiary formed, created or acquired after
the Issue Date to become a party to the Indenture as a Guarantor and guarantee
payment on the Securities pursuant to Article Eleven and Article Twelve of the
Indenture. In certain circumstances, the Guarantees may be released.
5. Optional Redemption.
-------------------
The Securities will be redeemable at the option of the Company, in
whole or in part, at any time on or after July 1, 2004, at the redemption prices
(expressed as a percentage of principal amount) set forth below, plus accrued
and unpaid interest thereon, if any, to the Redemption Date (subject to the
right of holders of record on the relevant Interest Record Date to receive
interest due on the relevant Interest Payment Date) if redeemed during the 12-
month period commencing on July 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004.......................... 106.250%
2005.......................... 104.688%
2006.......................... 103.125%
2007.......................... 101.563%
2008 and thereafter........... 100.000%
</TABLE>
6. Optional Redemption upon Public Equity Offerings.
----------------------------------------------------
In addition, at any time and from time to time on or prior to July 1,
2002, the Company may redeem in the aggregate up to 35% of the originally issued
aggregate principal amount of the Securities with the net cash proceeds of one
or more Public Equity Offerings by the Company at a redemption price in cash
equal to 112.500% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Redemption Date (subject to the right of
Holders of record on the relevant Interest Record Date to receive interest due
on the relevant Interest Payment Date); provided, however, that at least 65% of
the originally issued aggregate principal amount of the Securities must remain
outstanding immediately after giving effect to
A-5
<PAGE>
each such redemption (excluding any Securities held by the Company or any of its
Affiliates). Notice of any such redemption must be given within 60 days after
the date of the closing of the relevant Public Equity Offering of the Company.
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
Securities to be redeemed at its registered address. The Trustee may select for
redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption so long as the Company has deposited with the Paying Agent for the
Securities funds in satisfaction of the redemption price pursuant to the
Indenture and the Paying Agent is not prohibited from paying such funds to the
Holders pursuant to the terms of the Indenture.
8. Change of Control Offer.
-----------------------
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall, within 45
days after the Change of Control Date, make an Offer to Purchase all Securities
then outstanding at a purchase price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the Purchase Date (subject to the right of Holders of record on the relevant
Interest Record Date to receive interest due on the relevant Interest Payment
Date).
9. Limitation on Disposition of Assets.
-----------------------------------
The Company is, subject to certain conditions and certain exceptions,
obligated to make an Offer to Purchase Securities at a purchase price equal to
100% of the principal amount thereof, plus accrued and unpaid interest thereon,
if any, to the Purchase Date (subject to the right of Holders of record on the
Interest Relevant Record Date to receive interest due on the relevant Interest
Payment Date) with the proceeds of certain asset dispositions.
10. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
A-6
<PAGE>
11. Persons Deemed Owners.
---------------------
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
12. Unclaimed Funds.
---------------
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee and the Paying Agent will repay the funds to the Company
at its written request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
----------------------------------------
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guarantees, except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guarantees, in each case upon satisfaction of certain conditions specified in
the Indenture.
14. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture, the Securities and the
Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture, the Securities and the Guarantees to, among other things, cure
any ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, or make any other change that does not materially adversely
affect the rights of any Holder of a Security.
15. Restrictive Covenants.
---------------------
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets and to engage in transactions with affiliates or certain other related
persons. The limitations are subject to a number of important qualifications
and exceptions. The Company must report annually to the Trustee on compliance
with such limitations.
16. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Securities or the Guarantees except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or
A-7
<PAGE>
power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
17. Trustee Dealings with Company.
-----------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
18. No Recourse Against Others.
--------------------------
No director, officer, employee, incorporator, stockholder, general or
limited partner or member, as such, of the Company or any of its Affiliates
shall have any liability for any obligation of the Company or any of its
Affiliates under the Securities, the Guarantee of such Guarantor or the
Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities and the Guarantees.
19. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Registration Rights.
-------------------
Pursuant to the Registration Rights Agreement, the Company will be
obligated upon the occurrence of certain events to consummate an exchange offer
pursuant to which the Holder of this Security shall have the right to exchange
this Security for a 12 1/2% Senior Subordinated Note due 2009, Series B, of the
Company (an "Unrestricted Security") which has been registered under the
---------------------
Securities Act, in like principal amount and having terms identical in all
material respects to the Initial Securities. The Holders shall be entitled to
receive certain liquidated damages in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in accordance
with the terms of the Registration Rights Agreement.
A-8
<PAGE>
23. Governing Law.
-------------
The laws of the State of New York shall govern the Indenture, this
Security and any Guarantee thereof 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.
A-9
<PAGE>
[FORM OF SECURITY GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
The Guarantor (as defined in the Indenture referred to in the Security
upon which this notation is endorsed) hereby unconditionally guarantees on a
senior subordinated basis (such Guarantee by the Guarantor being referred to
herein as the "Guarantee") the due and punctual payment of the principal of,
premium, if any, and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal, premium and interest on the Securities, and the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee, all in accordance with the terms set forth in Article Eleven of the
Indenture.
The obligations of the Guarantor to the Holders of Securities and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth,
and are expressly subordinated and subject in right of payment to the prior
payment in full of all Guarantor Senior Indebtedness (as defined in the
Indenture) of such Guarantor, to the extent and in the manner provided in
Article Eleven and Article Twelve of the Indenture, and reference is hereby made
to such Indenture for the precise terms of the Guarantee therein made.
This Security Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Securities upon which
this Security Guarantee is noted shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized officers.
This Security Guarantee shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law to the extent that the application of the law of another
jurisdiction would be required thereby.
This Security Guarantee is subject to release upon the terms set forth
in the Indenture.
ST. JOHN KNITS, INC.
ST. JOHN TRADEMARKS, INC.
ST. JOHN ITALY, INC.
By:___________________________________
Name:
Title:
ST. JOHN HOME, LLC
By: St. John Knits, Inc., its sole member
By:___________________________________
Name:
Title:
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:___________________ Signed:___________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: ________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.05 or Section 4.12 of the Indenture, check the appropriate
box:
Section 4.05 [ ]
Section 4.12 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.05 or Section 4.12 of the Indenture, state the
amount: $_____________
Dated:___________________ Your Signature: ___________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: _________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
EXHIBIT B
---------
[FORM OF SERIES B SECURITY]
ST. JOHN KNITS INTERNATIONAL, INCORPORATED
12 1/2% Senior Subordinated Note
due 2009, Series B
CUSIP No.:[ ]
No. [ ] $[ ]
ST. JOHN KNITS INTERNATIONAL, INCORPORATED, a Delaware corporation
(the "Company", which term includes any successor corporation), for value
-------
received promises to pay to [ ] or registered assigns, the principal sum
of [ ] Dollars, on July 1, 2009.
Interest Payment Dates: January 1 and July 1, commencing on [ ].
Interest Record Dates: December 15 and June 15.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officer.
ST. JOHN KNITS INTERNATIONAL, INCORPO-
RATED
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
Dated: [ ]
B-1
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 12 1/2% Senior Subordinated Notes due 2009, Series
B, described in the within-mentioned Indenture.
Dated: [ ]
THE BANK OF NEW YORK,
as Trustee
By:______________________________________
Authorized Signatory
B-2
<PAGE>
(REVERSE OF SECURITY)
ST. JOHN KNITS INTERNATIONAL, INCORPORATED
12 1/2% Senior Subordinated Note
due 2009, Series B
1. Interest.
--------
ST. JOHN KNITS INTERNATIONAL, INCORPORATED, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
-------
Security at the rate per annum shown above. Cash interest on the Securities
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from [ ]. The Company will pay interest semi-
annually in arrears on each Interest Payment Date, commencing [ ].
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 from time to time
on demand and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful from time to time on demand, in
each case at the rate borne by the Securities
2. Method of Payment.
-----------------
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Securities are canceled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Securities to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
-----------------
the Company may pay principal and interest by wire transfer of Federal funds
(provided that the Paying Agent shall have received wire instructions on or
prior to the relevant Interest Record Date), or interest by check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to
the Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
--------------------------
Initially, The Bank of New York (the "Trustee") will act as Paying
-------
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to the Holders. The Company or any of its Subsidiaries may,
subject to certain exceptions, act as Registrar.
4. Indenture and Guarantees.
------------------------
The Company issued the Securities under an Indenture, dated as of July
7, 1999 (the "Indenture"), by and among the Company, the Guarantors and the
---------
Trustee. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. This Security is one of a duly authorized issue of
Securities of the Company designated as its 12 1/2% Senior Subordinated Notes
due 2009, Series B (the "Unrestricted Securities"), limited (except as otherwise
-----------------------
provided in the Indenture) in aggregate principal
B-3
<PAGE>
amount to $100,000,000, which may be issued under the Indenture. The Securities
include the 12 1/2% Senior Subordinated Notes due 2009, Series A (the "Initial
-------
Securities"), the Private Exchange Securities (as defined in the Indenture) and
- ----------
the Unrestricted Securities. The Initial Securities, the Private Exchange
Securities and the Unrestricted Securities are treated as a single class of
securities under the Indenture. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) (the "TIA"), as in effect
---
on the date of the Indenture (except as otherwise indicated in the Indenture)
until such time as the Indenture is qualified under the TIA, and thereafter as
in effect on the date on which the Indenture is qualified under the TIA.
Notwithstanding anything to the contrary herein, the Securities are subject to
all such terms, and holders of Securities are referred to the Indenture and the
TIA for a statement of them. The Securities are general unsecured obligations of
the Company. The Securities are subordinated in right of payment to all Senior
Indebtedness of the Company to the extent and in the manner provided in the
Indenture. Each Holder of a Security, by accepting a Security, agrees to such
subordination, authorizes the Trustee to give effect to such subordination and
appoints the Trustee as attorney-in-fact for such purpose.
Payment on the Securities is guaranteed (each, a "Guarantee"), on a
---------
senior subordinated basis, jointly and severally, by each Domestic Restricted
Subsidiary of the Company existing on the Issue Date (each, a "Guarantor")
---------
pursuant to Article Eleven and Article Twelve of the Indenture. In addition, in
certain circumstances subject to certain exceptions, the Indenture requires the
Company to cause each Restricted Subsidiary formed, created or acquired after
the Issue Date to become a party to the Indenture as a Guarantor and guarantee
payment on the Securities pursuant to Article Eleven and Article Twelve of the
Indenture. In certain circumstances, the Guarantees may be released.
5. Optional Redemption.
-------------------
The Securities will be redeemable at the option of the Company, in
whole or in part, at any time on or after July 1, 2004, at the redemption prices
(expressed as a percentage of principal amount) set forth below, plus accrued
and unpaid interest thereon, if any, to the Redemption Date (subject to the
right of holders of record on the relevant Interest Record Date to receive
interest due on the relevant Interest Payment Date) if redeemed during the 12-
month period commencing on July 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004................................ 106.250%
2005................................ 104.688%
2006................................ 103.125%
2007................................ 101.563%
2008 and thereafter................. 100.000%
</TABLE>
6. Optional Redemption upon Public Equity Offerings.
----------------------------------------------------
In addition, at any time and from time to time on or prior to July 1,
2002, the Company may redeem in the aggregate up to 35% of the originally issued
aggregate principal amount of the Securities with the net cash proceeds of one
or more Public Equity Offerings by the Company at a redemption price in cash
equal to 112.500% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Redemption Date (subject to the right of
Holders of record on the relevant Interest Record Date to receive interest due
on the relevant Interest Payment Date); provided, however, that at least 65% of
the originally issued aggregate principal amount of the Securities must remain
outstanding immediately after giving effect to
B-4
<PAGE>
each such redemption (excluding any Securities held by the Company or any of
its Affiliates). Notice of any such redemption must be given within 60 days
after the date of the closing of the relevant Public Equity Offering of the
Company.
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
Securities to be redeemed at its registered address. The Trustee may select for
redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption so long as the Company has deposited with the Paying Agent for the
Securities funds in satisfaction of the redemption price pursuant to the
Indenture and the Paying Agent is not prohibited from paying such funds to the
Holders pursuant to the terms of the Indenture.
8. Change of Control Offer.
-----------------------
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall within 45 days
after the Change of Control Date, make an Offer to Purchase all Securities then
outstanding at a purchase price in cash equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the
Purchase Date (subject to the right of Holders of record on the relevant
Interest Record Date to receive interest due on the relevant Interest Payment
Date).
9. Limitation on Disposition of Assets.
-----------------------------------
The Company is, subject to certain conditions and certain exceptions,
obligated to make an Offer to Purchase Securities at a purchase price equal to
100% of the principal amount thereof, plus accrued and unpaid interest thereon,
if any, to the Purchase Date (subject to the right of Holders of record on the
Interest Relevant Record Date to receive interest due on the relevant Interest
Payment Date) with the proceeds of certain asset dispositions.
10. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
B-5
<PAGE>
11. Persons Deemed Owners.
---------------------
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
12. Unclaimed Funds.
---------------
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee and the Paying Agent will repay the funds to the Company
at its written request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
----------------------------------------
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guarantees, except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guarantees, in each case upon satisfaction of certain conditions specified in
the Indenture.
14. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture, the Securities and the
Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture, the Securities and the Guarantees to, among other things, cure
any ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, or make any other change that does not materially adversely
affect the rights of any Holder of a Security.
15. Restrictive Covenants.
---------------------
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets and to engage in transactions with affiliates or certain other related
persons. The limitations are subject to a number of important qualifications
and exceptions. The Company must report annually to the Trustee on compliance
with such limitations.
16. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Securities or the Guarantees except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
B-6
<PAGE>
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
17. Trustee Dealings with Company.
-----------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
18. No Recourse Against Others.
--------------------------
No, director, officer, employee, incorporator, stockholder, general or
limited partner or member, as such, of the Company or any of its Affiliates
shall have any liability for any obligation of the Company or any of its
Affiliates under the Securities, the Guarantee of such Guarantor or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities and the Guarantees.
19. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Governing Law.
-------------
The laws of the State of New York shall govern the Indenture, this
Security and any Guarantee thereof without giving effect to applicable
principles of conflicts of law to the effect that the application of the law of
another jurisdiction would be required thereby.
B-7
<PAGE>
[FORM OF SECURITY GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
The Guarantor (as defined in the Indenture referred to in the Security
upon which this notation is endorsed) hereby unconditionally guarantees on a
senior subordinated basis (such Guarantee by the Guarantor being referred to
herein as the "Guarantee") the due and punctual payment of the principal of,
premium, if any, and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal, premium and interest on the Securities, and the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee, all in accordance with the terms set forth in Article Eleven of the
Indenture.
The obligations of the Guarantor to the Holders of Securities and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth,
and are expressly subordinated and subject in right of payment to the prior
payment in full of all Guarantor Senior Indebtedness (as defined in the
Indenture) of such Guarantor, to the extent and in the manner provided in
Article Eleven and Article Twelve of the Indenture, and reference is hereby made
to such Indenture for the precise terms of the Guarantee therein made.
This Security Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Securities upon which
this Security Guarantee is noted shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized officers.
This Security Guarantee shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law to the extent that the application of the law of another
jurisdiction would be required thereby.
This Security Guarantee is subject to release upon the terms set forth
in the Indenture.
ST. JOHN KNITS, INC.
ST. JOHN TRADEMARKS, INC.
ST. JOHN ITALY, INC.
By:______________________________________
Name:
Title:
ST. JOHN HOME, LLC
By: St. John Knits, LLC, its sole member
By:______________________________________
Name:
Title:
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:___________________ Signed: ___________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: __________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.05 or Section 4.12 of the Indenture, check the appropriate
box:
Section 4.05 [ ]
Section 4.12 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.05 or Section 4.12 of the Indenture, state the
amount: $_____________
Dated:_________________ Your Signature: ___________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: __________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
EXHIBIT C
---------
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
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 SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.16 OF THE INDENTURE.
C-1
<PAGE>
EXHIBIT D
---------
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 12 1/2% Senior Subordinated Notes due 2009
(the "Securities"), of St. John Knits International, Incorporated
-----------------------------------------------------------------
This Certificate relates to $_______ principal amount of Securities
held in the form of* ___ a beneficial interest in a Global Security or* _______
Physical Securities by ______ (the "Transferor").
The Transferor:*
[_] has requested by written order that the Registrar deliver in exchange
for its beneficial interest in the Global Security held by the Depositary a
Physical Security or Physical Securities in definitive, registered form of
authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
[_] has requested that the Registrar by written order to exchange or
register the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such Security,
the Transferor does hereby certify that the Transferor is familiar with the
Indenture relating to the above captioned Securities and the restrictions on
transfers thereof as provided in Section 2.16 of such Indenture, and that the
transfer of the Securities does not require registration under the Securities
Act of 1933, as amended (the "Act"), because*:
[_] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16 of the Indenture).
[_] Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
[_] Such Security is being transferred to an institutional "accredited
investor" (within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Act) which delivers a certificate to the Trustee in the form of
Exhibit E to the Indenture. [An Opinion of Counsel to the effect that such
- ---------
transfer does not require registration under the Securities Act accompanies this
certification.]
[_] Such Security is being transferred in reliance on Rule 144 under the
Act.
[_] Such Security is being transferred in reliance on Regulation S under
the Act.
[_] Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act other than Rule
144A or Rule 144 under the Act to a person other than an institutional
"accredited investor." [An Opinion of Counsel to the effect that such transfer
does not require registration under the Securities Act accompanies this
certification.]
________________________________
[INSERT NAME OF TRANSFEROR]
By: __________________________
[Authorized Signatory]
Date: _____________
*Check applicable box.
D-1
<PAGE>
EXHIBIT E
---------
Form of Transferee Letter of Representation
-------------------------------------------
The Bank of New York
101 Barclay Street - Floor 21W
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Dear Sirs:
This certificate is delivered to request a transfer of $________
principal amount of the 12 1/2% Senior Subordinated Notes due 2009 (the "Notes")
of St. John Knits International, Incorporated (the "Company"). Upon transfer,
the Notes would be registered in the name of the new beneficial owner as
follows:
Name:__________________________________
Address:_______________________________
Taxpayer ID Number:____________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the "Securities
Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risk of our investment in the Notes and we
invest in or purchase securities similar to the Notes in the normal course of
our business. We and any accounts for which we are acting are each able to bear
the economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing Notes to offer, sell or otherwise
transfer such Notes prior to the date which is two years after the later of the
date of original issue and the last date on which the Company or any affiliate
of the Company was the owner of such Notes (or any predecessor thereto) (the
"Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to
-----------------------------------
a registration statement which has been declared effective under the Securities
Act, (c) in a transaction complying with the requirements of Rule 144A under the
Securities Act, to a person we reasonably believe is a qualified institutional
buyer under Rule 144A (a "QIB") that purchases for its own account or for the
---
account of a QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) to an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is
purchasing for its own account or for the account of such an institutional
"accredited investor," in each case in a minimum principal amount of Notes of
$250,000, (e) pursuant to offers and sales that occur outside the United States
within the meaning of Regula-
E-1
<PAGE>
tion S under the Securities Act or (f) 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 our property
or the property of such investor account or accounts be at all times within our
or their control and in compliance with any applicable state securities laws.
The foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the 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
substantially in the form of this letter to the Company and the Trustee, which
shall provide, among other things, that the transferee is an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act and that it is acquiring such Notes for investment
purposes and not for distribution in violation of the Securities Act. Each
purchaser acknowledges that the Company and the Trustee reserve the right prior
to any offer, sale or other transfer prior to the Resale Restriction Termination
Date of the Notes pursuant to clause (d), (e) or (f) above to require the
delivery of an opinion of counsel, certificates and/or other information
satisfactory to the Company and the Trustee.
Dated: ______________________ TRANSFEREE: _________________________
By:______________________________________
E-2
<PAGE>
EXHIBIT F
---------
Form of Certificate To Be
Delivered in Connection
with Regulation S Transfers
_______________, ____
The Bank of New York
101 Barclay Street - Floor 21W
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: ST. JOHN KNITS INTERNATIONAL, INCORPORATED (the "Company")
12 1/2% Senior Subordinated Notes due 2009, Series A and
12 1/2% Senior Subordinated Notes due 2009, Series B (the "Securities")
-----------------------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $____________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
F-1
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By: _________________________
[Authorized Signatory]
F-2
<PAGE>
EXHIBIT 99.(a)(3)
ST. JOHN KNITS INTERNATIONAL, INCORPORATED
15 1/4% EXCHANGEABLE PREFERRED STOCK DUE 2010
CERTIFICATE OF DESIGNATIONS
---------------
Pursuant to Section 151
of the General Corporation Law of the State of Delaware
---------------
St. John Knits International, Incorporated (the "Company"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, does hereby certify that pursuant to the provisions of
Section 151 of the General Corporation Law of the State of Delaware, its Board
of Directors, by unanimous written consent dated as of July 7, 1999 adopted the
following resolution, which resolution remains in full force and effect as of
the date hereof:
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") is authorized, within the limitations and restrictions stated in the
Certificate of Incorporation of the Company, to fix by resolution or resolutions
the designation of each series of preferred stock and the powers, designations,
preferences and relative participating, optional or other rights, if any, or the
qualifications, limitations or restrictions thereof, including, without limiting
the generality of the foregoing, such provisions as may be desired concerning
voting, redemption, dividends, dissolution or the distribution of assets,
conversion or exchange, and such other subjects or matters as may be fixed by
resolution or resolutions of the Board of Directors under the General
Corporation Law of Delaware; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to authorize and fix the terms of a series of preferred
stock and the number of shares constituting such series:
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such
series of preferred stock on the terms and with the provisions herein set forth:
1. Certain Definitions. Unless the context otherwise requires, the terms
-------------------
defined in this Section 1 shall have, for all purposes of this resolution, the
meanings herein specified (with terms defined in the singular having comparable
meanings when used in the plural).
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Acquisition from such Person or (b) existing at the time such
Person becomes a Restricted Subsidiary or is merged or consolidated with or into
the Company or any Restricted Subsidiary.
"Acquired Person" means, with respect to any specified Person, any other
Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any capital contribution (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or
<PAGE>
2
otherwise) by the Company or any Restricted Subsidiary to any other Person, or
any acquisition or purchase of Equity Interests of any other Person by the
Company or any Restricted Subsidiary, in either case pursuant to which such
Person shall become a Restricted Subsidiary or shall be consolidated with or
merged into the Company or any Restricted Subsidiary or (ii) any acquisition by
the Company or any Restricted Subsidiary of the assets of any Person which
constitute substantially all of an operating unit or line of business of such
Person or which is otherwise outside of the ordinary course of 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 and shall also mean any beneficial owner of
shares representing 5% or more of the total voting power of the Voting Equity
Interests (on a fully diluted basis) of the Company or of rights or warrants to
purchase such Voting Equity Interests (whether or not currently exercisable) and
any Person who would be an Affiliate of any such beneficial owner pursuant to
this definition. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise.
"Applicable Day Count Fraction" means, with respect to any Dividend Period
or portion thereof, the number of days in such Dividend Period or portion
divided by 360.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including, without
limitation, any merger, consolidation or sale-leaseback transaction) to any
Person other than the Company or a Restricted Subsidiary, in one transaction or
a series of related transactions, of (i) any Equity Interest of any Restricted
Subsidiary (other than directors' qualifying shares, to the extent mandated by
applicable law); or (ii) any property or asset of the Company or any Restricted
Subsidiary outside of the ordinary course of business (including the receipt of
proceeds paid on account of the loss of or damage to any property or asset and
awards of compensation for any asset taken by condemnation, eminent domain or
similar proceedings). For the purposes of this definition, the term "Asset Sale"
shall not include (a) the creation of any lien, charge or encumbrance; (b) sales
of property or equipment that has become worn out, obsolete or damaged or
otherwise unsuitable for use in connection with the business of the Company or
any Restricted Subsidiary, as the case may be; (c) any transaction consummated
in compliance with Section 12 hereof; (d) any transfers of properties and assets
between Restricted Subsidiaries or the Company and a Restricted Subsidiary; (e)
the sale of Cash Equivalents in the ordinary course of business; (f) a
disposition of inventory in the ordinary course of business; (g) the sale or
other disposition of assets owned by Amen Wardy Home Stores, LLC; and (h) the
sale of accounts receivable, or participation therein, in connection with any
Qualified Receivables Transactions.
"Attributable Indebtedness" in respect of a sale/leaseback transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Notes, compounded semi-annually) of the total
obligations of the lessee for rental payments during the
<PAGE>
3
remaining term of the lease included in such sale/leaseback transaction
(including any period for which such lease has been extended).
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day in the
City of New York on which banks are authorized or ordered to close.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be properly capitalized on the balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means: (a) U.S. dollars; (b) securities issued or
directly and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of not more than one year from the
date of acquisition; (c) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million; (d) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(b) and (c) above entered into with any financial institution meeting the
qualifications specified in clause (c) above; (e) commercial paper rated P-1, A-
1 or the equivalent thereof by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, and in each case maturing within six months
after the date of acquisition; and (f) money market funds at least 95% of the
assets of which constitute Cash Equivalents of the kinds described in clauses
(a) through (e) of this definition.
"Change of Control" means the occurrence of any of the following events
(whether or not approved by the Board of Directors of the Company): (i) any
Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act,
including any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other
than one or more Permitted Holders, is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all shares that any such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time, upon the happening of an event or otherwise),
directly or indirectly, of greater than 35% of the total voting power of the
then outstanding Voting Equity Interests of the Company and such Person
beneficially owns a greater percentage of the total voting power of the then
outstanding Voting Equity Interests of the Company than the Permitted Holders;
(ii) the Company or any of its Subsidiaries sells, assigns, conveys, transfers,
leases or otherwise disposes (other than by way of
<PAGE>
4
merger or consolidation) of all or substantially all of the assets of the
Company and its Subsidiaries (determined on a consolidated basis) to any Person
(other than the Company or any Wholly Owned Restricted Subsidiary); (iii) during
any period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Company was approved by a vote of a majority
of the directors of the Company then still in office who were either directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; or (iv) the Company is
liquidated or dissolved or adopts a plan of liquidation or dissolution.
"Change of Control Date" has the meaning set forth in Section 11 hereof.
"Common Stock" means the Common Stock, $.01 par value, of the Company and
any other class of common stock issued by the Company from time to time.
"Company" means St. John Knits International, Incorporated, a Delaware
corporation.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Financial Advisor as having a maturity comparable to
the remaining term of the Exchangeable Preferred Stock that would be utilized,
at the time of selection and in accordance with customary financial practice, in
pricing new issues of securities similar to, and with a comparable maturity to
the remaining term of, the Exchangeable Preferred Stock.
"Comparable Treasury Price" shall be determined by an Independent Financial
Advisor and means, with respect to any redemption date, (i) the average of the
bid and asked prices for the Comparable Treasury Issue (expressed in each case
as a percentage of its principal amount) on the third Business Day preceding
such redemption date, as set forth in the daily statistical release (or any
successor release) published by the Federal Reserve Bank of New York and
designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or
(ii) if such release (or any successor release) is not published or does not
contain such prices on such Business Day, (A) the average of the Reference
Treasury Dealer Quotations for such redemption date, after excluding the highest
and lowest such Reference Treasury Dealer Quotations, or (B) if the Independent
Financial Advisor obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Quotations.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated EBITDA for the four quarter
period of the most recent four consecutive fiscal quarters for which financial
statements are available ending prior to the date of such determination (the
"Four Quarter Period") to (ii) Consolidated Fixed Charges for such Four Quarter
Period; provided, however, that (1) if the Company or any Restricted Subsidiary
has incurred any Indebtedness since the beginning of such Four Quarter 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, Consolidated EBITDA and Consolidated Fixed Charges
for such Four Quarter Period shall be calculated after giving effect
<PAGE>
5
on a pro forma basis to such Indebtedness as if such Indebtedness had been
Incurred on the first day of such Four Quarter Period and the discharge of any
other Indebtedness repaid, repurchased or otherwise discharged with the proceeds
of such new Indebtedness as if such discharge had occurred on the first day of
such Four Quarter Period, (2) if since the beginning of such Four Quarter Period
the Company or any Restricted Subsidiary shall have made any Asset Sale, the
Consolidated EBITDA for such Four Quarter Period shall be reduced by an amount
equal to the Consolidated EBITDA (if positive) directly attributable to the
assets that are the subject of such Asset Sale for such Four Quarter Period or
increased by an amount equal to the Consolidated EBITDA (if negative) directly
attributable thereto for such Four Quarter Period and Consolidated Fixed Charges
for such Four Quarter Period shall be reduced by an amount equal to the
Consolidated Fixed Charges directly attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased or otherwise discharged
with respect to the Company and its continuing Restricted Subsidiaries in
connection with such Asset Sale for such Four Quarter Period (or, if the Equity
Interests of any Restricted Subsidiary are sold, the Consolidated Fixed Charges
for such Four Quarter Period directly attributable to the Indebtedness of such
Restricted Subsidiary to the extent the Company and its continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if
since the beginning of such Four Quarter Period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an
acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit or a line of a
business or which constitutes replacement assets, Consolidated EBITDA and
Consolidated Fixed Charges for such Four Quarter Period shall be calculated
after giving pro forma effect to (x) such Investment or acquisition of assets
(including the Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such Four Quarter Period and (y) net
expense and cost reductions attributable to the assets acquired which, in the
good faith estimate of management, will be eliminated or realized, as the case
may be, as a result of such asset acquisition and (4) if since the beginning of
such Four Quarter Period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any Restricted Subsidiary
since the beginning of such Four Quarter Period) shall have made any Asset Sale
or any Investment or acquisition of assets that would have required an
adjustment pursuant to clause (2) or (3) above if made by the Company or a
Restricted Subsidiary during such Four Quarter Period, Consolidated EBITDA and
Consolidated Fixed Charges for such Four Quarter Period shall be calculated
after giving pro forma effect thereto as if such Asset Sale, Investment or
acquisition of assets occurred on, with respect to any Investment or
acquisition, the first day of such Four Quarter Period and, with respect to any
Asset Sale, the day prior to the first day of such Four Quarter Period. 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 Fixed Charges associated with any Indebtedness Incurred
in connection therewith, the pro forma calculations shall be determined in
accordance with GAAP, except as provided in clause (3)(y). If any Indebtedness
bears a floating rate of interest and is being given pro forma effect, the
interest expense on 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 agreement under which Hedging Obligations are
outstanding applicable to such Indebtedness if such agreement under which such
Hedging Obligations are outstanding has a remaining term as at the date of
determination in
<PAGE>
6
excess of 12 months); provided, however, that the Consolidated Fixed Charges of
the Company attributable to interest on any Indebtedness Incurred under a
revolving credit facility computed on a pro forma basis shall be computed based
upon the average daily balance of such Indebtedness during the Four Quarter
Period.
"Consolidated EBITDA" means, for any period, the Consolidated Net Income
for such period, plus, without duplication, the following to the extent deducted
in calculating such Consolidated Net Income: (i) Consolidated Income Tax Expense
for such period; (ii) Consolidated Interest Expense for such period; (iii)
Consolidated Non-cash Charges for such period; (iv) step-ups in inventory
valuation as a result of purchase accounting in connection with the acquisition
of assets or Equity Interests; (v) costs not reimbursable by the Company's or
any Subsidiary's insurance incurred in connection with any litigation and other
legal proceedings to which the Company or such Subsidiary is currently a party
(other than in connection with the settlement of the litigation concerning Amen
Wardy Home Stores, LLC), provided that such costs included in this clause (v)
shall not exceed $1.0 million for all periods; (vi) cash charges not to exceed
$1.0 million in connection with the settlement of the litigation concerning Amen
Wardy Home Stores, LLC, the acquisition of the remaining 49% interest in Amen
Wardy Home Stores, LLC and the closure of certain Amen Wardy stores and related
costs; and (vii) expenses related to the Transactions; less (A) all non-cash
items increasing Consolidated Net Income for such period and (B) all cash
payments during such period relating to non-cash charges that were added back in
determining Consolidated EBITDA in any prior period.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense and
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Equity Interest of the Company and its Restricted Subsidiaries (other
than dividends paid solely in Qualified Equity Interests and other than unpaid
dividends on the Exchangeable Preferred Stock) paid, accrued or scheduled to be
paid or accrued during such period times (y) a fraction, the numerator of which
is one and the denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of such Person, expressed as a
decimal.
"Consolidated Income Tax Expense" means, with respect to the Company for
any period, the provision for Federal, state, local and foreign income taxes
payable by the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to the Company for any
period, without duplication, the sum of (i) the interest expense of the Company
and the Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of debt discount, (b) the net cost under Hedging Obligations, (c)
the interest portion of any deferred payment obligation, (d) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (e) all capitalized interest and all accrued
interest and (f) 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 the Company) in connection with
Indebtedness Incurred by such plan or trust; provided, however,
<PAGE>
7
that there will be excluded therefrom any such interest expense of any
Unrestricted Subsidiary to the extent the related Indebtedness is not guaranteed
or paid by the Company or any Restricted Subsidiary and (ii) interest expense
attributable to Capitalized Lease Obligations and the interest portion of rent
expense associated with Attributable Indebtedness in respect of the relevant
lease giving rise thereto, determined as if such lease were a capitalized lease
in accordance with GAAP, as determined for the Company and the Restricted
Subsidiaries on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and the Restricted Subsidiaries determined in
accordance with GAAP and before any reduction in respect of dividends paid
solely in Qualified Equity Interests and before any reduction in respect of
unpaid dividends on the Exchangeable Preferred Stock; provided, however, that
there shall not be included in such Consolidated Net Income: (i) any net income
(loss) of any Person if such Person is not a Restricted Subsidiary, except (A)
to the extent of cash actually distributed by such Person during such period to
the Company or a Restricted Subsidiary as a dividend or other distribution, (B)
with respect to foreign joint ventures, to the extent that cash is available for
distribution (without restriction and not committed for other purposes) during
such period to the Company or a Restricted Subsidiary as a dividend or other
distribution, but is not distributed due to adverse tax or other business
reasons, such cash shall be included and (C) the Company's 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; (ii) any net income
(loss) of any person acquired by the Company or a Restricted Subsidiary in a
pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any net income (but not loss) 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 the Company to the extent of such
restrictions; (iv) any gain or loss, together with any related provision for
taxes on such gain or loss, realized upon the sale or other disposition of any
asset of the Company or the Restricted Subsidiaries (including pursuant to any
sale/leaseback transaction) outside of the ordinary course of business; (v) any
extraordinary gain or loss, together with any related provision for taxes on
such extraordinary gain or loss; (vi) the cumulative effect of a change in
accounting principles; (vii) any restoration to income of any contingency
reserve of an extraordinary, non-recurring or unusual nature, except to the
extent that provision for such reserve was made out of Consolidated Net Income
accrued at any time following the Issue Date; (viii) gains and losses resulting
from foreign currency transaction adjustments; (ix) gains and losses on assets
that are marked to market; (x) any costs and expenses related to the
Transactions incurred on or immediately after the Issue Date, including the
settlement of all outstanding options; and (xi) non-cash expenses resulting from
the grant of Equity Interests and other compensation to management personnel of
the Company and its Subsidiaries pursuant to a written plan or agreement or the
treatment of options under variable plan accounting.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period the sum of (i) depreciation, (ii) amortization and (iii) all non-cash
extraordinary charges and other non-cash expenses of such Person and its
Restricted Subsidiaries reducing Consolidated Net Income of such Person and its
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (excluding, for purposes of clause (iii) only, such
<PAGE>
8
charges which require an accrual of or a reserve for cash charges for any future
period) including, without limitation, non-cash charges in connection with the
settlement of the litigation concerning Amen Wardy Home Stores, LLC, the
acquisition of the remaining 49% interest in Amen Wardy Home Stores, LLC and the
closure of certain Amen Wardy stores and related costs.
"Credit Facility" means the Credit Agreement, dated as of the Issue Date,
among the Company, the lenders named therein, and The Chase Manhattan Bank, as
Administrative Agent, and any and all guarantee agreements, security agreements
and other agreements and instruments relating thereto, in each case as the same
may be amended, modified, supplemented or replaced from time to time, and
including any deferrals, renewals, extensions, replacements, refinancings or
refundings thereof, or amendments, modifications or supplements thereto and any
agreement providing therefor (including any restatements thereof and any
increases in the amount of the commitments or Indebtedness thereunder), whether
by or with the same or any other lender, creditor, group of lenders or group of
creditors, and including related notes, guarantee and note agreements and other
instruments and agreements executed in connection therewith.
"Designation" has the meaning set forth in Section 14 hereof.
"Designation Amount" has the meaning set forth in Section 14 hereof.
"Disqualified Equity Interest" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable at the option of the holder thereof), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable, at the option of the holder thereof
(except, in each case, upon the occurrence of a Change of Control), in whole or
in part, or exchangeable into Indebtedness on or prior to the earlier of the
Mandatory Redemption Date or the date on which no Exchangeable Preferred Stock
remains outstanding.
"Dividend Payment Date" means January 1 and July 1 of each year.
"Dividend Period" means the applicable period from (and including) the
Issue Date to (but excluding) the first Dividend Payment Date or from (and
including) a Dividend Payment Date to (but excluding) the next subsequent
Dividend Payment Date.
"Equity Interest" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Equity Interests.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Exchange Date" means the date on which the shares of Exchangeable
Preferred Stock are exchanged for the Exchange Debentures by the Company.
<PAGE>
9
"Exchange Debentures" means the Company's 15 1/4% Subordinated Exchange
Debentures Due 2010, for which the Exchangeable Preferred Stock may be exchanged
in accordance with Section 8 hereof.
"Exchange Indenture" means the Exchange Indenture between the Company and
the Exchange Trustee, governing the Company's 15 1/4% Subordinated Exchange
Debentures Due 2010, which will have terms consistent with this Certificate of
Designations.
"Exchange Trustee" means the trustee under the Exchange Indenture.
"Exchangeable Preferred Stock" shall mean the 15 1/4% Exchangeable
Preferred Stock due 2010, par value $.01 per share, of the Company.
"Expiration Date" has the meaning set forth in the definition of "Offer to
Purchase" below.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided, however, that the Fair Market
Value of any such asset or assets shall be determined conclusively by the Board
of Directors of the Company acting in good faith, and shall be evidenced by
resolutions of the Board of Directors of the Company.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Coverage Ratio" above.
"GAAP" means generally accepted accounting principles in effect in the
United States on the date hereof and which are consistently applied for all
applicable periods.
"Gray Common Stock" means Common Stock of the Company owned by Robert E.
Gray, Marie Gray or Kelly A. Gray.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantee" means the guarantee of the Notes by each Guarantor under the
Indenture.
"Guarantor" means any guarantor under the Indenture.
<PAGE>
10
"Hedging Agreement" means, with respect to any Person, all interest rate
swap or similar agreements or foreign currency or commodity hedge, exchange or
similar agreements of such Person.
"Hedging Obligations" means, with respect to any Person, the Obligations of
such Person under Hedging Agreements.
"Holder" means a holder of shares of Exchangeable Preferred Stock.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing). Indebtedness of any Acquired Person or any of its
Subsidiaries existing at the time such Acquired Person becomes a Restricted
Subsidiary (or is merged into or consolidated with the Company or any Restricted
Subsidiary), whether or not such Indebtedness was Incurred in connection with,
as a result of, or in contemplation of, such Acquired Person becoming a
Restricted Subsidiary (or being merged into or consolidated with the Company or
any Restricted Subsidiary), shall be deemed Incurred at the time any such
Acquired Person becomes a Restricted Subsidiary or merges into or consolidates
with the Company or any Restricted Subsidiary.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (a) every obligation of such Person for money borrowed; (b)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (c) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person; (d)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding trade accounts payable incurred in the
ordinary course of business and payable in accordance with industry practices,
or other accrued liabilities arising in the ordinary course of business which
are not overdue or which are being contested in good faith); (e) every Capital
Lease Obligation of such Person; (f) every net obligation under Hedging
Agreements of such Person; (g) every obligation of the type referred to in
clauses (a) through (f) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed or is
responsible or liable for, directly or indirectly, as obligor, guarantor or
otherwise; and (h) any and all deferrals, renewals, extensions and refundings
of, or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (a) through (g) above. Indebtedness
(a) shall never be calculated taking into account any cash and cash equivalents
held by such Person; (b) shall not include obligations of any Person (x) arising
from the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently drawn against insufficient funds in the
ordinary course of business, provided that such obligations are extinguished
within two business days of their incurrence, (y) resulting from the endorsement
of negotiable instruments for collection in the ordinary course of business and
consistent with past
<PAGE>
11
business practices and (z) under stand-by letters of credit to the extent
collateralized by cash or Cash Equivalents; (c) which provides that an amount
less than the principal amount thereof shall be due upon any declaration of
acceleration thereof shall be deemed to be incurred or outstanding in an amount
equal to the accreted value thereof at the date of determination; and (d) shall
include the liquidation preference and any mandatory redemption payment
obligations in respect of any Disqualified Equity Interests of the Company or
any Restricted Subsidiary.
"Indenture" means the Indenture, dated July 7, 1999, by and among the
Company, the Guarantors and The Bank of New York as Trustee, governing the
Company's 12 1/2% Senior Subordinated Notes due 2009, as the same may be
amended, modified, supplemented or replaced from time to time.
"Independent Financial Advisor" means a nationally recognized accounting,
appraisal, investment banking firm or consultant which, in the judgment of the
Board of Directors of the Company, is independent and qualified to perform the
task for which it is to be engaged.
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
any liquidation, dissolution or winding up of such Person, or any bankruptcy,
reorganization, insolvency, receivership or similar proceeding with respect to
such Person, whether voluntary or involuntary.
"Investment" means, with respect to any Person, any direct or indirect
loan, advance, guarantee or other extension of credit or capital contribution to
(by means of transfers of cash or other property or assets to others or payments
for property or services for the account or use of others, or otherwise), or
purchase or acquisition of capital stock, bonds, notes, debentures or other
securities or evidences of Indebtedness issued by, any other Person; provided
that (i) endorsements of negotiable instruments and documents in the ordinary
course of business and (ii) an acquisition of assets, Equity Interests or other
securities by the Company for consideration consisting exclusively of Equity
Interests (other than Disqualified Equity Interests) of the Company shall in
each case not be deemed to be an Investment. For purposes of Section 12 hereof,
(i) "Investment" shall include the applicable Designation Amount at the time of
the Designation of any Restricted Subsidiary as an Unrestricted Subsidiary and
(ii) the amount of any Investment shall be the original cost of such Investment,
plus the cost of all additions thereto, but without any other adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment; reduced by the payment of dividends or distributions
in connection with such Investment or any other amounts received in respect of
such Investment; provided, however, that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. If the Company or any
Restricted Subsidiary sells or otherwise disposes of any Voting Equity Interests
of any direct or indirect Restricted Subsidiary such that, after giving effect
to any such sale or disposition, the Company no longer owns, directly or
indirectly, greater than 50% of the outstanding Voting Equity Interests of such
Restricted Subsidiary, the Company shall be deemed to have made an Investment on
the date of any such sale or disposition.
"Issue Date" means July 7, 1999.
<PAGE>
12
"Junior Securities" has the meaning set forth in Section 3 hereof.
"Lien" means any lien, mortgage, charge, security interest, hypothecation,
assignment for security or encumbrance of any kind (including any conditional
sale or capital lease or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest).
"Liquidation Preference" means $100 per share, plus an amount in cash equal
to all accrued and unpaid dividends (including an amount equal to the dividends
accruing from the last Dividend Payment Date to the date such Liquidation
Preference is being determined). The Liquidation Preference of a share of
Exchangeable Preferred Stock will increase on a daily basis as dividends accrue
on such share and will decrease only to the extent such dividends are actually
paid, all as provided in Section 4 hereof.
"Mandatory Redemption Date" means July 1, 2010.
"Notes" means the Company's 12 1/2% Senior Subordinated Notes due 2009
issued pursuant to the Indenture, and any refinancing or refunding thereof.
"Obligations" means any principal, interest (including, without limitation,
Post-Petition Interest), penalties, fees, indemnification obligations,
reimbursement obligations, obligations to provide cash collateral, damages and
other liabilities payable under the documentation governing any Indebtedness.
"Offer" has the meaning set forth in the definition of "Offer to Purchase"
below.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
behalf of the Company by first-class mail, postage prepaid, to each Holder at
his address appearing in the records of the Company on the date of the Offer
offering to purchase up to the aggregate Liquidation Preference of Exchangeable
Preferred Stock specified in such Offer at the purchase price specified in such
Offer (as determined pursuant to this Certificate of Designations if so
required). Unless otherwise required by applicable law, the Offer shall specify
an expiration date (the "Expiration Date") of the Offer to Purchase, which shall
be not less than 20 business days nor more than 60 days after the date of such
Offer, and a settlement date (the "Purchase Date") for purchase of Exchangeable
Preferred Stock to occur no later than five business days after the Expiration
Date. The Offer shall contain all the information required by applicable law to
be included therein. The Offer shall contain all instructions and materials
necessary to enable such Holders to tender Exchangeable Preferred Stock pursuant
to the Offer to Purchase. The Offer shall also state: (1) the section of this
Certificate of Designations pursuant to which the Offer to Purchase is being
made; (2) the Expiration Date and the Purchase Date; (3) the aggregate
Liquidation Preference of the outstanding Exchangeable Preferred Stock offered
to be purchased by the Company pursuant to the Offer to Purchase (including, if
less than 100%, the manner by which such amount has been determined pursuant to
the section of this Certificate of Designations requiring the Offer to Purchase)
(the "Purchase Amount"); (4) the purchase price to be paid by the Company for
each share of Exchangeable Preferred Stock accepted for payment (as specified
pursuant to this Certificate of Designations) (the "Purchase Price"); (5) that
the
<PAGE>
13
Holder may tender all or any portion of the Exchangeable Preferred Stock
registered in the name of such Holder; (6) the place or places where the
Exchangeable Preferred Stock is to be surrendered for tender pursuant to the
Offer to Purchase; (7) that dividends on Exchangeable Preferred Stock not
tendered or tendered but not purchased by the Company pursuant to the Offer to
Purchase will continue to accrue; (8) that on the Purchase Date the Purchase
Price will become due and payable upon each share of Exchangeable Preferred
Stock being accepted for payment pursuant to the Offer to Purchase and that
dividends thereon shall cease to accrue on and after the Purchase Date; (9) that
each Holder electing to tender all or any portion of its Exchangeable Preferred
Stock pursuant to the Offer to Purchase will be required to surrender such
Exchangeable Preferred Stock at the place or places specified in the Offer prior
to the close of business on the Expiration Date (such Exchangeable Preferred
Stock being, if the Company so requires, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company duly executed
by, the Holder thereof or his attorney duly authorized in writing); (10) that
(a) if Exchangeable Preferred Stock in an aggregate Liquidation Preference less
than or equal to the Purchase Amount is duly tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase all such Exchangeable
Preferred Stock and (b) if Exchangeable Preferred Stock in an aggregate
Liquidation Preference in excess of the Purchase Amount is tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall purchase
Exchangeable Preferred Stock having an aggregate Liquidation Preference equal to
the Purchase Amount on a pro rata basis; and (11) if shares of Exchangeable
Preferred Stock are in certificated form, and in the case of any Holder whose
Exchangeable Preferred Stock is purchased only in part, the Company shall
execute and deliver to the Holder of such Exchangeable Preferred Stock without
service charge, Exchangeable Preferred Stock, of any authorized denomination as
requested by such Holder, in an aggregate Liquidation Preference equal to and in
exchange for the unpurchased portion of the Exchangeable Preferred Stock so
tendered.
An Offer to Purchase shall be governed by and effected in accordance with
the provisions above pertaining to any Offer.
"Officers' Certificate" means a certificate signed by (i) the Chairman of
the Board of Directors, the Chief Executive Officer, the President or a Vice
President of the Company and (ii) the Chief Financial Officer or the Secretary
of the Company, which certificate shall comply with the Indenture.
"Opinion of Counsel" means a written opinion from legal counsel. The
counsel may be an employee of or counsel to the Company or Vestar.
"Parity Securities" has the meaning set forth in Section 3 hereof.
"Permitted Business" means the business of the Company and its Restricted
Subsidiaries conducted on the Issue Date and businesses ancillary or reasonably
related thereto, including businesses whose principal strategy is to capitalize
on the image of the Company and its products.
"Permitted Holder" means Vestar and its Affiliates.
<PAGE>
14
"Permitted Indebtedness" has the meaning set forth in the second paragraph
of Section 13 hereof.
"Permitted Investments" means (a) Cash and Cash Equivalents; (b)
Investments in prepaid expenses, negotiable instruments held for collection and
lease, utility and workers' compensation, performance and other similar
deposits; (c) Hedging Obligations; (d) bonds, notes, debentures, stock or other
securities received as a result of asset sales; (e) Investments in the Company
and Investments in a Restricted Subsidiary or a Person that, as a result of or
in connection with such Investment, becomes a Restricted Subsidiary or is merged
with or into or consolidated with the Company or another Restricted Subsidiary
or that transfers or conveys all or substantially all its assets to the Company
or a Restricted Subsidiary; (f) Investments existing as of the Issue Date; (g)
any Investment consisting of a guarantee by a Restricted Subsidiary of Senior
Indebtedness or any guarantee of Indebtedness otherwise permitted by the
Indenture; (h) receivables owing to the Company or any Restricted Subsidiary
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however, that
such trade terms may include such concessionary trade terms as the Company or
any such Restricted Subsidiary deems reasonable under the circumstances; (i)
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; (j) Investments
in joint ventures in an aggregate amount not to exceed $10.0 million; (k) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments or pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of a
debtor; (l) Investments by the Company or a Restricted Subsidiary in a
Receivables Entity or any Investment by a Receivables Entity in any other
Person, in each case, in connection with a Qualified Receivables Transaction;
and (m) Investments by the Company or a Restricted Subsidiary in St. John
Company, Ltd. for the purpose of purchasing minority interests therein in an
aggregate amount not to exceed $1.5 million.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited liability
limited partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Post-Petition Interest" means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding with respect to such
Person in accordance with and at the contract rate (including, without
limitation, any rate applicable upon default) specified in the agreement or
instrument creating, evidencing or governing such Indebtedness, whether or not,
pursuant to applicable law or otherwise, the claim for such interest is allowed
or allowable as a claim in such Insolvency or Liquidation Proceeding.
"Preferred Equity Interest", in any Person, means an Equity Interest of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
<PAGE>
15
"Public Equity Offering" means, with respect to the Company, an
underwritten public offering of Qualified Equity Interests of the Company
pursuant to an effective registration statement filed under the Securities Act
(excluding registration statements filed on Form S-8).
"Purchase Amount" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Purchase Date" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price, or the cost of construction or improvement of any property;
provided, however, that the aggregate principal amount of such Indebtedness does
not exceed the lesser of the Fair Market Value of such property or such purchase
price or cost, including any refinancing of such Indebtedness that does not
increase the aggregate principal amount (or accreted amount, if less) thereof as
of the date of refinancing.
"Purchase Money Note" means a promissory note of a Receivables Entity
evidencing a line of credit, which may be irrevocable, from the Company or any
Restricted Subsidiary of the Company in connection with a Qualified Receivables
Transaction to a Receivables Entity, which note is repayable from cash available
to the Receivables Entity, other than amounts required to be established as
reserves pursuant to agreements, amounts paid to investors in respect of
interest, principal and other amounts owing to such investors and amounts owing
to such investors and amounts paid in connection with the purchase of newly
generated accounts receivable.
"Purchase Price" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Qualified Equity Interest" in any Person means any Equity Interest in such
Person other than any Disqualified Equity Interest.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Restricted
Subsidiaries pursuant to which the Company or any of its Restricted Subsidiaries
may sell, convey or otherwise transfer to (1) a Receivables Entity (in the case
of a transfer by the Company or any of its Restricted Subsidiaries) and (2) any
other Person (in the case of a transfer by a Receivables Entity), or may grant a
security interest in, any accounts receivable (whether now existing or arising
in the future) of the Company or any of its Restricted Subsidiaries, and any
assets related thereto including, without limitation, all collateral securing
such accounts receivable, all contracts and all guarantees or other obligations
in respect of such accounts receivable, the proceeds of such receivables and
other assets which are customarily transferred, or in respect of which security
interests are customarily granted in connection with asset securitization
involving accounts receivable.
"Receivables Entity" means a Wholly Owned Restricted Subsidiary of the
Company (other than a Guarantor) which engages in no activities other than in
connection with the
<PAGE>
16
financing of accounts receivable and which is designated by the board of
directors of the Company (as provided below) as a Receivables Entity:
(1) no portion of the Indebtedness or any other obligations
(contingent or otherwise) of which:
(a) is guaranteed by the Company or any Restricted Subsidiary of
the Company (excluding guarantees of Obligations (other than the
principal of, and interest on, Indebtedness) pursuant to Standard
Securitization Undertakings);
(b) is recourse to or obligates the Company or any Restricted
Subsidiary of the Company in any way other than pursuant to Standard
Securitization Undertakings; or
(c) subjects any property or asset of the Company or any
Restricted Subsidiary of the Company, directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than
pursuant to Standard Securitization Undertakings;
(2) with which neither the Company nor any Restricted Subsidiary of
the Company has any material contract, agreement, arrangement or
understanding (except in connection with a Purchase Money Note or Qualified
Receivables Transaction) other than on terms no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at
the time from Persons that are not Affiliates of the Company, other than
fees payable in the ordinary course of business in connection with
servicing accounts receivable; and
(3) to which neither the Company nor any Restricted Subsidiary of the
Company has any obligation to maintain or preserve such entity's financial
condition or cause such entity to achieve certain levels of operating
results.
Any such designation by the board of directors of the Company shall be
evidenced to the Trustee by a resolution of the Board of Directors of the
Company giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a resolution of the
Board of Directors of the Company, as an Unrestricted Subsidiary pursuant to
Section 14 hereof. Any such designation may be revoked by a resolution of the
Board of Directors of the Company, subject to the provisions of such covenant.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" means, at any date, (a) all Obligations of the
Company under or in respect of the Credit Facility; (b) all Hedging Obligations
of the Company; (c) all Obligations of the Company under stand-by letters of
credit; and (d) all other Indebtedness of the Company for
<PAGE>
17
borrowed money, including principal, premium, if any, and interest (including
Post-Petition Interest) on such Indebtedness, unless the instrument under which
such Indebtedness of the Company for money borrowed is Incurred expressly
provides that such Indebtedness for money borrowed is not senior or superior in
right of payment to the Exchange Debentures under the Exchange Indenture, and
all renewals, extensions, modifications, amendments or refinancings thereof.
Notwithstanding the foregoing, Senior Indebtedness shall not include (a) to the
extent that it may constitute Indebtedness, any Obligation for Federal, state,
local or other taxes; (b) any Indebtedness among or between the Company and any
Subsidiary of the Company or any Affiliate of the Company or any of such
Affiliate's Subsidiaries, unless and for so long as such Indebtedness has been
pledged to secure obligations under or in respect of Senior Indebtedness; (c) to
the extent that it may constitute Indebtedness, any Obligation in respect of any
trade payable Incurred for the purchase of goods or materials, or for services
obtained, in the ordinary course of business; (d) that portion of any
Indebtedness that is Incurred in violation of the Indenture; (e) Indebtedness
evidenced by the Notes; (f) Indebtedness of the Company that is expressly
subordinate or junior in right of payment to any other Indebtedness of the
Company; (g) to the extent that it may constitute Indebtedness, any obligation
owing under leases (other than Capitalized Lease Obligations) or management
agreements; (h) any obligation that by operation of law is subordinate to any
general unsecured obligations of the Company; and (i) Indebtedness of the
Company to the extent such Indebtedness is owed to and held by any Federal,
state, local or other governmental authority.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Restricted
Subsidiary of the Company which are reasonably customary in securitization of
accounts receivable transactions.
"Stockholders' Agreement" means the Stockholders' Agreement among St. John
Knits, Inc., the Company, Vestar/Gray Investors LLC, Vestar/SJK Investors LLC
and the members of Vestar/Gray Investors LLC party thereto dated as of, and as
in effect on, the Issue Date.
"Subordinated Indebtedness" means, with respect to the Company or any
Guarantor, any Indebtedness of the Company or such Guarantor, as the case may
be, which is expressly subordinated in right of payment to the Notes or such
Guarantor's Guarantee, as the case may be.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which the outstanding Voting Equity Interests having at least a majority of the
votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, through one or more Persons by such Person, or
(b) any other Person of which at least a majority of Voting Equity Interests are
at the time, directly or indirectly, owned by such first named Person.
"Transactions" means the series of transactions whereby the Company was
acquired by Vestar/Gray Investors LLC, including the financing of the
acquisition.
"Transfer Agent" means the transfer agent for the Exchangeable Preferred
Stock, which initially shall be the Company unless and until a successor is
selected by the Company.
<PAGE>
18
"Treasury Yield" shall be determined by an Independent Financial Advisor
and shall mean, with respect to any redemption date, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
assuming a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for such redemption
date.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to Section 14 hereof. Any such designation may be revoked by a
resolution of the Board of Directors of the Company, subject to the provisions
of such covenant.
"Vestar" means Vestar Capital Partners III, L.P.
"Voting Equity Interests" means Equity Interests in a corporation or other
Person with voting power under ordinary circumstances entitling the holders
thereof to elect the Board of Directors or other governing body of such
corporation or Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
or Disqualified Stock at any date, the number of years obtained by dividing (a)
the sum of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required scheduled
payment of principal or liquidation preference, as applicable, including payment
at final maturity, in respect thereof, by (ii) the number of years (calculated
to the nearest one-twelfth) that will elapse between such date and the making of
such payment, by (b) the then outstanding aggregate principal amount or
liquidation preference, as applicable, of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary all of
the outstanding Voting Equity Interests (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company and/or one or
more Wholly Owned Restricted Subsidiaries.
2. Designation.
-----------
There is hereby authorized 250,000 shares of 15 1/4% Exchangeable
Preferred Stock Due 2010 (the "Exchangeable Preferred Stock"), par value $0.01
per share, with a liquidation preference of $100 per share on the terms and with
the provisions set forth herein. All shares of Exchangeable Preferred Stock
shall be identical with each other in all respects.
3. Ranking.
-------
The Exchangeable Preferred Stock will, with respect to the dividend
rights and rights on liquidation, winding-up and dissolution, rank (i) senior to
all classes of Common Stock and each other class of Capital Stock or series of
preferred stock issued by the Company established after the Issue Date by the
Board of Directors of the Company which does not expressly provide that it ranks
senior to or on a parity with the Exchangeable Preferred Stock as to dividend
rights and rights on liquidation, winding-up and dissolution (collectively
referred to with the Common Stock of the Company as "Junior Securities"); (ii)
on a parity with each other
<PAGE>
19
class of Capital Stock or series of preferred stock issued by the Company
established after the Issue Date by the Board of Directors of the Company, which
expressly provides that such series will rank on a parity with the Exchangeable
Preferred Stock as to dividend rights and rights on liquidation, winding-up and
dissolution (collectively referred to as "Parity Securities"); and (iii) junior
to each other class of Capital Stock or series of Exchangeable Preferred Stock
issued by the Company established after the Issue Date by the Board of Directors
of the Company the terms of which specifically provide that such series will
rank senior to the Exchangeable Preferred Stock as to dividend rights and rights
on liquidation, winding-up and dissolution (collectively referred to as "Senior
Securities"). The Exchangeable Preferred Stock will be subject to the issuance
of series of Junior Securities, Parity Securities and Senior Securities.
4. Dividends.
---------
(a) The Holders of the Exchangeable Preferred Stock shall be entitled
to receive, when, as and if dividends are declared by the Board of Directors out
of funds of the Company legally available therefor, cumulative cash dividends
from the date of issuance of the Exchangeable Preferred Stock accruing at the
rate per share of 15 1/4% per annum, payable semi-annually in arrears on January
1 and July 1 of each year (each, a "Dividend Payment Date"), or if any such date
is not a Business Day, on the next succeeding Business Day, commencing on
January 1, 2000, to the Holders of record as of the preceding December 15 and
June 15 (each, a "Record Date"). If dividends accrued by any Dividend Payment
Date are not paid in full on such Dividend Payment Date, each Holder shall be
entitled to receive, out of funds of the Company legally available therefor,
additional cumulative cash dividend payments for each succeeding Dividend Period
or portion thereof during which such accrued but unpaid dividends shall remain
unpaid, in an amount determined by multiplying (A) .1525 times (B) the amount of
such accrued but unpaid dividends times (C) the Applicable Day Count Fraction
for such Dividend Period or portion.
(b) Dividends payable on the Exchangeable Preferred Stock will be
computed on the basis of a 360-day year of twelve 30-day months and will be
deemed to accrue on a daily basis. On any scheduled Dividend Payment Date, the
Company may, at its option, but subject to certain conditions, exchange all but
not less than all of the shares of Exchangeable Preferred Stock for the Exchange
Debentures. Dividends on the Exchangeable Preferred Stock shall accrue whether
or not the Company has earnings or profits, whether or not there are funds
legally available for the payment of such dividends and whether or not dividends
are declared.
5. Voting Rights.
-------------
Holders of record of the Exchangeable Preferred Stock will have no
voting rights, except as required by law.
6. Right of Appointment.
--------------------
Upon (i) the failure by the Company or any of its Restricted
Subsidiaries to comply with any mandatory redemption obligation with respect to
the Exchangeable Preferred Stock; and (ii) failure by the Company or any of its
Restricted Subsidiaries to comply with any of
<PAGE>
20
the other covenants or agreements set forth in this Certificate of Designations
and the continuance of such failure for 60 consecutive days or more (each of the
events described in clauses (i) and (ii) being referred to as an "Appointment
Event"), then the number of members of the Company's Board of Directors will be
immediately and automatically increased by one, and the Holders of a majority of
the outstanding aggregate Liquidation Preference of Exchangeable Preferred
Stock, voting as a separate class, will be entitled to elect one member to the
Board of Directors of the Company. Voting rights arising as a result of an
Appointment Event will continue until such time as all Appointment Events have
been cured or waived. An Appointment Event shall constitute a violation
hereunder.
7. Amendment, Supplement and Waiver.
--------------------------------
Except as provided in the next two succeeding paragraphs, this
Certificate of Designations or the Exchangeable Preferred Stock may be amended
or supplemented with the consent of the Holders of at least a majority in
aggregate Liquidation Preference of the Exchangeable Preferred Stock then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, Exchangeable Preferred
Stock), and any existing default or compliance with any provision of this
Certificate of Designations or the Exchangeable Preferred Stock may be waived
with the consent of the Holders of a majority in aggregate Liquidation
Preference of the then outstanding Exchangeable Preferred Stock (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Exchangeable Preferred Stock).
Without the consent of each Holder affected, an amendment or waiver
may not (with respect to any Exchangeable Preferred Stock held by a non-
consenting Holder): (i) alter the voting rights with respect to the Exchangeable
Preferred Stock or reduce the number of shares of Exchangeable Preferred Stock
whose Holders must consent to an amendment, supplement or waiver, (ii) reduce
the Liquidation Preference of or change the Mandatory Redemption Date of any
Exchangeable Preferred Stock or alter the provisions with respect to the
redemption of the Exchangeable Preferred Stock (other than the provisions of
Section 11 hereof), (iii) reduce the rate of or change the time for payment of
dividends on any Exchangeable Preferred Stock, (iv) make any Exchangeable
Preferred Stock payable in any form other than that stated in this Certificate
of Designations, (v) waive a redemption payment with respect to any Exchangeable
Preferred Stock (other than a payment required by Section 11 hereof) or (vi)
make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Exchangeable Preferred Stock, the Company may (to the extent permitted by
Delaware law) amend or supplement this Certificate of Designations to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Exchangeable
Preferred Stock in addition to or in place of certificated Exchangeable
Preferred Stock or to make any change that would provide any additional rights
or benefits to the Holders of Exchangeable Preferred Stock or that does not
adversely affect the legal rights under this Certificate of Designations of any
such Holder.
<PAGE>
21
8. Exchange.
--------
The Company may, at its option on any Dividend Payment Date, exchange
all but not less than all of the shares of then outstanding Exchangeable
Preferred Stock for Exchange Debentures in a principal amount equal to the
Liquidation Preference of the Exchangeable Preferred Stock; provided that (i)
such exchange would be permitted under the terms of the Indenture, the Credit
Facility and other contractual arrangements of the Company and, immediately
after giving effect to such exchange, no default or event of default would exist
under the Exchange Indenture, the Credit Facility, the Indenture or any other
material instrument governing Indebtedness outstanding at the time; (ii) the
Exchange Indenture has been qualified under the Trust Indenture Act if such
qualification is required at the time of exchange; and (iii) the Company shall
have delivered a written opinion to the Exchange Trustee to the effect that all
conditions to be satisfied prior to such exchange have been satisfied. If
issued, the Exchange Debentures will be subordinated to the Notes to the same
extent as the Notes are subordinated to the Credit Facility.
Upon any exchange pursuant to the preceding paragraph, holders of
outstanding Exchangeable Preferred Stock will be entitled to receive, subject to
the second succeeding sentence of this paragraph, $1.00 principal amount of
Exchange Debentures for each $1.00 of the aggregate Liquidation Preference. The
Exchange Debentures will be issued in registered form, without coupons. The
Exchange Debentures will be issued in principal amounts of $1,000 and integral
multiples thereof to the extent possible, and will also be issuable in principal
amounts less than $1,000 so that each Holder of Exchangeable Preferred Stock
will receive interests representing the entire amount of Exchange Debentures to
which such Holder's shares of Exchangeable Preferred Stock entitle such Holder;
provided that the Company may pay cash in lieu of issuing an Exchange Debenture
having a principal amount less than $1,000. Notice of the intention to exchange
shall be sent by or on behalf of the Company not more than 60 days nor less than
30 days prior to the Exchange Date, by first class mail, postage prepaid, to
each Holder of record of Exchangeable Preferred Stock at its registered address.
In addition to any information required by law or by the applicable rules of any
exchange upon which Exchangeable Preferred Stock may be listed or admitted to
trading, such notice will state: (i) the Exchange Date; (ii) the place or places
where certificates for such stock are to be surrendered for exchange, including
any procedures applicable to exchanges to be accomplished through book-entry
transfers; and (iii) that dividends on the Exchangeable Preferred Stock to be
exchanged will cease to accrue on the Exchange Date. If notice of any exchange
has been properly given, and if on or before the Exchange Date the Exchange
Debentures have been duly executed and authenticated and an amount in cash or
additional Exchangeable Preferred Stock (as applicable) equal to all accrued and
unpaid dividends, if any, thereon to the Exchange Date has been deposited with
the Transfer Agent, then on and after the close of business on the Exchange
Date, the Exchangeable Preferred Stock to be exchanged will no longer be deemed
to be outstanding and may thereafter be issued in the same manner as other
authorized but unissued preferred stock, but not as Exchangeable Preferred
Stock, and all rights of the Holders thereof as stockholders of the Company will
cease, except the right of the Holders to receive upon surrender of their
certificates the Exchange Debentures and all accrued and unpaid dividends, if
any, thereon to the Exchange Date.
<PAGE>
22
A Holder may transfer or exchange Exchangeable Preferred Stock in
accordance with this Certificate of Designations if the requirements of the
Transfer Agent for such transfer or exchange are met. The Transfer Agent may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by this Certificate of Designations.
9. Redemption.
----------
Mandatory Redemption.
On July 1, 2010 (the "Mandatory Redemption Date"), the Company shall
be required to redeem, from any source of funds legally available therefor, all
outstanding Exchangeable Preferred Stock at a price in cash equal to the
Liquidation Preference thereof. The Company shall not be required to make
sinking fund payments with respect to the Exchangeable Preferred Stock. The
Company shall take all actions required or permitted under Delaware law to
permit such redemption.
Optional Redemption.
Except as provided in the next two succeeding paragraphs, the
Exchangeable Preferred Stock may not be redeemed at the option of the Company
prior to July 1, 2004. The Exchangeable Preferred Stock may be redeemed, in
whole or in part, at the option of the Company on or after July 1, 2004, at the
redemption prices specified below (expressed as percentages of the Liquidation
Preference thereof), in each case upon not less than 30 nor more than 60 days=
prior written notice, if redeemed during the 12-month period commencing on July
1 of each of the years set forth below:
<TABLE>
<CAPTION>
Year Redemption Rate
---- ---------------
<S> <C>
2004........................ 107.625%
2005........................ 105.719%
2006........................ 103.813%
2007........................ 101.906%
2008 and thereafter......... 100.000%
</TABLE>
The Exchangeable Preferred Stock will also be redeemable in whole or
in part, at the option of the Company at any time before July 1, 2004, at a
redemption price equal to the greater of (i) 100% of the Liquidation Preference
of the Exchangeable Preferred Stock and (ii) the present value of the
Liquidation Preference at the Mandatory Redemption Date, discounted on a semi-
annual basis at the Treasury Yield plus 15 basis points, all as determined by an
Independent Financial Advisor.
In addition, at any time and from time to time on or prior to July 1,
2002, the Company may redeem in the aggregate up to 35% of the originally issued
Liquidation Preference of the Exchangeable Preferred Stock with the net cash
proceeds of one or more Public Equity Offerings by the Company at a redemption
price in cash equal to 115.25% of the Liquidation
<PAGE>
23
Preference thereof; provided, however, that at least 65% of the originally
issued aggregate Liquidation Preference of the Exchangeable Preferred Stock must
remain outstanding immediately after giving effect to each such redemption
(excluding any Exchangeable Preferred Stock held by the Company or any of its
Affiliates). Notice of any such redemption must be given within 60 days after
the date of the closing of the relevant Public Equity Offering of the Company.
General Redemption Provisions
Subject to the provisions of this Section 9 and Section 11 hereof, the
following provisions shall apply to the redemption or repurchase of shares of
Exchangeable Preferred Stock.
(a) Selection of Shares to Be Redeemed.
If less than all of the shares of Exchangeable Preferred Stock are to
be redeemed or purchased in an offer to purchase at any time, the Company shall
select the shares of Exchangeable Preferred Stock to be redeemed or purchased
among the Holders of the shares of Exchangeable Preferred Stock in compliance
with the requirements of the principal national securities exchange, if any, on
which the shares of Exchangeable Preferred Stock are listed or, if the shares of
Exchangeable Preferred Stock are not so listed, on a pro rata basis, by lot or
in accordance with any other method the Company considers fair and appropriate;
provided that no shares shall be redeemed in part. In the event of partial
redemption by lot, the particular shares of Exchangeable Preferred Stock to be
redeemed shall be selected, unless otherwise provided herein, not less than 30
nor more than 60 days prior to the redemption date by the Company from the
outstanding shares of Exchangeable Preferred Stock not previously called for
redemption.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail or cause to be mailed, by first class mail, a notice of
redemption to each Holder whose shares of Exchangeable Preferred Stock are to be
redeemed at its registered address. The notice shall identify the shares of
Exchangeable Preferred Stock to be redeemed and shall state: (i) the redemption
date; (ii) the redemption price; (iii) the name and address of the Paying Agent;
(iv) that shares of Exchangeable Preferred Stock called for redemption must be
surrendered to the Paying Agent to collect the redemption price; (v) that,
unless the Company defaults in making such redemption payment, dividend payments
on shares of Exchangeable Preferred Stock called for redemption cease to accrue
on and after the redemption date; (vi) the section of this Certificate of
Designations pursuant to which the shares of Exchangeable Preferred Stock called
for redemption are being redeemed; and (vii) 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 shares of Exchangeable Preferred Stock.
(b) Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with this Section 9,
shares of Exchangeable Preferred Stock called for redemption become irrevocably
due and payable on the redemption date at the redemption price. A notice of
redemption may not be conditional.
<PAGE>
24
(c) Deposit of Redemption Price.
On the redemption date, the Company shall deposit with the Paying
Agent money sufficient to pay the redemption price of and accumulated dividends
on all shares of Exchangeable Preferred Stock to be redeemed on that date. The
Paying Agent shall promptly return to the Company any money deposited with the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and accumulated dividend payments on, all shares of
Exchangeable Preferred Stock to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, dividend payments shall cease to
accrue on the shares of Exchangeable Preferred Stock. If a share of
Exchangeable Preferred Stock is redeemed on or after a payment Record Date but
on or prior to the related Dividend Payment Date, then any accumulated and
unpaid dividends shall be paid to the Person in whose name such share of
Exchangeable Preferred Stock was registered at the close of business on such
Record Date. If any shares of Exchangeable Preferred Stock called for
redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, dividends shall
be paid on the Liquidation Preference thereof, from the redemption date until
such principal is paid, and to the extent lawful on any dividends not paid on
such unpaid principal, in each case at the rate provided in this Certificate of
Designations.
10. Liquidation Rights.
------------------
Upon any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Company or reduction or decrease in its capital stock
resulting in a distribution of assets to the holders of any class or series of
the Company's Capital Stock (a "reduction or decrease in Capital Stock"), each
Holder of the Exchangeable Preferred Stock will be entitled to payment out of
the assets of the Company available for distribution of an amount equal to the
Liquidation Preference per share of Exchangeable Preferred Stock held by such
Holder to the date fixed for liquidation, dissolution, winding up or reduction
or decrease in Capital Stock, before any distribution is made on any Junior
Securities, including, without limitation, Common Stock of the Company. After
payment in full of the Liquidation Preference to which Holders of Exchangeable
Preferred Stock are entitled, such Holders will not be entitled to any further
participation in any distribution of assets of the Company. However, neither
the voluntary sale, conveyance, exchange or transfer (for cash, stock,
securities or other consideration) of all or substantially all of the property
or assets of the Company nor the consolidation or merger of the Company with or
into one or more corporations will be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the Company or reduction or decrease
in Capital Stock, unless such sale, conveyance, exchange or transfer shall be in
connection with a liquidation, dissolution or winding up of the business of the
Company or reduction or decrease in Capital Stock.
<PAGE>
25
11. Change of Control.
-----------------
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall notify the
Holders of such occurrence in the manner prescribed by this Certificate of
Designations and shall, within 45 days after the Change of Control Date, make an
Offer to Purchase all Exchangeable Preferred Stock then outstanding at a
purchase price in cash equal to 101% of the aggregate Liquidation Preference
thereof to the Purchase Date (subject to the right of Holders of record on the
relevant Record Date to receive dividends due on the relevant Dividend Payment
Date).
The Company will not be required to make an Offer to Purchase upon a
Change of Control if a third party makes the Offer to Purchase in the manner, at
the times and otherwise in compliance with the requirements set forth in this
Certificate of Designations applicable to an Offer to Purchase made by the
Company and purchases all Exchangeable Preferred Stock validly tendered and not
withdrawn under such Offer to Purchase.
If the Company makes an Offer to Purchase, the Company shall comply
with all applicable securities laws and regulations, and any violation of the
provisions of this Certificate of Designations relating to such Offer to
Purchase occurring as a result of such compliance shall not be deemed a
violation or an event that, with the passing of time or giving of notice, or
both, would constitute a violation, of this Certificate of Designations.
12. Restricted Payments.
-------------------
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or any other distribution on any
Parity Securities or Junior Securities of the Company or make any payment
or distribution to the direct or indirect holders (in their capacities as
such) of Parity Securities or Junior Securities of the Company (other than
(A) any dividends, distributions and payments made to any Restricted
Subsidiary, (B) dividends and distributions payable to any Person solely in
Parity Securities or Junior Securities of the Company that are Qualified
Equity Interests, or (C) dividends and distributions payable to any Person
solely in options, warrants or other rights to purchase Parity Securities
or Junior Securities of the Company that are Qualified Equity Interests);
(ii) purchase, redeem or otherwise acquire or retire for value any
Parity Securities or Junior Securities of the Company (other than any such
Parity Securities or Junior Securities owned by any Restricted Subsidiary);
or
(iii) make any Investment in any Person (other than Permitted
Investments)
(any such payment or any other action (other than any exception thereto)
described in (i), (ii), or (iii) each, a "Restricted Payment"), unless
<PAGE>
26
(a) no Appointment Event shall have occurred and be continuing at the
time or immediately after giving effect to such Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the
Company would be able to Incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the Consolidated Coverage Ratio of the first
paragraph of Section 13 hereof; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made on or after
the Issue Date does not exceed an amount equal to the sum of (1) 50% of
cumulative Consolidated Net Income determined for the period (taken as one
period) from the Issue Date and ending on the last day of the most recent
fiscal quarter immediately preceding the date of such Restricted Payment
for which consolidated financial information of the Company is available
(or if such cumulative Consolidated Net Income shall be a loss, minus 100%
of such loss), plus (2) the aggregate net cash proceeds received by the
Company either (x) as capital contributions to the Company after the Issue
Date or (y) from the issue and sale (other than to a Restricted Subsidiary)
of its Qualified Equity Interests after the Issue Date (excluding the net
proceeds from any issuance and sale of Qualified Equity Interests financed,
directly or indirectly, using funds borrowed from the Company or any
Restricted Subsidiary until and to the extent such borrowing is repaid),
plus (3) the principal amount (or accreted amount (determined in accordance
with GAAP), if less) of any Indebtedness of the Company or any Restricted
Subsidiary Incurred after the Issue Date which has been converted into or
exchanged for Qualified Equity Interests of the Company, plus (4) without
duplication of any amounts included in clause (1) above, in the case of the
disposition or repayment of, or the receipt by the Company or any
Restricted Subsidiary of any dividends or distributions from, any
Investment constituting a Restricted Payment made after the Issue Date
(including by way of a Revocation), an amount equal, in the aggregate, to
the lesser of the amount of such Investment, other than pursuant to a
Revocation, in which case such amount will be the lesser of the Fair Market
Value of such Investment at the date of Revocation, and the amount received
by the Company or any Restricted Subsidiary upon such disposition,
repayment, dividend or distribution or Revocation.
The foregoing provisions will not prevent (i) the payment of any
dividend or distribution on, or redemption of, Equity Interests within 60 days
after the date of declaration of such dividend or distribution or the giving of
formal notice of such redemption, if at the date of such declaration or giving
of such formal notice such payment or redemption would comply with the
provisions of this Certificate of Designations provided, however, that the
payment of the $0.025 per share dividend on St. John common stock declared on
June 8, 1999 and payable on July 22, 1999 shall not constitute a Restricted
Payment; (ii) the purchase, redemption, retirement, defeasance or other
acquisition of Parity Securities or Junior Securities, or any other payment
thereon, made in exchange for, or out of the net cash proceeds of a
substantially concurrent issue and sale (other than to a Restricted Subsidiary)
of Parity Securities or Junior Securities, as the case may be, that are
Qualified Equity Interests of the Company; provided, however, that any such net
cash proceeds and the value of any Qualified Equity Interests issued in exchange
for
<PAGE>
27
Parity Securities or Junior Securities are excluded from clauses (c)(2) and
(c)(3) of the preceding paragraph (and were not included therein at any time)
and are not used to redeem the Exchangeable Preferred Stock pursuant to
"Redemption--Optional Redemption" in Section 9 hereof; (iii) the repurchase,
redemption, defeasance, retirement, refinancing or acquisition for value or
payment of principal of Parity Securities or Junior Securities at a purchase
price not greater than 101% of the Liquidation Preference of such Parity
Securities or Junior Securities in the event of a Change of Control pursuant to
a provision similar to the Change of Control provisions in Section 11 above;
provided, however, that prior to any such repurchase, the Company has made an
Offer to Purchase as provided in Section 11 above with respect to the
Exchangeable Preferred Stock and has redeemed all Exchangeable Preferred Stock
validly tendered in connection with such Offer to Purchase; (iv) the purchase,
redemption or other acquisition, cancellation or retirement for value of Equity
Interests of the Company held by any existing or former employees or management
of the Company or any Restricted Subsidiary of the Company (other than Robert
Gray, Marie Gray and Kelly Gray) 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; provided that such redemptions or repurchases pursuant to this clause
will not exceed $500,000 in the aggregate during any calendar year; provided,
further, that any amounts not used for redemptions or repurchases pursuant to
this clause (iv) may be used in any subsequent calendar year; (v) repurchases of
Equity Interests deemed to occur upon the exercise of stock options if such
Equity Interests represent a portion of the exercise price thereof; (vi) the
defeasance, redemption or repurchase of any Disqualified Equity Interest of the
Company in exchange for, or out of the net cash proceeds of, a substantially
concurrent issue and sale (other than to the Company or a Subsidiary of the
Company) of Disqualified Equity Interests of the Company or such Restricted
Subsidiary, respectively; provided that: (A) the aggregate liquidation
preference of such Disqualified Equity Interest does not exceed the aggregate
liquidation preference of the Disqualified Equity Interest so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (B) such Disqualified
Equity Interest has a final redemption date later than the final redemption date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Exchangeable Preferred Stock; and (C)
such Disqualified Equity Interest is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Disqualified Equity Interest
being extended, refinanced, renewed, replaced, defeased or refunded; (vii) the
defeasance, redemption or repurchase of any Preferred Equity Interest or
Disqualified Equity Interest issued in connection with the acquisition of assets
or a Permitted Business, provided, that the aggregate amount of such defeasance,
redemption or repurchase payments shall not exceed at any time $15.0 million;
(viii) the payment of any dividend by a Restricted Subsidiary to the holders of
its common Equity Interests on a pro rata basis; (ix) the performance by the
Company of its obligations under the Stockholders= Agreement to (A) purchase
Gray Common Stock, (B) make cash payments to Robert Gray, Marie Gray or Kelly
Gray on Preferred Equity Interests of the Company that are Qualified Equity
Interests and (C) to purchase, redeem or otherwise acquire or retire for value
Preferred Equity Interests of the Company that are Qualified Equity Interests
that are owned by Robert Gray, Marie Gray or Kelly Gray; (x) Restricted Payments
in an amount not to exceed $20.0 million; and (xi) Restricted Payments made on
the Issue Date in connection with the Transactions; provided, however, that in
the case
<PAGE>
28
of each of clauses (iii), (iv), (vii) and (viii) no Appointment Event shall have
occurred and be continuing or would arise therefrom.
In determining the amount of Restricted Payments permissible under
this covenant, amounts expended pursuant to clauses (iv), (vii) and (ix) of the
immediately preceding paragraph shall be included as Restricted Payments.
Amounts paid pursuant to clause (i) of the immediately preceding paragraph shall
be included, when paid, as Restricted Payments only to the extent not already
included as Restricted Payments upon declaration. Amounts expended pursuant to
all other clauses of the immediately preceding paragraph shall not be included
as Restricted Payments. The amount of any non-cash Restricted Payment shall be
deemed to be equal to the Fair Market Value thereof at the date of the making of
such Restricted Payment.
13. Limitation on Indebtedness.
--------------------------
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, Incur any Indebtedness (including
Acquired Indebtedness), except for Permitted Indebtedness; provided, however,
that the Company and any Restricted Subsidiary may Incur Indebtedness if, at the
time of and immediately after giving pro forma effect to such Incurrence of
Indebtedness and the application of the proceeds therefrom, the Consolidated
Coverage Ratio would be at least 1.75 to 1.0.
The foregoing limitations will not apply to the Incurrence by the
Company or any Restricted Subsidiary of any of the following (collectively,
"Permitted Indebtedness"), each of which shall be given independent effect:
(a) Indebtedness under the Indenture, other Indebtedness outstanding
on the Issue Date and the Exchange Debentures;
(b) Indebtedness of the Company and any Restricted Subsidiary
Incurred pursuant to the Credit Facility if at the time of and immediately
after giving effect thereto, the aggregate consolidated Indebtedness
Incurred under the Credit Facility would not exceed $215.0 million at any
one time outstanding; provided, however, that such $215.0 million shall be
reduced by the sum of (i) the amount of any repayments or prepayments of
Indebtedness (that are accompanied by a corresponding permanent commitment
reduction) under the Credit Facility and (ii) the outstanding principal
amount of Indebtedness and preferred stock of a Receivables Entity
(excluding the net proceeds of such Indebtedness and preferred stock that
are applied to the repayment or prepayment of Indebtedness described in
clause (i));
(c) Indebtedness of any Restricted Subsidiary owed to and held by the
Company or any Restricted Subsidiary and other Indebtedness of the Company
owed to and held by any Restricted Subsidiary; provided, however, that an
Incurrence of Indebtedness that is not permitted by this clause (c) shall
be deemed to have occurred upon (i) any sale or other disposition of any
Indebtedness of the Company or any Restricted Subsidiary referred to in
this clause (c) to a Person (other than the Company or a Restricted
Subsidiary), (ii) any sale or other disposition of Equity Interests of any
Restricted
<PAGE>
29
Subsidiary or which holds Indebtedness of the Company or another Restricted
Subsidiary such that such Restricted Subsidiary ceases to be a Restricted
Subsidiary and (iii) the designation of a Restricted Subsidiary which holds
Indebtedness of the Company or any other Restricted Subsidiary as an
Unrestricted Subsidiary;
(d) the Guarantees and guarantees by any Restricted Subsidiary of
Indebtedness of the Company;
(e) Hedging Obligations of the Company or any Restricted Subsidiary
entered into in the ordinary course of business and not for speculative
purposes;
(f) Purchase Money Indebtedness (and refinancings thereof) and
Capitalized Lease Obligations (and refinancings thereof) which do not
exceed $15.0 million in the aggregate at any one time outstanding;
(g) Indebtedness to the extent representing a replacement, renewal,
refinancing or extension (collectively, a "refinancing") of outstanding
Indebtedness Incurred in compliance with the Consolidated Coverage Ratio of
the first paragraph of this covenant or clause (a) of this paragraph of
this covenant; provided, however, that (i) any such refinancing shall not
exceed the sum of the principal amount (or accreted amount (determined in
accordance with GAAP), if less) of the Indebtedness being refinanced, plus
the amount of accrued interest thereon, plus the amount of any reasonably
determined prepayment premium necessary to accomplish such refinancing and
such reasonable fees and expenses incurred in connection therewith, (ii)
Indebtedness representing a refinancing of Indebtedness other than Senior
Indebtedness shall have a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of the Indebtedness
being refinanced, (iii) Indebtedness that is pari passu with the Exchange
Debentures may only be refinanced with Indebtedness that is made pari passu
with or subordinate in right of payment to the Notes and Subordinated
Indebtedness may only be refinanced with Subordinated Indebtedness and (iv)
Indebtedness of the Company may only be refinanced by Indebtedness of the
Company and Indebtedness of a Restricted Subsidiary may only be refinanced
by Indebtedness of such Restricted Subsidiary or by the Company;
(h) Indebtedness incurred in respect of workers' compensation claims,
self-insurance obligations, performance, surety and similar bonds and
completion guarantees provided by the Company or a Restricted Subsidiary in
the ordinary course of business;
(i) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or Equity Interests
of a Restricted Subsidiary, provided that the maximum aggregate liability
in respect of all such Indebtedness shall at no time exceed the gross
proceeds actually received by the Company and its Restricted Subsidiaries
in connection with such disposition;
<PAGE>
30
(j) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument (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;
(k) Indebtedness representing deferred compensation to employees of
the Company and its Subsidiaries in an aggregate amount not to exceed $5.0
million at any one time outstanding;
(l) Indebtedness of a Receivables Entity that is non-recourse to the
Company or any other Restricted Subsidiary of the Company Incurred in
connection with a Qualified Receivables Transaction, provided that the
proceeds of such Indebtedness are used to reduce Indebtedness under the
Credit Facility; and
(m) in addition to the items referred to in clauses (a) through (l)
above, Indebtedness of the Company (including any Indebtedness under the
Credit Facility that utilizes this subparagraph (m)) having an aggregate
principal amount not to exceed $45.0 million at any one time outstanding.
For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness incurred pursuant to and in
compliance with, this Section 13:
(1) in the event that Indebtedness meets the criteria of more than one
of the types of Indebtedness described in the first and second paragraphs
of this covenant, the Company, in its sole discretion, will classify such
item of Indebtedness on the date of Incurrence and only be required to
include the amount and type of such Indebtedness in one of such clauses;
and
(2) the amount of Indebtedness issued at a price that is less than the
principal amount thereof will be equal to the amount of the liability in
respect thereof determined in accordance with GAAP.
Accrual of interest, accrual of dividends, the accretion of accreted
value, the payment of interest in the form of additional Indebtedness and the
payment of dividends in the form of additional shares of preferred stock will
not be deemed to be an Incurrence of Indebtedness for purposes of this covenant
provided, in each such case, that the amount thereof is included in the
Consolidated Fixed Charges of such Person.
14. Designation of Unrestricted Subsidiaries.
----------------------------------------
The Company may designate after the Issue Date any Subsidiary of the
Company as an "Unrestricted Subsidiary" under this Certificate of Designations
(a "Designation") only if:
(i) no Appointment Event shall have occurred and be continuing at the
time of or after giving effect to such Designation;
<PAGE>
31
(ii) at the time of and after giving effect to such Designation, the
Company could Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the Consolidated Coverage Ratio of the first paragraph
of Section 13 hereof; and
(iii) the Company would be permitted to make an Investment (other
than a Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
Section 12 hereof in an amount (the "Designation Amount") equal to the Fair
Market Value of the net assets of such Subsidiary on such date.
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section 12
hereof for all purposes of this Certificate of Designations in the Designation
Amount.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") only if:
(i) no Appointment Event shall have occurred and be continuing at the
time of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of this
Certificate of Designations.
All Designations and Revocations must be evidenced by resolutions of
the Board of Directors of the Company.
15. Payment.
-------
(a) All amounts payable in cash with respect to the Exchangeable
Preferred Stock shall be payable in United States dollars at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of dividends (if any) may be
made by check mailed to the Holders of the Exchangeable Preferred Stock at their
respective addresses set forth in the register of Holders of Exchangeable
Preferred Stock maintained by the Transfer Agent, provided that all cash
payments with respect to the Global Certificates (as defined below) and shares
of Exchangeable Preferred Stock the Holders of which have given wire transfer
instructions to the Company shall be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
(b) Any payment on the Exchangeable Preferred Stock due on any day
that is not a Business Day need not be made on such day, but may be made on the
next succeeding Business Day with the same force and effect as if made on such
due date.
(c) The Company will initially act as the paying agent (the "Paying
Agent"). The Company may at any time appoint additional or other Paying Agents;
provided that until the
<PAGE>
32
Exchangeable Preferred Stock has been delivered to the Company for cancellation,
or moneys sufficient to pay the Liquidation Preference on the Exchangeable
Preferred Stock have been made available for payment and either paid or returned
to the Company as provided in this Certificate of Designations, the Company
shall maintain an office or agency in the Borough of Manhattan, The City of New
York for surrender of Exchangeable Preferred Stock for payment and exchange.
(d) Dividends payable on the Exchangeable Preferred Stock on any
redemption date or repurchase date that is a Dividend Payment Date shall be paid
to the Holders of record as of the immediately preceding Record Date.
(e) All moneys and shares of Exchangeable Preferred Stock deposited
with any Paying Agent or then held by the Company in trust for the payment of
the Liquidation Preference on any shares of Exchangeable Preferred Stock which
remain unclaimed at the end of two years after such payment has become due and
payable shall be repaid to the Company, and the Holder of such shares of
Exchangeable Preferred Stock shall thereafter look only to the Company for
payment thereof.
16. Exclusion of Other Rights.
-------------------------
Except as may otherwise be required by law, the shares of Exchangeable
Preferred Stock shall not have any voting powers, preferences and relative,
participating, optional or other special rights, other than those specifically
set forth in this Certificate of Designations (as such Certificate of
Designations may be amended from time to time) and in the Certificate of
Incorporation. The shares of Exchangeable Preferred Stock shall have no
preemptive or subscription rights.
17. Remedies for Breach of Covenants.
--------------------------------
The sole remedy to Holders in the event of a breach of any of the
covenants herein, including Section 9 hereof, will be the appointment rights
arising from Section 6 hereof and such breach by the Company will not cause any
action taken by the Company to be invalid or unauthorized under its charter
documents.
18. Headings of Subdivisions.
------------------------
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
19. Form of Exchangeable Preferred Stock.
------------------------------------
(a) The Exchangeable Preferred Stock may be issued in the form of
Certificated Securities (as defined) or in the form of one or more Global
Certificates (the "Global Certificates"). The Global Certificates shall be
deposited with, or on behalf of, The Depository Trust Company (the "Depositary")
and registered in the name of Cede & Co., as nominee of the Depositary (such
nominee being referred to as the "Global Certificate Holder").
<PAGE>
33
(b) So long as the Global Certificate Holder is the registered owner
of any Exchangeable Preferred Stock, the Global Certificate Holder will be
considered the sole Holder under this Certificate of Designations of the shares
of Exchangeable Preferred Stock evidenced by the Global Certificate. Beneficial
owners of shares of Exchangeable Preferred Stock evidenced by the Global
Certificate shall not be considered the owners or Holders thereof under this
Certificate of Designations for any purpose.
(c) Payments in respect of the Liquidation Preference on any
Exchangeable Preferred Stock registered in the name of the Global Certificate
Holder on the applicable Record Date shall be payable by the Company to or at
the direction of the Global Certificate Holder in its capacity as the registered
Holder under this Certificate of Designations. The Company may treat the
persons in whose names Exchangeable Preferred Stock, including, without
limitation, the Global Certificate, are registered as the owners thereof for the
purpose of receiving such payments.
(d) If (i) the Company notifies the Holders in writing that the
Depositary is no longer willing or able to act as a depositary and the Company
is unable to locate a qualified successor within 90 days or (ii) the Company, at
its option, notifies the Holders in writing that it elects to cause the issuance
of Exchangeable Preferred Stock in the form of registered definitive
certificates ("Certificated Securities") under this Certificate of Designations,
then, upon surrender by the Global Security Holder of its Global Certificate,
Exchangeable Preferred Stock in such form will be issued to each person that the
Global Certificate Holder and the Depositary identify as being the beneficial
owner of the related Exchangeable Preferred Stock. Upon any such issuance, the
Company shall 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).
(e) Each Global Certificate which has not been registered pursuant to
an effective registration (including a shelf registration) statement shall bear
a legend in substantially the following form:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY. THE DEPOSITORY TRUST COMPANY SHALL ACT AS
THE DEPOSITARY UNTIL A SUCCESSOR SHALL BE APPOINTED BY THE
COMPANY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET,
NEW YORK, NEW YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
<PAGE>
34
CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE
& CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
(f) All shares of Exchangeable Preferred Stock and the Exchange
Debentures which have not been registered pursuant to an effective registration
(including a shelf registration) statement shall bear a legend to the following
effect, unless the Company determines otherwise in compliance with applicable
law:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS SECURITY MAY
NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER ("RULE 144A") OR ANOTHER EXEMPTION UNDER THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO
THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS
<PAGE>
35
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE.
<PAGE>
36
IN WITNESS WHEREOF, St. John Knits International, Incorporated has
caused this Certificate to be executed by Roger Ruppert, as Vice-President and
Chief Financial Officer of the Company, this ____ day of July, 1999.
ST. JOHN KNITS INTERNATIONAL,
INCORPORATED
By:________________________________________
Name: Roger Ruppert
Title: Vice-President and Chief Financial
Officer
<PAGE>
EXHIBIT 99.(d)
Company Press Release
Gray Family, Vestar Capital Complete St. John Buyout
IRVINE, Calif.--July 7, 1999--St. John Knits, Inc. (NYSE: SJK) and Vestar
Capital Partners said today that a group consisting of Company founder, Chairman
and Chief Executive Officer Bob Gray, his family and an affiliate of Vestar
Capital has completed its acquisition of St. John Knits, Inc., in a transaction
valued at approximately $520 million.
The definitive agreement to take St. John private was signed Feb. 2, 1999 and
approved by an independent committee and the Company's Board of Directors the
same day. Shareholders of St. John gave their approval to the transaction at a
special meeting held June 28, 1999.
Vestar Capital provided approximately $179 million in equity financing for the
transaction and has become the majority holder of the recapitalized private
company, called St. John Knits International, Incorporated, with 78.1% of the
equity. Bob, Marie and Kelly Gray hold 14.9% of the equity, which they received
in exchange for a portion of their previous holdings in the public company.
Certain former holders of St. John Knits common stock elected to retain shares
giving them a 7.0% total equity interest in the recapitalized private company.
Shares of St. John Knits International, Incorporated will not be listed on any
public exchange. The remainder of St. John's public shareholders received $30
per share in cash for their stock. Vestar Capital said a sufficient number of
public shareholders opted to retain their shares, such that all shareholders who
desired cash received all cash.
Bob Gray said, "We are very delighted to have completed this transaction and
are looking forward to our new partnership with Vestar, a high quality
investment firm."
Jim Kelley, managing director at Vestar Capital, said, "We are extremely
pleased to be investing with the Gray family in this tremendous women's apparel
franchise they have built. We look forward to working with them and the entire
St. John team in this next exciting chapter in the Company's history."
Vestar Capital Partners, a leading investment firm based in New York with an
office in Denver, manages more than $1.2 billion in equity capital and
specializes in management buyouts and growth capital investments. Vestar
invests, as partners with management, in high-quality, middle market companies.
It has been a leading or majority shareholder in such well-known companies as
Celestial Seasonings, Inc., Prestone Products Corporation, Westinghouse Air
Brake Company, Remington Products Company, Sun Apparel, Inc., Aearo Corporation,
Insight Communications Company and Cluett American Group. Since its founding in
1988, Vestar Capital has completed 30 transactions with a total value of
approximately $7 billion.
St. John designs, manufacturers and markets women's clothing and accessories.
The Company's products are sold under the St. John, Griffith & Gray, and Marie
Gray trade names. St. John's retail division operates 18 boutiques and nine
outlet stores.
Contact:
St. John Knits
Roger G. Ruppert, 949/863-1171
or
Vestar Capital Partners
Gene Donati, Clark & Weinstock
212/953-2550
